[Senate Hearing 113-]
[From the U.S. Government Publishing Office]




 
   MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2015

                              ----------                              


                        WEDNESDAY, APRIL 2, 2014

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

    The subcommittee met at 3:08 p.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Tim Johnson (chairman) presiding.
    Present: Senators Johnson, Pryor, Udall, Kirk, Collins, and 
Coats.

                         DEPARTMENT OF DEFENSE

                   Office of the Secretary of Defense

STATEMENTS OF:
        HON. MICHAEL J. McCORD, PRINCIPAL DEPUTY UNDER SECRETARY OF 
            DEFENSE (COMPTROLLER)
        HON. JOHN CONGER, ACTING DEPUTY UNDER SECRETARY OF DEFENSE FOR 
            INSTALLATIONS AND ENVIRONMENT, OFFICE OF THE DEPUTY UNDER 
            SECRETARY OF DEFENSE (INSTALLATIONS AND ENVIRONMENT)

                OPENING STATEMENT OF SENATOR TIM JOHNSON

    Senator Johnson. Good afternoon. This hearing will come to 
order.
    We meet today to discuss the President's fiscal year 2015 
budget request for military construction (MILCON) and family 
housing for the Department of Defense (DOD) and the Army.
    We will have two panels today, representing the DOD 
Comptroller and the Army. Our first panel includes Mr. Mike 
McCord, Principal Deputy Under Secretary of Defense, 
Comptroller, and Mr. John Conger, Acting Deputy Under Secretary 
of Defense for Installations and Environment. We welcome you 
both to this hearing, and we look forward to your testimony.
    We are all aware that the Defense budget is under severe 
pressure due to budget constraints. Nowhere is this more 
evident than in the fiscal year 2015 MILCON request. At $6.6 
billion, the request is 40 percent below last year's request. 
We have not seen a MILCON request level this low for nearly two 
decades.
    The intervening years have seen many new MILCON 
requirements arising from the wars in Iraq and Afghanistan and 
associated Grow-the-Force initiatives. But those bills were 
mostly off budget, paid for in supplemental appropriations. 
Base Realignment and Closure (BRAC) 2005 spiked the MILCON 
request for several years, but even then, the baseline budget 
remained close to $10 billion.
    I understand fiscal reality, but I am concerned that MILCON 
always seems to be the go-to bill payer when Defense budgets 
are squeezed. Mr. Conger, you note in your prepared remarks 
that DOD is accepting more risk in MILCON to reduce risk in 
operations and training. Readiness must be the military's top 
priority, but our troops need the right facilities to work, and 
train, and service equipment if they are to maintain a high 
state of readiness.
    We often speak of the importance of installations in 
preparing the troops to fight and win wars, but those words 
must be backed up by investment, not just in new mission, but 
also in current mission and quality of life requirements.
    Military construction investments can be deferred, but not 
indefinitely. Coupled with the steep cuts proposed for 
sustainment, restoration, and maintenance funding in fiscal 
year 2015, I fear that investment in installations is on a 
slippery slope. I hope the Department recognizes that and will 
not make the mistake of allowing the hollowing out of MILCON 
investment to the detriment of our troops and their missions.
    Mr. McCord and Mr. Conger, I look forward to discussing 
these and other issues.
    Before deferring to my ranking member, I would like to 
point out to those on this subcommittee, who may not know Mike 
McCord, that he served as a professional staff member of the 
Senate Armed Services Committee for 21 years, including more 
than a decade as the MILCON and Readiness clerk before being 
confirmed by the Senate to his current position. He has worked 
closely with this subcommittee in the past, and I am confident 
that he will be a knowledgeable and supportive partner on 
MILCON issues. His nomination to succeed Bob Hale as the Office 
of the Secretary of Defense (OSD) Comptroller is pending, and I 
hope and fully expect that he will soon be confirmed.
    I now ask my ranking member for any opening remarks he 
cares to make.
    Senator Kirk

                     STATEMENT OF SENATOR MARK KIRK

    Senator Kirk. Thank you, Mr. Chairman.
    I would say top priority, in coming budgets would be the 
missile defense, bricks and mortar that we need to make sure we 
carry out our commitments to build missile defense sites in 
Poland, and in Japan, and in Turkey, and in Romania to make 
sure that we fulfill those commitments.
    I would say how strongly I am backing missile defense in 
Guam with the $21 billion in investments that the 
administration has laid out for that place, now within range of 
almost the entire Chinese missile force.
    Senator Johnson. Thank you, Senator Kirk.
    I remind our witnesses that their prepared statements will 
be placed in the record, so I encourage you to summarize your 
remarks.
    Mr. McCord, please proceed.

              SUMMARY STATEMENT OF HON. MICHAEL J. MCCORD

    Mr. McCord. Thank you, Mr. Chairman, and members of the 
committee.
    Thank you for the opportunity to present the military 
construction portion of the fiscal year 2015 DOD budget. It is 
a pleasure to appear before this subcommittee with my 
colleague, John Conger.
    Mr. Chairman, thank you for mentioning that in my previous 
life as a Senate staffer on the Armed Services Committee, I 
spent many productive hours in your subcommittee's offices 
working on these issues with Ms. Evans, and Mr. Bolcombe, and 
Mr. Wright before that, and it is good to be back.
    I have my written statement. I ask that it be made part of 
the record, as you suggested, and I would like to highlight a 
few points now.
    Before Mr. Conger summarizes our MILCON request in more 
detail, I would like to provide some context by briefly 
discussing the overall DOD budget.
    For fiscal year 2015, DOD is requesting $495.6 billion, 
which is consistent with the Murray-Ryan spending caps and 
represents a freeze at the fiscal year 2014 level for DOD. This 
request supports the strategy outlined in the Quadrennial 
Defense Review, which was also released with the budget.
    Our budget was put together with a couple of major 
priorities in mind. First, we were trying to balance readiness, 
capability and the size of our military to ensure that our 
forces are properly trained, equipped, compensated, and 
prepared to accomplish their missions.
    Second, given fiscal realities, our budget proposes to 
shrink the size of our forces in some areas so that we can 
afford to keep the troops we do retain both trained and ready.
    Third, to make funding available for mission needs, the 
fiscal year 2015 requests continues to seek great efficiencies 
across the Department. But given the fiscal constraints we 
face, we had to go beyond just efficiencies to make some very 
hard choices; one such area is compensation.
    Our men and women in uniform certainly deserve the best 
support possible and taxpayers have provided substantial 
increases in military compensation in recent years. We propose 
in our budget relatively small savings in the area of our 
budget devoted to personnel, and we are going to keep 
compensation generous. But, in order to free up funds to 
support high priority readiness and modernization, our military 
and civilian leaders agreed we must slow the growth of 
compensation somewhat.
    Of particular interest in this area to this subcommittee, 
the request slows the growth in the Basic Allowance for Housing 
(BAH), until out-of-pocket costs would average 5 percent and it 
would also eliminate reimbursement for renter's insurance from 
the BAH rates.
    Most importantly for this hearing, and to your point in 
your opening statement, Mr. Chairman, we were also forced to 
take risks in the facility maintenance and construction part of 
our budget in order to protect near-term readiness, as we dig 
out of the sequester hole.
    I believe the fiscal year 2015 budget request balances the 
needs or our armed forces with the fiscal reality we face, but 
again, those were tough calls. Given the longer term funding 
constraints that we face under the Budget Control Act (BCA), we 
must shrink the force to keep it ready and, in turn, we must 
downsize our footprint to what we need and can afford to 
maintain. BRAC is the proven way to do that, and without it, 
our limited facility dollars are going to be both squeezed and 
diluted.
    While I wish we could do more, our budget supports a 
reasonable and financially responsible military construction 
and family housing program. But let me just take a second to 
touch on the administration's proposal for how we could do 
better on that front.
    The President has proposed $26 billion for the DOD portion 
of the Government-wide Opportunity, Growth and Security 
Initiative (OGSI) that would enable the Department to pay for 
important readiness, facility, and modernization needs. This 
initiative is fully paid for with a balanced package of 
spending reductions and tax reforms.
    Of that $26 billion for the OGSI, $3.1 billion would fund 
military construction, housing, and environmental restoration 
at DOD installations across the country. It would generate jobs 
while reducing our future facility costs. Another $4.5 billion 
is included for operation and maintenance (O&M)-funded facility 
sustainment, restoration, and modernization (SRM), which would 
improve the condition of our existing facilities. So that is a 
proposal to get some additional money into facilities.
    But I also need to mention, lastly, the other alternative 
which is that funding may fall below the levels that we are 
recommending in this budget and over the next 5 years due to 
the restrictions of the Budget Control Act.
    Prolonged funding at sequester levels would starve us of 
funds needed for maintenance, training, and preserving our 
technological edge. In particular, resumption of sequester 
level cuts would unwisely increase our risk. And that is why 
our budget proposes to exceed those sequester level caps in the 
out years.
    In 2015, we are sticking with the Murray-Ryan deal, but in 
the out years, we propose to go above sequester levels. If 
sequester level cuts persist, our military will become too 
small and too outdated to fully implement our strategy.
    If we return to sequester levels beginning in 2016, our 
military construction accounts will be reduced by about one-
sixth or more than $5 billion below the levels projected our 
future year defense plan. If that happens we would only be able 
to support the most critical facility requirements.
    So in conclusion, your support is critical for ensuring 
that America's armed forces continue to have the infrastructure 
and facilities they need to carry out their missions and 
provide for the security of the United States. We value our 
partnership with this subcommittee in doing just that, and I 
thank you for your strong support for the men and women who 
wear America's uniform and for our civilians.
    We seek your support for our request, and we ask your help 
in replacing sequestration and ending its harmful impact on our 
military.
    That concludes my statement, and I would welcome your 
questions after Mr. Conger is finished.

    [The statement follows:]
            Prepared Statement of the Hon. Michael J. McCord
    Mr. Chairman, members of the subcommittee, thank you for the 
opportunity to present the Military Construction and Family Housing 
portion of the fiscal year 2015 budget for the Department of Defense.
    As you know, your support is critical for ensuring that America's 
Armed Forces continue to have the infrastructure and facilities they 
need to carry out their missions and provide for the security of the 
United States.
    Before Mr. Conger summarizes the Military Construction and Family 
Housing request in more detail, however, I would like to provide some 
context by briefly discussing the President's budget for the entire 
Department.
                          base budget request
    For fiscal year 2015 the Department of Defense is requesting $495.6 
billion in discretionary budget authority. That is about $400 million 
dollars less than the enacted fiscal year 2014 appropriation, and it is 
consistent with the current budget caps. To meet defense requirements 
in the outyears, fiscal year 2016 to fiscal year 2019, we are 
projecting a budget that would exceed estimated budget caps by about 
$115 billion, which we believe is necessary in order to execute the 
defense strategy at manageable levels of risk. Under this plan, Defense 
base spending will grow to $535 billion in fiscal year 2016 and $559 
billion in fiscal year 2019.
    The 2015 base request of $495.6 billion supports the strategy 
outlined in the 2014 Quadrennial Defense Review, which was released 
concurrently with the budget. The QDR took its lead from the strategy, 
``Sustaining U.S. Global Leadership: Priorities for 21st Century 
Defense,'' that was completed in January 2012. This strategy prepared 
for the future by rebalancing our defense efforts in what Secretary of 
Defense Hagel has termed, ``a period of great uncertainty regarding the 
future level of resources DOD will have to defend the nation.''
    In addition to the base request, we have included a placeholder of 
$79 billion for DOD's Overseas Contingency Operations (OCO) request in 
fiscal year 2015. This is equivalent to last year's request and does 
not reflect policy for fiscal year 2015. We are unable to be more 
precise until a decision is made about an enduring U.S. presence in 
Afghanistan. When that decision is finalized, the administration will 
submit a formal request to fund OCO needs in fiscal year 2015.
    Besides the base budget and funding for OCO, the President's budget 
is also asking for $26 billion for DOD's portion of the Government-wide 
Opportunity, Growth, and Security Initiative that will enable the 
Department to pay for important readiness and modernization needs. This 
initiative will be fully paid for with a balanced package of spending 
reductions and tax reforms. Of DOD's $26 billion in the OGSI, $3.1 
billion will fund Military Construction, Family Housing, and BRAC 
environmental restoration at DOD installations across the country, 
generating jobs and avoiding some larger-than- necessary future cuts to 
replace buildings, roads, runways, and other facilities. Further, $4.6 
billion is also included in the OGSI for O&M-funded facilities 
sustainment, restoration, and modernization to arrest the degradation 
and improve the condition of the existing facilities.
    The Department's fiscal year 2015 budget request was put together 
with a number of fundamental principles very much in mind:
             balancing readiness, capability, and capacity
    The fiscal year 2015 request places a priority on balancing 
readiness, capability, and capacity, ensuring that no matter their 
size, America's Armed Forces are properly trained, equipped, 
compensated, and prepared to accomplish their mission.
    Approximately two-thirds of the requested budget ($336.3 billion) 
pays for the Department's compensation and day-to-day operations, 
including pay and benefits for 1.3 million Active military personnel, 
0.8 million Reserve and Guard personnel, and 0.7 million civilians, as 
well as healthcare benefits for over 9 million beneficiaries, both 
active and retired. Also included are funds for training, logistics, 
fuel, maintenance, service contracts, administration, family housing, 
and much more.
    The remaining third of the budget ($159.3 billion) pays for 
investments in future defense needs, including modernization and 
recapitalization of equipment and facilities. That includes $90.4 
billion for procurement, $63.5 billion for research and development, 
and $5.4 billion for military construction.
    Most of this funding will be divided between the Military 
Departments: 24.2 percent ($120.3 billion) for the Army, 29.8 percent 
($147.8 billion) for the Navy/Marine Corps, and 27.8 percent ($137.8 
billion) to the Air Force. The balance of the requested budget--18.1 
percent ($89.8 billion)--funds the Defense-Wide account, which includes 
the Defense Health Program, intelligence agencies, Missile Defense 
Agency, Defense Advanced Research Projects Agency, and the many smaller 
DOD agencies.
                           greater efficiency
    To make more funding available for mission needs, the fiscal year 
2015 budget continues the recent emphasis on improved efficiency across 
the Department. Institutional reforms will save $18.2 billion in fiscal 
year 2015 and an estimated $93 billion through fiscal year 2019. 
Efficiencies include a 20 percent cut in headquarters operating 
budgets, reduced contractor funding, targeted reductions in civilian 
personnel, reductions in funding for defense support agencies, savings 
in military healthcare, and savings from deferred military construction 
projects and family housing.
    The Department will also continue to monitor ongoing cost-cutting 
efforts that were launched in recent years, including $150 billion in 
cost reductions from the fiscal year 2012 budget, $60 billion in fiscal 
year 2013, and $35 billion in fiscal year 2014. In addition, DOD will 
continue to make progress towards auditability, with a goal of 
achieving audit-ready budgets by this fall and full audit-readiness by 
2017. DOD will also aggressively pursue Better Buying Power initiatives 
aimed at improvements in acquisition efficiency.
    The fiscal year 2015 budget also requests authority for DOD to 
commence an additional round of base realignment and closures (BRAC) in 
fiscal year 2017 and to establish an independent commission that will 
provide an objective, thorough, and non-partisan review and analysis of 
DOD's recommendations. Annual recurring savings are estimated to be on 
the order of $2 billion. Delays in approving this request will mean 
that funds needed for investments in readiness and modernization will 
be spent instead on unneeded infrastructure.
                          compensation changes
    In another effort to free up funds to support high-priority 
readiness and modernization, our budget proposes slowing the growth of 
military compensation. Men and women in uniform certainly deserve the 
best support possible, and taxpayers have provided substantial 
increases in military compensation in recent years. Now there is a need 
to slow that growth to increase funding for training and modernization.
    Obviously, this must be done while upholding core principles--
including full support for the All-Volunteer Force, assurance that 
compensation is and will remain generous enough to recruit and retain 
needed personnel, and a guarantee that current servicemembers will not 
see their pay and allowances cut. All of the savings realized will be 
used to close shortfalls in training, maintenance, and equipment, 
helping to ensure that our troops are well-equipped and well-trained.
    Consistent with these fundamental principles, and with full support 
from the Secretary of Defense and the Joints Chiefs of Staff, we are 
proposing that the basic pay raise for most military personnel be 
limited to 1 percent next year, with some limits in future years as 
well. General and Flag Officer basic pay will not increase at all in 
fiscal year 2015.
    The request also slows the growth in the Basic Allowance for 
Housing (BAH) until out-of-pocket costs average 5 percent. In addition, 
the budget eliminates reimbursement for renters insurance from BAH 
rates. These changes will be phased in over several years to allow 
members to plan accordingly. Additionally, the rate protection feature 
already in place for BAH will remain in effect. A member's BAH will not 
be reduced so long as that member retains eligibility for BAH at the 
same location and does not change dependency status or lose rank. 
Servicemembers in the same pay grade but living in different areas 
would have their BAH rates adjusted by the same dollar amount to ensure 
members retain the same purchasing power regardless of the cost of 
housing in their local area. Adjusted rates will be publicly available 
(as they are today) to allow members to make informed decisions when 
making housing choices. Depending on a member's actual housing choices, 
they may or may not have to pay any out of pocket costs.
    The budget reduces DOD's commissary subsidies, saving $200 million 
in fiscal year 2015, $600 million in fiscal year 2016, and $1 billion a 
year thereafter. The remaining subsidy of about $400 million will go to 
overseas commissaries and those in remote locations. It is important to 
note that no commissaries will be directed to close. They will continue 
to be exempt from rent or taxes and should be able to provide their 
customers with discounts.
    The fiscal year 2015 request also simplifies and modernizes TRICARE 
by consolidating the three largest healthcare plans into a single, 
modernized health plan. Modest increases to deductibles and co-pays 
will help to guide beneficiaries to the most affordable and effective 
healthcare. The Department is also resubmitting changes proposed last 
year affecting pharmacy co-pays and military healthcare enrollment fees 
for retirees age 65 and older in the TRICARE-for-Life program.
                  sustaining a ready and capable force
    Despite these efforts to improve efficiency and to slow growth in 
compensation, the current budget limits require that the military also 
get smaller and streamline modernization programs. At the same time, 
the services must recover from readiness problems caused by 13 years at 
war, as well as last year's sequestration cuts. Each of the military 
services is facing these challenges.
Army
    The fiscal year 2015 request will support 32 Active Army brigade 
combat teams and 28 Army National Guard brigade combat teams. Since DOD 
strategy will no longer size the force for large and prolonged 
stability operations, the Army will accelerate the pace of its post-war 
drawdown, attaining a range of 440,000 to 450,000 Active Duty soldiers, 
compared to 490,000 today. When combined with the Marine Corps, these 
end strength numbers will be sufficient to meet the needs of the 
President's defense strategy, including capability to decisively defeat 
aggression in one theater, while defending the homeland and supporting 
air and naval forces in a second theater. There will be somewhat 
increased risks at these force levels, particularly for missions 
involving multiple and simultaneous conflicts.
    To maintain a balanced force, the Army National Guard and Reserves 
will also draw down, reducing 355,000 Guardsmen to 335,000 and 205,000 
Reservists to 195,000. In addition, the Army's Ground Combat Vehicle 
program has been terminated and alternative options are being 
evaluated. Changes are also planned for the helicopter force.
Navy
    Under the President's budget, the Navy will have funds to support a 
fleet of 283 ships in fiscal year 2015, increasing to about 309 ships 
by fiscal year 2019. The President's budget plan protects investments 
in attack submarines, guided missile destroyers, and afloat staging 
bases. The Navy is also requesting $3.3 billion in fiscal year 2015 for 
8 Joint Strike Fighters--2 for the Navy and 6 for the Marine Corps--and 
$22.9 billion for 105 aircraft over the FYDP.
    This request requires offsets. As a result, the Navy will put 11 
cruisers in long-term phased modernization. These ships will be placed 
in reduced operating status while they are modernized. They will 
eventually be returned to service with greater capability and a longer 
lifespan. The Navy will also re-examine its program for the Littoral 
Combat Ship.
Marine Corps
    The budget requests $22.7 billion to support end strength of 
182,700 marines for fiscal year 2015. Funds will also support a 
geographically distributed force posture in the Asia-Pacific, which 
will be increasingly important as U.S. forces are rebalanced to that 
region.
Air Force
    In fiscal year 2015, the Air Force is asking for funds for 
modernization, including $4.6 billion for 26 Joint Strike Fighters in 
fiscal year 2015 and $31.7 billion for 238 planes over the Future Years 
Defense Program (FYDP). The Long Range Strike Bomber is funded at $900 
million for fiscal year 2015 and $11.4 billion over the FYDP. The 
budget requests $2.4 billion for seven KC-46 Tankers in fiscal year 
2015 and $16.5 billion for 69 aircraft over the FYDP. In addition, the 
budget invests $1 billion over the next 5 years in a next-generation 
jet engine.
    These investments required tradeoffs. Accordingly, the A-10 Warthog 
is being phased out. The 50-year-old U-2 is being retired in favor of 
the unmanned Global Hawk system. The growth of Predator/Reapers forces 
is being slowed. And plans for the new combat rescue helicopter are 
under review.
Defense-Wide
    The fiscal year 2015 request includes $7.5 billion for the Missile 
Defense Agency and $5.1 billion to fully fund cyber operations, which 
will enable both offensive and defensive capabilities across the full 
range of contingencies.
    U.S. Special Operations Command is allocated $7.7 billion, a 10 
percent increase over the appropriated level in fiscal year 2014, which 
will support a Special Operations force of 69,700 personnel. At this 
level, SOCOM will have resources for full-spectrum training, global 
capabilities, and regional expertise.
                   effects of sequester-level budgets
    Lastly, we need to recognize that prolonged funding at 
sequestration levels would work against these efforts and starve the 
Department of funds needed for maintenance and training and for the 
capabilities that give the U.S. military its technological edge. 
Resumption of sequester-level cuts would lead to immediate and severe 
risks to our strategy. If sequester-level cuts persist, our Joint Force 
will become too small and too outdated to fully implement our defense 
strategy.
    Under sequester-level cuts, the Navy would need to eliminate one 
aircraft carrier starting in 2016. The Air Force would need to retire 
80 more aircraft, including the entire fleets of KC-10 Tankers and 
Global Hawk Block 40. Flying hours would be reduced, and F-35 buys 
would have to be cut. The Army would decline further in size to 420,000 
Active Duty troops and about 500,000 Guard and Reserve personnel. The 
marines would shrink to 175,000 active-duty personnel. In short, our 
ability to carry out our defense strategy would be significantly 
reduced.
                military construction and family housing
    Mr. Chairman, that is a brief summary of our overall budget request 
for fiscal year 2015, its basis, and our concerns about continued 
sequestration. It is the context in which we present our military 
construction request.
    For fiscal year 2015, we are asking for $5.4 billion for military 
construction. That is $3.3 billion less than the fiscal year 2014 
enacted budget of $8.7 billion or a decrease of 38 percent. The request 
is lower in part because of an era of constrained resources, the 
deferral of investments for facilities that may no longer be required 
due to force structure reductions and in order to provide more funding 
for O&M-funded readiness accounts. Our construction request continues 
to emphasize investment in operational and training facilities ($1.8 
billion) that support the deployment of weapons systems and readiness; 
funds for the recapitalization of medical facilities ($500 million); 
and funds for seven Dependents Schools projects ($400 million).
    In addition, we are asking for $1.2 billion for the Family Housing 
program, which will help to provide and maintain quality, affordable 
housing for military personnel and their families. Of this amount, $1.1 
billion will support the operation and maintenance of over 41,300 
Family Housing units world-wide, though mostly overseas. The remaining 
$95 million is requested to fund Family Housing Construction and 
Improvements. I would add that no privatization projects are funded in 
the fiscal year 2015 request. At the end of fiscal year 2014, over 
205,000 family housing units will have been privatized, or almost 99 
percent of the domestic inventory. Ultimately, less than 1 percent of 
the original domestic inventory will remain Government owned due to 
their remote location and/or a small number of units that make 
privatization financially unviable.
                         global defense posture
    This request is critical to supporting our Global Defense Posture 
initiatives. In addition to the $857 million military construction 
investment planned for overseas military facility investments, we are 
asking for another $267 million of military construction to continue 
strengthening forward capabilities, ensure U.S. commitments to alliance 
goals, and rebalance to the Asia-Pacific region. Funding is included 
to:
  --Continue working with Japan to achieve an end state marine presence 
        remaining in Okinawa consistent with the April 2012 Joint 
        Statement on planned force posture adjustments;
  --Enable the development of Guam as a strategic hub for the Western 
        Pacific and facilitate the movement of assets into the region;
  --Enhance base resiliency to increase survivability where U.S. 
        defense posture is vulnerable to emerging capabilities; and
  --Provide infrastructure support for training and partnering with 
        allied nations to develop tactics, techniques, and procedures.
    The fiscal year 2015 investments in the Asia-Pacific region are 
critical to establishing a more enduring U.S. role in order to preserve 
peace and stability in the region. Furthermore, our funding request 
supports global posture initiatives in accordance with defense 
strategic priorities outlined in both the 2012 Defense Strategic 
Guidance and the 2014 Quadrennial Defense Review.
       sequestration for military construction and family housing
    Resumption of sequester-level cuts would lead to significantly 
lower funding levels for the military construction accounts to allow 
for the rebalancing of resources to higher Departmental priorities, 
such as readiness and training. The military construction accounts will 
only be able to support the most critical facility requirements, 
including projects that protect life, health, and safety. Most 
recapitalization efforts will be deferred, increasing risk and the 
degradation of overall facility conditions that will drive higher 
facility sustainment costs. If we return to sequester-level funding 
caps beginning in fiscal year 2016, we project the military 
construction accounts would be reduced by one-sixth, or over $5 
billion, during fiscal year 2016-2019 compared to the levels projected 
in our Future Years Defense Plan.
                               conclusion
    In conclusion, I believe that the fiscal year 2015 budget request 
is appropriate given current needs of the Armed Forces and fiscal 
reality. In particular, the budget supports a reasonable and 
financially responsible Military Construction and Family Housing 
program. We seek your support for our request. We also ask your help, 
and the help of others in Congress, to repeal sequestration and end its 
harmful impact on America's military.
    Mr. Chairman, members of the subcommittee, thank you again for your 
support for the Department of Defense, including the men and women who 
wear America's uniform and the civilians who support them. That 
concludes my statement. I welcome your questions.

