[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                         [H.A.S.C. No. 113-12] 
                   IMPACTS OF A CONTINUING RESOLUTION 
                   AND SEQUESTRATION ON ACQUISITION, 
                  PROGRAMMING, AND THE INDUSTRIAL BASE

                               __________

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON TACTICAL AIR AND LAND FORCES

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                           FEBRUARY 28, 2013

                                     
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13

                                     

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              SUBCOMMITTEE ON TACTICAL AIR AND LAND FORCES

                   MICHAEL R. TURNER, Ohio, Chairman

FRANK A. LoBIONDO, New Jersey        LORETTA SANCHEZ, California
JOHN FLEMING, Louisiana              MIKE McINTYRE, North Carolina
CHRISTOPHER P. GIBSON, New York      JIM COOPER, Tennessee
JON RUNYAN, New Jersey               JOHN GARAMENDI, California
MARTHA ROBY, Alabama                 RON BARBER, Arizona
PAUL COOK, California                DANIEL B. MAFFEI, New York
JIM BRIDENSTINE, Oklahoma            JOAQUIN CASTRO, Texas
BRAD R. WENSTRUP, Ohio               TAMMY DUCKWORTH, Illinois
JACKIE WALORSKI, Indiana             WILLIAM L. ENYART, Illinois
MAC THORNBERRY, Texas                PETE P. GALLEGO, Texas
WALTER B. JONES, North Carolina      MARC A. VEASEY, Texas
ROB BISHOP, Utah
                 John Wason, Professional Staff Member
                  Doug Bush, Professional Staff Member
                     Julie Herbert, Staff Assistant


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2013

                                                                   Page

Hearing:

Thursday, February 28, 2013, Impacts of a Continuing Resolution 
  and Sequestration on Acquisition, Programming, and the 
  Industrial Base................................................     1

Appendix:

Thursday, February 28, 2013......................................    35
                              ----------                              

                      THURSDAY, FEBRUARY 28, 2013
 IMPACTS OF A CONTINUING RESOLUTION AND SEQUESTRATION ON ACQUISITION, 
                  PROGRAMMING, AND THE INDUSTRIAL BASE
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Sanchez, Hon. Loretta, a Representative from California, Ranking 
  Member, Subcommittee on Tactical Air and Land Forces...........     3
Turner, Hon. Michael R., a Representative from Ohio, Chairman, 
  Subcommittee on Tactical Air and Land Forces...................     1

                               WITNESSES

Davis, Lt Gen Charles R., USAF, Military Deputy, Office of the 
  Assistant Secretary of the Air Force for Acquisition, U.S. Air 
  Force; and Lt Gen Michael R. Moeller, USAF, Deputy Chief of 
  Staff for Strategic Plans and Programs, U.S. Air Force.........    10
Shyu, Hon. Heidi, Assistant Secretary of the Army for 
  Acquisition, Logistics and Technology, U.S. Department of the 
  Army; and LTG James O. Barclay III, USA, Deputy Chief of Staff, 
  G-8, U.S. Army.................................................     5
Stackley, Hon. Sean J., Assistant Secretary of the Navy 
  (Research, Development & Acquisition (RDA)), U.S. Department of 
  the Navy; VADM Allen G. Myers, USN, Deputy Chief of Naval 
  Operations, Integration of Capabilities and Resources (N8), 
  U.S. Navy; and LtGen John E. Wissler, USMC, Deputy Commandant 
  for Programs and Resources, U.S. Marine Corps..................     7

                                APPENDIX

Prepared Statements:

    Davis, Lt Gen Charles R., joint with Lt Gen Michael R. 
      Moeller....................................................    68
    Shyu, Hon. Heidi, joint with LTG James O. Barclay III........    42
    Stackley, Hon. Sean J., joint with VADM Allen G. Myers and 
      LtGen John E. Wissler......................................    53
    Turner, Hon. Michael R.......................................    39

Documents Submitted for the Record:

    Follow-up Written Testimony of LTG James O. Barclay III......    85

Witness Responses to Questions Asked During the Hearing:

    Ms. Sanchez..................................................    93

Questions Submitted by Members Post Hearing:

    Mr. Maffei...................................................   109
    Mr. Turner...................................................    97


 IMPACTS OF A CONTINUING RESOLUTION AND SEQUESTRATION ON ACQUISITION, 
                  PROGRAMMING, AND THE INDUSTRIAL BASE

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
              Subcommittee on Tactical Air and Land Forces,
                       Washington, DC, Thursday, February 28, 2013.
    The subcommittee met, pursuant to call, at 9:08 a.m., in 
room 2118, Rayburn House Office Building, Hon. Michael R. 
Turner (chairman of the subcommittee) presiding.

 OPENING STATEMENT OF HON. MICHAEL R. TURNER, A REPRESENTATIVE 
  FROM OHIO, CHAIRMAN, SUBCOMMITTEE ON TACTICAL AIR AND LAND 
                             FORCES

    Mr. Turner. Good morning. We will call to order the hearing 
of the Tactical Air and Land Forces Subcommittee.
    The Tactical Air and Land Forces Subcommittee meets today 
in open session to receive testimony on the impacts of 
sequestration and the continuing resolution, CR, its impacts on 
acquisition, programming, and the industrial base.
    Before I continue with my opening statement, I want to 
pause for a moment just to say I voted against this mess. And I 
voted against this mess because I thought we would be right 
here, right where we are, with this clock ticking, 14 hours and 
15 minutes until sequestration hits in what I believe will be 
devastating impacts upon our national security and our 
Department of Defense.
    Now, it is noted that there is a pause button there, and I 
truly believe that the President of the United States is the 
only one who can hit that pause button. We need him to come to 
the table with a workable plan. And we certainly are hopeful 
that once sequestration does hit and the effects that we hear 
today, that a responsible plan will be brought forward in order 
to set this off.
    I noted that in talking to some of the witnesses before we 
opened, that they thought that perhaps this clock was their 
opening statement clock, but they don't get 14 hours for their 
opening statement.
    But I think this demonstrates the fact that it is imminent; 
it is upon us. Today, the panel that we have that will be 
speaking will be the last word on sequestration before we are 
in the post-implementation of sequestration, before we begin to 
see its effects. And that is why this committee continues its 
efforts on oversight and our detailed examination of the 
harmful impacts of the continuing resolution on sequestration, 
on the military's ability to protect national security 
interests of our Nation.
    We have already heard very candid testimony from the 
military service chiefs during the full committee hearing on 
February 13th, on how these forced budget cuts will be 
devastating to military training and force readiness.
    General Dempsey, chairman of the Joint Chiefs of Staff, 
stated, ``We built a strategy last year that we said we can 
execute and absorb $487 billion. I can't sit here today and 
guarantee you that if you take another $175 [billion] that that 
strategy remains solvent. . . . What do you want your military 
to do? If you want it to be doing what it is doing today, then 
we can't give you another dollar.''
    Today, we plan to leverage the information gained from that 
hearing and provide our members with the opportunity to gain a 
better understanding of how the CR and sequestration would 
impact defense acquisition, programs, projects and activities, 
and their associated industrial bases across the country.
    One of the most tragic aspects of our current situation is 
that sequestration was never supposed to happen, and there were 
numerous opportunities to avoid it.
    By laying out the details of the impacts of sequestration, 
the Department of Defense could have helped us in our education 
campaign to avoid the catastrophic cuts we are now facing.
    On the eve of sequester, it is my hope that this hearing 
will aid to provide greater clarity concerning the details and 
levels of risk that will be associated with the arbitrary cuts 
mandated by sequestration on all major defense acquisition 
programs, including how these severe reductions will impact 
local communities, small businesses and ultimately the 
military's ability of meeting the national military strategy.
    These details will help to illustrate the depths of these 
impacts and help us make our case to Congress and the Nation.
    And I want to underscore what I just said. The Department 
of Defense has been very slow to provide information, both to 
Congress and to the Nation, as to what the impacts of these 
cuts will be. Because of that, it has stunted the debate and 
the conversation about how to avoid them, because many of the 
actual details of their effects could not be evaluated and 
known.
    Ironically, the sequestration conversation has been seated 
in a context of savings and fiscal austerity. However, it seems 
apparent that allowing these cuts to take place would, 
ultimately, cost our country more than it saves, while 
simultaneously costing jobs.
    Second- and third-tier vendors, mostly small businesses, 
will be affected if these cuts are enacted, many of which are 
referred to as ``single points of failure vendors,'' meaning 
only one company is qualified to provide a particular part. And 
once that capability is lost, it will take significant capital 
and time to regain that capability. This, in turn, will put 
people out of work and dramatically drive up cost.
    We need to be assured that the Department and the military 
services are conducting the appropriate level of analysis to 
assist the impact of sequester on our industrial base. For 
example, the Army indicates that every procurement program 
would be affected. Quantities would be reduced by 10 to 15 
percent, and that these mandated sequester reductions affect 
more than 1,000 companies in more than 40 States.
    For the Army alone, over 3,000 vendors will be affected. 
The Army has stated the total economic impact would be 
approximately $15.4 billion, the Marine Corps, $2.4 billion, 
the Navy is over $20 billion. I witness the devastating effects 
of these reactions each time that I return home.
    My community, in southwest Ohio, includes Wright-Patterson 
Air Force Base, the home of the Air Force Materiel Command and 
the Air Force Research Laboratory. Recent information provided 
by the Air Force has indicated that over 14,000 civilian 
employees at the base face potential furloughs.
    The base provides cutting-edge research and development, as 
well as real-time intelligence, surveillance, and 
reconnaissance that enhances the lethality and survivability of 
our warfighters who are in harm's way. Every State is going to 
be impacted by sequestration.
    As I stated before, I voted against this. And I think, 
certainly, our discussion today will be incredibly important as 
we try to learn the information that will give us the ability 
to advocate for these cuts to be set aside.
    I would like to welcome our distinguished panel of 
witnesses. Representing the Army today, we have Ms. Heidi Shyu, 
Assistant Secretary of the Army for Acquisition, Logistics and 
Technology. We have Lieutenant General James Barclay III, 
Deputy Chief of Staff, G-8.
    Representing the Navy and Marine Corps, we have Mr. Sean J. 
Stackley, Assistant Secretary of the Navy, Research, 
Development and Acquisition, RDA. We have Vice Admiral Allen G. 
Myers, Deputy Chief of Naval Operations, Integration of 
Capabilities and Resources; Lieutenant General John E. Wissler, 
Deputy Commandant for Programs and Resources.
    And then representing the Air Force, we have Lieutenant 
General Michael R. Moeller, Deputy Chief of Staff for Strategic 
Plans and Programs; Lieutenant General Charles R. Davis, 
Military Deputy, Office of the Assistant Secretary of the Air 
Force for Acquisition.
    We thank each of you for being here. We appreciate that you 
will, on the House side, be the last word on the effects of 
sequestration before we are actually implementing 
sequestration.
    And it is my pleasure to introduce my good friend, and 
bipartisan colleague, Ms. Sanchez.
    [The prepared statement of Mr. Turner can be found in the 
Appendix on page 39.]

   STATEMENT OF HON. LORETTA SANCHEZ, A REPRESENTATIVE FROM 
 CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON TACTICAL AIR AND 
                          LAND FORCES

    Ms. Sanchez. Thank you, Mr. Chairman. And as always, it is 
a pleasure to serve with you on this subcommittee. And to the 
young lady and the gentlemen before us, thank you for being 
here to discuss the effects of sequestration, especially on our 
second- and third-tier suppliers, and the need to have the type 
of tactical equipment, in particular, that is required to train 
up our troops and to keep our troops out in the field. So I 
appreciate that.
    Obviously, we have had many hearings on sequestration in 
the Congress. And the fact that we are, you know, less than a 
day away from the trigger of sequestration coming about is--I 
don't think that this hearing, quite frankly, is going to have 
an impact on what starts tomorrow. I am glad that recently the 
President said that this will be a continuing, ongoing sort of 
situation, once it starts in place, because it really signals 
to the fact, I hope to the American public, that this isn't a 
fiscal cliff. This is a concern. And the Congress really needs 
to get back to the table and do its job.
    I think it is a little frustrating--I think it is a little 
frustrating for my colleagues on this committee, myself, too, 
to really want to sit down at the table in a very bipartisan 
manner and figure out where some of these cuts need to be made. 
The fact that we have sequestration is really because many of 
us in the Congress have not been either asked to be at the 
table, or the people at the table who want to be at the table, 
who can really help to make some of these cuts, not just in 
defense, but in all areas of the budget, much, for example, in 
a sense, to what the Simpson-Bowles report told us 2 years ago.
    Americans want Washington to tighten their belt. And to do 
that, we need to find waste. We need to find programs that 
don't work. We need to, maybe, make decisions between several 
different types of programs and decide which one will we invest 
in for the future, and which one do we just not have the 
resources to do that.
    And I think the people in front of us have--so many of you, 
I mean, although you all look young--believe me--decades of 
acquisition and procurement and, you know, really understanding 
how the military is one of those operating pieces of the 
Government that works well.
    So, for me, it is a shame when we see sequestration coming, 
whether the program is good or not, whether it has been working 
well or whether people have been under budget, whether they 
have been ahead of time, and say, ``well, we just need to cut 
10 percent from that.''
    And those programs, you know, we all look around, and 
whatever job we have, and we see, you know, some waste or some 
inefficiencies, and then those programs will be able to say, 
``You know, this program is not working. This is the piece that 
we have to eliminate from here.''
    Quite frankly, that is our job. That is Congress' job. It 
is not the President's job. One person cannot sit there and 
have an eyeball to everything, to every first-, and second-, 
and third-tier situation that is going on.
    So I hope that you will give us information so that we can 
work together, if the leadership gives us that ability, from 
both sides and from both Houses, to sit down and really get 
this done in the right way.
    I am more worried, quite frankly, about what comes about on 
March 27th. That is the appropriations process. Now, I have 
been here 17 years. When I first came to the Congress, we 
actually got several appropriation bills passed and put 
through. Maybe not all--at that time, I think it was 13; maybe 
now it is 12. Maybe not all of them, but certainly defense bill 
was one of those that we were able to put through as an 
appropriations process.
    And you know, especially in the last couple of years, we 
have seen the CR process, over and over and over again, tied to 
politics of who will win the election and maybe we will get a 
better chance, and one side will get more of what they want, 
and the other side will get less or what have you.
    But, you know, now we are just at a 2-month, 4-month, 6-
month, end-of-the-year CR and the American public doesn't, in a 
lot of ways, understand what that means. But it basically is a 
lurch and a start, a lurch and a start, a stop and a start, 
sort of a process for all, not just the military, but for all 
our departments at the Federal level.
    So, March 27th comes along, and what type of a CR extension 
will we have? Or will we not have one? I mean, I have a lot of 
my colleagues saying, you know, that they are willing to see 
the Government shut down. I don't want to see that happen, 
because I understand what the impact is to production line. I 
understand what the impact is. I understand the nervousness of 
our troops and our families about what that means.
    And it is not just for the military, but it is our Federal 
workers. I happen to be one of those people that believe that 
the majority of our Federal workers go to work every day 
wanting to do a good job for Americans. And they have already 
not had raises in the last 3 or 4 years. Now they are looking 
at maybe up to 20 percent of what, effectively, is a pay cut 
for them and for their families. And, believe me, most of them 
make a lot less than what you and I make, Mr. Chairman.
    So, I hope this hearing will really paint a picture for us 
of what the CR process also will do with respect to our 
readiness, our ability to do what is one of the number one 
things our Government should do, which is to keep Americans 
safe and be ready to be out there and do this.
    So, I look forward to this hearing, Mr. Chairman. And thank 
you.
    Mr. Turner. Thank you, Ms. Sanchez.
    Turning first then to each of our panelists. Secretary 
Shyu, we will begin with you.

STATEMENTS OF HON. HEIDI SHYU, ASSISTANT SECRETARY OF THE ARMY 
 FOR ACQUISITION, LOGISTICS AND TECHNOLOGY, U.S. DEPARTMENT OF 
 THE ARMY, AND LTG JAMES O. BARCLAY III, USA, DEPUTY CHIEF OF 
                     STAFF, G-8, U.S. ARMY

    Secretary Shyu. Thank you, very much.
    Chairman Turner, Ranking Member Sanchez, and members of the 
subcommittee, thank you for the opportunity to testify before 
you today.
    Mr. Turner. Ma'am, would you please move the microphone 
closer?
    Secretary Shyu. Okay, how about now? Okay, so I will start 
over. Chairman Turner, Ranking Member Sanchez, and members of 
the subcommittee, thank you for the opportunity to testify 
before you today on the impact of sequestration and a 
continuing resolution and its effects to the Army acquisition 
programs, as well as the industrial base.
    I will ask that my statement be entered into the record. I 
would like to take this opportunity to highlight some key 
points. The reality is that the sequestration provision in the 
Budget Control Act would cause sharp reductions in soldier 
equipment investment.
    Every single piece of soldier equipment under development 
or in production will be affected in the implementation of 
sequestration in some manner. All of our carefully planned 
timelines for delivering new capability to soldiers will be 
necessarily delayed. Costs to the Army, over the long term, 
will likely increase. The impact will be felt long after this 
fiscal year.
    As we consider the impacts of these budgetary decisions 
today, the Army's equipment needs are significant. We are 
conducting combat operations in Afghanistan today. Equipment 
use over the past decade must be reset, while deferred 
modernization is now in need of attention and investment.
    We must also continue to prepare for the uncertain and 
emerging threats of the future, which holds an increasingly 
complex and less predictable environment.
    The fiscal impacts to Army acquisitioning and equipment 
modernization programs are attributable to the estimated $12 
billion reduction to the Army's budget during the remaining 
months of the current fiscal year, using the DOD's [Department 
of Defense] planning assumptions for sequestration.
    This incorporates a $6 billion reduction in Army's 
operation and maintenance accounts, representing approximately 
51 percent of the total Army's reduction due to sequestration 
in fiscal year 2013, a significant reduction of about $3 
billion in Army procurement accounts, applied equally across 
over 400 Army programs, and almost a billion dollars reduction 
in RDT&E [Research, Development, Test & Evaluation] investment 
across the Army.
    Every Army acquisition program will be affected by these 
cuts. Schedules for RDT&E-funded programs will be impacted. 
Procurement programs will be reduced across the board by 
roughly 9 percent.
    The impacts to the industrial base will be significant. 
Based on our current assessment, impacts of sequestration and 
the CR could result in thousands of jobs lost or not realized, 
which affects 40 States and the District of Columbia.
    The almost a billion dollars in reduction to RDT&E accounts 
may result in the closure of some of the DOD's high-performing 
computing centers, impacts on grants and partnerships with 
universities and other affiliated research institutions, and 
potential loss of critical expertise through indiscriminate 
budget cuts.
    Moreover, the broad effects of sequestration will 
significantly impact the acquisition workforce. Overall, we 
anticipate that the funding shortfalls will result in a large 
number of contract changes relating to the program quantities 
and schedule.
    These changes will increase the burden on contracting 
workforce. Contracting personnel, program management, and cost 
analysts who are charged with the responsibility of getting the 
best value for the taxpayer will be potentially subject to a 
22-day furlough.
    Compounding our difficulties is the effect of a yearlong CR 
with sequestration on all programs. These impacts include the 
Army being unable to award the multiyear contract for Chinook 
[CH-47 heavy-lift helicopter] production; the Army will be 
unable to commence Paladin PIM [M109 Paladin Integrated 
Management self-propelled howitzer] low-rate initial 
production; reduced Apache helicopter [AH-64 attack helicopter] 
production quantities in the current fiscal year; and the 
inability to procure the new common sensor payload for the Gray 
Eagle [MQ-1C unmanned aircraft system], which provides high-
definition intelligence, surveillance, and reconnaissance 
capabilities to our warfighters.
    In closing, the Army will continue to provide soldiers with 
the best equipment available. Their sacrifices deserve no less. 
We hope that the impacts discussed today will summon a renewed 
dedication to the needs of our force, which has consistently 
answered the Nation's call for service throughout its history.
    Mr. Chairman, members of the subcommittee, we thank you 
again for your steadfast and generous support of the 
outstanding men and women of the United States Army, its 
civilians and families. And we look forward to your questions.
    Thank you.
    [The joint prepared statement of Secretary Shyu and General 
Barclay can be found in the Appendix on page 42.]
    Mr. Turner. Thank you, Secretary Shyu.
    Secretary Stackley.