    Senator Johnson. Thank you.
    Mr. Conger, please proceed.

                 SUMMARY STATEMENT OF HON. JOHN CONGER

    Mr. Conger. Chairman Johnson, distinguished members of the 
subcommittee.
    I appreciate the opportunity to appear before you to 
discuss the Department's fiscal year 2015 budget request for 
installations and environment.
    The testimony that I have submitted for the record 
describes the $6.6 billion we are requesting for military 
construction and family housing, the $8 billion more that we 
are investing in sustaining and restoring our facilities, and 
the $3.5 billion we are seeking for environmental compliance 
and clean-up.
    Because infrastructure, generally, has a long, useful life 
and its associated degradation is not as immediate, the DOD 
components are taking more risk in the military construction 
program in order to decrease risk and other operational and 
training budgets. In addition, reducing military construction 
reduces investment risk as we contemplate the uncertain 
allocation of force structure cuts and the possibility of a new 
round of Base Realignment and Closure (BRAC).
    The Military Construction (MILCON) request alone is a 40-
percent reduction from what we requested last year, and the 
facilities sustainment request is only 65 percent of the 
model's requirement. The budget challenges facing the 
Department are deep and they extend for many years. We continue 
to believe that an important way to ease this pressure is with 
base closure, allowing us to avoid paying upkeep for unneeded 
infrastructure and making those funds available for readiness 
and modernization of our forces.
    That said, I know the high cost of BRAC 2005 has left a bad 
taste in many Senators' mouths. We have long talked about the 
emphasis in 2005 on transformation rather than efficiency. But 
that answer did not satisfy Congress' concern about the $35 
billion cost, and it certainly did not explain why we were not 
going to end up with more of the same if another round were 
authorized. I was not satisfied either, and I tasked my staff 
to review each of the recommendations from the BRAC 2005 round.
    What we found was that we actually ended up conducting two 
parallel BRAC rounds. One was about transformation, the 
recommendations were expensive and they did not pay back. But 
there are some moves you can only do during a BRAC round.
    Looking at the nearly half of the last round's 
recommendations that either did not pay back at all or paid 
back in 7 years or more, we found that this quote/unquote 
``transformation BRAC'' cost $29 billion out of the $35 
billion, and resulted in only $1 billion in recurring savings. 
Clearly, that was not based on efficiency or savings.
    However, the other half of the recommendations was focused 
on saving money. They had pay back in less than 7 years. They 
ended up costing a total of $6 billion out of the $35 billion, 
and yielding recurring savings of $3 billion a year. So that 
part of the recommendation's $6 billion investment, $3 billion 
every year in recurring savings. This quote/unquote 
``efficiency BRAC'' proves that when we are trying to save 
money, we do. That is the kind of round we are trying to 
conduct now.
    One last topic I would like to touch on is the European 
infrastructure consolidation effort. Many members have said 
that we should close bases overseas before we close bases in 
the United States, so we have embarked on a BRAC-like process 
in Europe. However, we are not looking in this study to bring 
forces back to the United States. So it does not take any 
pressure off of the need from a domestic BRAC round.
    The analysis has taken longer than expected, but we are 
nearing completion and we anticipate results in the spring. We 
have affirmed several recommendations already, and have 
promised classified briefings to committee staff. In fact, we 
briefed this subcommittee's staff 3 weeks ago.
    While most of the recommendations will take years to 
execute and will require lengthy consultation with host 
nations, there are some near term activities. One that I would 
like to highlight that is in this year's MILCON request is the 
consolidation of intelligence activities at Royal Air Force 
(RAF) Croughton. There is a $92 million construction request in 
this budget, which is part of a 3-year effort we expect to cost 
$317 million that will yield $1 billion in savings over the 
next 10 years. That is the kind of efficiency that we are 
looking for.
    I appreciate the opportunity to testify, and I look forward 
to your questions.

    [The statement follows:]
                 Prepared Statement of Hon. John Conger
                              introduction
    Chairman Johnson, Ranking Member Kirk and distinguished members of 
the subcommittee: Thank you for the opportunity to present the 
President's fiscal year 2015 budget request for the Department of 
Defense programs supporting installations, facilities energy and the 
environment.
    First, let me thank you for your support for our installation 
mission. The DOD operates an enormous real property portfolio 
encompassing over 562,000 buildings and structures on 523 bases, posts, 
camps, stations, yards and centers. The replacement cost of the 
Department's installations is $850 Billion, excluding the cost of the 
27 million acres of land that our installations occupy. Our 
installations remain critical components of our ability to fight and 
win wars. Our warfighters cannot do their job without bases from which 
to fight, on which to train, or in which to live when they are not 
deployed. The bottom line is that installations support our military 
readiness.
    In addition, I would like to express my thanks to Congress for an 
fiscal year 2014 budget that allowed us to avoid a catastrophic budget 
year. The funding levels for the facilities accounts and the relative 
timeliness of the budget compared to fiscal year 2013 allowed us to 
recover from the disproportionate burden that facilities sustainment 
and base operations bore last year. While this will still be a 
challenging budget year, the funding levels and the certainty achieved 
by striking a budget deal and taking sequestration off the table for 
the year will allow us to manage our resources and conduct our 
operations more effectively.
    Still, the fiscal year 2015 budget request reflects the assumption 
that Budget Control Act funding levels are likely to continue. The 
recent budget deal provided more assistance to fiscal year 2014 than 
fiscal year 2015, and in order to meet the overall budget numbers, we 
had to scale back programs across the Department, to include military 
construction. As such, the fiscal year 2015 request for military 
construction and family housing is $6.6 billion, a 40.4 percent 
decrease from the fiscal year 2014 request. Because infrastructure, 
generally, has a long useful life, and its associated degradation is 
not as immediate, the DOD Components are taking more risk in the 
military construction program in order to decrease risk in other 
operational and training budgets. In addition, reducing military 
construction reduces investment risk as we contemplate the uncertain 
allocation of force structure cuts and the possibility of a new round 
of Base Realignment and Closure (BRAC).
    Tighter budgets have driven the services to take more risk in their 
Facilities Sustainment accounts. While continuing to assume risk in 
these accounts over time will result in increased repair requirements 
and decreased energy efficiency, we are accepting near term risk in 
facility maintenance while the Department adjusts to the new funding 
profile.
    To address this and other shortfalls driven by the funding caps, 
the President's budget includes the Opportunity, Growth and Security 
Initiative. This initiative would provide an additional $26 billion for 
the Defense Department in fiscal year 2015, including substantial 
investments in military construction and facilities sustainment.
    Finally, we persist in our request for another BRAC round, though 
given Congress' rejection of our previous request in 2015 and the time 
it takes to execute the BRAC process, we are now asking for a round in 
2017. We maintain that the Department has well documented excess 
capacity and is on a path for even more as we reduce our force 
structure. As Secretary Hagel indicated, we cannot afford to spend 
money on infrastructure we don't need while we continue to take risk in 
military readiness accounts.
    My testimony will outline the fiscal year 2015 budget request and 
highlight a handful of top priority issues--namely, the 
administration's request for BRAC authority, our progress on the 
European Infrastructure Consolidation analysis, new developments on the 
Pacific realignment, an overview of our facility energy programs, and a 
discussion of the steps DOD is taking to mitigate the risk posed by 
climate change.
   fiscal year 2015 budget request--military construction and family 
                                housing
    The President's fiscal year 2015 budget requests $6.6 billion for 
the Military Construction (MilCon) and Family Housing Appropriation--a 
decrease of approximately $4.5 billion from the fiscal year 2014 budget 
request. This decrease primarily reflects the declining budget 
environment resulting from the Budget Control Act and the recent budget 
agreement. In light of the sharp reductions in the construction budget, 
the DOD Components focused principally on sustaining warfighting and 
readiness postures. As I noted in the introduction, infrastructure 
degradation is not immediate, so DOD Components are taking more risk in 
the MilCon program in order to decrease risk in other operational and 
training budgets.
    This funding will still enable the Department to respond to 
warfighter requirements and mission readiness. However, the reduced 
budget will have an impact on routine operations and quality of life as 
projects to improve aging workplaces are deferred. In addition to new 
construction needed to bed-down forces returning from overseas bases, 
this funding will be used to restore and modernize enduring facilities, 
acquire new facilities where needed, and eliminate those that are 
excess or obsolete. The fiscal year 2015 MilCon request ($4.9 billion) 
includes projects in support of the strategic shift to the Asia-
Pacific, projects needed to support the realignment of forces, a few 
projects to improve and update facilities used by the Guard and 
Reserves forces, and although at a reduced level, it includes some 
projects to take care of our people and their families, such as 
unaccompanied personnel housing, medical treatment facilities, and 
schools.

           TABLE 1. MILCON AND FAMILY HOUSING BUDGET REQUEST, FISCAL YEAR 2014 VERSUS FISCAL YEAR 2015
----------------------------------------------------------------------------------------------------------------
                                                                                   Change From Fiscal Year 2014
                                                    Fiscal Year     Fiscal Year  -------------------------------
                    Category                       2014 Request    2015 Request     Funding ($
                                                   ($ Millions)    ($ Millions)      Millions)        Percent
----------------------------------------------------------------------------------------------------------------
Military Construction...........................           8,656           4,859         (3,797)          (43.9)
Base Realignment and Closure....................             451             270           (181)          (40.1)
Family Housing..................................           1,544           1,191           (353)          (22.9)
Chemical Demilitarization.......................             123              39            (84)          (68.3)
NATO Security Investment Program................             240             200            (40)          (16.7)
                                                 ---------------------------------------------------------------
      TOTAL.....................................          11,014           6,559         (4,455)          (40.4)
----------------------------------------------------------------------------------------------------------------

                         military construction
    We are requesting $5.1 billion for ``pure'' military construction--
i.e., exclusive of BRAC and Family Housing--, the lowest amount in 10 
years. This request addresses routine requirements for construction at 
enduring installations stateside and overseas, and for specific 
programs such as the NATO Security Investment Program and the Energy 
Conservation Investment Program. In addition, we are targeting MilCon 
funds in three key areas:
    First and foremost, our MilCon request supports the Department's 
operational missions. MilCon is key to implementing initiatives such as 
the Asia-Pacific rebalance, the Army's Brigade Combat Team 
reorganization, maritime homeland defense, and cyber mission 
effectiveness. Our fiscal year 2015 budget request includes $84 million 
for the final increment of the Kitsap Explosives Handling Wharf-II, 
$120 million for a cyber warfare training facility, $255 million for 
KC-46A mission facilities; and, $51 million for Guam relocation support 
facilities. The budget request also includes $180 million for the 
fourth increment of the U.S. Strategic Command Headquarters Replacement 
facility at Offutt Air Force Base, Nebraska; $166 million for the 
second increment of the U.S. Cyber Command Joint Operations Facility at 
Fort Meade, Maryland; $92.2 million for the first phase of a Joint 
Intelligence Analysis Complex Consolidation at RAF Croughton, United 
Kingdom; and $411 million to address Special Forces Operations 
requirements.
    Second, our fiscal year 2015 budget request includes $394 million 
to replace or modernize seven DOD Education Activity (DODEA) schools 
that are in poor or failing physical condition. These projects, six of 
which are at enduring locations overseas, support the Department's plan 
to replace or recapitalize more than half of DODEA's schools over the 
next several years, but at a slower pace to improve execution. The 
recapitalized or renovated facilities, intended to be models of 
sustainability, will provide a modern teaching environment for the 
children of our military members.
    Third, the fiscal year 2015 budget request includes $486 million 
for five projects to upgrade our medical treatment and research 
facilities, including $260 million for the fourth increment of funding 
to replace the Landstuhl Regional Medical Center at the Rhine Ordnance 
Barracks in Germany. Recapitalizing this facility is critical because 
it not only supports our wounded warriors but also serves as the 
primary DOD European referral center for high acuity specialty and 
surgical care. It is also our only theater level medical asset 
providing comprehensive services to the extraordinary large 
Kaiserslautern military community. Our budget focuses on medical 
infrastructure projects that are crucial to ensure that we can deliver 
the quality healthcare our service members and their families deserve, 
especially during overseas deployments.
                    family and unaccompanied housing
    A principal priority of the Department is to support military 
personnel and their families and improve their quality of life by 
ensuring access to suitable, affordable housing. Servicemembers are 
engaged in the front lines of protecting our national security and they 
deserve the best possible living and working conditions. Sustaining the 
quality of life of our people is crucial to recruitment, retention, 
readiness and morale.
    Our fiscal year 2015 budget request includes $1.2 billion for 
construction, operation, and maintenance of Government-owned and leased 
family housing worldwide, oversight of privatized housing, and services 
to assist military members in renting or buying private sector housing. 
Most Government-owned family housing is on bases in foreign countries, 
since the Department has privatized almost all of its family housing in 
the United States. The requested funding will ensure that U.S. military 
personnel and their families continue to have suitable housing choices.