STATEMENTS OF HON. SEAN J. STACKLEY, ASSISTANT SECRETARY OF THE 
    NAVY (RESEARCH, DEVELOPMENT & ACQUISITION (RDA)), U.S. 
DEPARTMENT OF THE NAVY; VADM ALLEN G. MYERS, USN, DEPUTY CHIEF 
OF NAVAL OPERATIONS, INTEGRATION OF CAPABILITIES AND RESOURCES 
   (N8), U.S. NAVY; AND LTGEN JOHN E. WISSLER, USMC, DEPUTY 
    COMMANDANT FOR PROGRAMS AND RESOURCES, U.S. MARINE CORPS

    Secretary Stackley. Chairman Turner, Ranking Member 
Sanchez, distinguished members of the subcommittee, it is a 
pleasure to appear before you today to address the impacts of 
the continuing resolution and sequestration on our Department 
of the Navy acquisition, programming, and industrial base.
    Joining me today are the Deputy Chief of Naval Operations, 
Vice Admiral Myers and the Deputy Commandant, Lieutenant 
General Wissler.
    And with the permission of the subcommittee, I propose to 
provide a brief statement and submit a separate formal 
statement for the record.
    The Navy-Marine Corps team is this Nation's expeditionary 
force in readiness, a balanced air-ground naval force, forward 
deployed and forward engaged, performing missions around the 
globe, on the ground in Afghanistan; providing maritime 
security along the world's vital sea lanes; missile defense in 
the Mediterranean, the Sea of Japan; intelligence, 
surveillance, and reconnaissance where needed, as needed; 
persistent presence at sea, with an embarked Marine force ready 
to move ashore.
    They are conducting antipiracy patrols, global partnership 
stations, humanitarian assistance. And they are quietly, 
reliably on patrol, providing strategic deterrence, and all the 
while training for the next deployment, the next operation, the 
next crisis, the next contingency.
    The Department of the Navy's 2013 budget request, as 
authorized by this committee, provides the resources needed to 
meet this full range of missions and the overarching defense 
strategy. It balances the resources required to execute today's 
mission against today's threat and the investment required to 
execute tomorrow's mission against a future threat.
    The Department greatly appreciates the committee's work in 
passing the 2013 National Defense Authorization Act. Today, 
however, we are here to discuss the unfinished work of the 
Congress, as it relates to defense appropriations and the 
pending sequestration.
    Account by account, program by program, the $170 billion 
authorized for Navy and Marine Corps by the Armed Services 
Committee is severely undercut by the shortcomings of the 
continuing resolution and the across-the-board cuts posed by 
sequestration.
    Further, authorities for the multiyear procurement of 98 
MV-22 aircraft [Osprey medium-lift tilt-rotor aircraft], 10 
DDG-51 destroyers [Arleigh Burke class guided missile 
destroyers], 10 Virginia class submarines [nuclear-powered 
attack submarines] and the near $5 billion worth of savings 
these multiyear provides, and authority to start construction 
of the next aircraft carrier, John F. Kennedy [Ford class 
aircraft carrier USS John F. Kennedy], to start the refueling 
complex overhaul of the CVN-72 Abraham Lincoln [Nimitz class 
supercarrier USS Abraham Lincoln], these lay idle.
    In terms of the dollar impact of the continuing resolution, 
now about to enter its sixth month, operations and maintenance 
funding authorized by this committee is reduced by about $4 
billion for the Department of the Navy.
    Procurement and research and development funding authorized 
by this committee is reduced by about $5 billion; $5 billion in 
new start and multiyear authority lays idle. And with no 
ability to reprogram under the continuing resolution, in excess 
of $14 billion of the funding authorized by this committee for 
2013 falters.
    To these constraints we add the impact of the budget 
reduction imposed by sequestration, approximately $12.9 billion 
across the Navy and Marine Corps. And to these numbers we add 
the method by which it is applied, indiscriminately, line by 
line, and the timing with which it is applied, halfway through 
the year, thus compounding its impact.
    And we are left with stark choices. In fact, absent the 
ability to realign our reduced funding levels in accordance 
with our priorities, these are not so much choices as they are 
fait accompli results of a distortion of the budget process 
which Congress has otherwise faithfully executed in prior 
years.
    The first impact hits operations, because we operate 
forward and maintain the high state of readiness such 
operations demand. Therefore, when the flow of funds for our 
operations and maintenance is cut, our operations are cut in 
real time.
    Thus, the Truman [USS Harry S. Truman supercarrier] Battle 
Group deployment, scheduled this past month, has been canceled, 
and aviation and ship depot maintenance for the third and 
fourth quarters, it is next, affecting as many as 300 aircraft 
and over 1,000 engines planned for depot work.
    Training is curtailed, and readiness will follow because of 
cuts to steaming hours and flight hours and maintenance and 
procurement of spare parts, thus impacting next year's 
operations and our ability to surge our forces in response to 
crises.
    Procurement of new weapons systems follows next. Pending 
determination of whether there will be sufficient funding to 
execute our ship and aircraft and missile and vehicle 
contracts, decisions regarding cancellation, reduction, or 
delay hang in the balance.
    Thus, the Abraham Lincoln aircraft carrier sits pier-side 
at Norfolk Naval Base, pending sufficient funding to start her 
refueling complex overhaul at Newport News. The John F. 
Kennedy, the next aircraft carrier, its build plan is in 
disarray.
    And on factory floors in Tucson, Arizona; and Huntsville, 
Alabama; Tewksbury, Massachusetts; and Morristown in New 
Jersey, and Amarillo, Texas; and Philadelphia, Pennsylvania; in 
St. Louis, Missouri; Dallas-Fort Worth; Lima, Ohio; Bath, 
Maine; Groton, Connecticut; Quonset Point; Bethpage, New York; 
St. Augustine, Florida; Palmdale, California; and on and on and 
on, the skilled workers at critical defense production 
facilities across the country are bracing for the potential 
indiscriminate drawdown of our force structure, done in a 
fashion that will defeat the combined efforts of the Department 
and the Congress to improve the affordability of our weapons 
systems, thus irrationally compounding the budget challenges we 
face today.
    Next, modernization; the development of those advance 
capabilities that are critical to ensuring our future military 
superiority suffers benign neglect under the compounding 
impacts of a continuing resolution subject to sequestration.
    In total, no less than 15 combat aircraft and unmanned 
systems are at risk, and a bow wave of unfunded requirements 
for the balance of the aviation program is yet unresolved.
    Three hundred missiles and weapons systems are at risk, 
cutting our inventory at a time when we are striving to restore 
our weapons to levels called for by the combatant commanders.
    Most milestones tied to developing, testing, and fueling 
new weapons systems will be delayed. Virtually every Marine 
Corps major program is delayed or reduced, from the Joint Light 
Tactical Vehicle to ground/air task-oriented radar, to the 
Amphibious Combat Vehicle, to the modernization of the current 
inventory, which has weathered 10 years of warfare.
    Greater than 100,000 jobs will be lost across the country 
as a result of these cuts to Navy-Marine Corps operations and 
programs, first affecting small business and critical 
suppliers, for they are the first to receive orders for many of 
our contracts. And, in general, they are the least prepared to 
weather the financial storm that is about to hit them.
    Meanwhile, about 200,000 dedicated career civil servants 
face the prospects of being furloughed in 2013, impacting 
current and future operations at every military installation 
and on every factory floor responsible for the production of 
weapons, parts, and supplies for our forces.
    Clearly, these examples do not capture the full magnitude, 
and they do not begin to approach the impacts that will result 
from subsequent budget-year reductions. Unabated, the 
reductions will profoundly affect the size and shape and 
readiness of your Navy and Marine Corps, and therefore the 
roles and missions which they are able to perform.
    The Department and the Armed Services Committee share 
common responsibilities to protect the Nation, to take care of 
our men and women in uniform, and to protect the taxpayer. The 
course we are currently on fails to address these 
responsibilities in a deliberate way.
    Again, I thank the committee for its work on the 2013 
National Defense Authorization Act. Our appeal is that Congress 
complete its work on the 2013 budget request with the passage 
of an appropriations bill, and that this mechanism for 
addressing the Nation's budget impasse, which was devised to be 
so unacceptable that it would be averted, sequestration, 
somehow be reversed before we are driven to irreversible 
actions which impair our collective responsibility to provide 
for the Nation's defense.
    Thank you.
    [The joint prepared statement of Secretary Stackley, 
Admiral Myers, and General Wissler can be found in the Appendix 
on page 53.]
    Mr. Turner. Secretary Stackley, thank you so much for that 
very good opening statement, and the great examples of not only 
the dangers of sequestration, but also the impacts of you 
operating under a CR. I really do appreciate that.
    General Davis.

 STATEMENTS OF LT GEN CHARLES R. DAVIS, USAF, MILITARY DEPUTY, 
    OFFICE OF THE ASSISTANT SECRETARY OF THE AIR FORCE FOR 
  ACQUISITION, U.S. AIR FORCE; AND LT GEN MICHAEL R. MOELLER, 
 USAF, DEPUTY CHIEF OF STAFF FOR STRATEGIC PLANS AND PROGRAMS, 
                         U.S. AIR FORCE

    General Davis. Mr. Chairman, Ms. Ranking Member, thank you 
very much. And other committee members, I appreciate this 
opportunity.
    First of all, you will notice right off the bat that I am 
wearing a slightly different uniform than my other Service 
counterparts here as the acting assistant secretary of Air 
Force for acquisition, kind of filling that role. Actually our 
Secretary, Secretary Donnelly, is filling that role.
    Because of a variety of issues, notably climates and 
challenges within the things that are going on within the 
Department and the Air Force, we have not had a confirmed 
individual for that position for 4 years. And it has actually 
been vacant as an acting for over a year.
    So right now, I am speaking on behalf of Secretary Donnelly 
that is filling the role in our Service acquisition executives. 
So thank you for that.
    Joining me is Lieutenant General Mike Moeller, who runs our 
plans and programs. He will be able to talk to a lot of the 
budget issues.
    I am going to talk in a slightly different vein this 
morning, as an acquisition professional, an individual that has 
spent a lot of time testing, flying airplanes, and then running 
major programs in major centers. And I will talk to you a 
little about what I see going on within our acquisition 
programs at a slightly different level.
    I think our Chief and Secretary have given you a lot of 
information on the specifics of what is going to happen to our 
Service. I will tell you that, as we notice it start to evolve 
right off the bat, the first thing that gets hit is our small 
business, and then it goes very much to readiness from that 
point on.
    Our small businesses; we are already seeing that we are 
about $170 million behind in obligations of where we were this 
time last year, because the first thing that will suffer in 
this is the operational accounts. You won't buy computers. You 
won't bring that individual on to repair the buildings. You 
won't bring that individual on to maintain landscape.
    So they start to fall off right off the bat.
    And then our Chief and Secretary talked about how very soon 
in the May timeframe we start losing the combat readiness 
capability of many of our squadrons, which is the core 
warfighting unit. And then the acquisition impacts become very 
insidious. They do not appear devastating in 2013, but I tell 
you that is just the bow wave of what comes in 2014 and 2015, 
because everything we do not do, every piece of equipment we do 
not plan for in terms of how we acquire and sustain, it becomes 
less capable and less clear on how you pursue that path next 
year.
    So, the one thing I wanted to talk about is the fact that 
while all this is going on, obviously the Nation demands that 
the United States Air Force provide the air superiority and the 
ability of freedom of movement for all of our troops and all of 
our joint partners all over the world. And it has been over six 
decades since an enemy airplane has shot an American airman, 
sailor, soldier, anywhere on the ground.
    And so one thing that we worry about is how we are able to 
maintain that with an aging fleet. And we will talk about that 
as the questions go.
    We provide the unblinking eye for global intelligence, 
surveillance, and reconnaissance through space and a variety of 
other means. And we worry about maintaining that aging 
infrastructure in space as time goes on.
    We also have to provide global mobility for any of our 
joint partners across the world, as well as the wounded ones 
coming back from the theater. And that becomes challenged, 
notably with new programs we are looking at to replace combat 
rescue helicopters.
    And then, most importantly, we commit to the Nation that we 
will have the ability to strike any target anywhere in the 
world within a very short period of time. And we worry about 
how we modernize the forces to go do that as we go forward.
    And to do those tasks, we ask our acquisition folks and our 
programmers and program managers to be able to navigate 
probably what is the most complex, chaotic, overregulated, 
overseen process in the world to be able to deliver the combat 
capability to the Nation. And they do a magnificent job with a 
significant amount of American treasure every year to go do 
that.
    But, as we go through this process, the thing that worries 
me most is that challenge has become much greater for these 
individuals as they work through that, because there are so 
many unknowns. Chairman, as you mentioned, the questions that 
hang out there that bother us.
    Our acquisition program workforce, they fight through these 
innumerable policies and laws every year to try to deliver the 
combat capability that I said the Nation demands of the United 
States Air Force.
    In the process, we as the leadership in the Department and 
within the Service demand that they build the most exquisite 
planned schedules, the most detailed cost estimates, the most, 
if you will, exquisite architectures of systems and the systems 
engineering that will deliver them, the technical baselines, 
the critical paths, the test plans, everything that will 
determine just how the systems that we have to meet the 
requirements of the Nation will perform.
    And as they come to us now in this environment, the 
challenge that we have for all those work force individuals in 
the side is we cannot tell them some of the most basic 
questions that any type of activity demands. We can't tell them 
what was their baseline that they begin their program from. We 
can't tell them what the changes will be particularly in 
sequestration, and the numbers, and the percentages and the 
rules that will imply. We can't tell them where the continuing 
resolution will allow them to maybe transfer funds or not based 
on how that will evolve.
    So they come to us with the most simple questions to be 
able to keep these programs intact, and we can't answer them. 
So what we are able to tell them is that everything that they 
produced, and everything that has been reviewed and on the 
books now is basically invalid, and that they have to go back 
and try to do all the drills and all the ``what if'' questions 
again to be able to restructure those programs to be able to 
deliver that capability.
    And so when they come back and tell us that their programs 
and their schedules are not able to be fully fleshed out to the 
demands of the system, we just ask them to do more, and we ask 
them to go back, and we ask them to try one more time. And they 
do, because that is basically what these people do.
    And while we are sending them back to redo these programs 
all hours of the days and nights and weekends, to be able to 
make sure we are prepared as best we can be to answer the 
questions that will come as soon as the actions hit, we tell 
them that probably you all have to plan for having 20 percent 
of your pay cut in the remaining period of time.
    And when we have an acquisition work force of about 34,000 
folks, all told, about 24,000 of those are civilians--and I got 
to tell you, the one question I get most whenever we sit down 
with these civilians and ask them, okay, what are your concerns 
about the furlough, the first question I have gotten--and I 
have gotten it five times--is, can I work during furlough?
    And we have to tell them, no you cannot. It is against the 
law. It is illegal. And then when they come back from those 
periods, we will have asked the military to kind of fill in the 
gaps and work for those individuals that are not there. So the 
impacts to our programs, our test centers, our acquisition 
centers will be dramatic.
    We will tell them, we need you to start the exercise again, 
and we can't tell you what 2014 will look like; we can't tell 
you what 2015 will look like; right now, we can't tell you what 
2013 looks like. But we need that program planned so we can try 
to start determining the impacts to the very critical missions 
we have to deliver to the Nation from the United States Air 
Force. And they go out and do it again, because that is just 
what they do.
    So, I thank you for your comments that you made at the 
beginning. You share very much the concerns I know of our 
Secretary, our Chief, and certainly all members of the Air 
Force. We would be very honored to be able to answer any more 
questions you have related to that.
    And I thank you for the support you have given, not only 
our collective warriors here, but certainly the United States 
Air Force.
    Thank you.
    [The joint prepared statement of General Davis and General 
Moeller can be found in the Appendix on page 68.]
    Mr. Turner. Thank you, General.
    I appreciate your also underscoring the personal affects 
that sequestration is going to have, because that is something 
that we have to be very mindful of. As you know, we have held a 
full committee hearing on the issue of the effects of 
sequestration on readiness, on our men and women in uniform, on 
our civilian personnel. And the picture is bleak, and the 
stories are absolutely compelling.
    Our hearing topic today is acquisition, programming, and 
the industrial base. So although we are looking at the issue of 
acquisition programming in the industrial base, we are still 
very mindful of the personal effects and the effects on our men 
and women in uniform, on our national security. As we have all 
said in all of our comments, this is certainly something that 
we shouldn't be doing to those who serve our Nation, especially 
those who serve our Nation in a way to keep us safe.
    General Davis, you were talking about small business, and I 
am going to turn my question to that.
    Secretary Shyu and Secretary Stackley, you also referenced 
the effects on small business. We know that large contractors 
are certainly going to be affected, but the number of vendors 
that are going to be affected, those down the chain, small 
businesses, will be critically affected.
    And the way that we know that they will be critically 
affected is because they have less resources. They have less 
ability to shift the affects of this onto other assets. And so 
that puts them in a situation that they may actually fail.
    And one of the things that I know that you are aware of, as 
I mentioned in my opening statement, is single-point failure 
vendors, and that is their failure can be our failure, where we 
currently look to in either a system or a program or a project 
the vendors that are down the line and those that have unique 
capability, are uniquely qualified, and that their solvency, 
their ability to continue to operate can affect overall the 
program.
    We have a concern because obviously that goes to the issue 
of our being able to critically maintain those programs, but 
also as we are trying to maintain domestic production, and the 
threat that some of these operations, some of these critical 
aspects of our industrial base may feel even further pressure 
to go overseas, or for outsourcing.
    I am going to ask each of you if you similarly share that 
concern. And if you do, if you have an example, or if you are 
aware of either a small business or a single-point failure 
vendor or a program that is subject to perhaps single-point 
failure as a result of vendor vulnerability, we would greatly 
appreciate that.
    And before I begin asking you to answer this, and beginning 
with Secretary Shyu, I want to tell you, for all the generals 
and the admiral who did not give opening statements, at the end 
of this hearing, I will, as I traditionally did in the 
Strategic Forces Subcommittee, ask each of the panel members if 
they have anything that they would like to add to the record at 
the end.
    So each of you will be able to make any additional 
statement that you would like at the end of this. I also will 
have the record open for an additional 5 days, if after you do 
leave this hearing, if you would like to submit in writing any 
additional comments or thoughts that you have that you would 
like to be included in this record. Please feel free to avail 
yourself of that also.
    But I wanted to give you advance warning before I called on 
you at the end.
    So on the question of single-point vendors and the effect 
on small business, we will begin with Secretary Shyu.
    Secretary Shyu. Thank you very much for the question. This 
is an area that we have significant concerns. As you well know, 
due to the instability of the financial budget, it is very 
difficult for the primes even to do the planning, much less 
telling them the impacts to their immediate suppliers, the 
second tier, or the third tier, or the fourth tier on down.
    And that is the biggest concern that we all have across the 
board. We look at our industrial base impacts continuously, 
okay? We look at not just on the production side. We look at 
the design aspect. We also look at component suppliers as well.
    So, my fear is due to the instability of the current budget 
environment, it is very, very difficult to tell these companies 
that is multiple layers down, that provides a niche capability, 
how long they can survive the downturn because we don't have 
clear visibility in terms of the gap.
    So, that is my biggest concern, sir.
    Mr. Turner. General Barclay, any comment?
    General Barclay. No, sir.
    Mr. Turner. Secretary Stackley.
    Secretary Stackley. Yes, sir. Let me throw some numbers 
your way to try to characterize this a bit. Something north of 
greater than 20 percent of the Department of the Navy's 
procurement and service contracting goes directly to small 
business. And of the balance that goes to larger defense 
contractors, another 20-plus percent goes to small business.
    So in total, small business is our base in terms of our 
spending, either direct or indirect through the defense 
contractors. They bring a cost structure and agility, a degree 
of innovation that is critical to development on the front end, 
and also response to emerging requirements on the back end. So 
they are core to the way we do our business.
    And then let me offer you now some more specific examples. 
I am just going to quickly tick through some of these. First, 
the Department of the Navy is extremely unique in terms of some 
of our platforms, specifically nuclear submarines, and nuclear 
aircraft carriers. We build them at very low rates and no one 
else does. So the components that are assembled into the 
construction of these critical platforms, much of that 
industrial base is small business, almost a cottage industry 
that builds small numbers of critical items.
    We have to work that small business base directly to ensure 
its long-term viability, its health and welfare come all of the 
ebb and flow of the budget cycle. So we maintain a very hands-
on relationship with that particular small business.
    Let me shift over to the aviation side. A specific example, 
there is one small business manufacturer in the country that is 
responsible for the forging, the hobbing and machining of most 
of the rotor heads for all of our rotary programs, one small 
business manufacturer, a single point of failure. And in fact 
he is struggling at this particular time.
    So we are working closely with our aviation prime 
contractors to ensure that we work with their critical vendor 
as we work through the uncertainty of our programs during this 
period of time.
    On the R&D [Research and Development] side of the house, we 
have a small business contractor who has brought forward a 
concept for going beyond what we refer to as ``open systems 
architecture,'' in terms of automated test and retest. 
Extremely innovative, our large defense contractors are turning 
to this one source to figure out how to break down some of the 
technical barriers in our test programs to drive costs out. 
That small business contractor, his cash flow is hurting as a 
result of the current sequestration-CR uncertainty.
    Further examples abound, but we are working directly with 
the small businesses, through roundtables around the country, 
as well as through our defense contractors, to identify the 
single points of failure and what we need to do near term, long 
term to ensure they are not inadvertently taken down by the 
current delays and potential cancellations in our contracting.
    Mr. Turner. Admiral, General, any comments?
    General Davis.
    General Davis. Sir, just a couple of points. I will 
highlight that probably just under 40 percent of our Air Force 
TOA [Total Obligation Authority] falls in the O&M [operations 
and maintenance] regime, and that is going to be the first 
thing that will start to drop off here very quickly. That is 
where our biggest challenges are. And that is where most of the 
contracts go to small businesses.
    So anything across our bases and installations where just 
the most routine services generally are all set aside for small 
businesses. So out of roughly $44 million of O&M, a very large 
chunk of that goes to small businesses to do maintenance on 
buildings; to do military construction, which we have virtually 
no money for, to be able to run the services that operate most 
of these installations.
    So anything related to any of our O&M accounts, which are 
certainly going to be the ones to suffer first, will feel the 
biggest extent of that.
    As I mentioned in the opening statement, we know right now 
we are $170 million behind where we were in small business 
obligations compared to this point last year, simply because 
they have started pulling back the obligations on O&M because 
they know what is coming, to be able to just keep our fighter 
squadrons flying at a certain level.
    Second part of it kind of goes to what Secretary Stackley 
was mentioning. For us, it really starts with the old mantra, 
``for want of a nail, the shoe is lost, the horse is lost, the 
war is lost.'' Our small businesses, the ones I have had 
experience with over time, and the ones that we continually 
have pop up that surprise us when they have a problem--because 
it does not take long for a small business to get in trouble 
real quickly.
    We have small businesses that basically are responsible for 
doing things like building the fuses for most of our weapons. 
And it is the most challenging thing. It is the most 
underappreciated thing, but it is the one thing that will cause 
the reliability of our weapons to fail instantly.
    We have had some very good success stories and we continue 
to bring these people on. We had a small individual in 
California once that manufactured surfboards. He competed and 
successfully won, and builds a very key component now as a 
bigger business for our joint air-to-surface standoff missile, 
JASSM [Joint-Air-to-Surface Standoff Missile], which is a key 
component of Global Strike.
    We currently have a woman-owned disadvantaged small 
business that builds the target drones for our training across 
the Gulf and across the Pacific. And it is these weapons, these 
missiles, these drones that provide our crews the ability to 
employ like in wartime.
    So, as you can see, they are not necessarily the leading 
edge on our weapons, but they are things we cannot execute if 
they are not there. And unfortunately, those would be the first 
ones to start fall off, because we will give up on training. We 
will give up on those areas first to be able to preserve the 
basic readiness we need for the AOR [Areas of Responsibility] 
and things like that. So we will see the fall-off in the small 
businesses to take hold. And as I mentioned, we are already 
seeing that to begin.
    So really for us, the capability of the Air Force hinges 
on, in many cases, that nail that we don't have for the shoe. 
Then we have to wait a year later to figure out just how bad a 
shape we are in to try to go reconstruct part of that industry 
we don't have.
    Mr. Turner. I turn to my ranking member, Ms. Sanchez.
    Ms. Sanchez. Thank you, Mr. Chairman.
    Secretary Stackley, I actually would love for you to send 
over a report that shows that 40 percent of Navy acquisition 
goes to small business, because I have this discussion quite a 
bit, with all respect to our Services, with Nydia Velazquez, 
our ranking member on Small Business. And she feels, over time, 
and I have felt over time when I actually see the numbers, that 
we have really not ever met our goals probably in any of the 
Services with respect to where we want a piece of the action 
going to small business.
    So, I would appreciate in detail any report you have that 
shows me that about 40 percent goes toward small business.
    Secretary Stackley. Yes, ma'am.
    [The information referred to can be found in the Appendix 
on page 93.]
    Ms. Sanchez. That is another subject, but just because you 
mentioned it, I would love to see that.
    Secretary Stackley. Can I clarify here?
    Ms. Sanchez. I heard 20-20, but----
    Secretary Stackley. Right. Yes, ma'am.
    Ms. Sanchez. Okay. So, let me sort of place this in context 
because, you know, one of the things that the President has 
been doing is to go around the country and to talk about what 
sequestration might look like. So let me go down the line, 
because you have all been associated with the military in one 
way or another for quite a while, and ask you, to each of you, 
and I just would like a yes or no answer to this: waste, fraud, 
standing around, have you ever seen it in the workplace?
    Secretary, have you ever seen any waste or fraud or 
standing around or not correctly used resources that the 
taxpayers put towards the military? Have you ever seen that?
    Secretary Shyu. Yes, ma'am, there is.
    Ms. Sanchez. Yes.
    General Barclay. Yes, ma'am.
    Ms. Sanchez. Yes, of course.
    Secretary Stackley. Yes, ma'am.
    Ms. Sanchez. Yes.
    Admiral Myers. Yes, ma'am.
    General Davis. Yes, ma'am.
    General Moeller. Yes, ma'am.
    Ms. Sanchez. Okay. You know, when taxpayers sit here and 
get angry about things, they are paying taxes and they are not 
being able to make ends meet or their lifestyle is changing or 
their quality of life is changing on them. So, you know, they 
believe that there is waste, fraud, abuse and other things 
going on. And in any workplace, you see things where efficiency 
isn't at 100 percent for whatever reason.
    Here in the Beltway, we have the Pentagon, the largest 
office building in the world. Now, we have Pentagon, which some 
people are calling the ``Pentagon South,'' another huge office 
building just south of that, that is going to be filled up with 
more Pentagon contractors and everything to it, so we are 
definitely growing all of this.
    You know, I had a very close person to me who was in the 
military--I won't say what Service--who said at the end of the 
month, when they had jet fuel left over, they would go out and 
burn it down, because they were afraid they wouldn't get the 
same allocation the next month.
    I have had people tell me--believe me, I sit on planes and 
people recognize who I am, a lot of armed forces people. And 
they tell me, you know, September comes around--October 1st is 
the first date, September comes around, and last month of the 
fiscal budget for the Federal Government, and I have got the 
``vultures''--that is what one of them called it--``vultures 
coming to my door telling me I have got to spend down the funds 
at the end of the month. I need new computers; I need new 
things, even though,'' he said, ``I just got new computers this 
year. And here I am basically signing away contracts or getting 
things or requisitions or whatever, and I am getting more stuff 
in.''
    By the way, this is usually at the lieutenant colonel level 
or the major level where I get these, you know, ``If you would 
just let me cut the budget, Congresswoman, I would know how to 
do it, at least in my area of the Pentagon.''
    I say all of this because this is the context on which we 
are trying to fight for what we need versus what sometimes the 
taxpayer out there thinks is really going on.
    So I think when I look at all of you that you have been in 
this long enough to understand, you know, we need to figure out 
how we get some of this under control. So maybe for, you know, 
into the record, but not directly today, you can give us some 
suggestions of how we get this more in line so that the 
American taxpayer feels confident when we are telling them we 
have efficiencies, we are effective, even when we have the type 
of cost overruns that they hear about in the newspaper or on 
the television.
    [The information referred to can be found in the Appendix 
on page 94.]
    Ms. Sanchez. My question--I am sorry, but I wanted to sort 
of give you an indication of where the taxpayer is coming from. 
And that is why it is hard, politically, for us not to cut. 
Because they do believe there are those inefficiencies, those 
abuses, et cetera.
    So let's go to an area; Mr. Turner and I will be making a 
trip to see the F-35 [Lightning II Joint Strike Fighter]. And I 
have just been talking to some of our European allies about 
their acquisition of the F-35. And you know, I have been a 
strong proponent to do one production airplane that can be used 
across the Services, that will, in the long run, we hope, bring 
down the operation and maintenance and training cost for that 
production plane. But we have had a lot of problems with it.
    And, specifically, recently, we have had the problem of the 
helmet design, for example. Jitter of images, night vision, 
acuity shortfalls; you know, there is a whole bunch of stuff 
behind that. So, I understand that we are trying to fix those 
problems so that we can make the plane work well.
    Can anybody tell me what sequestration or the CR will do 
with respect to us trying to get that back on schedule and in 
line so that we can provide a top plane for our Services that 
is going to do what we think it should do?
    Secretary Stackley. Let me start, ma'am.
    With specific regard to the Joint Strike Fighter, the 2013 
budget request includes about $2.6 billion for continued 
research and development and another $6.5 billion for 
procurement of aircraft parts, procurement in support of 
training, et cetera, et cetera.
    The specific question and issue that you raised with regard 
to helmet-mounted display system, that is one of many ongoing 
developments associated with that critical capability. When we 
look at continuing resolution, and we look at sequestration, in 
terms of that critical program, our top priority is to keep 
development on track. We have about $5 billion remaining in the 
FYDP [Future Years Defense Program] in terms of development 
funding to complete the remaining development, correction of 
technical deficiencies that have been identified thus far, 
testing and evaluation for the program.
    If we don't keep the development on track, the whole 
program goes off track. So that is our top priority. The team 
that is in place is keeping focused on resolving those 
technical issues and executing the test program that has been 
laid out to date. And we will continue to work with Congress to 
weather CR, sequestration.
    Ms. Sanchez. Do you believe that either the sequestration 
or the CR will affect that development and that team keeping 
on?
    Secretary Stackley. The answer is yes, if we do not have 
any flexibility to be able to be able to move money to address 
the priorities within the program. So, for example, the $2.6 
billion associated with research and development, the 9 percent 
across-the-board cut associated with sequestration, is going to 
remove about $250 million. That is in 2013. Sequestration goes 
against unobligated balances. So, in fact, there is another 
couple of hundred million dollars across the program that is 
affected by sequestration.
    What we have got to do is manage cash flow, manage critical 
path, and, hopefully, gain some flexibility to be able to 
realign funding to go after those priorities, so that the 
development schedule doesn't delay, doesn't protract, doesn't 
extend and push ultimate fielding of that aircraft to the 
right.
    Ms. Sanchez. And my last little piece to that, if you went 
the way of an alternate helmet design, would you have the 
flexibility as things sit now, if the CR just continued as it 
was? Or because of sequestration, would you have the 
flexibility to move to an alternate helmet design?
    Secretary Stackley. Okay, first I want to be clear. The 
progress on the helmet-mounted display system is good. We see 
those issues as, basically, being retired in due time. However, 
when they first emerged, we did set up an alternative path to 
have an exit ramp from the HMDS [helmet-mounted display system] 
to a more traditional legacy type of capability. And we are 
keeping that on track for a downstream decision.
    In the face of sequestration and CR, that would be at risk. 
If we do not, as I was describing earlier, have the ability to 
move funding to priorities, then we would be staring at, we 
have got two efforts, but one capability inside of this 
critical program. If the helmet-mounted display system looks 
like it is going green, then we would end up dropping the 
alternative parallel development.
    Ms. Sanchez. Thank you, Mr. Chairman. I have other 
questions, but I will put them in for the record.
    Mr. Turner. Mr. Bishop.
    Mr. Bishop. Thank you, Mr. Chairman.
    I suppose, General Davis, this would be addressed to you, 
or unless you want to defer to one of your colleagues here on 
the panel.
    I would like to ask a question about nuclear modernization, 
even though I have a hard time saying that word, 
``modernization''--no, ``nuclear.'' I just would like to like 
to ask for the impact of maybe the Air Force or the Navy--the 
impact of sequestration on modernization efforts? Or is there 
simply, in the base, a lack of funding that constricts those 
modernization efforts in the first place?
    General Davis. Sir, I will start, then I will let General 
Moeller kind of come. We just, as of 2 days ago, completed a 
major review down at Air Force Global Strike Command of all 
their programs, their acquisition programs and their issues.
    Mr. Bishop. Mm-hmm.
    General Davis. And so, there are two issues here, as you 
mentioned. We have significant modernization that we have to 
undertake now to be able to replace key items in our inventory 
that will reach a service life. And that has to start now.
    We have three or four major programs we are trying to begin 
right now that have some uncertainty as we look at what the 
budgets will be. We need to replace the gravity-drop B61 
[nuclear bomb]. We need to replace the air launch cruise 
missile. We are working very hard to replace the aging 60-plus-
year-old B-52 [Stratofortress strategic bomber] with a new 
bomber that is in our program right now.
    And that is just the air-breathing side. If you bring in 
the complexities of the systems that have to go on that, such 
as nuclear command and control, that, in some cases, is on a 
single thread type of capability right now, we have major other 
programs that need to be started within Global Strike Command, 
which we do not have the ability to do so.
    And then if you work through the missile side of it, our 
fuses are aging out and other issues that we have to deal with.
    So, right now, I will tell you, within the budget there is 
not the capability within our current constraints to be able to 
do all of those programs. So there is very much the debate 
going on about where we begin, where we invest, and which ones 
we take on next.
    Mr. Bishop. Maybe before General Moeller starts, I can try 
and narrow the focus a little bit. I do have some concern, at 
least personally, about our research and development that we 
are putting into the Minuteman III [LGM-30 land-based 
intercontinental ballistic missile], the ICBMs 
[intercontinental ballistic missiles], the Navy's D-5 [Trident 
II fleet ballistic missile], especially when the Russians seem 
to be going into a new generation, regardless, into these 
particular areas. And we don't even have the money to continue 
a warm-line funding past 2020.
    Where that takes us in 15 or 20 years, to me, that is a 
significant issue and a frightening issue. And as I understand, 
you are talking about it is not really going to be impacted by 
sequestration because we haven't put enough money in that--we 
haven't put a significant amount of money in that funding line 
in the first place.
    General Davis. Sir, I would say that the sequestration 
impacts on our nuclear forces only exacerbate the problem. We 
have a much bigger issue as we try to figure out how we divine 
the total Air Force budget in the future years to be able to 
meet those needs.
    Mr. Bishop. General, I cut you off.
    General Moeller. I can only add just a small piece here, 
Congressman, in that it is a function of delaying programs and 
the modernization efforts, but it is not an immediate impact. 
It is, in fact, having to determine strategic choices that will 
affect us in fiscal year 2016 and beyond.
    Mr. Bishop. Thank you.
    Secretary Stackley. Sir, I would like to go ahead, and you 
touched on the Trident Program. The Trident II D-5 life-
extension program is, in fact, very mature right now. In the 
2013 budget request, we have got north of $1.2 billion that we 
have requested, that you have authorized to address 36, 37 
weapons in 2013 alone. Sequestration, clearly, throttles that 
back.
    The life-extension program is essential to ensure the 
continued service provided by the D-5 out through the 2042 
timeframe. And it is closely coupled, not just with the current 
Ohio [Ohio class ballistic missile submarine] program, but the 
replacement program, which the development is also inside--the 
funding request is also included in the 2013 budget request, 
which is also throttled.
    Mr. Bishop. Gentlemen, I appreciate that answer. I have 
said in other venues before, and I truly believe this, if 
sequestration was the first cut we were asking of the military, 
I wouldn't really have much sympathy for you. But whereas every 
other area of our Government has been increasing its funding 
over the past 3 years, the military has taken not one, but 
three cuts.
    So if it hadn't been for the first or the second cut, which 
put you back almost $1\1/2\ trillion in some of these funding 
areas, this third cut is going to be the one that when you talk 
about doom and gloom coming, I actually believe this.
    And I am not skeptical of some of the statements that are 
coming from our military, simply because this happens to be cut 
number three. And so I appreciate--and this is one area in 
which I would have basic concerns of where we will be 20 years 
from now because of the funding decisions we are making right 
now.
    Mr. Chairman, I have no more time, but I will yield back 
what I don't have.
    Mr. Turner. Very good. Thank you.
    Mr. Barber.
    Mr. Barber. Thank you, Mr. Chairman. And thank you to all 
of the witnesses for being here today.
    I wasn't here when sequestration was voted in in August of 
2011. But I tell you this, I wouldn't have voted for it. As the 
chairman pointed out in his opening remarks, it was a disaster 
waiting to happen. And now we have less than 14 hours before 
the clock ticks down.
    When that vote was taken, I had just returned to work 
following my recovery from the wounds I received on January 
8th. And I saw the Congress inflict a wound on this country 
that we thought we would heal by now.
    We haven't, and we have failed in our responsibility to do 
so.
    Instead, we have squandered, week after week, the time we 
had to deal with this problem, long before we got to 13 hours, 
47 minutes and 15 seconds before the sequester kicks in.
    Included in that delay, in that time, we gave ourselves 2 
months back on January 1st to come to grips with the problem. 
And we failed again.
    Instead, we have put on the floor, time and time again, 
motions to adjourn, going home. I love to go home, but I would 
much rather be here working on this problem with my colleagues 
on both sides of the aisle.
    I voted against all of those adjournments, because we 
should be here, dealing with this issue.
    I grew up in a military family. I have worked for a long 
time with our men and women in uniform, with the civilians who 
work on bases, in garrisons across my district. I work with 