                TABLE 2. FAMILY HOUSING BUDGET REQUEST, FISCAL YEAR 2014 VERSUS FISCAL YEAR 2015
----------------------------------------------------------------------------------------------------------------
                                                                                   Change From Fiscal Year 2014
                                                    Fiscal Year     Fiscal Year  -------------------------------
                    Category                       2014 Request    2015 Request     Funding ($
                                                   ($ Millions)    ($ Millions)      Millions)        Percent
----------------------------------------------------------------------------------------------------------------
Family Housing Construction/Improvements........             194              95            (99)          (51.0)
Family Housing Operations & Maintenance.........           1,347           1,094           (253)          (18.8)
Family Housing Improvement Fund.................               2               2               0               0
                                                 ---------------------------------------------------------------
      TOTAL.....................................           1,543           1,191           (352)          (22.8)
----------------------------------------------------------------------------------------------------------------

    DOD also continues to encourage the modernization of Unaccompanied 
Personnel Housing (UPH) to improve privacy and provide greater 
amenities. In recent years, we have heavily invested in UPH to support 
initiatives such as BRAC, global restationing, force structure 
modernization and Homeport Ashore--a Navy program to move Sailors from 
their ships to shore-based housing when they are at their homeport. The 
fiscal year 2015 MilCon budget request includes $150 million for five 
construction and renovation projects that will improve living 
conditions for trainees and unaccompanied personnel.
    The military services completed the initial Military Housing 
Privatization Initiative (MHPI) award phase before the end of fiscal 
year 2013. The Air Force awarded the final three projects to complete 
its program, bringing the total privatized inventory to about 205,000 
homes. The new challenge will be to manage the government's interests 
in these privatized projects to ensure they continue to provide quality 
housing for 50 years.
              facilities sustainment and recapitalization
    In addition to new construction, the Department invests significant 
funds in maintenance and repair of our existing facilities. Sustainment 
represents the Department's single most important investment in the 
condition of its facilities. It includes regularly scheduled 
maintenance and repair or replacement of facility components--the 
periodic, predictable investments an owner should make across the 
service life of a facility to slow its deterioration, optimize the 
owner's investment and save resources over the long term. Proper 
sustainment retards deterioration, maintains safety, and preserves 
performance over the life of a facility, and helps improve the 
productivity and quality of life of our personnel.
    The accounts that fund these activities have taken significant cuts 
in recent years. In fiscal year 2013, DOD budget request included $8.5 
billion of Operations and Maintenance (O&M) funding for sustainment of 
our real property. This amount represents 82 percent of the requirement 
based on the Facilities Sustainment Model (FSM). Due to sequestration 
reductions, by the end of fiscal year 2013, the Department had only 
obligated $6.7 billion for sustainment, which equates to 65 percent of 
the modeled requirement. The Department's fiscal year 2014 budget 
request for sustainment included just $7.9 billion of O&M funds (78 
percent of the modeled requirement) and Congress appropriated only $7.3 
billion, or 74 percent of the modeled requirement, for this purpose.

       TABLE 3. SUSTAINMENT AND RECAPITALIZATION BUDGET REQUEST, FISCAL YEAR 2014 VERSUS FISCAL YEAR 2015
----------------------------------------------------------------------------------------------------------------
                                                                                   Change From Fiscal Year 2014
                                                    Fiscal Year     Fiscal Year  -------------------------------
                    Category                       2014 Request    2015 Request     Funding ($
                                                   ($ Millions)    ($ Millions)      Millions)        Percent
----------------------------------------------------------------------------------------------------------------
Sustainment (O&M)...............................           7,867           6,429         (1,438)          (18.3)
Recapitalization (O&M)..........................           2,666           1,617         (1,049)          (39.3)
                                                 ---------------------------------------------------------------
      TOTAL.....................................          10,533           8,046         (2,487)          (23.6)
----------------------------------------------------------------------------------------------------------------

    For fiscal year 2015, the Department's budget request includes $6.4 
billion for sustainment and $1.6 billion for recapitalization. The 
combined level of sustainment and recapitalization funding ($8 billion) 
reflects a 23.6 percent decrease from the fiscal year 2014 President's 
Budget (PB) request ($10.5 billion). While the Department's goal is to 
fund sustainment at 90 percent of modeled requirements, the funding 
level noted above supports an average DOD-wide sustainment funding 
level of 65 percent of the FSM requirement. Due to budget challenges, 
the military services have taken risk in maintaining and recapitalizing 
existing facilities. The services have budgeted facility sustainment 
between 63 and 77 percent of the DOD-modeled requirement, with the 
Marine Corps taking the least risk by budgeting sustainment at 77 
percent and the Army assuming the greatest risk by budgeting 
sustainment at 63 percent. Continued decreases in sustainment coupled 
with inadequate investment in recapitalization of existing facilities 
will present the Department with larger bills in the out-years to 
restore or replace facilities that deteriorate prematurely due to 
underfunding their sustainment.
                 facility investment policy initiatives
    Military Construction Premium: Last year, the Department completed 
a study to quantify elements of the MilCon process that increases 
construction costs compared to similar construction efforts in the 
private sector. We are now conducting additional analysis in two areas 
where military cost premiums were high.
    First, we are taking a close look at anti-terrorism standards for 
construction. With current policy that prescribes significant minimum 
anti-terrorism construction standards, many construction projects must 
absorb excessive and disproportionate requirements, which in turn drive 
up costs. On December 7, 2012, the Deputy Secretary of Defense issued 
policy for DOD to adopt the Federal Interagency Security Committee 
(ISC) security standards for off-base DOD leased space consistent with 
other Federal agencies. In addition, the Department is evaluating 
revisions to DOD requirements for building antiterrorism protection on 
our installations, which currently calls for the same minimum standards 
for nearly all on-base buildings. We are working to establish a process 
whereby risk and appropriate antiterrorism mitigation would be 
determined for each new project, similar to the policy we adopted for 
off-base leased facilities. For example, this risk assessment would 
take into account whether a building was well within a secure 
perimeter.
    Second, we are undertaking a study to better understand the life-
cycle cost impacts of our design practices in each of seven major 
building systems by comparing facilities designed for an extended 
service life (40 years or more) to those designed for the typical 
commercial practice of twenty to 25 years. We intend this study to 
inform decisions on design-life requirements in our technical 
standards. We believe our existing standards reduce life-cycle costs 
even where there appears to be an increase of initial costs; however, 
it is important to review them for improvement and/or validation.
    Facility Condition Standards: We have been working for some time to 
develop a policy that relates the condition of facilities to 
requirements for recapitalization. While straightforward on its 
surface, it has turned out to be far more complex than originally 
thought, requiring underlying policy adjustments to enable the 
implementation of a policy on facility investment related to facility 
condition standards.
    For example, each of the military services uses slightly different 
processes to measure the Facility Condition Index (FCI), a functional 
indicator used across the Federal Government to assess facility 
condition, expressed in terms of the relationship between what it would 
cost to repair a facility to a like-new condition and what it would 
cost to replace that facility (e.g., an FCI of 90 percent means that 
the cost to restore a facility is 10 percent of the cost to replace 
it). In order to increase the reliability of DOD's FCI data and to 
ensure the figures for each Service were comparable, the Department 
issued policy and implementation guidelines in September 2013 that 
reinvigorate and standardize our facility condition assessment and 
reporting processes, to include using a common inspection tool and 
ensuring qualified professionals conduct the inspections.
    With standardized and reliable FCI data, we will be in a better 
position to develop a facility investment strategy based on the 
condition of the Department's real property portfolio, either as an 
aggregate portfolio or by looking at individual assets. Generally, we 
would like to maintain an average portfolio FCI of Fair (80 percent, 
formerly referred to as Q2), and we are seeking to replace, repair, 
excess or demolish buildings that are in such bad shape that they are 
rated as Failing (FCI less than 60 percent, formerly the Q4 
designation). Today, our average FCI for all DOD facilities is 86 
percent, and we have more than 17,000 buildings that are rated as 
Failing across the enterprise. Taking risk by underfunding sustainment 
will drive these figures in the wrong direction, and we will need a 
strategy to improve the condition of our real property inventory in the 
coming years.
    Payment in Kind Projects: In 2013, the Senate Armed Service 
Committee released a report that focused on host nation funded 
construction in Germany, South Korea, and Japan. The report raised 
several concerns regarding the selection and prioritization of DOD 
construction projects using host nation funds, particularly those funds 
provided to the Department as in-kind contributions. As a result, the 
fiscal year 2014 National Defense Authorization Act requires that the 
Department obtain advance authorization for construction projects 
funded through payment-in-kind from host nations. While we disagree 
with the provision because it is overly restrictive, we understand 
congressional concerns and will work with you to ensure we not only 
comply with this restriction but keep you better informed about all 
projects funded with host nation contributions.
        fiscal year 2015 budget request--environmental programs
    The Department has long made it a priority to protect the 
environment on our installations, not only to preserve irreplaceable 
resources for future generations, but to ensure that we have the land, 
water and airspace we need to sustain military readiness. To achieve 
this objective, the Department has made a commitment to continuous 
improvement, pursuit of greater efficiency and adoption of new 
technology. In the President's fiscal year 2015 budget, we are 
requesting $3.5 billion to continue the legacy of excellence in our 
environmental programs.
    The table below outlines the entirety of the DOD's environmental 
program, but I would like to highlight a few key elements where we are 
demonstrating significant progress--specifically, our environmental 
restoration program, our efforts to leverage technology to reduce the 
cost of cleanup, and the Readiness and Environmental Protection 
Integration (REPI) program.

            TABLE 4: ENVIRONMENTAL PROGRAM BUDGET REQUEST, FISCAL YEAR 2015 VERSUS. FISCAL YEAR 2014
----------------------------------------------------------------------------------------------------------------
                                                                                   Change From Fiscal Year 2014
                                                    Fiscal Year     Fiscal Year  -------------------------------
                     Program                       2014 Request    2015 Request     Funding ($
                                                   ($ Millions)    ($ Millions)      Millions)        Percent
----------------------------------------------------------------------------------------------------------------
Environmental Restoration.......................           1,303           1,105           (198)          (15.2)
Environmental Compliance........................           1,460           1,458             (2)           (0.1)
Environmental Conservation......................             363             381              18             5.0
Pollution Prevention............................             106             119              13            12.3
Environmental Technology........................             214             172            (42)          (19.6)
BRAC Environmental..............................             379             264           (115)          (30.3)
                                                 ---------------------------------------------------------------
      TOTAL.....................................           3,825           3,499           (326)           (8.5)
----------------------------------------------------------------------------------------------------------------

                       environmental restoration
    We are requesting $1.4 billion to continue cleanup efforts at 
remaining Installation Restoration Program (IRP--focused on cleanup of 
hazardous substances, pollutants, and contaminants) and Military 
Munitions Response Program (MMRP--focused on the removal of unexploded 
ordinance and discarded munitions) sites. This includes $1.1 billion 
for ``Environmental Restoration,'' which encompasses active 
installations and Formerly Used Defense Sites (FUDS) locations and $264 
million for ``BRAC Environmental.'' DOD is making steady progress, 
moving sites through the cleanup process towards achieving program 
goals. The fiscal year 2015 cleanup request is reduced by 21.1 percent. 
The reduction for the Environmental Restoration request is primarily 
due to budgetary reductions for the Army, who will still meet our 
restoration goals despite the lower funding. The reductions in the BRAC 
funding request will be augmented with unobligated balances from the 
consolidated BRAC account.

                                     TABLE 5: PROGRESS TOWARD CLEANUP GOALS
----------------------------------------------------------------------------------------------------------------
Goal: Achieve Response Complete at 90 percent and 95 percent of Active and BRAC IRP and MMRP sites, and FUDS IRP
                          sites, by fiscal year 2018 and fiscal year 2021, respectively
-----------------------------------------------------------------------------------------------------------------
                                              Status as of the end   Projected Status at    Projected Status at
                                              of fiscal year 2013     the end of fiscal      the end of fiscal
                                                      (%)               year 2018 (%)          year 2021 (%)
----------------------------------------------------------------------------------------------------------------
Army.......................................                    89                     97                     98
Navy.......................................                    75                     88                     95
Air Force..................................                    70                     89                     94
DLA........................................                    88                     91                     97
FUDS.......................................                    78                     90                     95
                                            --------------------------------------------------------------------
      Total................................                    79                     92                     96
----------------------------------------------------------------------------------------------------------------

    By the end of 2013, the Department, in cooperation with State 
agencies and the Environmental Protection Agency, completed cleanup 
activities at 79 percent of Active and BRAC IRP and MMRP sites, and 
FUDS IRP sites, and is now monitoring the results. During fiscal year 
2013 alone, the Department completed cleanup at over 800 sites. Of the 
more than 38,000 restoration sites, almost 30,000 are now in monitoring 
status or cleanup completed. We are currently on track to exceed our 
program goals--anticipating complete cleanup at 96 percent of Active 
and BRAC IRP and MMRP sites, and FUDS IRP sites, by the end of 2021.
    Our focus remains on continuous improvement in the restoration 
program: minimizing overhead; adopting new technologies to reduce cost 
and accelerate cleanup; and refining and standardizing our cost 
estimating. All of these initiatives help ensure that we make the best 
use of our available resources to complete cleanup.
    Note in particular that we are cleaning up sites on our active 
installations in parallel with those on bases closed in previous BRAC 
rounds--cleanup is not something that DOD pursues only when a base is 
closed. In fact, the significant progress we have made over the last 20 
years cleaning up contaminated sites on active DOD installations is 
expected to reduce the residual environmental liability in the 
disposition of our property made excess through BRAC or other reasons.
                        environmental technology
    A key part of DOD's approach to meeting its environmental 
obligations and improving its performance is its pursuit of advances in 
science and technology. The Department has a long record of success 
when it comes to developing innovative environmental technologies and 
getting them transferred out of the laboratory and into actual use on 
our remediation sites, installations, ranges, depots and other 
industrial facilities. These same technologies are also now widely used 
at non-Defense sites helping the Nation as a whole.
    While the fiscal year 2015 budget request for Environmental 
Technology overall is $172 million, our core efforts are conducted and 
coordinated through two key programs--the Strategic Environmental 
Research and Development Program (SERDP--focused on basic research) and 
the Environmental Security Technology Certification Program (ESTCP--
which validates more mature technologies to transition them to 
widespread use). The fiscal year 2015 budget request includes $57.8 
million for SERDP and $26.5 million for ESTCP for environmental 
technology demonstrations. (The budget request for ESTCP includes an 
additional $25.0 million for energy technology demonstrations.)
    These programs have already achieved demonstrable results and have 
the potential to reduce the environmental liability and costs of the 
Department--developing new ways of treating groundwater contamination, 
reducing the life-cycle costs of multiple weapons systems, and 
improving natural resource management.
    Most recently, SERDP and ESTCP have developed technology that 
allows us to discriminate between hazardous unexploded ordnance and 
harmless scrap metal without digging up an object. This technology 
promises to reduce the liability of the MMRP program by billions of 
dollars and accelerate the current cleanup timelines for munitions 
sites--without it; we experience a 99.99 percent false positive rate 
and are compelled to dig up hundreds of thousands of harmless objects 
on every MMRP site. The rigorous testing program for this technology 
has experienced some delays due to sequestration and is now expected to 
be complete in 2015. Even as the technical demonstrations are ongoing, 
the department has been pursuing an aggressive agenda to transition the 
technology to everyday use. We are proceeding deliberately and 
extremely successfully with a testing and outreach program designed to 
validate the technology while ensuring cleanup contractors, State and 
Federal regulators, and local communities are comfortable with the new 
approach. We are already beginning to use this new tool at a few 
locations, but hope to achieve more widespread use within the next few 
years.
    Looking ahead, our environmental technology investments are focused 
on the Department's evolving requirements. We will work on the 
challenges of contaminated groundwater sites that will not meet 
department goals for completion because no good technical solutions 
exist; invest in technologies to address munitions in the underwater 
environment; develop the science and tools needed to meet the 
Department's obligations to assess and adapt to climate change; and 
continue the important work of reducing future liability and life-cycle 
costs by eliminating toxic and hazardous materials from our production 
and maintenance processes.
         environmental conservation and compatible development
    In order to maintain access to the land, water and airspace needed 
to support our mission needs, the Department continues to manage 
successfully the natural resources entrusted to us--including 
protection of the many threatened and endangered species found on our 
lands. DOD manages over 28 million acres containing some 420 federally 
listed threatened or endangered species, more than 520 species-at-risk, 
and many high-quality habitats. A surprising number of these species 
are found only on military lands--including more than ten listed 
species and at least 75 species-at-risk. That is 9 times more species 
per acre than the Bureau of Land Management, 6 times more per acre than 
the United States Fish and Wildlife Service (USFWS), 4.5 times more per 
acre than Forest Service, and 3.5 times more per acre than the National 
Park Service.
    The fiscal year 2015 budget request for Conservation is $381 
million. The Department invests so much to manage not only its 
imperiled species but all its natural resources, in order to sustain 
the high quality lands our service personnel need to train and to 
maximize our flexibility when using those lands. Species endangerment 
and habitat degradations can have direct mission-restriction impacts. 
That is one reason we work hard to prevent species from becoming 
listed, or from impacting our ability to test and train if they do 
become listed.
    As a result of multiple law suits, the USFWS has entered into 
court-approved agreements to make decisions on 250 species that are 
``candidates'' for listing as threatened or endangered under the 
Endangered Species Act by 2016. The Department has already analyzed the 
250 species and thirty-seven of them, if listed and critical habitat 
was designated on DOD lands, have the potential to impact military 
readiness at locations such as Yakima Training Center and Joint Base 
Lewis-McChord (JBLM). To minimize the potential impacts these 
installations have already begun to appropriately manage these species 
and to consult with USFWS. USFWS and DOD have long worked 
collaboratively to minimize any critical habitat designation on DOD 
lands and to ensure that listed species conservation is consistent with 
military readiness needs.
    Our focus has been on getting ahead of any future listings. I have 
tasked the Military Departments to get management plans in place now to 
avoid critical habitat designations.
    While we make investments across our enterprise focused on 
threatened or endangered species, wetland protection, or protection of 
other natural, cultural and historical resources, I wanted to highlight 
one particularly successful and innovative program--the Readiness and 
Environmental Protection Integration (REPI) Program. Included within 
the $381 million for Conservation, $43.6 million is directed to the 
REPI Program. The REPI Program is a cost-effective tool to protect the 
Nation's existing training, testing, and operational capabilities at a 
time of decreasing resources. In 11 years of the program, REPI 
partnerships have protected more than 314,000 acres of land around 72 
installations in 27 States. This land protection has resulted in 
tangible benefits to testing, training and operations, also made a 
significant contribution to biodiversity and endangered species 
recovery actions.
    Under REPI, DOD partners with conservation organizations and State 
and local governments to preserve buffer land near installations and 
ranges. Preserving these areas allows DOD to avoid much more costly 
alternatives, such as workarounds, segmentation, or investments to 
replace existing test and training capability, while securing habitat 
off of our installations and taking pressure off of the base to 
restrict activities. REPI supports the warfighter and protects the 
taxpayer because it multiplies the Department's investments with its 
unique cost-sharing agreements. Even in these difficult economic times 
for States, local governments, and private land trusts, REPI partners 
continue to directly leverage the Department's investments one-to-one. 
In other words, we are securing these buffers around our installations 
for half-price.
    In addition, DOD, along with the Departments of the Interior and 
Agriculture, announced the Sentinel Landscapes Partnership to protect 
critical DOD missions, working lands, and environmentally sensitive 
habitat. The Sentinel Landscapes Partnership further strengthens 
interagency coordination, and provides taxpayers with the greatest 
leverage of their funds to advance the mutually-beneficial land 
protection goals of each agency. The pilot Sentinel Landscape project 
at Joint Base Lewis-McChord helped USFWS avoid listing a butterfly 
species in Washington, Oregon, and California, citing the ``high level 
of protection against further losses of habitat or populations'' from 
Joint Base Lewis-McChord's REPI investment on private prairie lands in 
the region. These actions allow significant maneuver areas to remain 
available and unconstrained for active and intense military use at 
JBLM.
                           highlighted issues
    In addition to the budget request, there are several legislative 
requests and other initiatives that have received interest from 
Congress. In the sections that follow, I highlight five specific items 
of interest--(1) Base Realignment and Closure; (2) European 
Infrastructure Consolidation; (3) Relocation of Marines to Guam; (4) 
DOD Facilities Energy Programs; and (5) DOD's Response to Climate 
Change.