private companies that are critical to our defense, our 
national defense.
    And we have absolutely squandered the time we could have 
taken to fix the problems that they are facing.
    There is a morale problem in our military as a result of 
this uncertainty. There is a morale problem and an uncertainty 
in the economy as a result of our inaction.
    Last Friday, I met with a group of representatives from my 
district, civilian employees of the Department of Defense, 
companies that provide for our national defense, firefighters, 
and others.
    And one of my constituents described what we did in a way 
that I think is very apt. He said, ``when Congress approved 
sequestration, it built a nuclear bomb which it never intended 
to explode. It designed a poison pill it never intended to have 
us swallow.''
    But here we are, now 13 hours, 45 minutes, 21 seconds and 
counting, before the bomb goes off and the pill is ingested.
    It is simply unacceptable that we got to this irresponsible 
point.
    When I came here last June, I came not as a partisan, but 
prepared to work across the aisle with anyone who was willing 
to find common ground to resolve this and other critical 
issues. And I remain here ready to do so.
    My district is home to the Army garrison at Fort Huachuca 
in Cochise County, to the Davis-Monthan Air Force Base in 
Tucson, and just across the line--I claim it as if it was our 
own--the Air National Guard Fighter Wing. These are vital 
elements in our national defense and in our local economy.
    And my question, Secretary, is for you in regard to the 
impact that sequestration and the continuing resolution will 
have. You made some important points that really struck me.
    In your testimony, you said, for example, that every single 
piece of equipment used by our soldiers will be impacted if 
sequestration goes into effect. And as a result, equipment will 
not be modernized, timelines for delivery will be delayed, and 
costs will be overrun.
    It is clear to me, at least, from your testimony, that 
sequestration will not only impact our forces in the next weeks 
and months, but will set them back for years.
    My question is, since it appears in a few short hours, we 
will be allowing sequestration to kick in, we are likely see 
furloughs in our Army, could see losses in operability, how 
long, in your view, and how, in your view, will the economy 
recover from the $479 billion in cuts we have already taken and 
the further cuts that will take effect in this fiscal year?
    Madam Secretary.
    Secretary Shyu. Thank you very much for the question. I 
think your data are correct in terms of the impacts. And that 
is my biggest fear. The problem is we are facing, with the CR 
impact today, to do programs we can't start, production rates 
that were supposed to ramp up which we cannot do. There is a 
program that is in development that we arbitrarily put a 
ceiling on, so it is going to impact in stretching out our 
programs and increasing the cost to the Army.
    On top of that, now we are having a sequestration, which 
cuts uniformly. It is a buzz saw cut across all the programs.
    So it is a double whammy on the impact of all of our 
programs.
    So how do we recover from that? You can only recover if you 
have a full understanding of the limitation of the cuts and 
what is going to happen next. If we had a budget and if we know 
exactly what is going to happen this year and future years, we 
can at least start to do the detailed planning.
    But the tremendous uncertainty that we are facing today is 
posing these challenges, because I can't tell, as my 
counterparts have already articulated, since each of our 
programs are being cut, we have to rework every single program.
    To understand the long-term impact, it is hard to judge, 
without knowing what is going to happen to the future budgets.
    So I have some significant concerns, sir.
    Mr. Barber. Well, I think it is well-said. You know, when I 
was at Fort Huachuca a week ago, a week ago tomorrow, I was 
talking to some local businesses. They are not involved in the 
defense industry, but very much affected by it.
    I talked to a woman who runs a car dealership. And she 
hasn't had an order for a car in almost a month. And why? 
Because people don't know if they are going to have a job or if 
their job is going to be cut by 20 percent.
    Let me just ask one quick question of you, Lieutenant 
General Davis.
    I appreciate your testimony. We have taken, I think, a very 
irresponsible approach to our fiscal crisis. And just as our 
constituents--my constituents--could not cut their budget by 10 
percent without going into foreclosure if they cut their 
mortgage, or having their car repossessed if they cut that, 
neither can companies nor our Department of Defense.
    So I want to ask you, General, how do you build 90 percent 
of an airplane and how do you build 90 percent, in the case of 
the Navy, of a submarine? How do you make these decisions about 
which programs and assets to fund and which to leave behind?
    How will you determine the priorities given the situation 
we are facing, which hopefully still can be reversed in due 
course. But if it does not change, how do you make these 
decisions? What priorities will you be looking at, from the Air 
Force perspective moving forward, if nothing changes?
    General Davis. Yes, sir. I think it starts back where our 
Chief and Secretary have testified, that there are some very 
key priorities within the United States Air Force, and it 
starts with modernization.
    We have fighters that are approaching 25 years old, 
trainers that are 40 years old, bombers that are in excess of 
30 years old. So we have had to take what we have within our 
current modernization budget of roughly $35, $37 billion a 
year, and try to figure where those priorities. Our top three 
priority programs, the tanker, the bomber, the F-35, are about 
15 percent of that budget.
    And it is clearly imperative that, again, back to if we are 
going to maintain the missions that you have given the United 
States Air Force, that those have to be modernized.
    So that means that other programs, of lower priority, if we 
are given the flexibility, will have to pay that 10 percent 
that will drop from those programs at some point.
    And it will be very insidious as we go through this. As you 
take 10 percent out of the F-35 program, you lose a couple of 
airplanes this year. And then you lose a couple more next year. 
And then the challenge as we go through that program in the 
outyears, when we ramp up production, it gets quite significant 
numbers.
    So again, it starts with the priorities that the Nation has 
given the Air Force. It starts with how the Chief and Secretary 
put those priorities into play within our budget. And then we 
go execute the programs to meet those, and we decide where we 
fill in that 10 percent and from what program it comes from.
    And that bottom 20 percent to 30 percent of our 
modernization budget will be the first casualties of those 
programs.
    Mr. Barber. General, you just said something I think is 
very important. You said, ``given the flexibility,'' you will 
make decisions in a different way than you would without that 
flexibility.
    Hopefully, the least we could do is give you flexibility. 
But what if it doesn't happen? What if you don't get the 
flexibility?
    General Davis. Sir, then, if that is the case, and we have 
done this in many cases in the past, you take a very surgical 
cut to pieces of that program that will move to the next year.
    And then, as we often are asked to do, we tell the program 
managers, ``tell me how you are going to live with that.'' And 
next year, we will tell them the same thing, and we will ask 
them the same question.
    So what this means is that these programs that already, as 
was mentioned, somewhat struggle, they struggle even more as 
you push that capability piece out a year or a year or a year, 
and that falls off.
    So you try to target the least important of those 
capabilities. You try to target, as you can, most of the 
inefficiencies and waste that may exist in the programs, 
because it does.
    But very often, after you do that once or twice, you are 
now cutting the capability you asked to have in that program to 
begin with.
    So we will do that, and have to do that across the board. 
And that is where the utter inefficiency of the process really 
takes hold, and that is where a lot of the waste occurs, 
because when you are not given the flexibility to manage the 
budget you have against your priorities, it creates extreme 
inefficiencies, and you lose capability quickly.
    Mr. Barber. Thank you, General.
    Thank you, Mr. Chairman.
    Mr. Turner. Mr. Barber, thanks for the questions.
    General Wissler, Secretary Shyu and Secretary Stackley have 
given us a great understanding of the impacts of the CR and 
sequestration and the overlying/arching issue of the 
uncertainty of the CR and the sequestration, that, in fact, 
operating in an environment of uncertainty it makes it 
incredibly difficult for planning.
    The clock that we have that shows that we are now about 
13.5 hours from when sequestration is going to hit, the 
sequestration that was never to happen, doesn't illustrate 
effectively that, in fact, sequestration is a 10-year program.
    This is the first hit of sequestration that is going to go 
into place. Even if there is a patch for this fiscal year, we 
are facing this again just at the end of the year, with 
sequestration coming again, and then for the next, including 
this year, 10 in total.
    If sequestration is fully implemented--and there are those 
who say we should just let it sit. You know, I am very mindful 
of the fact that defense spending is less than 18 percent of 
the overall Federal budget, and we are going to have 50 percent 
of the overall cost-cuts fall on less than 18 percent of the 
budget.
    But if that happens, could you tell us what your 
procurement profile looks like over the next 10 years, assuming 
that sequestration is fully implemented?
    If it is not just a year after year patch, and the 
uncertainty that we heard from the two secretaries impacted, 
but actually that the cuts are put and left in place, what 
programs would survive?
    General Wissler. Mr. Chairman, we have a fairly small 
procurement budget as it is, so we have already had to take--as 
a result of the previous cuts, we have had to look at all of 
our investments in a portfolio approach. And I will use our 
tactical vehicle strategy as an example of this 10-year 
problem.
    So, if we look at our tactical vehicle portfolio, we have 
several key pieces in that portfolio that we must have in order 
for marines to be successful on the battlefield, not only 
today, but in the future. Certainly a future capability would 
be the Amphibious Combat Vehicle, and the ability to preserve 
our ability to come from the sea to place our forces ashore 
wherever the President decides they need to be, in a safe and a 
combat-effective manner.
    We also have a responsibility to protect our marines as 
they go ashore from the threats that occur on the shore. And 
our current piece of that is our investment in Joint Light 
Tactical Vehicle. But in order to be able to afford a 
modernization over time in our entire tactical vehicle 
portfolio, we have had to, in a sense, put together timing for 
the investments in Joint Light Tactical Vehicle, Amphibious 
Combat Vehicle, upgrades and safety upgrades to our seven-ton 
truck, our large heavy haulers, as well as our Light Armored 
Vehicles and other members of that portfolio.
    Sequestration, in the 1st year, will cause delays, delays 
in JLTV [Joint Light Tactical Vehicle] that could be as much as 
2 years, and depending on the second, or the subsequent impacts 
to that program, could delay Joint Light Tactical Vehicle to a 
point where we won't be able to buy both Joint Light Tactical 
Vehicle and Amphibious Combat Vehicle at the same time.
    If that happens, we will have to scale back our purchase on 
Joint Light Tactical Vehicle. Figured into that mix, in the 
middle, would be our Marine Personnel Carrier. We can't afford 
to fully invest in Amphibious Combat Vehicle for our entire 
lift requirement. We have a requirement to move marines around 
the battlefield in several of our operations plans and other 
things around the globe.
    What would happen over time is we would be forced to make a 
decision on an investment, either level of or continued at all, 
in Joint Light Tactical Vehicle or the Marine Personnel 
Carrier.
    And the reason that we would have to do that is because the 
Amphibious Combat Vehicle is replacing an amphibious assault 
vehicle that is now 40 years old, and will be 50 years old by 
the time we start to field those capabilities, a vehicle that 
doesn't have right now the ability to allow us to do what we 
need, given the security environment that we will operate in 
with our partners in the United States Navy.
    That is the 10-year impact in that. It will cause us to 
make very hard decisions about our portfolio.
    Our program is designed as a 10-year program. We 
intentionally looked at a 10-year investment program so that we 
could maximize our opportunity over time to use our limited 
assets. So that is how that 10-year program will affect us. It 
will cause us to make some very significant decisions, not only 
in those three vehicles that I mentioned specifically, but 
across our entire portfolio.
    Mr. Turner. Ranking Member Ms. Sanchez.
    Ms. Sanchez. Mr. Chairman, I just wanted to add for the 
record that the sequestration talks we are talking about are on 
top of the cuts that we have all already worked on, these some, 
depending on how you count it, about $487 billion worth of cuts 
over 10 years, having started this past year.
    So it is not like defense hasn't already taken--started 
down a path of taking its set of cuts. Now, Congress can 
always, and the President together can always reverse some of 
that, but I should note that, for the record, we are already on 
schedule, and we have already begun to do the drawdown of $487 
billion cuts to our military services.
    Just wanted to put that on the record.
    Mr. Turner. Mr. Barber, any closing comments before I offer 
closing comments to the panel?
    Mr. Barber. Thank you, no, Mr. Chairman.
    Mr. Turner. Thank you. Well, as I said when I opened this, 
I voted against the this mess, because I believed that we would 
be right here, right where we are, with this clock ticking 
down, 13 and a half hours away from the cuts that were never 
supposed to happen.
    This obviously is a failure of leadership. But the White 
House, the Senate, and the House have all said these are the 
cuts that shouldn't happen and wouldn't happen. And on behalf 
of, you know, the members of this subcommittee, let me tell you 
how sorry we are that we are in this situation and watching the 
Department of Defense and our men and women in uniform be 
suffering what is a process that is egregious, was set up to be 
irresponsible, and certainly needed to be avoided.
    With that, I want to give each of you an opportunity, if 
you would like, to make any closing statements on both the 
impacts and your thoughts as a result of this hearing.
    And I will start with you, Secretary Shyu, if you would 
like.
    Secretary Shyu. Thank you, Chairman.
    I appreciate the opportunity to testify in front of you 
today. I think the congressmen here certainly fully understand 
the impact of not just what we have already taken in terms of 
cuts, the significant chunk, but the CR impacts on top of that, 
and then the addition of the sequestration. So it has been a 
significant amount of turmoil within the building of planning, 
replanning, and what-ifs.
    This constant turmoil is creating significant impacts on us 
looking ahead. And this type of instability has tremendous 
rippling effects, not just on the price, but on the second, 
third, fourth level of tiers of suppliers that we have.
    And in addition to that, it is the unintended consequences 
of folks knowing that they will get a budget cut, they are not 
going to upgrade their kitchens, they are not going to do 
repairs. There is a huge rippling effect that will happen. And 
you may not see it exactly tomorrow, in 13 hours, but it is 
going to happen as a function of time.
    So, anything you guys can do to help us sort through this 
mess will be sincerely appreciated.
    Thank you.
    Mr. Turner. General Barclay.
    General Barclay. Yes sir, Mr. Chairman.
    Again, thank you for the opportunity to be here today. But 
to clearly state the impacts on the Army, if nothing is done to 
mitigate the effects of operations under a continuing 
resolution, the shortfalls in our funding of overseas 
contingency funds and operations, and the enactment of 
sequestration, the Army will be forced to make dramatic cuts to 
its personnel, its readiness, and its modernization programs, 
and hence putting our national defense at risk.
    And I thank you for the opportunity to submit in writing 
and we will get that to you in the future.
    Thank you, sir.
    Mr. Turner. Thank you, General.
    Secretary Stackley.
    Secretary Stackley. Yes sir, I am going to revert a little 
bit back to my opening statement with a slightly different 
twist. We recruit America's youth to don the cloth of the 
Nation. It is incumbent upon us to develop and deliver the most 
capable weapons systems we can, to put them in their hands, and 
to properly train them before we send them over the horizon to 
defend our Nation's interests.
    This environment that we are in places that at risk. We owe 
those men and women far better, far greater. We need to go 
about that business.
    Thank you.
    Mr. Turner. Admiral Myers.
    Admiral Myers. Chairman Turner, Ranking Member Sanchez, 
members of the subcommittee, for the Navy, the immediate 
impacts are readiness and training will be significant, the 
combination of sequestration and a full year of continuing 
resolution.
    In the long term, without action from Congress to replace 
sequestration, we will be compelled to dramatically reduce our 
fleet size, limit our ability to support the defense strategic 
guidance, and unable to fully support the global force 
management allocation plan for our combatant commanders.
    As the Chief of Naval Operations testified to the full 
committee a couple of weeks ago, the important qualities of our 
naval forces are the readiness to respond to crisis, and 
persistent forward presence. The Navy and Marine Corps are the 
first responders to crisis such as a terrorist attack, military 
aggression, or a natural disaster.
    Operating forward at the strategic maritime crossroads, 
such as the Straits of Malacca, Hormuz, or Gibraltar, naval 
forces can contain conflict, deter aggression without 
escalation, and build partnerships.
    Naval aviation is a critical component to the Navy's 
ability to carry out our full-spectrum operations. We do 
everything from delivering humanitarian assistance in disaster 
relief, at home and overseas, to maritime security operations 
to ensure safe passage of commercial vessels, to high-intensity 
sea control and power projection in a major contingency.
    Helicopters and fixed-wing aircraft operating from nuclear 
aircraft carriers, large-deck amphibious ships, and shore 
installations, and helicopters operating from cruisers and 
destroyers, complimented by unmanned aerial vehicles, are key 
contributors to the capabilities of the Navy and Marine Corps.
    The continuing resolution is based on fiscal year 2012 
funding levels, and therefore includes fewer operating dollars 
than we proposed and Congress authorized. Extending for the 
whole year in fiscal 2013, the CR would provide the Navy $3.2 
billion less in operating and maintenance funds than requested 
in our fiscal year 2013 budget.
    In addition we have growth, growth that was unplanned in 
terms of cost for emergent ship repairs and also for increased 
presence in the Arabian Gulf. Adding the combined effect of the 
continuing resolution, the emerging cost and sequestration, the 
Navy has an $8.6 billion shortfall when it comes to operations 
in maintenance accounts.
    For naval aviation, this shortfall results in reductions in 
our third and fourth quarter aircraft and engine depot 
maintenance. This is going to affect upwards of 327 aircraft 
that we were expecting to come out of that depot, and over 
1,200 engines and engine modules. Our maintenance backlog will 
increase and the work to complete critical aircraft end service 
repair for our F/A-18 [Hornet fighter jet] high flight hour 
inspections is an example of the delays.
    Mr. Stackley talked about furloughs and we are going to be 
furloughing or planning to furlough upwards of 186,000 
civilians. And this will also negatively impact our ability to 
complete our depot maintenance repair on aircraft and engines. 
Our backlogs are going to increase. We will have fewer aircraft 
available for fleet operations and fewer aircraft in the fleet 
for our fleet replacement squadrons, which are training the 
pilots.
    Looking past fiscal year 2013, the readiness for navy 
aviation, as well as the rest of the fleet, will continue to 
erode. It is going to erode and it is going to be visible with 
the material condition that we expect out on the flight line 
and on our ships. It is going to also show up in the reduction 
in the expected service life of our ships and aircraft. It is 
going to show up in the reduced proficiency of our sailors and 
their confidence to work on the aircraft and effectively repair 
them.
    And it is also going to damage the industrial base and 
increase the strain in the operational tempo of our sailors and 
civilians. We are going to have to look very carefully at the 
new capabilities that we are investing in, the things that we 
know we need to sustain the ability to defend this Nation. But 
we are going to have to fundamentally change the way the Navy 
is organized, trained, and equipped.
    To do that in a comprehensive and a deliberate manner, we 
have got to base our decisions on a careful reevaluation of the 
defense strategic guidance.
    Now, Mr. Stackley referred to the delay of the USS Harry S. 
Truman deployment. And we have reduced our carrier presence in 
the Gulf. We have reduced a number of deployments, 13 around 
the globe. The reduction and the delay of the Harry S. Truman 
deployment was all about trying to preserve longer-term and 
still robust naval presence in the Middle East.
    But without action from Congress to avert the combination 
of sequestration and the reduced discretionary caps, we will be 
continued to be forced to make hard decisions that are going to 
result in reduced overseas presence. Those decisions are going 
to reduce our ability to respond to crises and reduce our 
efforts to support vital national security missions like 
counterterrorism and illicit drug trafficking.
    Now, the Navy understands the importance of getting our 
Nation's fiscal house in order. And our role is to be good 
stewards of the resources. We should accomplish deficit 
reduction in a coherent and a thoughtful manner to ensure that 
we have the appropriate readiness, warfighting capability, and 
forward presence. And we ask that Congress act quickly to pass 
the fiscal year 2013 appropriations bill and avert 
sequestration.
    If that proves untenable, we ask for the flexibility to 
implement these reductions carefully and deliberately versus 
the indiscriminate manner of what is in the law today.
    Thank you for the opportunity to be here.
    Mr. Turner. Admiral, thank you.
    We are going to pause on closing statements. Ms. Duckworth 
has joined us and I know she has a question. So we will yield 5 
minutes to her and then we will conclude with the three of you. 
Thank you.
    Ms. Duckworth. Thank you so much, Mr. Chairman.
    So I continue to be appalled by the continued publication 
of reports that speak to DOD contracting and acquisition waste. 
It is GAO [U.S. Government Accountability Office] report after 
GAO report, and even the DOD IG [Inspector General] itself has 
found extreme waste.
    In 2003, the DOD's IG showed that $1 trillion that the DOD 
had spent could not be accounted for. More recently, in 2011, 
the Commission on Wartime Contracting reported that DOD wasted 
between $9 million to $12 million a day in improperly 
supervised contracts during wartime. In Iraq alone, between $30 
billion to $60 billion was lost to waste and fraud.
    I am concerned especially with sequestration. You know, as 
someone who had to buy my own flight gloves because we did not 
have enough to issue flight gloves to all of our pilots, it 
bothers me that we are wasting this kind of money.
    Ms. Shyu, I know you don't speak for the entire DOD, but 
could you speak to what the Army might be doing to ensure that 
their practices in terms of acquisition and contracting are 
better supervised, that you have a better idea of what is going 
on with the various business lines? I see, for example, that in 
2010, the Army was spending $119 million annually to lease 
3,000 cars at a price tag of $40,000 a year in Iraq, and that 
we have spent $36.3 billion alone with KBR. Yet this single 
contractor could not account for $100 million in waste of 
Government property.
    I am looking at the OIG's [Office of Inspector General] Web 
page right now, and just this month, the reports include things 
like ``recovering organization, OCIE [Organizational Clothing 
and Individual Equipment] equipment from civilians and 
contractor employees remains a challenge.''
    If we are going into sequestration and we are laying off 
psychiatric nurses at Fort Belvoir who take care of our wounded 
warriors and furloughing them, what are we doing to take care 
and ensure that we do a better job of safeguarding the 
taxpayers' dollars when it comes to contracting and 
acquisition?
    Secretary Shyu. Representative Duckworth, that is a great 
question. And first of all, I want to thank you for your 
service to the Army and to this Nation. You personally have 
sacrificed tremendously and I am incredibly grateful for what 
you have done. Okay.
    I do want to let you know that one of the key things that 
we have initiated about a year and a half ago is an overall, 
across-the-board look across contracting in our enterprise 
procurement review. We conduct those reviews. My deputy 
assistant secretary of procurement conducts the review on a 
monthly basis. I conduct the review on a quarterly basis.
    We now have visibility across every single command on how 
we are doing in contracting. We have established metrics. We 
have 15 set of metrics that we measure ourselves on. And we 
have the visibility to see how well we are doing within 
commands.
    And this is relayed up. We have now quarterly meeting with 
all the parts who are really head of contracting within the 
commands. We share lessons learned. We discuss issues and 
challenges we have.
    There has been a tremendous change, I can tell you. As a 
matter of fact, we will be more than happy to come by and brief 
you on all the things that we have been doing the last year and 
a half to improve this.
    Ms. Duckworth. Thank you. I would love to have that meeting 
and I would love to have that meeting with your colleagues in 
the other Services as well. I hope that it sticks. I hope that 
as we get into sequestration, that we are doing everything that 
we can. You know, some of these things are minor, improperly 
renewed contracts with vending machines on military bases, to 
the spectacular cost overruns of the F-35.
    But we have a force that has a National Guard where 50 
percent of its Black Hawk helicopters are still alpha models 
and have been in service for a good 30 years. And those 
aircraft need to be modernized. We need to certainly be 
modernizing the CH-47s, but we can't do that in a time of 
budget restrictions if we are continuing to waste those 
dollars.
    So I ask the whole panel to please remember that money is 
tight. We have to go after the fraud and abuse. And I know you 
are all doing the best job that you can, but we in Congress 
will do our job in watching you as you do that as well.
    Thank you.
    Mr. Turner. Thank you, Ms. Duckworth.
    Continuing, then, with closing statements, General Wissler.
    General Wissler. Chairman Turner, Ranking Member Sanchez, 
distinguished members of the panel, thank you.
    We have talked a lot today about delays in contracts. We 
have talked about inefficiencies that result from the lack of 
multiyear procurements. We have talked about the potential for 
cancellations, if we look at this in a 10-yearlong piece.
    But what we are really talking about in all of this is a 
direct impact to readiness and our ability to respond. The 
United States Marine Corps acts for the United States, if you 
will, as an insurance policy, a capability to respond around 
the globe when we are called, when called on, to that crisis 
that we may not have planned on; to do things like we did in 
Libya in 2011; to do things like we did in the Philippines most 
recently in humanitarian assistance and disaster relief; or 
Japan before that; or putting people ashore in Afghanistan.
    And that insurance policy is important. And what we will do 
over this extended 10-year period is reduce our investment in 
that insurance policy.
    Readiness is not a today thing alone. Readiness is both 
today and tomorrow's readiness. In the Marine Corps, we look at 
readiness across five pillars. We talk about our quality 
people. We talk about unit readiness. We talk about the ability 
to meet combatant commanders' demands. We look at it from an 
infrastructure perspective. We look at it also from the 
modernization perspective. And I talked briefly about 
modernization impacts earlier in simply our ground tactical 
vehicles.
    But what we will do is we will erode readiness both near 
and far term. And we will continue to have to pay near-term 
readiness, because of the conflict that we are currently 
fighting in Afghanistan, in order to be ready to do what we 
have to do today, mortgaging our long-term readiness. It will 
affect every phase and every pillar of readiness and it will 
cause us to reduce that investment in our insurance policy.
    And most importantly, it will affect people. And we briefly 
touched on some of the people today in our small businesses, 
and our people who ultimately won't be able to take the kinds 
of cuts and continue to support us with the tremendous service 
that they provide across a vast array of capabilities, be it 
small businesses that support trailers to the United States 
Marine Corps, to people who are working on very high-tech 
things like gallium nitride in our ground-to-air task-oriented 
radar. From the very complex to the very simple, we will hurt 
those people, their businesses.
    And more importantly, we will hurt our marines and we will 
hurt our civilian marines. It is already been talked about, 
furlough. But furlough will attack a very real part of 
readiness. It is not just people in the headquarters when we 
talk about our civilian marines who will go on furlough. 
Ninety-five percent of the civilian marines do not work in the 
National Capital Region; 95 percent of the civilian marines are 
turning a wrench somewhere fixing a piece of equipment, making 
something ready so that as we bring our forces back out of 
Afghanistan, they can, in fact, execute that pivot to the 
Pacific, that we can rebalance our force to the Pacific to be 
ready to deal with the next, most difficult security problem we 
have.
    In partnership with the Navy, we need to be forward 
present, and we won't be, because we won't have the resources 
to do it. The impact to our national strategy will be 
uncompromising. And then, in the end, as we go out and try and 
maintain this tremendous, All-Volunteer Force that has given 
their life, blood, and treasure over the last 10 years of 
combat, they will return home less trained, with a less 
positive view of what service in the cloth of our Nation means.
    And that will, in turn, make it more difficult to recruit 
the next generation of All-Volunteer Force that will continue 
to keep this Nation free. It starts from the very beginning and 
rolls through all of those five pillars to modernization. And, 
at the end of the day, it attacks the very heart of readiness, 
the readiness of the force represented by all the gentlemen and 
women on this panel, to do the things that the Nation expects.
    Thank you, sir.
    Mr. Turner. Well said, General.
    General Davis.
    General Moeller.
    General Moeller. Thank you, General Davis.
    Mr. Chairman, thank you, Member Sanchez. Members of the 
subcommittee, thank you very much for the opportunity to speak 
with you today.
    Rather than echo the concerns of the distinguished members 
of the panel, I will simply say that my number one concern, 
from a strategic planning and programming perspective, is the 
unprecedented levels of uncertainty.
    As we begin the fiscal year 2015 budgeting cycle and look 
out over the next 5 and 10 years, we don't know where the 
starting point is. We do know that we will have a bow wave of 
readiness, must-pay bills to repair the degradation and 
readiness that we see already. We believe that will take 
between 2, 3, 4 years, depending on the levels of degradation 
that we see over the course of the next year to year and a 
half. At the same time, we must also continue to support combat 
operations, sustain strategic deterrents, and support to the 
Joint Force anywhere on the globe.
    As we begin this planning cycle, I was talking to one of my 
civilian programmers who, in fact, will face the threat of 
furlough coming up. He said, ``this future budget planning is 
like painting a color-by-numbers picture while blindfolded in 
the back of a C-130 [Hercules tactical airlifter], flying 
through a thunderstorm.'' I think that everyone sitting here 
would echo that. That accurately describes the level of 
uncertainty that we face as we look to the future.
    We will have to make tough strategic choices to ensure that 
the Air Force balances competing requirements across our 
enduring contributions of air and space superiority; 
intelligence, surveillance, and reconnaissance; rapid global 
mobility; global strike; and command and control.
    The bottom line is, in this fiscal crisis environment, we 
believe the choice to preserve readiness will drive us to make 
tough decisions about slowing the pace of modernization, 
sustaining capability or capacity, and looking to programs or 
force structure in order to make up the difference.
    Through all this, our unchanging responsibility is to 
provide the world's most capable Air Force, ready to fly, 
fight, and win against any adversary today and tomorrow. 
However, in this current fiscal environment, the Air Force will 
be forced to make drastic choices that will have both immediate 
and far-ranging impact on our capability and capacity to 
provide air and space power effectively across the full 
spectrum of operational requirements.
    Thank you, again, for the opportunity to speak.
    Mr. Turner. I want to thank all of our panelists for giving 
us a very good understanding of what the impacts of both 
operating under a CR and the effects of sequestration will have 
on both acquisition in our industrial base. You will be the 
last word in the House of Representatives as sequestration 
falls into place in approximately 13 hours from now, the cuts 
that were never intended to happen.
    Thank you for your giving us this perspective. And we look 
forward to your continued dialogue, because without the 
additional information of what the effects of these cuts will 
be, we will not be able to amass the congressional and the 
presidential will to offset them. So please make that picture 
as clear as possible, even though the full effects won't be 
completely known until you are in the middle of implementation. 
But thank you.
    With that, we will be adjourned.
    [Whereupon, at 10:42 a.m., the subcommittee was adjourned.]
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                            A P P E N D I X