1. Base Realignment and Closure

    For the third year in a row, the Administration is requesting BRAC 
authority from Congress. This year, we are requesting authority to 
conduct a BRAC round in 2017.
    The Department is facing a serious problem created by the tension 
of declining budgets, reductions in force structure, and limited 
flexibility to adapt our infrastructure accordingly. We need to find a 
way to strike the right balance, so infrastructure does not drain 
resources from the warfighter. Our goal is therefore a BRAC focused on 
efficiency and savings, and it is a goal we believe is eminently 
achievable.
    We believe the opportunity for greater efficiencies is clear, based 
on three basic facts:
  --In 2004, DOD conducted a capacity assessment that indicated it had 
        24 percent aggregate excess capacity;
  --In BRAC 2005, the Department reduced only 3.4 percent of its 
        infrastructure, as measured in Plant Replacement Value--far 
        short of the aggregate excess indicated in the 2004 study;
  --Force structure reductions--particularly Army personnel (from 
        570,000 to 450,000 or lower), Marine Corps personnel (from 
        202,000 to 182,000 or lower) and Air Force force structure 
        (reduced by 500 aircraft)--subsequent to that analysis point to 
        the presence of additional excess.
    Historically, savings from BRAC have been substantial. The first 
four rounds of BRAC (1988, 1991, 1993 and 1995) are producing a total 
of about $8 billion and BRAC 2005 is producing an additional $4 billion 
in annual, recurring savings. This $12 billion total represents the 
savings that the Department realizes each and every year as a result of 
the avoided costs for base operating support, personnel, and leasing 
costs that BRAC actions have made possible.
    A considerable proportion of the opposition to a new BRAC round is 
the cost of BRAC 2005--specifically, the $35 billion it cost compared 
to the original projection (which was $21 billion). The Government 
Accountability Office has validated the $4 billion in recurring savings 
associated with the round, so its savings is not in question. When 
congressional members say the last round did not save money, what they 
really mean is that it cost too much, the cost growth was unacceptable, 
and the payback was too slow.
    Simply put, we cannot afford another $35 billion BRAC round. 
However, it turns out the key factor that drove the cost of the last 
BRAC round was the willingness of the Department, the BRAC Commission, 
and Congress to accept recommendations that were not designed to save 
money.
    To the casual observer, this makes no sense. BRAC has been sold as 
a method of efficiency--a tool to save money. That is true to an 
extent, but the law effectively prevents the Department from shifting 
its functions around from base to base without BRAC, and in the last 
round that is exactly what was done. The reality is that there were 
really two parallel BRAC rounds conducted in 2005: one focused on 
Transformation and one focused on Efficiency.
    Last year, we conducted an analysis of the payback from BRAC 2005 
recommendations. We found that nearly half of the recommendations from 
the last round were focused on taking advantage of transformational 
opportunities that were available only under BRAC--to move forces and 
functions where they made sense, even if doing so would not save much 
money. In BRAC 2005, 33 of the 222 recommendations had no recurring 
savings and 70 recommendations took over 7 years to pay back. They were 
pursued because the realignment itself was important, not the savings.
    This ``Transformation BRAC'' cost just over $29 billion and 
resulted in a small proportion of the savings from the last round, but 
it allowed the Department to redistribute its forces in ways that are 
otherwise extraordinarily difficult outside of a BRAC round. It was an 
opportunity that the Department seized and Congress supported while 
budgets were high. For example, in our consolidations of hospitals in 
the National Capital Region and San Antonio areas, we decided to make 
the hospitals world class in line with direction from Congress. This 
approach was the right approach because it was an approach focused on 
healing our wounded and taking care of our men and women according to 
the latest healthcare standards. We could have implemented the 
recommendations for a much lower cost by putting two people in a room 
and using standard designs, but we did not. Similarly, we chose to 
transform the Army's Reserve and Guard facilities by building new Armed 
Force Reserve Centers.
    The remaining recommendations made under BRAC 2005 paid back in 
less than 7 years, even after experiencing cost growth. This 
``Efficiency BRAC'' cost only $6 billion (out of $35 billion) with an 
annual payback of $3 billion (out of $4 billion). This part of BRAC 
2005 paid for itself speedily and will rack up savings for the 
Department in perpetuity. It was very similar to previous BRAC rounds 
and very similar to what we envision for a future BRAC round. In 
today's environment, a $6 billion investment that yields a $3 billion 
annual payback would be extraordinarily welcome. In today's 
environment, we need an Efficiency BRAC.
    In addition to being a proven process that yields significant 
savings, BRAC has other advantages. The BRAC process is comprehensive 
and thorough. Examining all installations and conducting thorough 
capacity and military value analyses using certified data enable 
rationalization of our infrastructure in alignment with the strategic 
imperatives detailed in the 20-year force structure plan. The merits of 
such an approach are twofold. First, a comprehensive analysis ensures 
that the Department considers a broad spectrum of approaches beyond the 
existing configuration to increase military value and align with our 
strategy. Second, the process is auditable and logical which enables 
independent review by the Commission and affected communities. In its 
2013 report GAO stated:--''We have reported that DOD's process for 
conducting its BRAC 2005 analysis was generally logical, reasoned and 
well documented and we continue to believe the process remains 
fundamentally sound.''
    Additionally, and of primary importance, is the BRAC requirement 
for an ``All or None'' review by the President and Congress, which 
prevents either from picking and choosing among the Commission's 
recommendations. Together with the provision for an independent 
commission, this all-or-none element is what insulates BRAC from 
politics, removing both partisan and parochial influence, and 
demonstrating that all installations were treated equally and fairly. 
It is worth noting that the process validates the importance of those 
bases that remain and are then deserving of continued investment of 
scarce taxpayer resources.
    The Department's legal obligation to close and realign 
installations as recommended by the Commission by a date certain, 
ensures that all actions will be carried out instead of being endlessly 
reconsidered. That certainty also facilitates economic reuse planning 
by impacted communities.
    Finally, after closure, the Department has a sophisticated and 
collaborative process to transition the property for reuse. The closure 
of a local installation can cause upheaval in the surrounding 
community. Therefore, it is important to note that there are advantages 
to communities under BRAC that are not provided under existing disposal 
authorities, to include involvement in the land disposal process, 
availability to acquire property for job creation purposes, 
environmental review concentrating on the community's planned uses to 
the extent practicable, and the availability of more extensive 
community redevelopment/reuse assistance from the Office of Economic 
Adjustment. Land disposal outside of BRAC is done on a parcel-by-parcel 
basis with no mechanism for taking local planned uses into account. 
Additionally, without BRAC conveyance authorities, there is no special 
property disposal preference for the local community--by law, the local 
community has to stand in line for the property behind other Federal 
agencies, the homeless, and potential public benefit recipients.

2. European Infrastructure Consolidation

    The Department has been reducing its European footprint since the 
end of the Cold War. Generally, infrastructure reductions have been 
proportional to force structure reductions, but we haven't taken a 
holistic, joint review of our European infrastructure like we have with 
BRAC and our domestic bases. In response to our recent requests for 
BRAC, Congress made it clear that it wanted DOD to do so.
    In January 2013, the Secretary of Defense directed the Department 
to conduct a comprehensive review of its European infrastructure in an 
effort to create long-term savings by eliminating excess 
infrastructure, recapitalizing astutely to create excess for 
elimination, and leveraging announced force reductions to close sites 
or consolidate operations. Under this comprehensive effort, dubbed the 
European Infrastructure Consolidation (EIC) process, we are analyzing 
infrastructure relative to the requirements of a defined force 
structure while emphasizing military value, joint utilization, and 
obligations to our allies.
    The Department does not conduct this degree of comprehensive 
analyses of its infrastructure on a regular basis, so the learning 
curve has been steep. We initially hoped to complete our European 
infrastructure review and have recommendations by the end of 2013, but 
the learning curve, furloughs, and other resource constraints have 
caused delays. The services did, however, identify and are in the 
process of implementing a number of ``quick wins'' in Europe--small 
scale, non-controversial closures and realignments that require no 
military construction funding, can be implemented quickly, and produce 
near term savings. We are also analyzing a variety of major actions to 
determine operational impacts and positive business case results. The 
analysis includes the three Military Departments and four joint work 
groups to look at the potential for cross service solutions. We expect 
to complete the analysis in the spring, and I would be happy to brief 
the committee in a classified forum on those scenarios we are 
analyzing. However, I wanted to highlight one opportunity that is 
mature enough to share today.
Scenario: Consolidate intelligence activities to RAF Croughton
    One of the efforts that we consider the prototype of the EIC 
process is the consolidation of intelligence activities from RAF 
Alconbury and RAF Molesworth to RAF Croughton. This is a mature 
scenario with a good business case that the EIC Senior Steering Group 
reviewed and endorsed early in our analytical process. The 
consolidation's funding was programmed and the first project is part of 
the fiscal year 2015 request, offering Congress an opportunity to 
signal support for consolidation in Europe in this year's bill.
    Under this effort, the Department plans to construct a total of 
$317 million in new facilities at RAF Croughton, consolidating the six 
intelligence organizations currently operating at RAF Molesworth and 
providing corresponding support facilities to accommodate the incoming 
personnel. The current facilities supporting U.S. and partner nation 
intelligence analysis, engagement, and training mission at RAF 
Molesworth are inadequate to support current analysis requirements and 
require substantial Sustainment, Restoration, and Modernization (SRM) 
funding. Support facilities (including schools, housing, fitness 
center, etc.) for RAF Molesworth are located 13 miles away at RAF 
Alconbury, approximately a 25 minute commute.
    The existing mission facilities at RAF Molesworth include 21 widely 
dispersed and degraded buildings, providing only 60 percent of the 
space authorized by the Unified Facilities Criteria. Total intelligence 
personnel number approximately 1,250. The dispersed layout inhibits 
intelligence collaboration, while overcrowding contributes to safety 
concerns and unhealthy working environment. Short-term repairs and 
temporary facilities are used to keep intelligence work areas and 
systems functional. The Defense Intelligence Agency (DIA) has spent $30 
million in SRM and Under Secretary of Defense for Intelligence and DIA 
have spent $60 million for leased modular facilities that require 
recapitalization every 7 years--this is not a cost effective situation.
    The consolidation of intelligence missions at RAF Croughton creates 
an opportunity for annual recurring savings of $75 million; a reduction 
in Restoration and Modernization funding required to alleviate $191 
million of SRM backlog; avoidance of $65 million for a DODEA Europe 
project at RAF Alconbury; and, reduction of nearly 350 total personnel 
(military, civilian and local foreign nationals). These figures 
demonstrate a relatively rapid payback of our up-front investment.
    The first phase of the construction is a $92 million project in 
this year's funding request.

3. Rebasing of Marines from Okinawa to Guam

    One of the most significant and contentious rebasing actions 
proposed in recent years is the movement of thousands of U.S. Marines 
from Okinawa to Guam. The establishment of an operational U.S. Marine 
Corps capability in Guam is an essential component of the rebalance to 
the Asia Pacific region. It is an important step in achieving our goal 
of a more geographically distributed, operationally resilient, and 
politically sustainable force posture in the region.
    The original agreement established in the May 2006 U.S.--Japan 
Realignment ``Roadmap'' included the relocation of approximately 8,600 
Marines and 9,000 dependents from Okinawa to Guam; construction of the 
``Futenma Replacement Facility'' on Okinawa, and consolidation of the 
remaining forces there by 2014. Under this agreement, Japan agreed to a 
cost-sharing arrangement to fund up to $6.1 billion ($2.8 billion in 
cash contributions) of the estimated total cost of $10.3 billion 
(fiscal year 2008 dollars)--later revised to approximately $19.0 
billion. Construction was to occur over a 7 year period after the 2010 
Record of Decision and the population was going to peak at 
approximately 79,000 in 2014. The plan received significant opposition 
in Congress, which raised reasonable questions about the affordability 
of this approach.
    In 2012, the United States and Japan decided to adjust our 
longstanding agreement to station U.S. Marines on Guam from a garrison 
(8,600) to a rotational force 5,000 Marines/1,300 dependents) with 
less Marines relocating from Okinawa (11,500 will remain). The revised 
agreement also de-links the movement of Marines to Guam from Japan's 
progress on the Futenma Replacement Facility (FRF). The preliminary 
estimate for the revised agreement totaled $8.6 billion with Japan 
providing up to $3.1 billion (fiscal year 2012 dollars) in cash 
contributions. There is no longer a date certain for completion and 
construction is projected to take 13 years after the 2015 Record of 
Decision (contingent on affordability).
    In order to implement this plan, the Department is pursuing a 
Supplemental Environmental Impact Statement (EIS) document that 
reflects these adjustments, and we expect a Record of Decision in 
Spring of 2015. That document will reflect the significantly reduced 
strain that will be imposed on Guam as a result of a much smaller--and 
much slower--transition. While the document has not been finalized, it 
is reasonable to expect a smaller requirement for mitigation as well.
    The Department appreciates the fiscal year 2014 authorization and 
appropriation of $85 million for construction of an aircraft hangar for 
the Marine Corps at the North Ramp of Andersen Air Force Base and is 
requesting $50.7 million for construction of Ground Support Equipment 
shops and Marine Wing Support Squadron Facilities at Andersen's North 
Ramp. Congress' continued support for cautious progress on this effort 
will be seen by Japan as an indication of our commitment to the 
realignment.
    Although the U.S. and Japan separated the requirement of tangible 
progress on the construction of the FRF before the movement of Marines 
to Guam could commence it is important to note that on December 26, 
2013, the Governor of Okinawa approved the landfill permit request to 
build the FRF at Camp Schwab-Henoko Bay.
    Finally, the fiscal year 2014 National Defense Authorization Act 
and the fiscal year 2014 Consolidated Appropriations Act included 
$106.4 million for the Guam civilian water and wastewater program and 
$13 million for a Guam public health laboratory. DOD, in collaboration 
with numerous Federal agencies, validated the need for this funding and 
has begun the planning and design of specific projects. The President's 
fiscal year 2015 budget requests an additional $80.6 million to 
continue improving Guam's civilian water and wastewater infrastructure 
and remedy deficiencies that impact the public health of DOD personnel. 
These projects are beyond the financial capability of Guam to correct, 
and will provide safer sustainable water resources and capacity 
critical not only for the more than 16,000 DOD personnel currently 
based on Guam and for future DOD growth and the increased civilian 
population induced by the military realignment, as well as for current 
residents of the Territory.