                           February 28, 2013

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                           February 28, 2013

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                  Statement of Hon. Michael R. Turner

      Chairman, House Subcommittee on Tactical Air and Land Forces

                               Hearing on

 Impacts of a Continuing Resolution and Sequestration on Acquisition, 
                  Programming, and the Industrial Base

                           February 28, 2013

    The Tactical Air and Land Forces Subcommittee meets today 
in open session to receive testimony on the impacts of 
sequestration and the continuing resolution (CR) on 
acquisition, programming, and the industrial base.
    This hearing continues the committee's extensive oversight 
and detailed examination of the harmful impacts of the 
continuing resolution and sequestration on the military's 
ability to protect national security interests of our Nation. 
We've already heard very candid testimony from the military 
service chiefs during the full committee hearing on February 
13th of how these forced budget cuts would be devastating to 
military training and force readiness. General Dempsey, the 
Chairman of the Joint Chiefs of Staff stated, ``We built a 
strategy last year that we said we can execute and absorb $487 
billion. I can't sit here today and guarantee you that if you 
take another $175 [billion] that that strategy remains solvent. 
. . . What do you want your military to do? If you want it to 
be doing what it is doing today, then we can't give you another
dollar.''
    Today, we plan to leverage the information gained from that 
hearing and provide our Members with the opportunity to gain a 
better understanding of how the CR and sequestration would 
impact defense acquisition programs, projects, and activities 
and their associated industrial bases around the country. One 
of the most tragic aspects of our current situation is that 
sequestration was never supposed to happen and there were 
numerous opportunities to avoid it. By laying out the details 
of the impacts of sequestration, the Department of Defense 
could have helped us in our education campaign to avoid the 
catastrophic cuts we are now facing. On the eve of sequester, 
it is my hope that this hearing will aid to provide greater 
clarity concerning the details and levels of risk that will be 
associated with the arbitrary cuts mandated by sequestration on 
all major defense acquisition programs, including how these 
severe reductions will impact local communities, small 
businesses, and ultimately the military's ability in meeting 
the national military strategy. These details will help to 
illustrate the depths of these impacts and help us make our 
case to Congress and the
Nation.
    Ironically, the sequestration conversation has been seated 
in a context of savings and fiscal austerity. However, it seems 
apparent that allowing these cuts to take place could 
ultimately cost our country more than it saves while, 
simultaneously, costing jobs. Second- and third-tier vendors , 
mostly small businesses, will be affected if these cuts are 
enacted, many of which are referred to as ``single points of 
failure'' vendors, meaning only one company is qualified to 
provide a particular part, and once that capability is lost it 
will take significant capital and time to regain that 
capability. This, in turn, will put people out of work and 
dramatically drive up cost. We need to be assured that the 
Department and the military services are conducting the 
appropriate level of analysis to assess the impact of sequester 
on the industrial base.
    For example, the Army indicates that every procurement 
program would be affected; quantities would be reduced by 10 to 
15 percent, and that these mandated sequester reductions affect 
more than 1,000 companies in more than 40 States. For the Army 
alone, over 3,000 vendors will be affected. The Army has stated 
the total economic impact would be approximately $15.4 billion; 
the Marine Corps $2.4 billion; the Navy is over $20.0 billion. 
I witness the devastating effects of these reductions each time 
I return home. My community in Southwest Ohio includes Wright-
Patterson Air Force Base, the home of the Air Force Materiel 
Command and the Air Force Research Laboratories. Recent 
information provided by the Air Force has indicated that over 
14,000 civilian employees at the base face potential furloughs 
despite the fact that the base provides cutting-edge research 
and development as well as real-time intelligence, 
surveillance, and reconnaissance that enhances the lethality 
and survivability of our warfighters in harm's way. Every State 
is going to be impacted by sequestration.
    As I've stated before, I voted against the Budget Control 
Act because I knew we would be here today discussing these 
types of harsh consequences that I just covered, and I have 
been working aggressively with my colleagues on this committee 
and Department of Defense to do everything we can to avert 
these catastrophic effects on our national security.
    I would like to welcome our distinguished panel of 
witnesses:

    Representing the Army:
         LMs. Heidi Shyu, Assistant Secretary of the 
        Army for Acquisition, Logistics and Technology; and
         LLieutenant General James O. Barclay III, 
        Deputy Chief of Staff, G-8.

    Representing the Navy and Marine Corps:
         LMr. Sean J. Stackley, Assistant Secretary of 
        the Navy, (Research, Development & Acquisition (RDA));
         LVice Admiral Allen G. Myers, Deputy Chief of 
        Naval Operations, Integration of Capabilities and 
        Resources (N8); and
         LLieutenant General John E. Wissler, Deputy 
        Commandant for Programs and Resources.
    Representing the Air Force:
         LLieutenant General Michael R. Moeller, Deputy 
        Chief of Staff for Strategic Plans and Programs; and
         LLieutenant General Charles R. Davis, Military 
        Deputy, Office of the Assistant Secretary of the Air 
        Force for Acquisition.
    Thank you all for your service and thank you all for being 
with us today. 

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                   DOCUMENTS SUBMITTED FOR THE RECORD

                           February 28, 2013

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                           February 28, 2013

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            RESPONSES TO QUESTIONS SUBMITTED BY MS. SANCHEZ

    Secretary Stackley. In examining the small business industrial base 
that supports the DON, we identify small business opportunities in two 
categories, inaccessible and accessible small business markets. The 
inaccessible small business markets are those where the prime 
contractor small business industry capacity and capability to perform 
is insufficient or non-existent and provides less than 1 percent of the 
required effort. Examples of this market, within the Navy, include 
nuclear and non-nuclear shipbuilding, submarine production, guided 
missile production, and military aircraft manufacturing among others. 
Across the Federal marketplace, of the thousands of product service 
code areas approximately 200 fall into this category. In Fiscal Year 
2012, the DON awarded contracts totaling $85.69 billion. Of this, 
$25.85 billion was in the inaccessible small business marketplace.
    The accessible small business marketplace was $59.41 billion. Small 
business was awarded $13.32 billion or 22.22 percent of these awards 
which was the reference point I used during my remarks. When including 
both the inaccessible and accessible small business markets, small 
business attainment for the DON was 15.59 percent. The Navy is 
committed to maximizing accessible small business market opportunities 
and has exceeded 20 percent in this area for the past four (4) years as 
illustrated in the table below.
    In 2012, the Department of Defense (DOD), as reported by the U.S. 
Small Business Administration (SBA), achieved a small business 
subcontracting performance of 35.2 percent. This only accounts for 
first tier small business subcontractors. Small business also plays 
critical supply chain roles at the second, third and fourth tier of 
many of our contracts. The current available subcontract reporting 
system however, does not specifically breakout each service component's 
share of the aforementioned report because many of our largest prime 
contractors have multiple contracts with each service. An example of 
this would be Lockheed Martin and the Joint Strike Fighter (F-35) 
program which is providing this advanced fighter jet to both the 
Department of the Navy and the Air Force and under the provisions of 
the Comprehensive Subcontracting Program (CSP) reports one summary 
small business subcontracting report to DOD. These large prime 
contractors dominate the inaccessible small business market I 
previously described and it is through these and many other 
subcontracting opportunities where small business continues to provide 
critical support to our programs. I am very confident that the 20 
percent figure I spoke of as Navy's share within subcontracting is a 
conservative figure especially when we account for second through 
fourth tier small business subcontractors not reflected in the figures 
captured in DOD's report to the SBA. [See page 16.]