4. Facilities Energy Programs

    Congress has demonstrated significant interest in the Department's 
energy programs in recent years. My portfolio includes the Facilities 
Energy segment of the DOD energy portfolio--the electricity, natural 
gas, and other energy used to support our fixed installations. 
Operational Energy--predominantly fuel for conducting training and 
operations of aircraft, ships, ground vehicles, and even tactical 
generators--is overseen by the Assistant Secretary of Defense for 
Operational Energy Plans and Programs. The Department's facility energy 
costs represent approximately $4 billion annually and comprise roughly 
half of the Base Operations accounts at our installations; while its 
operational energy costs are significantly more than $15 billion 
annually.
    Below, I discuss three key pillars of our Facilities Energy 
program--(1) Energy Efficiency and Demand Reduction; (2) Expand Energy 
Production; and (3) Leverage Advanced Technology.
Energy Efficiency and Demand Reduction
    The Department's fiscal year 2015 budget request includes 
approximately $500 million for investments in conservation and energy 
efficiency, most of which will be directed to existing buildings. The 
majority ($350 million) is in the Military Components' operations and 
maintenance accounts, to be used for sustainment and recapitalization 
projects. Such projects typically involve retrofits to incorporate 
improved lighting, high-efficiency HVAC systems, double-pane windows, 
energy management control systems, and new roofs. The remainder ($150 
million) is for the Energy Conservation Investment Program (ECIP), a 
flexible military construction account used to implement energy and 
water efficiency projects. In addition to Savings-to-Investment Ratio 
(SIR) and Simple Payback, ECIP projects are evaluated on several other 
criteria, the Department will revise its ECIP guidance for the fiscal 
year 2016 program to ensure greater weighting of financial payback 
factors for ECIP project evaluation. In addition, we will limit 
projects to only those with a positive payback (i.e. SIR > 1.0) and 
ensure the overall program has an SIR greater than 2.0.
    The Military Component investments include activities that would be 
considered regular maintenance and budgeted within the Facilities 
Sustainment, Restoration, and Maintenance accounts. The significant 
reductions in that account will not only result in fewer energy 
projects, but failing to perform proper maintenance on our buildings 
will without question have a negative impact on our energy usage. In 
plain terms, upgrades to air conditioning systems will not reduce 
energy usage as projected if the roof is leaking or the windows are 
broken. Sequestration and BCA budget cuts to the Department's 
facilities energy program have negatively impacted the DOD's ability to 
meet mandated energy intensity reduction goals. The DOD projects the 
Department will catch up and begin meeting its energy intensity 
reduction goals in fiscal year 2018.
    To offset appropriated funding reductions, the Services have 
increased their focus on third-party financing tools, such as Energy 
Savings Performance Contracts (ESPCs) and Utility Energy Service 
Contracts (UESCs), to improve the energy efficiency of their existing 
buildings. (With these tools private energy firms make upgrades to our 
buildings and are only paid back out of reduced utility costs.) While 
such performance-based contracts have long been part of the 
Department's energy strategy, within the last 2 years the Department 
has significantly increased our throughput in response to the 
President's Performance Contracting Challenge, issued in December 2011.
    In addition to retrofitting existing buildings, we continue to 
drive efficiency in our new construction. We are implementing a new 
construction standard for high-performance, sustainable buildings 
issued by my office last year, which will govern all new construction, 
major renovations, and leased space acquisition. This new standard, 
which incorporates the most cost effective elements of commercial 
standards like ASHRAE 189.1, will accelerate DOD's move toward 
efficient, sustainable facilities that cost less to own and operate, 
leave a smaller environmental footprint, and improve employee 
productivity.
    Collection of accurate, real-time facility energy information 
remains a priority. In April 2013, I issued an Advanced Utilities 
Metering policy which sets an aggressive goal for deploying advanced 
meters throughout the Department to automatically and accurately 
measure electricity, natural gas, water, and steam use. This policy 
requires advanced meters be installed to capture 60 percent of the 
Department's electricity and natural gas use (with a goal of 85 
percent) by fiscal year 2020. It also requires advanced meters 
installed on water-intensive facilities and facilities connected to 
district steam systems by fiscal year 2020. This will provide data 
essential for effectively managing building energy use, identifying 
water and steam leaks, and analyzing energy savings opportunities. In 
addition, this policy requires meters to be connected to an advanced 
metering system to automatically collect, analyze, and distribute 
energy data. Further, my office continues to lead the development of an 
Enterprise Energy Information Management system (EEIM) that will 
collect facility energy and project data in a systematic and timely 
way, giving energy professionals at all levels of the Department the 
advanced analytical tools that will allow us to both improve existing 
operations and identify cost-effective investments.
Expand Energy Production on DOD Installations
    DOD is actively developing projects to increase the supply of 
renewable and other distributed (on-site) sources of energy on our 
installations. Not only does on-site energy help to make our bases more 
energy resilient, but the projects we are pursuing will generally 
result in lower costs.
    There are particular authorities for renewable energy--particularly 
the ability to sign power purchase agreements of up to 30 years--that 
not only provide incentive for private firms to fund the projects 
themselves, but also can provide a good enough business case that they 
are able to offer DOD lower energy rates than are being paid currently. 
In addition, both Congress and the President have established renewable 
energy goals that motivate us to pay closer attention to these 
opportunities.
    As a result, the military services have stepped up their efforts to 
develop robust renewable energy programs with a goal to deploy a total 
of 3 gigawatts of renewable energy by 2025.
    Within the last 3 years, the Department has more than doubled the 
number of renewable energy projects in operation with approximately 700 
megawatts in place today. The Military Departments are planning for a 
number of renewable energy projects over the next 6 years that will 
provide an additional 900 megawatts of renewable energy, enough to 
power 200,000 American homes. The majority of these projects are solar 
projects. Army projects currently underway include Fort Drum, NY (28 MW 
Biomass), and Fort Detrick, MD (15 MW Solar PV); recent Navy projects 
include Naval Air Weapons Station China Lake, CA (13.8 MW Solar PV) and 
the Air Force recently completed a solar project at Davis-Monthan Air 
Force Base (16.4 MW Solar PV).
    Within my portfolio, I also manage the DOD Siting Clearinghouse, 
which reviews energy projects under development on and in the vicinity 
of our installations to ensure there is no unacceptable risk to 
military mission that cannot be mitigated. From calendar year 2012 to 
2013, the Department experienced a 17 percent increase in mission 
compatibility evaluations conducted on energy sources and electrical 
power transmission systems submitted under the provisions of Section 
358 of the Ike Skelton National Defense Authorization Act for fiscal 
year 2011. While 96 percent of these 2,084 project evaluations 
identified no adverse mission impact, the DOD Siting Clearinghouse is 
overseeing detailed mitigation discussions on a small number of 
projects that would otherwise have impacts. In these discussions, we 
attempt to identify solutions that allow projects to proceed without 
unacceptably impacting military operations, test, or readiness.
Leverage Advanced Technology
    DOD's Installation Energy Test Bed Program consists of 76 active 
and 24 completed projects conducted to demonstrate new energy 
technologies in a real-world integrated building environment so as to 
reduce risk, overcome barriers to deployment, and facilitate widespread 
commercialization. DOD partners with the DOE and reaches out directly 
to the private sector to identify energy technologies that meet DOD's 
needs. The fiscal year 2015 budget request includes $21 million for the 
Test Bed under the Environmental Security Technology Certification 
Program (ESTCP).
    The Test Bed operates in five broad areas: advanced microgrid and 
storage technologies; advanced component technologies to improve 
building energy efficiency, such as advanced lighting controls, high 
performance cooling systems and technologies for waste heat recovery; 
advanced building energy management and control technologies; tools and 
processes for design, assessment and decisionmaking on energy use and 
management; and on-site energy generation, including waste-to-energy 
and building integrated systems. The rigorous Installation Energy Test 
Bed Program provides an opportunity for domestic manufacturers to 
demonstrate the technical and economic feasibility of implementing 
their innovative products. These demonstrations provide the credible 
evidence needed by investors to commercialize emerging technologies to 
serve the DOD and broader markets. Several completed projects 
demonstrated energy savings of 20-70 percent for lighting and HVAC 
systems, cost-effective solar generation without tax subsidies, and the 
need to properly scale waste-to-energy systems.

5. Climate Change Adaptation

    The issue of climate change has received increasing attention in 
recent months--especially given the release last year of the 
President's Climate Action Plan and Executive Order 13653, ``Preparing 
the United States for the Impacts of Climate Change''--and I wanted to 
take a moment to discuss the Department's approach to addressing this 
issue.
    It is important to understand that DOD looks at climate change 
impacts through the lens of its mission. Using that perspective and 
focusing on mission impacts, the changes to the global climate affect 
national security in two broad categories.
    First, climate change shapes the operating environment and the 
missions that DOD must undertake: retreating Arctic ice creates new 
shipping lanes and an expansion of the Navy's operating area across the 
northern pole; increased storm intensity will lead to increased demands 
for humanitarian assistance or disaster response; and changes in 
availability of food and water will serve as an instability accelerant 
in regions that aren't sufficiently resilient to adapt to those 
changes.
    In short, climate change will mean more demands on a military that 
is already stretched thin.
    Second, climate change affects the execution of missions we have 
today. Sea-level rise results in degradation or loss of coastal areas 
and infrastructure, as well as more frequent flooding and expanding 
intrusion of storm surge across our coastal bases. Facilities and 
transportation infrastructure are already impacted by thawing 
permafrost around our Alaskan installations. The changing environment 
increases the threat to the 420 endangered species that live on our 
installations, leading to increased probability of training and 
operating restrictions. Increased high-heat days impose limitations on 
what training and testing activities our personnel can perform. 
Decreasing water supplies and increased numbers of wildfires in the 
Southwest may jeopardize future operations at critical ranges.
    Our warfighters cannot do their jobs without bases from which to 
fight, on which to train, or in which to live when they are not 
deployed. When climate effects make our critical facilities unusable, 
that is an unacceptable impact.
    As was made clear in my discussion of energy above, even those 
activities that reduce greenhouse gas emissions are justified by the 
benefits they bring to our mission capability. Increasing energy 
efficiency of our combat systems allows greater performance and lowers 
requirements for vulnerable supply lines. Our investments in facility 
energy efficiency help to reduce our $4 billion annual facilities 
energy bill, or at least slow its increase. In the future, this on-base 
renewable energy generation promises the opportunity to increase energy 
security and insulate our operations from the vulnerable electric grid. 
The result will be fewer greenhouse gas emissions, but that is a co-
benefit. We are focused on the mission benefits of managing our energy 
portfolio.
    Even without knowing precisely how the climate will change, we can 
see that the forecast is for more sea level rise; more flooding and 
storm surge on the coasts; continuing Arctic ice melt and permafrost 
thaw; more drought and wildfire in the American Southwest; and more 
intense storms around the world. DOD is accustomed to preparing for 
contingencies and mitigating risk, and we can take prudent steps today 
to mitigate the risks associated with these forecasts. These range from 
the strategic (DOD's new Arctic Strategy) to the mundane (ensuring 
backup power and computer servers are not in basements where facilities 
are facing increased flood risk). In 2013, DOD released the Climate 
Change Adaptation Roadmap, which highlights a wide range of climate 
impacts that affect DOD, and highlights our decision to incorporate 
consideration of climate change risks into our existing policies rather 
than to create climate change stovepipes within the Department.
    Along these lines, we have updated policies on master planning our 
installations to minimize construction in low lying areas; emphasized 
smart planning in floodplains and water-scarce regions; and revised 
guidance on natural resources management to ensure we are accounting 
for climate shifts as we protect endangered species on our 
installations.
    In addition, we are conducting studies of our coastal installations 
to assess their vulnerability to extreme weather events and other 
climate effects--an analysis that should be complete by July--and we 
will subsequently review the vulnerabilities of our inland bases. We 
are conducting research on the effects of thawing permafrost on our 
Alaskan infrastructure, where we've already seen significant damage to 
foundations and road infrastructure. In the Southwest, we've seen 
initial studies that indicate critical installations could run out of 
water within two decades. Not only do we need to begin reducing this 
risk today, but we need to comprehensively review our installation 
footprint to identify similarly vulnerable installations.
    In recent years, extreme weather events such as Hurricane Sandy and 
derechos have caused power outages, damage from floods, high winds, and 
storm surges. Climate change increases the likelihood of such events, 
and the DOD must be prepared for, and have the ability to recover from, 
utility interruptions that impact mission assurance on our 
installations, an ability we characterize as power resilience. In fact, 
the policy directing this already exists and we have embarked on an 
effort to review installation-level compliance with policies that 
require identifying critical loads, ensuring back-up power is in place, 
maintaining back-up generators, and storing an appropriate amount of 
emergency fuel.
    The bottom line is that we are dealing with climate change by 
taking prudent and measured steps to reduce the risk to our ability to 
conduct missions. We consider climate change an important national 
security consideration and one that will affect the Department's 
ability to operate in the decades to come.
                               conclusion
    Thank you for the opportunity to present the President's fiscal 
year 2015 budget request for DOD programs supporting installations, 
facilities energy, and the environment. As you can see, our budget 
constraints have required us to accept risk across the portfolio, but 
it is risk we are already managing and believe we can manage with this 
budget.
    We appreciate Congress' continued support for our enterprise and 
look forward to working with you as you consider the fiscal year 2015 
budget.

    Senator Johnson. Thank you, Mr. Conger.
    For the information of Senators, we will begin with a 7-
minute round of questions. We will use the early bird rule, and 
I will recognize members from alternating sides in the order in 
which they arrive.
    Mr. McCord, the committee this morning received DOD's 
fiscal year 2015 unfunded requirements list, which includes 
nearly $4 billion in MILCON. By that measure, the budget 
request falls 40 percent short of the requirement.
    All of the services have acknowledged that they are taking 
risk in their MILCON programs to meet budget constraints, but 
this level of risk is not sustainable and the defense budget 
outlook is far from rosy for the foreseeable future.
    Given that operations and readiness will remain priorities, 
what is the long solution to restoring and sustaining adequate 
levels at MILCON in an era of declining Defense spending?
    I recognize that DOD strongly supports another BRAC round, 
but reducing excess infrastructure in and of itself does not 
equate to providing additional funding for new MILCON 
requirements. Of particular concern to me is a long-term 
funding model for quality of life projects which are so vital 
to the well-being of our troops and their families, and which 
seem to be the first casualties of a budget crunch. Current 
mission projects, which include the recapitalization of aging 
and inadequate facilities are also subject to being deferred to 
coveted new mission requirements.
    How does DOD plan to preserve the adequacy of MILCON 
investment, and current mission, and quality of life projects 
in a time of shrinking budgets?
    Mr. McCord. Thank you, Mr. Chairman. A couple of points and 
I will ask Mr. Conger to amplify the point you made about the 
models in particular.
    First of all, our 5-Year Defense Plan or FYDP, as it is 
commonly known, does propose that we go back up to higher 
funding levels as soon as next year. Of course, uncertainty is 
our enemy in a couple of aspects.

                          MILCON BUDGET LEVELS

    As I said in my opening statement, our plan is that the DOD 
budget increase after 2016 to levels that are probably higher 
than we can afford to do if we go back to strict adherence with 
sequester levels. So that is part of a big picture discussion 
that the President, I think, has wanted to have and proposed in 
every budget since the Budget Control Act was signed. He thinks 
sequester is ultimately the wrong strategy for the country and 
that we can do better than that, but we need to agree on the 
offsets that will allow us to do better and not take all the 
reductions on discretionary spending.
    So that kind of larger context is very important if we are 
going to take the whole appropriations committee's budget back 
down to strict adherence. And I think, as I said, we probably 
would envision that we would not do any better than this if 
that is the future we face. But our budget is built on a more 
optimistic assumption, and on the belief by the administration 
that we need a little more than that for our security both in 
MILCON and in larger duty budgets.
    So we are proposing a budget that would probably get us 
back up into the $7 billion or higher range over the next 
couple of years. So not exactly 50 percent more than this, but 
a substantial increase back to a somewhat more sustainable 
long-term level. Second is----

               BASE REALIGNMENT AND CLOSURE (BRAC) ROUND

    Senator Johnson. Does that include a BRAC round?
    Mr. McCord. Well, that would include a BRAC round. That 
would not affect the funding until fiscal years 2018 and 2019 
of our plan. So it is not particularly material to 2016 and 
2017.
    But the one point I want to make on BRAC is that we have 
been requesting it because we think we need it. And the 
uncertainty about whether we are going to get it or not, I 
think, uncertainty is sort of an enemy of installation funding 
because it leads to, and has led to during my career in the 
past, pauses and people holding back, not being sure what we 
are going to keep.
    So the longer the question kind of hangs out there, whether 
we are going to be able to reduce footprint or not, is actually 
a bad thing, I think, for installations in that uncertain 
period.
    I agree with you in the near term. It does not really bear 
on, say, 2016, 2017 anyway, but I think the long-term 
uncertainty hurts us.
    Mr. Conger. I would just amplify one point. In an 
environment where budget caps are driving decisions that are 
difficult for everybody, we have to be thinking about what our 
goal is. And the end goal from the perspective of MILCON, 
first, we have new mission requirements and we have to be able 
to accommodate those.
    But from the perspective of recapitalization, it is cheaper 
to sustain a building than it is to repair it. And it is 
cheaper to repair it than it is to replace it.
    And so, really, from a perspective of maintaining the 
condition of our facilities and the recapitalization mindset, 
we have to fix the sustainment budget first and subsequent to 
that we will be able to address the MILCON issue.
    Senator Johnson. Mr. Conger, in your written testimony, you 
mentioned the importance of on-base, renewable energy in 
providing energy security.
    Given current concerns over cybersecurity and the potential 
of a cyber attack on U.S. electrical grids, what is DOD doing 
in terms of MILCON investment to protect the mission-critical 
energy security of U.S. installations? And is the budget 
request for the Energy Conservation Investment Program (ECIP) 
is $150 million which is consistent with the request for the 
past several years.
    Are there any additional energy security, or renewable 
energy, used at ProbChecks that could be executed in fiscal 
year 2015 if additional funding were available? Would you 
provide the committee a list of those projects for the record?
    Mr. Conger. We will certainly provide a list of executable 
projects for the record.

    [The information follows:]

    The DOD Components submit a list of projects to OSD, as part of the 
ECIP project selection process. OSD evaluates each of the projects 
against an array of evaluation criteria which represent the 
Department's energy priorities. Should additional funding for this 
program be provided in fiscal year 2015, the Department can provide a 
list of renewable energy projects that would utilize such funding most 
effectively.

                            ENERGY SECURITY

    Mr. Conger. The broader answer to your question as far as 
energy security is concerned, for the most part, renewable 
energy projects that we are conducting on our bases are third-
party financed. It is not universally true, but for the most 
part, it tends to be true, which means the DOD does not have to 
pay the upfront costs and that we end up getting the backend 
benefits, usually in terms of a lower electricity cost.
    That said, we do, within the ECIP program, have some 
renewable energy projects. The program in and of itself is 
based on cost savings. And so the business case behind those 
renewable energy projects is focused a little bit less on 
energy security and a little bit more on what kind of money we 
are going to get in return, what the savings to investment 
ratio is.
    Energy security is very important to us and you mentioned 
the cybersecurity threat. We are focused first on what--If the 
cybersecurity threat to the grid is--Let us just say it this 
way: the grid is vulnerable to more than just cybersecurity 
threats. Natural disasters, storms, et cetera, there are 
outages that occur. We have the backup power. We have 
identified critical loads on our bases and we have backup 
generators at those locations. That is the immediate response 
to an energy security scenario, and we do maintain operations 
in those situations.
    The larger strategic issue, obviously, we are looking at, 
but I do not have a specific answer to that right here.
    Senator Johnson. Senator Collins.
    Senator Collins. Thank you, Mr. Chairman.
    Mr. Conger, in view of your testimony on BRAC savings, I 
feel compelled to draw attention to the June 2013 Government 
Accountability Office (GAO) report that found that the one-time 
BRAC costs for the last BRAC round, the 2005 BRAC round, grew 
from $21 billion--which was the original DOD estimate--to $35 
billion, a 67-percent increase. GAO also found that overall 
military construction costs increase 86 percent from the 
original estimate; that was $13.2 billion to $24.5 billion. 
Moreover, the 20-year net present value savings expected to be 
reaped by the Department of Defense decreased by 72 percent.
    Now, that is not to say that there were not and are not 
some annual recurring savings, but the fact is that the 
Department was way, way off in its estimates. And from my 
perspective, we lost some valuable security assets.
    For example, I cannot tell you how many very high ranking 
naval officers have told me what a mistake it was to close the 
Brunswick Naval Air Station in my State because it was the last 
Active Duty air station in all of the Northeast.
    Which brings me to a second point, I remember Admiral 
Mullen when he was Chairman of the Joint Chiefs of Staff, 
giving a speech at the National Defense University in which he 
warned about the military becoming out of touch with the 
American people. And when all of our bases are starting to be 
located in just the southern and western parts of the United 
States, the people throughout the Northeast, for example, lose 
contact with the military.
    That means that they are far less likely for the young 
people to consider the military as a career. It means that the 
support for the military may well diminish. And it means that 
our military becomes less diverse geographically. I think those 
are less tangible, but nevertheless, very important 
consequences of the BRAC round of your proposal. Not you, 
personally, the administration's proposal for another BRAC 
round that will, in my judgement if it goes forth--and I 
certainly will work against it--increase the disconnect between 
the few who serve in uniform and the general public at large.
    Is that a factor as the administration goes forward in 
considering whether to proceed with another BRAC round in 2017?
    Mr. Conger. So you raised a couple of----
    Senator Collins. Two questions, really. Yes.
    Mr. Conger. You raise a couple of good points, Senator, and 
let me take them in reverse order.
    As someone who grew up in New Hampshire, I appreciate the 
view from the Northeast and that there are plenty of people in 
the Northeast who appreciate the military. So that, I 
understand where you are coming from on that particular 
concern, and military value is a complex calculation as we look 
at the value of each of our bases.
    Those calculations, I am not going to prejudge how any of 
that is going to get set up in a future BRAC round because it 
is generally--that formula is both quantitative and 
qualitative. And those qualitative factors, as you mentioned, 
might include: is this the last base in a particular area? And 
that might have been a calculation that was included in the 
past.
    With regard to the savings in the GAO report, the GAO 
report identified the cost increase and nobody questions that. 
The initial estimate was $21 billion. The end cost was $35 
billion. And there are well-documented reasons for that to 
include the fact that the Army moved a couple of brigades back 
to the United States from Europe, used BRAC to capitalize those 
moves, and those ended up costing money and not saving 
anything.
    As I alluded to in my opening statement, we did a thorough 
scrub of the individual BRAC recommendations and what we found 
was that those items that were not designed to save money, did 
not save money. But those that were designed to save money did.
    And so, as we look at that cost increase, those moves that 
did not have a planned payback or a planned pay back that was 
of 7 years or more, they cost $29 billion out of the $35 
billion and with recurring savings of only $1 billion a year. 
Those were recommendations that were accepted without 
consideration of payback, but more in consideration of the fact 
that there are certain things you can only do during a BRAC 
round.
    If you look at the half of the recommendations that were 
designed to save money, the cost was $6 billion, and the 
recurring savings were $3 billion a year. They definitely saved 
money as intended.
    Senator Collins. Well, all I can say is that the 
Congressional Budget Office found that the 20-year net present 
value savings that the Department expected decreased by 72 
percent.

                      BASE REALIGNMENT AND CLOSURE

    Mr. Conger. Absolutely, and that is attributable entirely 
to the increase in cost.
    Senator Collins. Let me, in my very short remaining time, 
ask about a similar, a related issue and I will direct this to 
Mr. McCord.
    Secretary Hagel has said that if Congress continued to 
block requests to conduct another BRAC round, that he will, 
quote, ``Have to consider every tool at our disposal to reduce 
infrastructure,'' end quote.
    I would ask you how I am to interpret what the Secretary 
said. Does the Department have plans to circumvent Congress if 
Congress turns down the request for a BRAC round?
    Mr. McCord. Senator, I think the Secretary was referring 
mainly to an authority known as 10 U.S.C. 2687, which is the 
other way that, and I think Mr. Conger and I would agree is the 
hard way, the less preferable way to reduce infrastructure if 
we do not have authority for a BRAC round. It does not have the 
benefits on the back end for the community and it is harder for 
the Department as well.
    So not the preferred alternative, but I think the Secretary 
is trying to make the point, which I discussed in my opening 
statement, that we face not a 1- or 2-year funding constraint 
with the Budget Control Act, rather, we face a long term 
funding constraint, so we have to control costs. We are going 
to have to get smaller as you probably heard, the Army in 
particular, looking at getting smaller over the next 5, 6, 7 
years.
    And so, a smaller force means a smaller footprint and we 
have to do that somehow. And we proposed, again, that we think 
BRAC is the right way to do it. 10 U.S.C. 2687 is another way 
to do that under the law. It is not outside the law. It is not 
around Congress. It is an authority given to us by Congress, 
but it is not the preferred way to do it.
    Senator Collins. Well, let me just close by suggesting that 
Congress has permitted under that statute limited discretionary 
authority and it is not intended to be used for the kind of 
sweeping infrastructure changes that a BRAC round would entail. 
And I think if it were used that way, that Congress would 
revoke that authority, and that would be unfortunate for the 
Department to lose that kind of flexibility that can be useful 
for making the kinds of changes that Congress contemplated.
    Thank you, Mr. Chairman.
    Senator Johnson. Senator Pryor.
    Senator Pryor. Thank you, Mr. Chairman.
    I really just have one question for this panel, and I will 
direct that to Mr. McCord.

                              ARMY ARSENAL

    I do not know if you can give me a lot of specifics on this 
yet, but I am eager to know how the Army will spend the $150 
million that we put in the fiscal year 2014 omnibus for 
maintaining workload for the arsenals. And, you know, we have 
an arsenal in our State and I know others do as well, and 
sometimes they are sort of underworked, and sometimes the Army 
does not really follow its own rules with regard to them.
    So do you know anything about how that money will be spent?
    Mr. McCord. Senator, thank you for the question. I must 
concede that I am not intimately familiar with that. So I would 
suggest that if Assistant Secretary Hammack on the second panel 
from the Army that follows cannot answer that to your 
satisfaction, then I will certainly take that for the record in 
conjunction with them.
    But I would, I guess, ask that you defer to the second 
panel who might have more familiarity with the Army's plans on 
that particular aspect.
    Senator Pryor. Thank you.
    Senator Johnson. Senator Coats.
    Senator Coats. Mr. Chairman, thank you.

                             PILOT PROGRAM

    Mr. McCord, I want to ask you a specific question also, but 
I also want to commend you, to start out with. On March 24 of 
this year, both Senator Donnelly and I, as the two U.S. 
Senators from Indiana, and four Members of Congress wrote a 
letter to Under Secretary Hale asking some series of questions 
relative to the proposed pilot plan on the financial issue, 
which would set up hubs in, I think, 10 to 12 different 
locations through a pilot program.
    Now, this has not happened in my fairly long career here in 
Congress. We actually got a response from you 2 days later; 
usually it is 2 years later. It is a miracle. I do not know how 
this happened, but your response came 2 days later and I know 
you are Deputy Under Secretary, and I know how that works. So 
you probably made all this happen, although your boss will get 
the credit for it. But I assume that you had a hand in all of 
this and you are right person to ask these questions to.
    So this Army Financial Management Organization (AFMO) 
Initiative, we had a series of questions that were raised by 
the four Congressmen and the two Senators. You said you were 
not able to specifically answer these, but you gave us a good 
response back, but I just want to follow up on that.
    Now, I have had two lives here in the Senate. My fist life 
was the first round of BRAC in the early 1990s and at the time, 
the decision was made that the best thing they could do to 
provide efficiencies in the Financial Management system was to 
consolidate; it was too dispersed. And a lot of that was 
consolidated to certain locations, one of them being 
Indianapolis at DFAS there, which is a very vital part of our 
economy, and we are very happy to have it there, and we think 
the performance has been very, very good.
    But now comes along the possibility, based on the pilot 
project, that while you say it will have no significant impact 
on the current workload. And I do appreciate the fact that 
before the decision is made, you say you will conduct an 
independent review and business analysis by the Army along with 
that, develop written recommendations, and all this will be 
coordinated with the support in consolidation with Congress. So 
no problem there. I appreciate that.
    But I wonder if you could just expand on why having once 
come to the decision on consolidation, and the efficiencies, 
and the cost effectiveness of consolidation, and now we are 
looking at the possibility of a pilot program, a possibility of 
dispersal into 12 different locations which, I think, is 
designed to be command aligned rather than just retained in the 
current State. So, could you comment on that? And I certainly 
look forward to working with you as this goes forward, but I 
just need to hear more from you in terms of why this decision 
is made, and what is the rationale behind it?
    Mr. McCord. Certainly, Senator. I guess the first thing I 
want to say is I would ask you not to baseline your expectation 
to 2 days.
    Senator Coats. No, I am going to frame it, and keep it, and 
show that Government can be efficient.
    Mr. McCord. We have had a lot of questions about this from 
the Indiana delegation and from New York, and the genesis of 
this, as you may know, is the Army is looking at how to 
rationalize their own system within the Army Financial 
Management community as they seek to get right sized and to 
seek auditability.

                 DEFENSE FINANCE AND ACCOUNTING SERVICE

    The Defense Finance and Accounting Service (DFAS), located 
in both New York and Indiana in this case, could be affected by 
the Army's choices since they are customer-funded. So what DFAS 
does depends on how much work customers bring to them. And 
hence, customer decisions affect DFAS, and possibly vice versa.
    But certainly in this case, we are looking at how does the 
Army's desire to see if they really can make themselves more 
efficient might have an impact on DFAS, and maybe there will be 
less work for DFAS to do because the Army can do it themselves. 
That is the gist of where the Army is coming from on this 
issue.
    We have some of the same questions you do, so we wanted to 
make sure that this works for the enterprise as a whole, as we 
would with any change within the Army, Navy, Air Force, that 
there should be an enterprise look.
    The Army wants to get this pilot going and then we intend 
to look at it when it is done to look at the results with them 
or over their shoulder, if you will, to see if it makes sense 
across the whole enterprise. But again, the Army, I think, is 
very, very legitimately looking at whether they can make 
themselves more efficient and whether their new, so-called 
Enterprise Resource Planning, their new system called General 
Fund Enterprise Business System (GFEBS), can eliminate some of 
the current extraneous work.
    So we want to make sure this is done right, as you do, and 
I agree with the briefing in the letter that was given to you 
that it is probably too soon to say, for now, what any results 
might be. But we are going to keep a close eye on this, and we 
understand Senator Donnelly, yourself, and others are very 
interested in whether this makes sense. I take your point that, 
yes, that is exactly what DFAS did in the BRAC era was 
consolidate and get out of places like Denver into fewer 
places. So we are very mindful of the benefits of 
consolidation.
    Senator Coats. Is any of this driven by the drawdown and 
lower numbers?
    Mr. McCord. Well, we have tried to make this point to some 
of the members from New York that the Army is getting smaller, 
number one.
    But number two, the Army's workload is decreasing. The Army 
has done, as you know, the lion's share of the heavy lifting in 
Afghanistan for the Nation and that workload filters throughout 
all kinds of things, such as logistics, combat training, and 
also on the backend like financial work.
    So as the Army gets smaller and draws down in Afghanistan, 
there will be less Army-related work of all kinds: financial, 
logistics, every kind to go around, and that could have an 
impact on workload regardless of whether anybody changes any 
processes or not. There are sort of overlapping effects of the 
Army; can they make their processes more efficient?
    But, there is also a postwar or a drawdown-related 
shrinkage that could have an impact as well.
    Senator Coats. And that is understandable. If the workload 
shrinks because of the drawdown, then obviously the amount of 
work and personnel needed to process that work could be 
affected. But I guess the question is, is decentralizing it to 
12 hubs, each one of which would have to have some kind of a 
location, administrative support, training, rehiring, et 
cetera, etc.
    I mean that, to me, on the face of it, unless there is some 
extraordinary technological software breakthrough or whatever 
that would allow that function to be handled in that way, I do 
not understand why that is possibly seen as a more efficient, 
effective way in terms of having a trained workforce that is 
centralized and everything to date electronically can be fed 
into that regardless of where the location is. But you avoid 11 
other administrative operations, 11 other facilities spread 
around the country, all the travel that takes place in between 
and so forth.
    And so, I assume that will be evaluated very, very 
carefully, but if you want to just comment on that.
    Mr. McCord. Again, I think that we are very cognizant of 
the concerns about this and so, if at all possible, we want to 
separate the two effects that I am describing to kind of a 
drawdown related effect from a business process change. I agree 
that we should, ``we'' the Department, the Comptroller as the 
process owner with, the command element of DFAS and then the 
Army should be able to demonstrate jointly to you that it does 
make sense, the business process part.
    Senator Coats. Very good. We look forward to working with 
you on that. Thank you for your prompt response and I hope over 
the next couple of years as this pilot plays out, we can stay 
in close contact. Thank you.
    Senator Johnson. Senator Udall.
    Senator Udall. And thank you very much, Chairman Johnson 
and I really appreciate both witnesses for being here, and 
thank you for your service.

                             F-16 BED-DOWN

    Last year I brought up the issue of the F-16 bed-down at 
Holloman Air Force Base and the need to better coordinate the 
scheduling of airspace with White Sands Missile Range before 
the F-16s arrive. My understanding is that while the Army and 
Air Force still have some challenges to resolve, that this is 
proceeding.
    Can I have your assurance that you will continue to work to 
ensure that White Sands Missile Range has the facilities and 
personnel it needs to manage the new airspace issues in order 
to prioritize both important testing mission and the F-16 
training mission at the Holloman Air Force Base?
    Mr. McCord. Senator, I guess I am going to have to look 
into that. I am not familiar with this issue from any previous 
engagements. I will ask Mr. Conger if he is any more familiar 
with it.
    Mr. Conger. I am not. We can take it for the record, sir.
    Senator Udall. Yes, that would be great.

    [The information follows:]

    The Department is aware that the Air Force and Army are working 
through the complex airspace issues at White Sands Missile Range. The 
Office of the Secretary of Defense will remain engaged with them and 
provide any support needed to ensure neither mission is jeopardized.

    Senator Udall. We want to work closely with you on this and 
we want to get your very specific answers. I have another 
question that is in this same area. You may or may not be able 
to deal with it, but I think it is important that you hear it.

                       WHITE SANDS MISSILE RANGE

    With the loss of the 2nd Engineer Battalion from White 
Sands Missile Range, the base has been left with not only an 
absence of an operational unit, but facilities which could be 
used by another unit. And as we hear more about the need to 
maintain and build new facilities, I would like to hear more 
about what the Army's plans are to utilize existing facilities, 
such as those being left behind at White Sands.
    What options is the Army considering to make use of these 
underutilized facilities at White Sands, the Nation's premiere 
testing facility and one of the largest training areas, which 
is also near the New Mexico portion of Fort Bliss? Has the Army 
considered? And these are things that I am asking whether you 
have considered this, moving a new unit to White Sands Missile 
Range, possibly from Fort Bliss? Has the Army considered 
working with the New Mexico National Guard to find a mission 
that they could undertake while using some of these facilities? 
And has the Army considered working with another branch of the 
military to make use of existing facilities at White Sands 
perhaps during joint training in that area?
    Mr. Conger. I would offer that, I am willing to bet that 
Secretary Hammack is taking notes right now, because she is on 
the next panel.
    Senator Udall. Oh, good.
    Mr. Conger. She is going to have an opportunity to answer 
this question better than we can.
    Senator Udall. Okay. Terrific.

                     DROUGHT AWARENESS IN SOUTHWEST

    And my final question, New Mexico and much of the West, and 
you all have probably heard a lot about this, is in the midst 
of one of the longest prolonged droughts in the history of the 
region. This week is also Southwest Fire Awareness Week, and I 
have been working to share information to help protect families 
and property from wildfires.
    I am, of course, very concerned about the impacts wildfires 
could have on our military bases. We have seen some of them 
come close to military bases. It was not so long ago that a 
major wildfire took out large areas of forest near Ruidoso, New 
Mexico, which is also near White Sands Missile Range.
    Can you tell me from an environmental and preparedness 
standpoint what the Army and the DOD are doing to help protect 
installations from the danger of wildfires? And what message 
would you give to the public to help prevent the wildfires from 
spreading or starting near military installations?
    As you know, the National Guard is often called in to 
assist in major wildfires. How is the Army and the DOD working 
with State governments and the National Guard commanders to 
help prepare for the possibility of wildfires in western 
States?
    Mr. Conger. With regard to the specifics around White 
Sands, I would defer to the Army panel that is going to be 
coming up shortly.
    With that said, the increased occurrence of wildfires in 
the west is not something that is lost on the Department. We 
are well aware that there is an increased threat, and frankly, 
it is one of the issues that has been associated with climate 
change, the increased drought, et cetera. These are serious 
issues and we are working to plan for them accordingly. Risk 
reduction types of efforts.
    With regard to the specific firefighting response, I think 
we are going to have to take that for the record.
    Senator Udall. Sure. That would be great.

    [The information follows:]

    Since 1975, the U.S. Departments of Agriculture and Interior have 
had an interagency agreement with the Department of Defense (DOD), 
allowing DOD to provide firefighting support to the wildland fire 
management agencies when needed.
    In preparation for each year's fire season the DOD meets with 
interagency partners to coordinate plans and processes. As an example 
of this coordination effort, the Air Force Wildland Firefighting Center 
and Air Force Space Command Fire Emergency Services hosted a Front 
Range Wildland Symposium from April 28 to May 2 with the Air Force 
installations on the Front Range, the Air Force Civil Engineer Center, 
FEMA Region 8, U.S. Northern Command, the Nevada Division of Forestry, 
U.S. Forest Service, and U.S. Fish and Wildlife Service.
    In addition, staff from the Air Force Wildland Fire Center 
conducted site visits in May to bases facing wildland fire risk such as 
Kirtland AFB, New Mexico on May 3 and 4 and Melrose Range/Cannon AFB on 
May 6.
    The military also supports firefighting efforts through the Modular 
Airborne Firefighting System (MAFFS) program. This program provides Air 
National Guard and Air Force Reserve units flying in military C-130 
aircraft equipped as air tankers to support wildland fire suppression 
activities. Aircrews get annual training and are certified by National 
Interagency Fire Center.
    Through the DOD Installation Emergency Management program, the DOD 
coordinates with State, local, and Tribal government emergency response 
agencies and departments to identify and update responsible points-of-
contact, emergency protocols, and expectations in the event of an 
emergency on or impacting a DOD installation. Further, Installation 
commanders are encouraged to provide input to mutual aid agreements 
with local emergency services.

    Senator Udall. Let me say how much I appreciate the 
military being aware of the dangers and the other issues with 
climate change, and that this is a national security issue. And 
I think in many cases, you all have been out front in terms of 
planning and giving us signals that we need to be doing a 
variety of things as we move down the road. So we very much 
appreciate your help.
    And with that, Mr. Chairman, I yield back.
    Senator Johnson. Thank you. This panel is excused.
    We will resume when the next panel is seated.

                         DEPARTMENT OF THE ARMY

STATEMENTS OF:
        HON. KATHERINE G. HAMMACK, ASSISTANT SECRETARY OF THE ARMY 
            (INSTALLATIONS, ENERGY, AND ENVIRONMENT)
        MAJOR GENERAL AL AYCOCK, DIRECTOR OF OPERATIONS, OFFICE OF THE 
            ASSISTANT CHIEF OF STAFF FOR INSTALLATION MANAGEMENT
        HON. JAMES B. BALOCKI, COMMAND EXECUTIVE OFFICER, ARMY RESERVE 
            COMMAND
        BRIGADIER GENERAL MICHAEL E. BOBECK, SPECIAL ASSISTANT TO THE 
            DIRECTOR, ARMY NATIONAL GUARD
    Senator Johnson. I am pleased to welcome our second panel 
of witnesses. Ms. Katherine Hammack, Assistant Secretary of the 
Army for Installations, Energy, and Environment; Major General 
Al Aycock, Director of Operations for Installation Management; 
Mr. James Balocki, Command Executive Officer, Army Reserve; and 
Brigadier General Michael Bobeck, Special Assistant to the 
Director, Army National Guard.
    The fiscal year MILCON request for the Army's Active and 
Reserve components is $700.3 million dollars, barely half of 
the fiscal year 2014 request. I recognize the Army is in a 
period of transition and force reduction, so that there is a 
major prudence in wrapping down on MILCON until the new end-
strength is settled.
    That said, a 52-percent drop is draconian reduction which 
even the Army has acknowledged as it has proposed a list of 
unfunded MILCON acceleration candidates totaling more than $200 
million. Coupled with the corresponding drop in funding for 
sustainment, restoration, and modernization, there is no 
question that the Army is taking significant risk in its MILCON 
program and, by extension, mission readiness.
    I look forward to discussing this and other issues with our 
Army witnesses.
    We are running out of time, and I would appreciate it if 
the witnesses would hold their opening remarks to 1 minute.
    Secretary Hammack.

             SUMMARY STATEMENT OF HON. KATHERINE G. HAMMACK

    Ms. Hammack. Thank you very much, Chairman Johnson, and 
other members of the subcommittee.
    Thank you for the opportunity to discuss this fiscal year 
2015 budget with my colleagues from the Active Duty Army, Army 
Reserve, and the National Guard.
    You are correct. In fiscal year 2015, it is a dramatic 
reduction for the Army. It is a 39-percent reduction from 
fiscal year 2014. Due to the fiscal reductions from current 
law, we are taking cuts in the Army. We are going down to an 
Army of 490,000 by the end of fiscal year 2015.
    The 2014 Quadrennial Defense Review caused the Army to be 
smaller to around 440,000 or 450,000. So as end strengths and 
force structures decline, we must assess and right size the 
supporting infrastructure to ensure that training and readiness 
needs are met. And that requires us to achieve a very difficult 
balance between the cost of maintaining infrastructure or 
building new with force readiness.
    Last year, this committee and the others asked when we had 
last conducted a capacity analysis. So the Army proceeded with 
a macro capacity analysis over the last year, which shows that 
with an Active Duty Army of 490,000 we will have approximately 
18-percent excess capacity in the Army and additional end-
strength reductions will increase excess capacity.
    In Europe, as Mr. Conger mentioned, we are doing a European 
infrastructure consolidation analysis. The Army is well on our 
way to consolidating infrastructure there. We right now have 
about 10- to 15-percent excess that we are working to 
consolidate.
    BRAC is a proven means to address excess capacity in the 
United States. Prior BRAC rounds for the Army produced $2 
billion in cumulative net savings every year. We are achieving 
savings from BRAC 2005, and we do have a clear business case 
for our 2017 round.
    Mr. Conger spoke about a transformational BRAC and an 
efficiency BRAC, and for the Army, the efficiency BRAC costs us 
$2 billion and is saving $534 million every year. That is about 
a 3.4-year return on investment. I think that is a good 
investment and I think that is the kind of return we are 
looking for from a BRAC 2017.
    So to keep my remarks short, I would like to yield my time 
over to the fellow members of this panel.