  Department of the Navy Accessible Small Business Market Performance

                             FY2009-FY2012


------------------------------------------------------------------------
                                                         Small Business
              Total DON    Total Small    Total Small      Accessible
Fiscal Year     Awards      Business       Business          Market
                             Awards       Percentage*      Percentage
------------------------------------------------------------------------
    2012     $85.69B      $13.3B        15.59%          22.22%
------------------------------------------------------------------------
    2011     $92.3B       $14.2B        15.41%          23.97%
------------------------------------------------------------------------
    2010     $79.7B       $14.1B        14.61%          28.47%
------------------------------------------------------------------------
    2009     $87.8B       $13.8B        17.57%          26.60%
------------------------------------------------------------------------


    *including inaccessible market areas
    Secretary Stackley. But, it is vital to note that a one word 
response does a great disservice to the hundreds of thousands of 
service members, Government civilians, and contractors who work 
tirelessly to support our Nation's defense. While each of us may be 
aware of rare occurrences of the type you mention, our responsibility 
is to take action and we do--just witness the Navy's recent action to 
pursue prosecution of those who violated the public trust in Rhode 
Island and Southern California. I, for one, can count one hundred fold 
the times I've seen both military and civilians standing watch, 
standing tall, working impossibly long hours to ensure we are spending 
the budget authorized and appropriated by Congress in the most 
responsible way possible. For every suggestion of waste or fraud, I can 
give you many examples of innovative savings and extraordinary efforts 
of our people to be responsible stewards of the taxpayer's money. 
Moreover, as you know, we have been working for the last three years to 
pursue further efficiency efforts instigated by Secretary Gates and 
Secretary Panetta. The implication that elimination of waste or abuse 
or further efficiencies can make a serious dent in the impacts of the 
shortfalls associated with the continuing resolution or sequestration 
is totally false. [See page 18.]

    Admiral Myers. But I would like to echo Secretary Stackley's 
response and emphasize that the Navy takes very seriously the 
responsibility of being good stewards of the taxpayer's money, and our 
2013 budget submission makes best use of our resources while still 
meeting the requirements of the defense strategic guidance. [See page 
18.]

    General Wissler. I concur with Secretary Stackley's and VADM Myers' 
responses. The Marine Corps values every dollar entrusted to us in 
order to be the Nation's expeditionary force in readiness. Any abuse of 
this trust is not tolerated in the Marine Corps. We are proud of our 
reputation as the ``frugal force'' and don't tolerate actions at any 
level that run counter to this moniker. Our FY 2013 budget submission 
is ``what we need,'' not simply what we want, and we are committed to 
the precise application of those resources to meet the defense 
strategic guidance. [See page 18.]
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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                           February 28, 2013

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

      
                   QUESTIONS SUBMITTED BY MR. TURNER

    Mr. Turner. How would the Army's planned growth of an additional 
combat aviation brigade be impacted by this current budget uncertainty?
    Secretary Shyu. To comply with the Budget Control Act of 2011, the 
Army continues to plan the drawdown to 490,000 Active Component spaces 
and assess our force structure today to achieve the right force mix for 
required missions. The 4th Infantry Division Combat Aviation Brigade 
(the additive CAB) remains programmed in the force and the Army remains 
committed to activating the CAB at Fort Carson with the Brigade 
Headquarters, General Support Aviation Battalion, and Aviation Support 
Battalion in April 2013, and the Assault Helicopter Battalion and two 
Attack Battalions in the summer of 2014.
    Mr. Turner. How did the Army determine that 1,100 companies (over a 
third of the critical vendor industrial base) were in moderate to high 
risk of bankruptcy?
    Secretary Shyu. Our initial assessment in February showed that 
sequestration and the continuing resolution could result in the loss of 
over $7.1 billion, 17,800 job across over 200 programs impacting 39 
States and DC. As we adapt to a rapidly shifting fiscal environment, in 
the current year and beyond, we will continue to closely monitor 
projected impacts to the industrial base.
    Mr. Turner. If the continuing resolution is in place for a full 
year, what impact does this have on execution of the Joint Light 
Tactical Vehicle program?
    Secretary Shyu. The JLTV Joint Program Office has made substantial 
progress in streamlining the program timeline, and both the Army and 
Marine Corps remain fully committed to the program. The Engineering and 
Manufacturing Development (EMD) Phase of the program is proceeding 
well, and the Department is making every effort to keep it on schedule 
in order to meet the proposed Milestone C and Low Rate Initial 
Production contract award in Fiscal Year 2015 (FY15), despite 
sequestration. A continuing resolution in FY14 would reduce the U.S. 
Army's FY14 program by an additional $18 million, beyond the program 
reductions already taken as a result of sequestration and Congressional 
marks in FY13. Due to the cumulative program budget reduction effects, 
the program office would no longer observe potential non-EMD vendor 
tests, including Limited User Tests. Also the test schedule would have 
to be extended, since a majority of FY14 Funds are for testing. This 
will likely delay the Milestone C decision and Low Rate Initial 
Production award until later in FY16.

    Mr. Turner. Are any PPAs exempt from sequestration and on what 
grounds?
    Secretary Shyu and General Barclay. No Procurement, Research, 
Development, Test & Evaluation, or Military Construction PPAs 
(Programs, Projects or Activities) are exempt from sequestration.
    Mr. Turner. How will the CR and sequestration impact your major 
defense acquisition programs and will these reductions require a change 
in national military strategy?
    Secretary Shyu and General Barclay. With the President's signature 
on the Fiscal Year 2013 (FY13) Consolidated and Further Continuing 
Appropriations Act, 2013, on March 26, the continuing resolution is no 
longer in place. As such statements related to a full year continuing 
resolution no longer apply and will not be addressed in this response. 
The primary impacts of the sequestration related to FY13 across our 
Major Defense Acquisition Programs will be to cause inefficiencies in 
program execution and resultant higher cost to the taxpayer for those 
programs. Our programs still in development will experience delays to 
planned schedules, which will extend the length of programs. Extending 
programs leads to higher development costs than originally planned. For 
our procurement programs, the primary impacts in FY13 will be: quantity 
reductions resulting in increased unit price, delayed equipment 
fielding; delays to cost savings initiatives that will increase the 
cost to sustain our systems when fielded; and impacts to future 
readiness due to deferring obsolescence and reliability upgrades. 
Additionally, our ability to effectively plan programs into the future 
is adversely impacted because of the continued uncertainty of future 
budget top lines and because of an FY14 budget that does not fully 
consider the impact of the late FY13 appropriation and sequestration
reductions.
    From our perspective, the sequestration reductions in FY13 will not 
require a change in the national military strategy.
    Mr. Turner. Please describe how the effects of sequestration differ 
for major defense acquisition programs in different stages of 
development and fielding? For example, would it be less disruptive for 
programs still in development, which are primarily based on a level of 
effort, than those in production?
    Secretary Shyu and General Barclay. In general, the earlier a 
program is in the acquisition lifecycle, the less disruptive funding 
reduction is likely to be in the near term. However, if system 
engineering is reduced and the program is not re-planned, then this 
will pose much greater risk to the program in follow-on phases. Unless 
the program is responding to an Urgent Operational Need Statement, most 
early contractual efforts are based on some type of cost type contract 
vehicle, in which the Government and the contractor share in the risk. 
Later in development, contract vehicles for operational testing or for 
fielding efforts become more fixed price oriented in general, where the 
contractor takes on more risk than the Government side.
    For example, a program that is pre-Milestone B is more likely to 
absorb changes in funding than a post-Milestone B program, once a 
program baseline has been established. As we continue to assess the 
impacts of sequestration, a significant concern is whether funding 
reductions result in a Nunn-McCurdy statutory breach or its equivalent 
for a Major Automated Information System program. These results would 
significantly affect the Army's ability to field equipment for 
Soldiers. Under sequestration, reductions to programs in procurement 
would likely result in reductions to procurement quantities, which 
increase unit costs. Such reductions may result in a production line 
break or other industrial base impacts--particularly to second and 
third tier vendors--and delayed deliveries of systems to the 
Warfighter.
    Mr. Turner. Will the potential effects of sequestration differ for 
major defense acquisition programs using different contract types and 
acquisition strategies (fixed-price v. cost-reimbursement; multiyear 
procurement v. annual procurement)?
    Secretary Shyu and General Barclay. The effects of sequestration on 
major defense acquisition programs depend on a range of factors, to 
include the program's acquisition strategy, life cycle phase, and 
contract type. Contract types are selected to fit the profile of each 
program and must comply with governing law and policy. Generally, 
modifications to fixed-price and multiyear contracts may require 
renegotiation and may result in cost penalties, which results in much 
less flexibility as the Army implements funding reductions.
    Long-term sequestration cuts are generally likely to increase the 
schedule for delivery under fixed-price contracts. As a result, total 
development cost or the cost of each individual production article may 
increase. Delays may ultimately delay the fielding of equipment to the 
Warfighter.
    Fiscal Year 2013 sequester impacts to annually funded programs will 
result in: 1) extension of planned multiple year schedules and 2) 
increased estimated life cycle cost, which takes into account reduced 
contract quantities and disruptions to planned events on each program's 
schedule. The cost to field will increase as the timelines for delivery 
are drawn out as a result of funding reductions.
    Mr. Turner. Would large numbers of fixed price or multiyear 
procurement contracts need to be renegotiated due to sequestration?
    Secretary Shyu and General Barclay. Where possible, programs have 
taken precautions to avoid significant renegotiation of procurement 
contracts due to sequestration in Fiscal Year 2013. For example, the 
multiyear production contract for the Tube Launched, Optically-Tracked, 
Wire-Guided Missile was affected by sequestration reductions this year. 
The Army was able to internally reprogram funds to avert impacts to the 
multiyear contract and maintain projected cost savings. In other 
instances, the Army uses quantity-range-option pricing on fixed-price 
contracts. While this has not avoided the increased unit prices 
associated with lower quantities, it has maintained flexibility to 
address sequestration reductions without renegotiations.
    With the estimated cuts for FY13 and anticipated reductions in 
FY14, some multiyear contracts may have to be renegotiated absent 
relief. For example, Program Executive Office Ground Combat Systems has 
three Acquisition Category 1D programs that are either fixed-price or 
cost-plus incentive fee type contracts that were awarded as 
incrementally funded contracts spanning multiple years. Contract plans 
for each are being revised to account for reduced work in the next year 
as a result of a reduction in planned funding. Work is being adjusted 
for the next several years within a revised schedule. Any change made 
to incentive fee contracts must include a review of the incentives to 
ensure that such measures are not inadvertently implicated due to a 
revision in contract scope.
    Mr. Turner. Please provide details on the major defense acquisition 
programs that would experience any delays in fielding needed 
capabilities to the warfighter as a result of the effects of 
sequestration and yearlong CR?
    Secretary Shyu and General Barclay. Sequestration reduces the 
amount of Second Destination Transportation (SDT) funding, which 
inhibits the ability of the Project Managers (PMs) to ship vehicles. 
Resolution would require adjusting/realigning the distribution 
schedules to ship the systems later to minimize PM risks, although 
potentially delaying delivery of vehicles to the Warfighter. Delays 
include:

      Assault Breacher Vehicle currently being fielded to Korea 
could be delayed beyond June or July 2013
      Stops shipment of Abrams Tanks and Bradleys from Fort 
Hood to the Fielding sites (impacts Initial Fielding of M1A2 SEP to the 
155th Mississippi Army National Guard (ARNG) and includes the Korea and 
Germany Rotational sets)
      Stops shipment of National Guard Equipment from their 
home station Maneuver Area Training and Equipment Site to Gowan Field/
Camp Shelby for New Equipment Training (NET) this Summer--Impacts 155th 
and 116th ARNG
      Stops shipment of Abrams/Bradley spares to keep the 
unit's authorized stockage list at 100 percent during NET--Impacts both 
the 155th Fielding/NET and 116th NET

    The following examples of potential delays in fielding needed 
capabilities to the Warfighter are driven by sequestration:

      Delay six Lightweight Counter Mortar Radar (LCMR) systems 
to two Brigade Combat Teams (BCTs).
      Delay one Counter Fire Radar system to one BCT.
      Delay fielding one Sensor Command and Control Shelter 
required for counter-rockets, artillery, and mortars (C-RAM) for one 
battalion.
      Loss of 32 Modern Man-stations for the Patriot 
Modifications program.
      Loss of 3 AH-64 Apache Remanufactured aircraft.
      Loss of 1 AH-64 Apache New Build aircraft.
      Loss of 2 AH-64 Apache Radar Electronics Units and 
subsequent overall unit cost increase for remaining quantity.
      The fielding decision for Release 2 of the Distributed 
Common Ground System-Army (DCGS-A) will be delayed six months and only 
Army Force Generation (ARFORGEN) units would be equipped with the 
latest version of DCGS-A.
    Mr. Turner. What measures will you take to mitigate the impact of 
sequestration on counter-IED efforts that could potentially diminish 
the Department's flexibility and increase risks to rapidly respond to 
unanticipated requirements?
    Secretary Shyu and General Barclay. The Army is assessing funding 
for counter-IED efforts in accordance with the priorities established 
by the Combatant Commands and the Army Service Component Commands. 
Additionally, the Warfighter Senior Integration Group, chaired by the 
Deputy Secretary of Defense, provides Office of Secretary of Defense 
level synchronization, prioritization and oversight not only for 
counter-IED efforts, but all requirements that need rapid response by 
Department of Defense. This is the means by which the Army will ensure 
any impact of sequestration is balanced against operational 
requirements and fiscal realities. This process allows senior Army 
leaders visibility, flexibility and access to a variety of means to 
address and minimize the impacts of budgetary challenges upon any 
requirement.
    Mr. Turner. How will you make cuts to major defense acquisition 
programs without forcing them into a Nunn-McCurdy breach? Should 
Congress modify the requirements that currently apply when a Nunn-
McCurdy breach occurs?
    Secretary Shyu and General Barclay. We do not anticipate any Nunn-
McCurdy breaches to our Major Defense Acquisition Programs and Major 
Automated Information System programs in Fiscal Year 2013 as a result 
of the reduction attributable to sequestration this year. However, in 
subsequent years whether or not a Program will incur a Nunn-McCurdy 
breach will not be a significant factor in selecting Programs for 
reductions. Cuts will be distributed on a requirements basis with cost 
implications and collateral costs (e.g. cancellation costs or breakage 
to other Programs) being factors.
    Exempting the Department from Nunn-McCurdy reporting 
responsibilities caused by CR or sequestration would be beneficial in 
reducing Program workloads.
    Mr. Turner. How would sequestration and a yearlong CR scenario 
impact your ability to fund weight reduction initiatives for personnel 
protection equipment? How would this impact the PPE industrial base, 
e.g. body armor, night vision devices, and other critical warfighter 
equipment?
    Secretary Shyu and General Barclay. Sequestration may affect 
ongoing development efforts regarding soft armor ballistic fibers and 
hard armor ballistic plates. The Soldier Protection System program 
entry into the Engineering Manufacturing and Development phase could be 
delayed up to one year.
    There is no immediate impact to the Industrial Base for ongoing 
procurement and fielding of head, eye, pelvic, torso armor, and other 
personal protective equipment. Funding is currently at the minimum 
sustaining rate for maintaining two qualified armor vendors in hard and 
soft armor solutions. Further funding reductions may place the Army's 
ability to maintain competition (and expertise) at risk.
    Projected Fiscal Year 2013 orders from the Army do not support 
minimum sustainment rates for two vendors for night vision image 
intensification tubes. Further funding decreases from sequestration may 
stress image intensification tube manufacturing and ultimately drive up 
system costs if competitive pressure is lost due to the loss of one 
vendor. However, the Office of the Secretary of Defense ``Report to 
Congress on the Assessment of Industrial Base for Night Vision Image 
Intensifier Sensors'' completed in September 2012 concluded that 
Warfighter readiness would not be negatively impacted if the industrial 
base was further reduced.