    [Clerk's Note: A prepared joint statement follows the 
summary statement of Brigadier General Michael E. Bobeck.]

    Senator Johnson. Thank you.
    General Aycock.

              SUMMARY STATEMENT OF MAJOR GENERAL AL AYCOCK

    General Aycock. Chairman Johnson and distinguished members 
of the subcommittee.
    It is an honor representing the soldiers, families of 
civilians, United States Army to discuss the 2015 Army military 
construction budget request. I want to thank the members of the 
committee for their support of the Army and for all those who 
serve our Nation.
    As the Honorable Hammack discussed earlier regarding the 
impacts of the Budget Control Act of 2011, it is a bipartisan 
budget agreement on the reduction of the MILCON program. The 
projects presented in this budget are the highest priority 
projects to provide the facilities necessary to enable a ready 
Army.
    The Army is focusing our military construction investments 
on the most important projects for our national security 
priorities to prudently build out critical shortfalls in 
supporter readiness and to improve facility quality in our 
industrial base.
    As we reduce 200,000 men and women from all the components 
of the Army, we must also reduce the excess infrastructure that 
was noted earlier. A BRAC round will accomplish this task in 
the most efficient manner.
    I want to thank the subcommittee for this opportunity to 
address the Army's most critical construction requirements.
    I look forward to your questions. I will be followed by Mr. 
Balocki.
    Senator Johnson. Mr. Balocki.

               SUMMARY STATEMENT OF HON. JAMES B. BALOCKI

    Mr. Balocki. Mr. Chairman and distinguished members of the 
subcommittee.
    Thank you. It is an honor to appear before you on behalf of 
our Nation's citizen soldiers, their families, and the 
civilians who support them.
    The Army Reserve is in the fabric of nearly 1,000 
communities across this Nation, standing ready as a part of the 
total force. America's need for the Army Reserve now, and in 
the future, is unambiguous, providing complementary and 
essential capabilities to the Army's formations. The Army 
Reserve is a sound investment, providing 19 percent of the 
Army's force for 6 percent of its total budget.
    The focus of our infrastructure investments is to enable 
the readiness of those units and soldiers. Our facility 
investment strategy will ensure adequate facilities to meet 
mission requirements in the right locations at the lowest 
achievable cost.
    As a part of that strategy, the Army Reserve supports a new 
round of base realignment and closure to enable greater 
efficiencies by consolidating our infrastructure portfolio.
    The military construction Army Reserve request for fiscal 
year 2015 is $104 million, which addresses our most pressing 
facility needs. Our Nation's citizen soldiers are the 
centerpiece of the Army Reserve. Their ability to perform 
missions successfully depends on the support of Congress.
    On behalf of our soldiers and their families, thank you.
    Senator Johnson. Thank you.
    I have a note that the cloakroom is expecting two roll call 
votes in the 4:15 range. That gives us probably 10 minutes post 
4:15.
    General Bobeck.

        SUMMARY STATEMENT OF BRIGADIER GENERAL MICHAEL E. BOBECK

    General Bobeck. Thank you, Chairman Johnson, and 
distinguished members of the subcommittee.
    It is an honor to be here today representing the more than 
355,000 citizen soldiers. For nearly four centuries, the men 
and women of the Army National Guard have stood ready to defend 
our Nation and respond to emergencies in our communities.
    Since 9/11, Army National Guard soldiers have mobilized 
525,000 times for overseas missions. On the home front, in 
fiscal year 2013 alone, Governors called up Army National Guard 
assets 148 times in a response to a wide variety of domestic 
crises. Our facilities were the key enablers as we use them for 
staging platforms, command and control, and to shelter citizens 
in our communities. As a tested and proven force, the Army 
National Guard will continue to provide the Nation a 
substantial return on investment.
    BRAC 2005 was an effective strategy for upgrading our 
facility inventory. This was a great opportunity to divest 
older facilities that could not support the transformation of 
our units and our equipment. We would also like the opportunity 
to use another round of BRAC to address facilities that could 
effectively be consolidated.
    In fiscal year 2015, budget requests of $125 million will 
fund five projects across five States. This request is a 60-
percent reduction from the fiscal year 2014 military 
construction budget.
    We thank Congress for its trust and its continued support. 
Your investments in our facilities are yielding a return that 
goes well beyond our men and women in uniform. It is enduring 
legacy that benefits all our citizens.
    Sir, I thank you and I look forward to your questions.

    [The joint statement follows:]
                        Prepared Joint Statement
                                   by
    Hon. Katherine G. Hammack, Assistant Secretary of the Army for 
                 Installations, Energy, and Environment
    Major General Al Aycock, Director of Operations, Office of the 
          Assistant Chief of Staff for Installation Management
Brigadier General Michael E. Bobeck, Special Assistant to the Director, 
                          Army National Guard
                                  and
  Mr. James B. Balocki, Command Executive Officer, United States Army 
                            Reserve Command
                              introduction
    Chairman Johnson, Ranking Member Kirk, and members of the 
subcommittee, on behalf of the soldiers, families, and civilians of the 
United States Army, I want to thank you for the opportunity to present 
the Army's fiscal year 2015 Military Construction (MILCON) and Army 
Family Housing (AFH) budget request.
    The President's fiscal year 2015 MILCON budget request supports the 
strategic priorities of developing a globally-responsive and 
regionally-engaged Army. We ask for the subcommittee's continued 
commitment to our soldiers, families and civilians and support of the 
Army's military construction and installations programs.
                                overview
    The Army's fiscal year 2015 President's budget includes $13 billion 
for installation energy, environmental programs, facility sustainment, 
restoration, and modernization, base operations support, and MILCON. 
This funding will enable the Army to sustain, restore, and modernize 
facilities to support the Army's priorities. The Installation 
Management Community is focused on providing the facilities necessary 
to enable a ready and modern Army. As part of the $13 billion, the Army 
is requesting $1.3 billion for MILCON, AFH, and Base Closure Accounts 
(BCA). The MILCON budget request represents 1 percent of the total Army 
budget. Of this $1.3 billion request, $539 million is for the Active 
Army, $127 million is for the Army National Guard, $104 million is for 
the Army Reserve, $429.6 million is for AFH, and $84 million is for 
BCA.
    The budget request reflects an overall 39 percent reduction from 
fiscal year 2014 in the MILCON accounts as a result of the reductions 
in the Army end-strength and force structure. The Army reviewed 
facility investments necessary to support the force, taking into 
consideration the fiscal reality that we are facing as a Nation: the 
Budget Control Act of 2011, the Bipartisan Budget Agreement of 2013, 
and the department's strategic shift to realign forces toward the Asia/
Pacific theater. This MILCON budget request reflects the focused 
investments necessary in training, maintenance, and operations 
facilities to enable the future force of the All Volunteer Army in a 
constrained fiscal environment.
                          army force structure
    Fiscal reductions required by the current law, along with the end 
of ground combat operations in Iraq and Afghanistan, have put the Army 
on a path to shrink its active duty end strength from its peak of 
570,000 to between 440,000 and 450,000. This is a reduction of 120,000 
to 130,000 soldiers, or approximately 22 percent from the active 
component. These reductions will affect every installation in the Army. 
The Army must retain our adaptability and flexibility to provide 
regionally-aligned and mission-tailored forces in support of national 
defense requirements. As the first part of the drawdown, the Army is 
reducing its active component from 45 Brigade Combat Teams (BCTs) to 32 
by fiscal year 2015. As part of the BCT reduction, the Army will 
reorganize Infantry and Armor BCTs by adding a third maneuver 
battalion, and additional engineer and fires capability. The Army will 
reduce or reorganize numerous non-BCT units as part of the drawdown.
    When we evaluated our initial force structure reductions from 
570,000 to 490,000 soldiers, we conducted a Programmatic Environmental 
Assessment (PEA), which was prepared in accordance with the National 
Environmental Policy Act (NEPA).
    The PEA analyzed potential environmental impacts that could result 
from the force reductions, including socioeconomic impacts at specified 
DOD personnel reduction thresholds. Following publication of the PEA, 
the Army conducted approximately 30 community listening sessions at all 
Army installations with military and civilian populations of 5,000 or 
more. The community listening sessions gave communities an opportunity 
to contribute feedback on socioeconomic impacts associated with force 
structure downsizing. Since the Army's Active Component end-strength 
will decline further than 490,000, the Army initiated a supplemental 
PEA analysis in February 2014 to analyze additional potential 
population loss scenarios. We will host another round of community 
listening sessions associated with these deeper reductions.
                       facility capacity analysis
    As the Army reduces and reorganizes over the next five to 7 years, 
the Army must gauge the current and future installation capacity that 
will be required for a ready and resilient Army. The Army has begun 
conducting a facility capacity analysis to determine how much excess 
capacity will be available at the enterprise level, as the Army 
decrements its end strength. The Army is taking steps to ensure we do 
not execute MILCON projects that are in excess of documented 
requirements based on the Total Army Analysis (TAA) and programmatic 
review of all MILCON facility requirements.
    While additional efforts are underway to understand changing 
facility requirements as our force structure declines, the Army is 
conducting some analyses of real property to support an end-strength of 
490,000 Active Component (AC) soldiers (and the accompanying force 
structure). Preliminary results indicate that the Army will have nearly 
18 percent excess capacity, totaling over 167 million square feet of 
facilities spread across our worldwide installations. The Army 
estimates it costs about $3 per square foot to maintain occupied and/or 
underutilized facilities, which could cost the Army over $500 million a 
year in unnecessary operations and maintenance. For some facility 
category types, such as small unit headquarters facilities (for example 
Company Operations Facilities), the Army has facility shortfalls. We 
are reviewing our requirements with an eye towards finding practical, 
efficient solutions that meet Soldier needs and which we as an Army can 
afford.
    Additional excess capacity will be created if the AC shrinks 
further, necessitating incremental facility capacity analyses.
    Excess capacity will range between 12 and 28 percent, depending on 
facility category group, with an average of approximately 18 percent. 
We are working now to confirm our excess capacity overseas; our current 
focus is in the European area of responsibility.
    A year ago, the Secretary of Defense directed the conduct of a 
European Infrastructure Consolidation (EIC) review for the specific 
purpose of reducing ``expenses by eliminating excess capacity in Europe 
while ensuring our remaining base structure supports our operational 
requirements and strategic needs.'' The Army is fully engaged in the 
conduct of this review. We are active participants in the steering 
group governing this work and employing the principles of capacity and 
military value analysis, developed originally for Base Realignment and 
Closure (BRAC), to guide our work. Our target date to complete the DOD 
and Army analysis and evaluation is Spring 2014. Current Army Capacity 
Analysis reflects 10 to 15 percent of excess capacity in Europe.
    The Army's work in this EIC review is wholly consistent with its 
commitment to reducing unneeded infrastructure. Consistent with changes 
in both the strategic and fiscal environments, we have been working 
aggressively to ensure we achieve the difficult balance between the 
cost of maintaining our infrastructure and force readiness. Our 
strategy is to: (a) consolidate on larger, more capable installations, 
(b) divest older and inadequate infrastructure, and (c) invest in the 
remaining footprint in order to provide adequate facilities to 
accomplish our mission--while meeting the needs of our soldiers and 
their families.
    The Army has been downsizing our footprint in both Europe and Asia 
for many years in the post-Cold War era. Since 2006, Army end strength 
in Europe has declined 45 percent, and we are on track to shrink the 
supporting infrastructure, overhead, and operating budgets by over 50 
percent. Similarly in Korea, the Army decreased the number of soldiers 
by about a third (10,000 soldiers) and is on pace to shrink our acreage 
and site footprint by about half.
    Overseas, the Army has the tools and authorities we need to 
identify and reduce excess capacity. Inside the United States, however, 
the best and proven way to address excess and shortfalls in facility 
requirements in a cost-effective and fair manner is through the BRAC 
Commission process.
    The Army continues to need additional BRAC authorization to reduce 
excess infrastructure effectively. As the Army's end strength and force 
structure decline alongside its available funding, hundreds of millions 
of dollars will be wasted maintaining underutilized buildings and 
infrastructure. Trying to spread a smaller budget over the same number 
of installations and facilities will inevitably result in rapid decline 
in the overall condition of Army facilities. Without a future round of 
BRAC, the Army will be constrained in closing or realigning 
installations to reduce overhead. This ``empty space tax'' of about $3 
a square foot on our warfighters will simply result in cuts to 
capabilities elsewhere in the budget.
    As the subcommittee considers the President's request to authorize 
another round of BRAC, I urge the members to think about the following 
considerations:
    First, if Congress fails to authorize another round of BRAC, this 
defense drawdown is likely to repeat a very unfortunate historical 
pattern of hollowed-out forces dispersed across hollowed-out 
installations.
    Second, postponing BRAC does not prevent defense communities from 
experiencing the consequences of smaller forces and lower off-post 
economic activity. The soldiers and families at the installations will 
be gone, and their spending power and requirements will go with them.
    Third, postponing BRAC means that excess infrastructure and 
civilian overhead cannot be properly addressed at sites experiencing 
the biggest reductions of workload. Declining budget targets must still 
be met. Therefore, without BRAC, communities hosting our highest 
military value installations are likely to see greater negative 
economic impacts than they would if the Army could close or realign 
some installations.
    The Army has the authority to close and realign U.S. installations 
outside the BRAC process as long as the congressional notification 
thresholds detailed in 10 U.S.C. Sec. 2687 are not triggered. 
Historically, however, the Army and Congress together have concluded 
that using non-BRAC authority to address excess infrastructure is not 
as transparent or economically advantageous to local communities.
    Local communities, including those where installations have closed, 
have benefitted in many ways from the BRAC property disposal 
authorities, as described below in the ``Base Closure Account'' section 
of this testimony.
                   facility investment strategy (fis)
    As we shape the Army of 2020 and beyond, through a series of 
strategic choices, the Installation Management Community looks to 
implement the FIS to provide quality, energy-efficient facilities in 
support of the Army Leadership priorities.
    FIS provides a strategic framework that is synchronized with the 
Army Campaign Plan (ACP), TAA, and Army Leadership priorities in 
determining the appropriate funding to apply in the capital investment 
of Army facilities at Army installations and Joint Service bases across 
the country. FIS proposes a cost effective and efficient approach to 
facility investments that reduces unneeded footprint, saves energy by 
preserving efficient facilities, consolidates functions for effective 
space utilization, demolishes failing buildings, and uses appropriate 
excess facilities as lease alternatives in support of the Army of 2020 
and beyond.
    FIS uses MILCON funding to replace failing facilities and build out 
critical facility shortages. We apply Operations and Maintenance (O&M) 
funding to address existing facilities' repair and maintenance. O&M 
Restoration and Modernization (R&M) funding is used to improve existing 
facility quality. O&M Sustainment funding is used to maintain existing 
facilities. Demolition and disposal funding is used to eliminate 
failing excess facilities. Focused investments from MILCON and O&M 
funding will support facilities grouped in the following categories: 
Redeployment/Force Structure; Barracks; Revitalization; Ranges; and 
Training Facilities. The fiscal year 2015 budget request implements the 
FIS by building out shortfalls for unmanned aerial vehicle units, the 
13th Combat Aviation Brigade, initial entry training barracks, selected 
maintenance facilities, and reserve component facilities. Additional 
departmental focus areas are Organic Industrial Base and Energy/
Utilities.