    Mr. Turner. How would sequestration and a yearlong CR scenario 
impact the
V-22 program? Would there be impacts to the V-22 industrial base?
    Secretary Stackley. Sequestration will reduce the program's 
available funding (FY13 and prior year unobligated funds) by 
approximately 10 percent although the exact percentage has not yet been 
determined. As a result, the following efforts will be deferred: 1) 
life cycle cost reduction and obsolescence initiatives (potentially 
grounding aircraft due to unavailability of parts), 2) incorporation of 
reliability and other improvements to production aircraft through FY 
2014 (resulting in lost savings in operations and support costs), 3) 
procurement of peculiar training equipment (adding significant costs 
due to in-aircraft training), 4) engineering development of reliability 
and other improvements until FY 2014 (further deferring savings in 
operations and support costs), and 5) standing up depot repair 
capability (which would improve readiness and reduce costs). If there 
was a yearlong CR without anomaly language to permit the planned 
multiyear contract to be awarded, the nearly $1 billion in savings 
assumed in the FYDP would not be realized.
    The impact to the V-22 industrial base has been minimized in FY 
2013 with the plan to definitize the follow-on multiyear procurement 
contract in May. The amount of future year budget reductions for the 
program has not yet been determined so those impacts, including impacts 
to the V-22 industrial base, cannot be addressed at this time.
    Mr. Turner. How would sequestration and a yearlong CR scenario 
impact your ground combat and tactical vehicle strategy? What programs 
will be delayed or impacted by this budget uncertainty?
    Secretary Stackley. Sequestration and the continued budget 
uncertainty will have varying impacts on each of our Ground Combat and 
Tactical Vehicle programs. While the specific impact on each program 
will not be known until the Marine Corps receives the final FY 2013 
appropriation and future year appropriations become more predictable, 
we anticipate schedule delays, reduced acquisition objectives, 
postponed modernization and upgrades, and subsequent cost increases due 
to delayed programs and decreased procurement quantities. In the case 
of the Joint Army/Marine Corps Joint Light Tactical Vehicle (JLTV) 
program, the initial operational capability (IOC) may be delayed by one 
year with the full operational capability (FOC) may be delayed by two 
years. This also slows the procurement plan and leaves a shortfall in 
the inventory which will need to be addressed at the end of the FYDP. 
That delay, in turn, risks the procurement of the Marine Corp 
Amphibious Combat Vehicle (ACV) as the Marine Corps strives to align 
their procurement strategy and optimize the cost for each major 
program. Other potential impacts include the delayed procurement of 
safety and performance modifications for Medium Tactical Vehicle 
Replacement (MTVR) and Logistics Vehicle Systems Replacement (LVSR), 
delayed upgrades on the M1A1 tank, and the delay or cancellation of 
engineering change proposals to Light Armored Vehicle (LAV) further 
compromising the Marine Corp's amphibious capability while increasing 
maintenance costs while awaiting the systems' replacement by the ACV.
    Mr. Turner. What programs do the Marine Corps anticipate it will 
have to cancel or extend due to the budget uncertainty?
    Secretary Stackley. While the Marine Corps has not cancelled or 
extended any programs as a result of the FY 2013 budget decisions, the 
uncertainty associated with FY 2014 and outyear budgets will require 
the Marine Corps to continually review and adjust their program plans 
consistent with the changing budget environment. Decreasing budgets 
within ongoing acquisition programs will necessarily lead to a review 
of each program's ability to execute approved cost, schedule and 
performance parameters. Programs such as JLTV, P-19 Firetruck 
replacement,
G/ATOR and CAC2S could all see schedules extended depending on future 
year budget decisions.
    Mr. Turner. If the continuing resolution is in place for a full 
year, what impact does this have on the execution of the Marine 
Personnel Carrier and Joint Light Tactical Vehicle program?
    Secretary Stackley. With the enactment of HR933, the risk of a full 
year continuing resolution has been eliminated. The Marine Corps is 
committed to executing these programs as planned, but both the Marine 
Corps Personnel Carrier (MPC) and the Joint Light Tactical Vehicle 
(JLTV) programs will continue to be under budgetary pressure resulting 
from future year budget uncertainty.

    Mr. Turner. Are any PPAs exempt from sequestration and on what 
grounds?
    Secretary Stackley and Admiral Myers. Original OMB guidance 
directed O&M program, project, and activity (PPA) detail to be at the 
Appropriation level and Investment to be at the Line Item level of 
detail. MILPERs accounts were excluded from sequestration.
    To date, no exclusions have been made for sequestration with the 
exception that the Navy expects to receive guidance from the Director 
of National Intelligence (DNI) that classified efforts will not be 
subject to furlough. The Navy may have classified efforts in its 
Operation and Maintenance accounts that are predominantly civilian 
personnel efforts that may not be able to take an assigned 
sequestration cut without causing a furlough. In these cases, the DON 
will have to exempt portions of these sequestration cuts to classified 
programs and take the cuts elsewhere. Once the Navy has processed all 
of the impacts to H.R 933 and then applied sequestration impacts, we 
will know more definitively if any classified efforts required relief.
    Mr. Turner. How will the CR and sequestration impact your major 
defense acquisition programs and will these reductions require a change 
in national military strategy?
    Secretary Stackley and Admiral Myers. Sequestration and the 
continued budget uncertainty will have varying impacts on each of the 
Department of the Navy's programs. While the specific impact on each 
program will not be known until the Department receives their final 
FY2013 appropriation including sequestration allocations and future 
year appropriations become more predictable, we anticipate schedule 
delays, reduced acquisition objectives, postponed modernization and 
upgrades, and the subsequent cost increases due to delayed programs and 
decreased procurement quantities. In addition, certain programs will 
require restoration of funds in future years in order to deliver end 
items. The strategic impact of any program adjustments and future 
program affordability will need to be considered as part of the SECDEF 
initiated review of the Department's Strategic Planning Guidance.
    Mr. Turner. Please describe how the effects of sequestration differ 
for major defense acquisition programs in different stages of 
development and fielding? For example, would it be less disruptive for 
programs still in development, which are primarily based on a level of 
effort, than those in production?
    Secretary Stackley and Admiral Myers. The effects of sequestration 
vary depending on a program's stage of development and fielding, but 
also vary from program to program. Sequestration impacts to some naval 
programs in the development stage will result in loss of capability, 
while other naval programs will experience a delay in delivery. Most of 
Navy's development work is tied directly to acquisition programs of 
record, consequently, reductions in the development stage will 
potentially have an impact on their production schedules and costs.
    Mr. Turner. Will the potential effects of sequestration differ for 
major defense acquisition programs using different contract types and 
acquisition strategies (fixed-price v. cost-reimbursement; multiyear 
procurement v. annual procurement)?
    Secretary Stackley and Admiral Myers. Yes, if sequestration remains 
in place, limited funds could cause the Department to reduce the 
products and/or services being purchased on existing contracts. Limited 
funds forces the Department to prioritize all its requirements, 
including mission critical programs, then determine how much money it 
has available for those programs.
    From a strict contractual obligation perspective, some types of 
contract vehicles provide the Department with more flexibility than 
others. Given current regulatory requirements, the Department has more 
flexibility with existing Cost Reimbursement, Indefinite Delivery, 
Indefinite Quantity (IDIQ) and ``Requirements'' contracts, because they 
provide the Department with maximum flexibility in avoiding hard budget 
limits. Typically cost reimbursement contracts provide greater 
flexibility than firm fixed price contracts. Through a higher level 
review, the Department, through ASN(RDA), may choose to limit 
obligations on the cost reimbursement contracts thereby effectively 
``stretching out'' performance and/or contract schedules to match 
limited funds. The amount of the Department's obligation under a 
``Requirements'' contract is the dollar value of each order actually 
placed under that contract. IDIQ contracts have obligation values at 
the guaranteed minimum amounts and increase only as individual task 
orders or delivery orders are placed by the Government. While these 
types of contracts have flexibility, the end result is still less 
supplies or services for the Government. The amount of obligations 
under a ``firm fixed price'' contract is the face value of the contract 
that is fully funded at contract award. The Department has less 
flexibility with existing fixed price contracts, but can choose, if it 
is deemed necessary, to re-negotiate established pricing based on its 
decision to de-scope quantity, capability and breadth of contract 
performance. The Department may also choose to not exercise and or re-
negotiate any contract options for future supplies and or services. The 
multiyear contract provides the least amount of flexibility for the 
Department in this sequestration environment. Unlike annual contracts, 
obligations under a multiyear contract must follow the established 
contract terms and conditions to avoid any cancellation payment 
arrangements established in the contract.
    The actual or potential effects on each program are specific to 
each program, lifecycle phase, funding profile, and contract type, to 
name a few issues. Each program would be required to assess the impact 
individually to provide the potential effects.
    Mr. Turner. Would large numbers of fixed price or multiyear 
procurement contracts need to be renegotiated due to sequestration?
    Secretary Stackley and Admiral Myers. The Navy does not anticipate 
renegotiating large numbers of fixed price or multiyear procurement 
(MYP) shipbuilding or aviation contracts due to sequestration in FY 
2013. No major previously awarded fixed price shipbuilding or aviation 
contracts will require deobligation of funds. Additionally, no current 
shipbuilding or aviation MYP's will need to be renegotiated. The Marine 
Corps has not cancelled or extended any programs as a result of the FY 
2013 budget decisions and does not have any MYP contracts.
    The Navy's shipbuilding and aviation MYP's requested in the 
President's Budget for FY 2013 (the Block IV VIRGINIA Class FY14--FY18 
MYP, the DDG 51 ARLEIGH BURKE Class destroyer FY13-FY17 MYP, and V-22 
FY13-17 MYP) were authorized in the FY 2013 National Defense 
Authorization Act (NDAA) and approved in the Appropriations Act.
    While the Department of the Navy has not renegotiated any major 
defense acquisition contracts to date as a result of the FY 2013 budget 
decisions, the uncertainty associated with FY 2014 and outyear budgets 
will require the Department to continually review and adjust program 
plans consistent with the changing budget environment. Adjustments to 
these program plans may require renegotiation of procurement contracts. 
However, the Department of the Navy will strive to minimize the number 
of these renegotiations to maintain the best value for the limited 
resources.
    Mr. Turner. Please provide details on the major defense acquisition 
programs that would experience any delays in fielding needed 
capabilities to the warfighter as a result of the effects of 
sequestration and yearlong CR?
    Secretary Stackley and Admiral Myers. Sequestration and the 
continued budget uncertainty will have varying impacts on each of the 
Department of the Navy's programs. We anticipate schedule delays, 
reduced acquisition objectives, postponed or cancelled modernization 
and upgrades, together with subsequent cost increases due to delayed 
programs and decreased procurement quantities. The impact on specific 
programs will not be known until the Department completes a strategic 
management review of DOD strategy, posture and investments and as 
future year appropriations become more predictable.
    Mr. Turner. What measures will you take to mitigate the impact of 
sequestration on counter-IED efforts that could potentially diminish 
the Department's flexibility and increase risks to rapidly respond to 
unanticipated requirements?
    Secretary Stackley and Admiral Myers. The Navy, as the Single 
Manager for Joint Service Explosive Ordnance Disposal (EOD) Technology 
and Training, and as Single Manager for Joint Service Counter-RCIED 
Electronic Warfare (CREW) has responsibilities to all four military 
Services for executing counter-IED efforts. The Navy continues to 
support two significant programs that support JS C-IED capabilities: 
JCREW and Advanced EOD Robotic System (AEODRS).
    The JCREW program of record is supported in the current budget and 
future technical insertions will allow us to respond to unanticipated 
requirements across the FYDP. The modular design of the JCREW counter-
IED system will allow rapid technology insertion of upgrades to meet 
emerging RCIED threats.
    The Advanced EOD Robotic System is the future JS EOD robot that 
will meet EOD requirements for safe standoff from IEDs and other 
unexploded ordnance. This system is also being designed in a modular, 
open architecture to easily allow technology insertion to address 
emerging counter-IED requirements for the EOD
community.
    Counter-IED efforts continue to hold high priority, and where 
budget lines are shared, reductions under sequestration will focus on 
lower priority areas where possible. As is the case with all urgent 
needs that arise within the execution year, the Department of the Navy 
will seek to reprogram funds from lower priority projects or seek 
assistance from OSD to meet funding requirements for urgent needs.
    For those ongoing counter-IED efforts, we are reviewing our 
critical path activities and schedules in anticipation of furlough of 
Government employees. Where necessary, we are modifying scheduled 
events to account for non-availability of key Government personnel due 
to Government furlough, while still achieving program milestones. 
Additionally, we have already reduced all travel and non-essential 
training and slowed all obligations to maximum extent in order to 
conserve funding in anticipation of the budget reductions due to the 
sequestration.
    Mr. Turner. How will you make cuts to major defense acquisition 
programs without forcing them into a Nunn-McCurdy breach? Should 
Congress modify the requirements that currently apply when a Nunn-
McCurdy breach occurs?
    Secretary Stackley and Admiral Myers. Whether or not a Program will 
incur a Nunn-McCurdy breach will not be a significant factor in 
selecting Programs for reductions. Cuts will be distributed on a 
requirements basis with cost implications and collateral costs (e.g. 
cancellation costs or breakage to other Programs) being factors. 
Exempting the Department from Nunn-McCurdy reporting responsibilities 
caused by CR or sequestration would be beneficial in reducing Program 
workloads.
    Mr. Turner. How would sequestration and a yearlong CR scenario 
impact the procurement of F-35Cs and F-35Bs? Would lower procurement 
numbers affect the strike fighter shortfall?
    Secretary Stackley and Admiral Myers. The Department of the Navy is 
working closely with the F-35 Program Office and the Under Secretary of 
Defense for Acquisition, Technology and Logistics to assess the impacts 
of sequestration on the F-35 program. Currently, the Department is 
investigating the balance between preserving the development program 
and maintaining capabilities of Block 2B, Initial Warfighting 
Capability; support and sustainment for all delivered aircraft; 
preserving production efficiencies and production capacity; and 
aircraft procurement. However, it is probable that sequestration 
reductions will reduce the number of
F-35B and F-35C within FY 2013 Low Rate Initial Production (LRIP) 7 
quantities, thereby increasing unit recurring flyaway costs for all 
services and partner procurements. We will see a decrease in investment 
in tooling, redesign for diminishing manufacturing sources and out of 
production parts, and cost reduction initiatives. Furthermore, if a 
furlough of Government workers were to occur and the shutdown of 
military airfields on weekends were to occur, it would significantly 
slow the execution of the F-35 flight testing and subsequent fielding 
of capability.
    The Navy actively manages the strike fighter shortfall to minimize 
impacts in each execution year. The projected strike fighter shortfall 
is a compilation of a number of factors including legacy usage, 
meticulous management of fatigue life, and
F-35 procurement. Delays in the F-35 procurement will aggravate 
challenges in meeting inventory requirements.
    Mr. Turner. Would sequestration and a yearlong CR affect life 
extension programs for F/A-18s and AV-8Bs resulting in a higher strike 
fighter shortfall this year or in the years ahead?
    Secretary Stackley and Admiral Myers. Yes. Sequestration will have 
an effect in the short term and is expected to exacerbate the long term 
strike fighter shortfall. Sequestration will cause delays in depot 
inductions and High Flight Hour inspections which will negatively 
impact the ability to source Navy and Marine Corps squadrons.

    Mr. Turner. Are any PPAs exempt from sequestration and on what 
grounds?
    General Wissler. No Programs, Projects Activities contained within 
any investment appropriation are exempt from sequestration. Only 
military personnel accounts have been exempted.
    Mr. Turner. How will the CR and sequestration impact your major 
defense acquisition programs and will these reductions require a change 
in national military strategy?
    General Wissler. In the near-term, sequestration should not have a 
negative impact to our ground combat and tactical vehicle strategy. 
These reductions were mitigated by current and prior year assets.
    In the long-term, sequestration will have a negative impact on our 
warfighting investment portfolio, including several critical vehicle 
modernization and sustainment programs. We have mitigated some of the 
impact by prioritizing and sequencing our investments. For example, we 
are investing in the Joint Light Tactical Vehicle now because it is the 
most mature capability, followed by investment in the Amphibious Combat 
Vehicle program. These measures, however, cannot fully mitigate the 
negative effects of sequestration. Our High Mobility Multipurpose 
Wheeled Vehicle (HMMWV), Assault Amphibious Vehicle (AAV), Light 
Armored Vehicle (LAV), and tank modification programs, which are 
critical to maintaining the operational availability of these vehicles, 
will likely be slowed significantly. Critical survivability and 
mobility upgrades to the AAV and LAV fleets will be delayed. These 
delays will ultimately impact our ability to provide Marines with 
ready, relevant and capable combat systems.
    Mr. Turner. Please describe how the effects of sequestration differ 
for major defense acquisition programs in different stages of 
development and fielding? For example, would it be less disruptive for 
programs still in development, which are primarily based on a level of 
effort, than those in production?
    General Wissler. Sequestration will be disruptive during every 
phase of the acquisition process. Examples of these disruptions 
include:

      Slowing the development and procurement of acquisition 
programs, increasing the total life cycle program cost.
      Slowing the sundown process on legacy systems, which will 
ultimately drive up current operation and support costs. Sequestration 
would require investment to replace obsolescent parts for legacy 
systems which are no longer available in the market place, further 
driving up sustainment costs.
      Investments in new technologies designed to improve 
efficiencies, such as fuel efficiency, lightweight armor, and 
information technology consolidation, would be delayed, negating their 
corresponding savings and capabilities.
      Initiatives to increase buying power in all phases of the 
acquisition process will likely be negated by schedule slips.
      Contraction of the small business industrial base is 
likely to occur as larger firms keep more work in house.
    Mr. Turner. Will the potential effects of sequestration differ for 
major defense acquisition programs using different contract types and 
acquisition strategies (fixed-price v. cost-reimbursement; multiyear 
procurement v. annual procurement)?
    General Wissler. Major Defense Acquisition Programs (MDAPs), like 
any other program, would be affected by sequestration. Firm-Fixed Price 
(FFP) contracts would already be fully funded, but options may need to 
be re-negotiated to buy a lesser quantity. Under Indefinite Delivery 
Indefinite Quantity (IDIQ) contracts, the Marine Corps would buy fewer 
items. This may require a program extension in order to buy the total 
Approved Acquisition Objective (AAO) if additional funding is received. 
Cost type contracts are incrementally funded. If the funding falls 
short, the contract would have to be modified to either extend the 
schedule or de-scope the statement of work.
    Mr. Turner. Would large numbers of fixed price or multiyear 
procurement contracts need to be renegotiated due to sequestration?
    General Wissler. The Marine Corps is not executing any ground 
multiyear contracts, and any current Firm-Fixed-Priced (FFP) contracts 
are already fully funded. However, any FFP options will have to be 
reviewed on a case-by-case basis.
    Mr. Turner. Please provide details on the major defense acquisition 
programs that would experience any delays in fielding needed 
capabilities to the warfighter as a result of the effects of 
sequestration and yearlong CR?
    General Wissler. There is no impact of a continuing resolution 
given the President's signing of the FY13 DOD appropriations bill.
    Potential long-term sequestration impacts specific to Marine Corps 
programs
include:

      Ground Air Task Oriented Radar (G/ATOR) (ACAT 1C)
      Delays Initial Operational Capability (IOC) of Block 2 
software (SW) counter battery development and delays start of Block 4 
SW Air Traffic Control development
      Transition to gallium nitride (GaN) at risk which would 
negatively impact cost, i.e. ``should-cost''
      Reduced system procurements increases production cost, 
scheduled to end in FY20, into FY21
      Industrial Base: Potential impacts to the GaN supplier 
base when G/ATOR funding is taken in context with other DOD investment 
reductions in advanced radar technologies
      Common Aviation Command and Control System (CAC2S) (ACAT 
1AM)
      Negative impact on Limited Deployment Unit (LDU) 
production, and testing
      Delays Full Deployment and stretches completion of 
procurement into FY19
      Joint Light Tactical Vehicle (JLTV) (ACAT 1D)
      Delays USMC IOC, Milestone (MS) C, and Full Operational 
Capability (FOC)
      Extends USMC procurement past currently scheduled 
attainment of Approved Acquisition Objective (AAO)
      Army sequestration impacts may contribute to Marine Corps 
delays
    Mr. Turner. What measures will you take to mitigate the impact of 
sequestration on counter-IED efforts that could potentially diminish 
the Department's flexibility and increase risks to rapidly respond to 
unanticipated requirements?
    General Wissler. Countering IEDs will remain a priority for the 
Marine Corps. Inherent flexibilities provided under the Budget Control 
Act will allow the Marine Corps to mitigate impacts to CIED programs in 
FY13 by using available prior and current year funding. However, we 
will not have these same flexibilities in FY14. Prioritization and risk 
reduction decisions on counter-IED efforts in the long term will be 
made in the context of the discretionary cap reductions in the Budget 
Control Act and their impact on the Marine Corps' entire procurement 
portfolio and associated priorities.
    Mr. Turner. How will you make cuts to major defense acquisition 
programs without forcing them into a Nunn-McCurdy breach? Should 
Congress modify the requirements that currently apply when a Nunn-
McCurdy breach occurs?
    General Wissler. Efforts to major defense acquisition programs 
without forcing them into a Nunn-McCurdy breach would include:

      Reductions to other programs in order to preserve 
capability provided by Major Defense Acquisition Programs (MDAPs) would 
have to be made based on the Service's priorities and flexibility 
provided to the Department for the application of sequestration.
      For current MDAPs the Service may de-scope capability to 
maintain costs within the current Acquisition Program Baseline.

    The Marine Corps recommends language that would recognize the 
unusual circumstances of MDAP breaches due to sequestration and 
authorize the Marine Corps to restructure and re-baseline in order to 
establish a new Acquisition Program
Baseline.
    Mr. Turner. Would sequestration and a yearlong CR affect life 
extension programs for F/A-18s and AV-8Bs resulting in a higher strike 
fighter shortfall this year or in the years ahead?
    General Wissler. Sequestration will cause a fiscal and operational 
environment of ``haves and have-nots''--the F-35 is no exception. 
Reducing the funding of the
F-35 program will impact the development of the combat capabilities the 
Marine Corps needs from the aircraft and/or limit the number of 
aircraft and related equipment needed to meet operational requirements. 
For the Marine Corps Air Ground Task Force, the Nation's force in 
readiness, overall integrated aviation capabilities will be degraded in 
terms of overall survivability, tactical agility, and strategic 
flexibility due to a diluting of capabilities from a decrease in 
procurement, sustainment, and operational funding.
    Mr. Turner. How would sequestration and a yearlong CR scenario 
impact your ground combat and tactical vehicle strategy? What programs 
will be delayed or impacted by this budget uncertainty?
    General Wissler. In FY13, sequestration should not have a negative 
impact to our ground combat and tactical vehicle strategy. These 
reductions were mitigated by current and prior year assets.
    In the long-term, sequestration will have a negative impact on our 
warfighting investment portfolio, including several critical vehicle 
modernization and sustainment programs. We have mitigated some of the 
impact by prioritizing and sequencing our investments. For example, we 
are investing in the Joint Light Tactical Vehicle now because it is the 
most mature capability, followed by investment in the Amphibious Combat 
Vehicle program. These measures, however, cannot fully mitigate the 
negative effects of sequestration. Our High Mobility Multipurpose 
Wheeled Vehicle (HMMWV), Assault Amphibious Vehicle (AAV), Light 
Armored Vehicle (LAV), and tank modification programs, which are 
critical to maintaining the operational availability of these vehicles, 
will likely be slowed significantly. Critical survivability and 
mobility upgrades to the AAV and LAV fleets will be delayed. These 
delays will ultimately impact our ability to provide Marines with 
ready, relevant and capable combat systems.
    Mr. Turner. What programs do the Marine Corps anticipate it will 
have to cancel or extend due to the budget uncertainty?
    General Wissler. If sequestration were fully implemented, the 
Marine Corps would have to assess every program. Sequestration will 
cause interruptions during program acquisition that increases the total 
program cost, as schedules slip and delays result in longer contracts, 
loss of efficiencies, negative impacts on development and production 
schedules, program restructures and potentially cause Nunn-McCurdy 
breaches. In procurement, existing contracts will have to be 
renegotiated which will prevent the Marine Corps from receiving 
Economic Order Quantity
pricing.
    The Marine Corps will also have to sustain legacy systems longer 
than planned, which will ultimately drive up current operation and 
support costs. We will have to shift our attention to developing and 
replacing obsolescent parts for legacy systems that are no longer 
available in the market place, which will shift the workforce to a 
focus of reengineering old and inefficient technology (e.g. sustaining 
5 legacy radar systems will cost more than employing one new Ground/Air 
Task Oriented Radar (G/ATOR)). Finally, technologies designed to 
improve efficiencies (fuel, lightweight armor, etc.) will have to be 
postponed, preventing the Marine Corps from reaping planned savings 
while simultaneously driving up costs due to the use of older, more 
expensive technologies.
    Mr. Turner. If the continuing resolution is in place for a full 
year, what impact does this have on the execution of the Marine 
Personnel Carrier and Joint Light Tactical Vehicle program?
    General Wissler. With the enactment of the FY13 DOD Appropriations 
Bill, the risk of a full year continuing resolution has been 
eliminated. Both the Marine Corps Personnel Carrier (MPC) and the Joint 
Light Tactical Vehicle (JLTV) programs will continue to be under 
budgetary pressure resulting from future year budgetary
uncertainty.
    Mr. Turner. According to the Commandant's planning guidance, the 
Marine Corps seeks to develop an expeditionary force capable of 
forcible entry to support the National Military Strategy during 
emerging conflicts and instabilities. The guidance also indicates that 
the Marine Corps desires to be a ``middle-weight force . . . light 
enough to get there quickly, but heavy enough to carry the day upon 
arrival, and capable of operating independent of local 
infrastructure.''
    How would sequestration and a yearlong CR scenario affect this 
planning guidance? What additional risks would the Marine Corps have to 
assume given this budget uncertainty?
    General Wissler. Despite the effects of sequestration, the Marine 
Corps will do everything in our power to protect enduring U.S. global 
interests that underpin our prosperity. We will meet our 
responsibilities for rapid response to crises wherever they may occur. 
Still, the Marine Corps' ability to execute our expeditionary crisis 
response role is based upon one word--READINESS. This requires trained 
Marines, ships at sea, and aircraft in the air. These assets are the 
foundation of our forward deployed and rotational forces. Without them, 
not only will our forces become hollow and unable to respond as we are 
accustomed to, but we will make enduring national interests hollow as 
well. Insufficient maintenance and operating resources may limit the 
presence of Marines forward, and therefore the ability to intervene 
when our citizens, diplomats, allies or interests are threatened. We 
will be able to respond to crisis as a nation, but our response options 
will be limited, and our response times dramatically slowed. The risk 
of small-scale crises escalating is increased without forces that can 
rapidly contain them at their lowest levels. Without ready amphibious 
ships and well-trained Marine units, there will be less engagement with 
allies and partners, leading to decreased deterrence for small scale 
conflict. Without ready Marines, our Nation will forfeit a primary 
political-military tool that helps to protect U.S. interests, prevent 
conflict, and enable our joint forces in war.
    Mr. Turner. What impacts would be associated with the Procurement, 
Marine Corps account?
    General Wissler. Potential sequestration reductions distributed 
across the Procurement, Marine Corps (PMC) appropriation by line item 
will have long-term impacts including:

      Operational Impacts
          Delayed Initial Operational Capability/Full Operational 
        Capability (IOCs/FOCs)
          Unaffordable Approved Acquisition Objectives (AAOs)
          Reduced procurements (resulting in less equipment)
          Delayed reconstitution and reset

      Cost
          Increased total cost due to decreased competition (i.e. 
        anticipate a reduction in industrial base and small businesses)
          Increase unit costs (due to decrease in number of units 
        procured)
          Contract termination costs (when applicable)
      Performance/Capabilities
          Postpone modernization/upgrade (resulting in reduced 
        system performance)
          Reduced trade space . . . compromised requirements 
        (resulting from the program being no longer affordable)
          Reduced collective Marine Air Ground Task Force (MAGTF) 
        capabilities
          Retention of legacy solutions

      Schedule
          Longer production timelines due to phasing of dollars
          Delayed reconstitution and reset
          Delayed fielding
          Delayed technology refresh

    Mr. Turner. Are any PPAs exempt from sequestration and on what 
grounds?
    General Davis and General Moeller. Apart from the President's 
exemption of military personnel accounts, there are no PPAs exempt from 
sequestration.
    Mr. Turner. How will the CR and sequestration impact your major 
defense acquisition programs and will these reductions require a change 
in national military strategy?
    General Davis and General Moeller. The Air Force has only addressed 
the impacts for FY13. Sequestration cuts to Air Force modernization 
investments, if applied at the program, project, and activity level as 
planned, impact every one of the Air Force's acquisition programs. For 
example, the F-35A low rate initial production would see reductions of 
at least two aircraft from the requested 19 in FY13. Such potential 
reductions not only drive up unit costs--resulting in FY14 production 
funding shortfalls--they also delay follow-on software and flight 
testing. While the disruptions to the detailed planning and execution 
of the Air Force's complex investment and modernization programs, such 
as the F-35 and KC-46, would be significant, the impacts to the 
industrial base grow in magnitude as the reductions cascade down 
through the network of companies that support each program.
    The current SECDEF-directed Strategic Choices and Management Review 
will determine if the impacts of sequestration will require any change 
to the current Defense Strategic Guidance, and in turn, the National 
Military Strategy. At a minimum, reductions associated with 
sequestration will drive the need to prioritize within and among the 
National Military Objectives (Counter Violent Extremism, Deter and 
Defeat Aggression, Strengthen International and Regional Security, and 
Shape the Future Force). As a result, the Air Force has already 
implemented a series of prudent measures to help mitigate current 
fiscal year budget risks; however, sequestration and other fiscal 
constraints have already disrupted strategic planning efforts and this 
will cause short-term and long-term effects that will adversely affect 
the Air Force today and for years into the future. These significant 
fiscal constraints require creative and innovative approaches to ensure 
the Air Force continues to play an integral role with Joint and 
interagency partners as we work together to meet national security 
responsibilities.
    Mr. Turner. Please describe how the effects of sequestration differ 
for major defense acquisition programs in different stages of 
development and fielding? For example, would it be less disruptive for 
programs still in development, which are primarily based on a level of 
effort, than those in production?
    General Davis and General Moeller. In general, regardless of 
program size, programs in earlier stages of their lifecycle have more 
flexibility to adjust to changes in funding by adjusting requirements. 
Programs nearly complete with development or with less-flexible (i.e. 
fixed-price type) contracts have fewer options to mitigate 
sequestration, which may lead to impacts such as schedule delays or 
increased costs. Mature programs in production with better defined unit 
costs and production rates also have less flexibility to respond to 
cuts, potentially forcing quantity reductions and unit cost increases.
    Mr. Turner. Will the potential effects of sequestration differ for 
major defense acquisition programs using different contract types and 
acquisition strategies (fixed-price v. cost-reimbursement; multiyear 
procurement v. annual procurement)?
    General Davis and General Moeller. Regardless of contract type, the 
effects of sequestration could drive a descope in program requirements, 
delays to performance, or termination. While cost-reimbursement type 
contracts may provide more flexibility and quickness to react to 
changes than fixed-price type contracts; both require modification. For 
both annual and multiyear procurements, reductions in the required 
number of items or level of service could result in increased unit 
prices. In the case of multiyear procurement, reductions could result 
in a Government breach of contract if the requirements fall below a 
minimum commitment in the
contract.
    Mr. Turner. Would large numbers of fixed price or multiyear 
procurement contracts need to be renegotiated due to sequestration?
    General Davis and General Moeller. The Air Force is carefully 
managing our multiyear and large fixed price development, production 
and sustainment contracts to avoid breaks in production or service. 
Smaller fixed price agreements at the installation-level are the most 
vulnerable.
    Mr. Turner. Please provide details on the major defense acquisition 
programs that would experience any delays in fielding needed 
capabilities to the warfighter as a result of the effects of 
sequestration and yearlong CR?
    General Davis and General Moeller. Sequestration cuts to Air Force 
modernization investments, if applied at the program, project, and 
activity level as planned, impact every one of the Air Force's 
acquisition programs. For example, the F-35A low rate initial 
production would see reductions of at least two aircraft from the 
requested 19 in FY13. Such potential reductions not only drive up unit 
costs--resulting in FY14 production funding shortfalls--they also delay 
follow-on software and flight testing.
    Mr. Turner. What measures will you take to mitigate the impact of 
sequestration on counter-IED efforts that could potentially diminish 
the Department's flexibility and increase risks to rapidly respond to 
unanticipated requirements?
    General Davis and General Moeller. The Air Force has largely 
absorbed sequestration of FY13 funding in ways which avoid impacts to 
operational capabilities supporting Counter-IED efforts in Afghanistan. 
Key ISR support such as U-2 Dragon Lady, MQ-1 Predator, MQ-9 Reaper, 
MC-12 Liberty, and Blue Devil Block 1 will not have their support to 
Counter-IED efforts impacted by sequestration. Likewise, sustainment of 
crucial EOD equipment will not be impacted by sequestration. However, 
sequestration funding reductions will impact the Dismount Detection 
Radar (DDR) development effort; which is being mitigated by delaying 
delivery of two systems and foregoing some risk reduction testing in 
lieu of cancelling this important capability solution. Although the Air 
Force is developing and has fielded considerable flexibility in its 
capabilities, sequestration reductions leave no unallocated funding 
available to rapidly respond to unanticipated Counter-IED requirements 
that cannot be addressed with current systems.
    Mr. Turner. How will you make cuts to major defense acquisition 
programs without forcing them into a Nunn-McCurdy breach? Should 
Congress modify the requirements that currently apply when a Nunn-
McCurdy breach occurs?
    General Davis and General Moeller. In all likelihood, the 
Department will need to make cuts to defense acquisition programs that 
may cause Nunn-McCurdy breaches. The Department may be declaring 
critical breaches on dozens of programs, some from terminations, but 
many others to the original and current baselines established in the 
pre-sequestration era. As a result, the required certifications and 
milestone re-approvals may overwhelm OSD and Service personnel. At this 
time we do not recommend modifying Nunn-McCurdy requirements.
    Mr. Turner. How would sequestration and a yearlong CR scenario 
impact the procurement of F-35Cs and F-35Bs? Would lower procurement 
numbers results in a future strike fighter shortfall?
    General Davis and General Moeller. The Air Force is procuring F-35A 
aircraft and is not procuring F-35B or F-35C aircraft. The Department 
of the Navy is procuring these versions of the Joint Strike Fighter.
    Mr. Turner. Would sequestration and a yearlong CR affect life 
extension programs for F-15s, F-16s, and A-10s resulting in a higher 
fighter shortfall this year or in the years ahead?
    General Davis and General Moeller. F-15: The F-15 does not have a 
formal service life extension program. Scheduled, periodic Programmed 
Depot Maintenance (PDM), which is performed on each F-15 approximately 
every 6 years, is used to repair known service life issues.
    Sequestration will remove 2 (of 75) aircraft from the PDM schedule 
in FY13. These 2 aircraft will be rescheduled for FY14. While this 
reduction will not cause a drastic reduction in aircraft availability 
or any immediate groundings, it will cause a cascade of PDM deferrals. 
Without additional funding, there will be a ripple effect causing at 
least 1 aircraft from FY14 to be pushed to FY15. The Air Force has not 
yet determined any additional impact of sequestration in the outyears.
    F-16: The F-16 is currently in the Research, Development, Test & 
Evaluation phase of the Legacy Structural Life Extension Program 
(SLEP). This program will extend the certified service life of 300 F-16 
aircraft from 8,000 Equivalent Flight Hours (EFH) to 10,000 EFH. This 
translates to an extension of the F-16 service life by approximately 8 
years in order to provide a viable F-16 fleet until replaced by the F-
35.
    Sequestration will not have a significant impact on the F-16 SLEP 
in FY13. The program is currently in full scale durability testing as 
part of the RDT&E phase, and fielding of SLEP aircraft will not occur 
until 2018. The Air Force has not yet determined the impact of 
sequestration in the outyears.
    A-10: The A-10 does not have a formal service life extension 
program. The
A-10 Wing Replacement Program (WRP) exists to replace the legacy wings 
with a structurally enhanced form, fit, and function replacement wing 
that will not need inspection for 10,000 flying hours, and will keep 
the A-10 flying through 2035.
    Sequestration will not have a significant impact on the A-10 WRP in 
FY13. Congress provided additional funds to maintain the A-10 force 
structure, and there is sufficient funding to procure the maximum 
number of wings specified in the WRP contract. The Air Force has not 
yet determined the impact of sequestration in the outyears.
    Note: As a result of the Consolidated and Further Continuing 
Appropriations Act for 2013, there is no impact to the F-15, F-16, or 
A-10 programs resulting from a yearlong CR.
    Mr. Turner. What effects could sequestration and a yearlong CR have 
on the military aviation industrial base?
    General Davis and General Moeller. Sequestration is driving 
significant reductions in Air Force expenditures within an extremely 
short period of time. These reductions in Air Force spending will 
negatively impact the industrial base network of suppliers on which the 
Air Force depends for the parts, supplies, and services needed to 
sustain our operational capabilities and infrastructure. The Air Force 
is concerned not only with the impacts but also by the fact that the 
reductions that cause these impacts reduce the ability to mitigate 
them.
    As part of Air Force actions to immediately reduce spending, the 
Air Force will be flying fewer hours, conducting fewer training 
exercises, reducing the flow of aircraft into depot maintenance, and 
deferring maintenance on facilities and equipment. These operational 
reductions translate immediately into less demand for parts, supplies, 
and services. This rapid and dramatic change in Air Force expenditures 
challenges our suppliers. For large suppliers with a diverse customer 
base, the consequences may be barely noticeable, no more than a ripple 
in their financial flows. For smaller suppliers whose primary customer 
is the Air Force, the consequences may be extremely significant, even 
resulting in a calamitous drop in their financial flow that threatens 
the viability of their company. In a March 13, 2013 article, Bloomberg 
reported that an index of 18 small- to mid-size defense contractors has 
fallen 7.3 percent this year while a corresponding index of the top 10 
defense contractors has risen 6.6 percent.
                                 ______
                                 
                    QUESTION SUBMITTED BY MR. MAFFEI

    Mr. Maffei. I represent Hancock Air National Guard Base in 
Syracuse, NY. Hancock has approximately 400 full-time employees of 
which 280 are DOD civilians and 120 Active Guard reservists. This means 
approximately 70 percent of the base's full-time staff will be 
furloughed in the coming months. Is that percentage on par with other 
similar Air National Guard units or is Hancock more severely impacted 
than other units? Can you also address any other impacts on 
acquisition, programming that sequestration may have on the MQ-9 Reaper 
training mission at Hancock Air Base?
    General Davis and General Moeller. Furloughs if implemented will be 
in accordance with the SECAF Fiscal Year 2013 Sequestration Guidance 
Memorandum dated 11 Mar 2013 and NGB guidance for Administrative 
Furlough dated 1 March 2013, provided by NG-J1-TN. Based on this 
guidance it is likely that all Air Technicians will be furloughed for 
some yet-to-be-determined number of days between now and the end of 
this fiscal year, with very few exceptions. Air National Guard full-
time workforce consists of 62% Title 32 civilian employees overall. The 
174 ATKW full-time force structure is consistent with the ANG full-time 
force structure.
    There will be no foreseeable acquisition impact at Hancock Air 
National Guard Base as the acquisition process is complete for the MQ-9 
RPA mission performed by the 174th FW.
    The Air Force is still working to determine and minimize the 
impacts of sequestration upon operations.

                                  
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