                    FISCAL YEAR 2015 BUDGET REQUEST

                      military construction, army
    The fiscal year 2015 Military Construction, Army (MCA) budget 
requests an authorization of $405.3 million and appropriations for 
$539.4 million. The appropriations request includes $58 million to fund 
the third and final increment of the fiscal year 2013 Cadet Barracks at 
the United States Military Academy and $76.1 million for planning and 
design, minor military construction, and host nation support.
    Barracks ($110 million): Provides 480 training barracks spaces at 
Fort Jackson, South Carolina and funds the previously discussed cadet 
barracks at the United States Military Academy, which was fully 
authorized in fiscal year 2013.
    Redeployment/Force Structure ($217.7 million): Invests $124 million 
to construct unmanned aerial vehicle hangars at Fort Irwin, California; 
Fort Carson, Colorado; Fort Campbell, Kentucky; and Fort Drum, New York 
to support the activation of Gray Eagle requirements. Fort Carson will 
also receive $60 million for an aircraft maintenance hangar to support 
the 13th Combat Aviation Brigade. The Military Ocean Terminal, Concord, 
California, will receive $9.9 million to construct an access control 
point in support of ammunition shipments. The remaining $23.8 million 
will support other redeployment/force structure requirements.
    Revitalization ($135.6 million): The Army is requesting five 
projects to correct significant facility deficiencies or facility 
shortfalls to meet the requirements of the units and/or organization 
mission. Projects include a $5.3 million general purpose maintenance 
shop at the Military Ocean Terminal, Concord, California, to alleviate 
known safety risks; a $96 million command and control facility complex, 
including a sensitive compartmented information facility, at Fort 
Shafter, Hawaii; a $16 million rebuild shop addition at Letterkenny 
Army Depot, Pennsylvania; a $7.7 million tactical vehicle hardstand at 
Joint Base Langley-Eustis, Virginia; and a $10.6 million missile 
magazine at Kadena Air Base, Japan supporting Patriot missile storage.
               military construction, army national guard
    The fiscal year 2015 Military Construction, National Guard (MCNG) 
budget requests an authorization of $95.6 million and an appropriation 
for $126.9 million. The request includes appropriations for $31.3 
million in planning and design and minor military construction. The 
MCNG program is focused on the MILCON categories of Modularity and 
Revitalization.
    Modularity ($38 million): The fiscal year 2015 budget request 
provides for a readiness center in Helena, Montana. The project is an 
addition and alteration to the existing readiness center, which will 
address critical space shortfalls created by force structure changes. 
The project will facilitate unit operations, enhancing unit readiness.
    Revitalization ($57.6 million): The Army National Guard budget 
requests four projects to replace failed or failing facilities as part 
of the FIS. This category includes two vehicle maintenance facilities 
and two readiness centers. The $10.8 million maintenance facility in 
Valley City, North Dakota will improve the safety and efficiency of 
operations by replacing the existing facility that provides only 11 
percent of the authorized unit space. An unheated storage facility 
included in the project will preserve equipment and increase readiness. 
The $4.4 million maintenance facility in North Hyde Park, Vermont 
combines two undersized facilities into one properly-sized facility. 
This new building will meet current standards to create a safe, 
productive work environment. In Augusta, Maine, multiple repurposed 
World War II era facilities will be replaced with a $30 million 
readiness center. The $12.4 million readiness center project in Havre 
De Grace, Maryland replaces a facility built in 1922, originally for a 
race track clubhouse, and subsequently acquired by the National Guard. 
The new readiness centers will meet existing construction standards and 
will be configured and sized for the current units. All four projects 
will provide modern facilities to enhance the Army National Guard's 
operational readiness.
                  military construction, army reserve
    The fiscal year 2015 Military Construction, Army Reserve (MCAR) 
budget requests an authorization of $92 million and appropriations for 
$104 million. The appropriations request includes $12 million for 
planning and design, and minor military construction. The MCAR program 
is focused on the MILCON category of Revitalization.
    Revitalization ($92 million): The fiscal year 2015 Army Reserve 
budget request includes five projects that build out critical facility 
shortages and consolidate multiple failing and inefficient facilities 
into energy efficient facilities. The Army Reserve will construct new 
Reserve Centers in California, New Jersey, and New York ($71 million) 
and an addition to an existing Reserve Center in Colorado ($5 million) 
that will provide modern training classrooms, simulations capabilities, 
and maintenance platforms that support the Army Force Generation 
(ARFORGEN) cycle and the ability of the Army Reserve to provide trained 
and ready soldiers when called. The request also includes a Total Army 
School System (TASS) Training Center (TTC) in Virginia in support of 
the One Army School System model ($16 million).
                          army family housing
    The Army's fiscal year 2015 AFH budget request of $429.6 million 
includes $78.6 million for construction and $351 million for housing 
operations worldwide. The AFH inventory includes 16,009 Government-
owned homes, 3,277 Government-leased homes, and 86,077 privatized-end 
state homes. The Army has privatized over 98 percent of on-post housing 
assets inside the United States. All Army overseas Family housing 
quarters are either Government-owned or Government-leased units.
    Operations ($70.5 million): The Operations account includes four 
sub-accounts: management, services, furnishings, and a small 
miscellaneous account. Within the management sub-account, Installation 
Housing Services Offices provide post housing, non-discriminatory 
listings of rental and for-sale housing, rental negotiations and lease 
review, property inspections, home buying counseling, landlord-tenant 
dispute resolution, in-and-out processing housing assistance, 
assistance with housing discrimination complaints, and liaison between 
the installation and local and State agencies. In addition, this 
account supports remote access to housing information from anywhere in 
the world with direct information or links to garrison information such 
as schools, relocation information, installation maps, housing floor 
plans, photo and housing tours, programs and services, housing wait 
list information, and housing entitlements.
    Utilities ($82.7 million): The Utilities account includes the cost 
of delivering heat, air conditioning, electricity, water, and 
wastewater support for owned or leased (not privatized) Family housing 
units.
    Maintenance and Repair ($65.3 million): The Maintenance and Repair 
account supports annual recurring projects to maintain and revitalize 
AFH real property assets. and is the account most affected by budget 
changes. This funding ensures that we appropriately maintain the 16,009 
housing units so that we do not adversely impact soldier and family 
quality of life.
    Leasing ($112.5 million): The Army Leasing program is another way 
to provide soldiers and their families with adequate housing. The 
fiscal year 2015 budget request includes funding for 895 temporary 
domestic leases in the US, and 2,382 leased units overseas.
    Privatization ($20.0 million): The Privatization account provides 
operating funds for portfolio and asset management and government 
oversight of privatized military family housing. The need to provide 
oversight of the privatization program and projects is reinforced in 
the fiscal year 2013 NDAA, which requires more oversight to monitor 
compliance, review, and report performance of the overall privatized 
housing portfolio and individual projects.
    In 1999, the Army began privatizing family housing assets under the 
Residential Communities Initiative (RCI). The RCI program continues to 
provide quality housing that soldiers and their families and senior 
single soldiers can proudly call home. All scheduled installations have 
been privatized through RCI. The RCI program met its goal to eliminate 
those houses originally identified as inadequate and built new homes 
where deficits existed. RCI Family housing is at 44 locations, with a 
projected end state of over 86,000 homes--98 percent of the on-post 
family housing inventory inside the United States. Initial construction 
and renovation investment at these 44 installations is estimated at 
$13.2 billion over a 3-to-14 year initial development period (IDP), 
which includes an Army contribution of close to $2 billion. All IDPs 
are scheduled to be completed by 2019. After all IDPs are completed, 
the RCI program is projecting approximately $14 billion in future 
development throughout the 44 locations for the next 40 years. From 
1999 through 2013, our RCI partners have constructed 31,935 new homes, 
and renovated another 25,834 homes.
    The Privatized Army Lodging (PAL) program is the Army's primary 
means of revitalizing and building new transient lodging facilities and 
providing for their long-term sustainment. Operations and Maintenance 
account funds are programmed to provide portfolio and asset management 
oversight for PAL. The PAL program is a natural extension of the 
success achieved through the RCI. The program conveyed existing 
transient lodging assets and executes a 50-year lease for the 
underlying ground to a qualified developer and hotel operator. To date, 
39 installations are privatized under the PAL program, and will 
increase to 41 installations by 2016. PAL encompasses all current 
lodging operations in the continental United States, Alaska, Hawaii, 
and Puerto Rico, with a projected end-state of 14,135 hotel rooms.
    Construction ($77.3 million): The Army's fiscal year 2015 Family 
Housing Construction request is for $77.3 million for new construction 
and $1.3 million for planning and design. The Army will construct 33 
single family homes at Rock Island Arsenal, Illinois to support Senior 
Officer and Senior Non-Commissioned Officer and families. These new 
homes will enable the Army to begin to address the housing deficit and 
to reduce dependency on leased housing. Additionally, the Army will 
construct 90 apartment-style quarters at Camp Walker in Daegu, Korea to 
replace aged and worn out leased units with on-post construction to 
consolidate families.
                          base closure account
    BRAC property disposal remains an Army priority. Putting excess 
property back into productive re-use, which can facilitate job 
creation, has never been more important than it is today.
    The fiscal year 2013 NDAA consolidated the Prior BRAC and BRAC 2005 
accounts into a single DOD Base Closure Account (BCA). The Army's 
portion of the fiscal year 2015 BCA budget request is for $84 million. 
The request includes $30 million for caretaker operations and program 
management of remaining properties, and $54 million for environmental 
restoration efforts. In fiscal year 2015, the Army will continue 
environmental compliance and remediation projects at various BRAC 
properties. The funds requested are needed to keep planned 
environmental response efforts on track, particularly at legacy BRAC 
installations including Fort Ord, California; Fort McClellan, Alabama; 
Fort Wingate, New Mexico; Pueblo Chemical Depot, Colorado; and Savanna 
Army Depot, Illinois. Additionally, the funds requested support 
environmental projects at several BRAC 2005 installations, including 
Fort Gillem, Georgia; Fort Monmouth, New Jersey; Fort Monroe, Virginia; 
Lone Star Army Ammunition Plant, Texas; and Kansas Army Ammunition 
Plant, Kansas. Completing environmental cleanup is critical to 
transferring property back to local re-use authorities for productive 
re-use and job creation.
    In total, the Army has disposed of almost 224,000 acres (75 percent 
of the total acreage disposal requirement of 297,000 acres), with 
approximately 73,000 acres (25 percent) remaining. The current goal is 
for all remaining excess property to be conveyed by 2021. Placing this 
property into productive reuse helps communities rebuild the local tax 
base, generate revenue, and, most importantly, replace lost jobs.
    BRAC-impacted communities have leveraged planning grants and 
technical assistance from the DOD Office of Economic Assistance (OEA), 
as well as BRAC property disposal authorities, to adjust in ways that 
are often not possible outside the BRAC process.
    The Newport Chemical Depot in Vermillion County, Indiana was closed 
during the BRAC 2005 round, and successfully completed the property 
transfer process for 7,236 acres in a relatively short period of time. 
This allowed the surrounding rural community to remain focused on 
redevelopment, and reduced the Army's caretaker costs. In 2013, Scott 
Pet Products, Inc., a pet supply manufacturer, opened a 50,000-square 
foot manufacturing and distribution facility on this closed 
installation, and plans to expand there, which will create new jobs. 
Newport Pallet Inc. moved into an 80,000-square foot building at the 
site in 2010, and the General Machine and Saw Company announced plans 
in February 2013 to move into facilities at the re-designated 
Vermillion Rise Mega Park.
    At Fort Monmouth, New Jersey, another BRAC 2005 closure site, the 
Army has started transferring property to return it to productive re-
use. Construction crews are progressing ahead of schedule on a new 
275,000-square foot facility to expand the capacity of the software 
data storage firm, CommVault. This is the first of several planned 
expansions by CommVault, with the potential to create over 1,500 jobs. 
The Army successfully transferred the old Paterson Army Health Clinic 
parcel in September 2013. The Local Redevelopment Authority (LRA) will 
sell it to a healthcare provider (AcuteCare). Locally-stated plans will 
create up to 200 new jobs, invest approximately $15 million in 
renovations, and will enable the LRA to avoid about $1 million in 
planned demolition expenses.
                                 energy
    The Army is moving forward to address the challenge of energy and 
sustainability on our installations. In fiscal year 2015, the 
Installation Energy budget total is $1.6 billion and includes $48.5 
million from the DOD Defense-wide MILCON appropriation for the Energy 
Conservation Investment Program (ECIP), $79 million for Energy Program/
Utilities Modernization program, $1.47 billion for Utilities Services, 
and $8 million for installation-related Science and Technology research 
and development. The Army conducts financial reviews, business case and 
life cycle cost analysis, and return on investment evaluations for all 
energy initiatives.
    ECIP ($48.5 million): The Army invests in energy efficiency, on-
site small scale energy production, and grid security through the DOD's 
appropriation for ECIP. In fiscal year 2014, the DOD began conducting a 
project-by-project competition to determine ECIP funding distribution 
to the Services. In fiscal year 2015, the Army requests $48.5M for 
eleven projects to include seven energy conservation projects, three 
renewable energy projects, and one energy security project.
    Energy Program/Utilities Modernization ($79 million): Reducing 
consumption and increasing energy efficiency are among the most cost 
effective ways to improve installation energy security. The Army funds 
many of its energy efficiency improvements through the Energy Program/
Utilities Modernization program account. Included in this total are 
funds for energy efficiency projects, the Army's metering program, 
modernization of the Army's utilities, energy security projects, and 
planning and studies. In addition, this account funds planning and 
development of third-party- financed renewable energy projects at or 
below grid parity through the Energy Initiatives Task Force (EITF). The 
EITF currently has 8 large-scale renewable energy projects in the 
acquisition phase with a potential of over 175 MW of production 
capacity.
    Utilities Services ($1.47 billion): The Utilities Services account 
pays all Army utility bills including the repayment of Utilities 
Privatization (UP), Energy Savings Performance Contracts (ESPCs), and 
Utilities Energy Service Contracts (UESCs). Through the authority 
granted by Congress, ESPCs and UESCs allow the Army to implement energy 
efficiency improvements through the use of private capital, repaying 
the contractor for capital investments over a number of years out of 
the energy cost savings. The Army has the most robust ESPC program in 
the Federal government. The ESPC program has more than 180 Task Orders 
at over 75 installations, representing $1.32 billion in private sector 
investments and over 360 UESC Task Orders at 45 installations, 
representing $568 million in utility sector investments. We have 
additional ESPC projects in development, totaling over $400 million in 
private investment and $100 million in development for new UESCs. From 
December 2011 through December 2013, under the President's Performance 
Contracting Challenge, the Army executed $498 million in contracts with 
third-party investment using ESPCs and UESCs, doubling historical 
trends.
    Installation Science and Technology Research and Development ($8 
million): Installation Science and Technology programs investigate and 
evaluate technologies and techniques to ensure sustainable, cost 
efficient and effective facilities to achieve resilient and sustainable 
installation and base operations. Facility enhancement technologies 
contribute to cost reductions in the Army facility life cycle process 
and support installation operations.
                              environment
    The Army's fiscal year 2015 budget requests $1.149 billion for its 
Environmental Programs in support of current and future readiness. This 
budget supports legally- driven environmental requirements under 
applicable Federal and State environmental laws, BRAC authority, 
binding agreements, and Executive orders. It also promotes stewardship 
of the natural resources that are integral to our capacity to 
effectively train our land-based force for combat.
    This budget maintains the Army's commitment to acknowledge the past 
by restoring Army lands to a usable condition and by preserving 
cultural, historic, and Tribal resources. It allows the Army to engage 
the present by meeting environmental standards that enable Army 
operations and protect our soldiers, families, and communities. 
Additionally, it charts the future by allowing the Army to 
institutionalize best practices and technologies to ensure future 
environmental resiliency.
               sustainment/restoration and modernization
    This year's sustainment funding is $2.4 billion or 62 percent of 
the OSD Facilities Sustainment Model (FSM) requirement for all the Army 
components. Due to this lower level of sustainment funding, we are 
accepting a level of risk in degraded facilities due to deferred 
maintenance.Our facility inventory is currently valued at $329 billion.
    In keeping with the FIS, the Army continues its investment in 
facility restoration through the O&M restoration and modernization 
account ($358 million). Our focus is to restore trainee barracks, 
enable progress toward energy objectives, and provide commanders with 
the means of restoring other critical facilities. The Army's demolition 
program has been reduced by 36 percent to $22.7 million, which slows 
our rate of removal of failing excess facilities. Facilities are an 
outward and visible sign of the Army's commitment to providing a 
quality of life for our soldiers, families, and civilians that is 
consistent with their commitment to our Nation's security.
                        base operations support
    The Army's fiscal year 2015 Base Operations Support (BOS) request 
is $8.6 billion and represents a 17 percent reduction compared to 
fiscal year 2013 execution. Although this reduction is in accordance 
with the BCA, Army's fiscal year 2015 Base Operations Support (BOS) 
funding will create challenges to our installations as they seek to 
provide a sustainable base for training and quality of life for our 
military families. The Army's fiscal year 2015 installation funding 
strategy continues to prioritize Life, Health, and Safety programs and 
services ensuring soldiers are trained and equipped to meet the demands 
of our Nation. The Army remains committed to its family programs and 
continues to evaluate these services in order to maintain relevance and 
effectiveness. Ensuring the resiliency of our soldiers and families is 
the priority of programs such as Army Substance Abuse Program, Soldier 
Family Assistance Centers, and Suicide Prevention.
    We continue to seek internal efficiencies/tradeoffs as 
sequestration is producing real-life consequences on our installations. 
Army continues to face challenges meeting day-to-day installation 
readiness requirements. Army installations and local communities felt 
the effects of sequestration in fiscal year 2013. Our efforts to 
balance expectations and stretch funding involve a contract management 
review process that enables better visibility for making decisions on 
how to terminate/down-scope, modify, or bundle current contracts to 
reduce overhead rates and compete for better rates. Without a reduction 
in the number of installations, the Army will be forced to sacrifice 
quality of life programs at the expense of maintaining excess capacity. 
The cumulative effect of funding reductions over the years stress the 
overall quality of life on our installations and adjoining communities 
as the Army realigns its military and civilian population and reduces 
supporting service program contracts across the garrisons.
                  intergovernmental support agreements
    Under the authority provided in the fiscal year 2013 NDAA, Section 
331 (codified as 10 U.S.C. 2336), the services may provide, receive, or 
share installation support services with their community counterparts 
if determined to be in the best interests of the department. Key 
elements include the ability to sole source to public entities; that 
State or local government wage grades may be used; and that the 
Intergovernmental Support Agreements (IGSAs) serve the best interests 
of the Department by enhancing mission effectiveness or creating 
efficiencies and economies of scale, including by reducing costs.
    The Army developed an overarching strategy and is following its 
implementation plan to use the expanded public-public partnership 
authority to enter into IGSAs. An execution order was issued to Army 
Commands to collect, benchmark, and analyze data for potential IGSAs. 
From the information gathered from the Commands, 29 IGSAs have been 
proposed. As of December 2013, four proposals are being developed in 
conjunction with local communities. Once complete, the agreements will 
be submitted to Army headquarters for final approval. These initial 
proposals will assist the Army in developing a standardized process for 
identifying, evaluating, and approving IGSAs.
                               conclusion
    The Army's fiscal year 2015 installations management budget request 
is a balanced program that supports the Army as it transitions from 
combat, and supports our soldiers, families, and civilians, while 
recognizing the current fiscal conditions.
    The Army's end-strength and force structure are decreasing. At 
490,000 Active Component soldiers, we have initial evidence that the 
Army will have about 18 percent excess capacity. The Army needs the 
right tools to reduce excess capacity. Failure to reduce excess 
capacity is tantamount to an ``empty space tax'' diverting hundreds of 
millions of dollars per year away from critical training and readiness 
functions.
    BRAC is a proven and fair means to address excess capacity. BRAC 
has produced net savings in every prior round. On a net $13 billion 
investment, the 2005 BRAC round is producing a net stream of savings of 
$1 billion a year. In this case, BRAC 2005 is producing a non-inflation 
adjusted 7.7 percent annual return on investment. That is a successful 
investment by any definition. A future round of BRAC is likely to 
produce even better returns on investment. We look forward to working 
with Congress to determine the criteria for a BRAC 2017 round.
    In closing, thank you again for the opportunity to appear before 
you today and for your continued support for our soldiers, families, 
and civilians.

    Senator Johnson. Given the time constraints I have, I will 
yield to Senator Pryor.
    Senator Pryor. Thank you, Mr. Chairman. I will try to be 
brief because I know we are under some time constraints.
    And Ms. Hammack, let me ask you, if I may about the $150 
million that was in fiscal year 2014. You probably heard me ask 
this question a few moments ago. In the fiscal year 2014 
omnibus for maintaining the workload for the arsenals, do you 
know the status of that? And do you know how that money will be 
used?
    Ms. Hammack. That is something that is not in the MILCON 
budget. That is something that Army Materiel Command is working 
with, and we can certainly take that question for the record, 
and get back to you.
    Senator Pryor. All right. If you could do that, that would 
be great.

    [The information follows:]

    The $150 million will be applied into the Army Working Capital Fund 
to control rates at Rock Island and Watervliet Arsenals due to their 
significantly reduced workload. The arsenals should begin receiving 
fiscal year 2014 dollars soon. The funds will be used to stabilize 
rates going into fiscal year 2015.

    Senator Pryor. Mr. Chairman, why do we not go ahead and 
allow others to ask, and if we have time at the end, I may ask 
a few more.
    Senator Johnson. Senator Udall.
    Senator Udall. Thank you very much. I will not repeat my 
question, since you were sitting in the audience and they 
thought you might have a little more information. So, but if 
you need anything additional, let me know, so.
    Ms. Hammack. Well, let me try to answer your questions. 
First of all, we are working----
    Senator Udall. Great working with you on a variety of 
issues out in New Mexico. Really appreciate all your help.
    Thank you.

                       WHITE SANDS MISSILE RANGE

    Ms. Hammack. Thank you, sir. And those are appropriate 
questions. There are a lot of critical missions at Holloman and 
as both the threat and the capabilities go faster, we need as 
much range as possible. We have a northern extension area 
there, which is a critical asset to White Sands Missile Range.
    So we are working hard to ensure that we keep the airspace, 
which is ground to the infinity, and ensure that there are no 
obstructions in that area that would endanger either the airmen 
who are flying the planes, or the missiles that we are testing 
in that area.
    The Army and the Air Force are working together very 
closely on this, as is the Navy. All services use this area, as 
do some of our allies. White Sands Missile Range is a true 
jewel in the inventory of the entire military services, and as 
such, deserves all of our attention to ensure it remains so.
    You asked about capacity; that is what BRAC does. If you 
look at the Army installations as we shrink to 490,000 we are 
going to be like Swiss cheese with holes, capacity availability 
in various places. And a BRAC round enables us to do the 
appropriate analysis to determine where we can move things and 
what we can fill up to ensure that we do not have that Swiss 
cheese, which requires resources that could be better put to 
use in training and readiness.
    Senator Udall. And as far as considering that additional 
mission for White Sands and possibly a new unit from Fort 
Bliss, the National Guard finding a mission, those kinds of 
things?
    Ms. Hammack. Sir, the Army is getting smaller.
    Senator Udall. Yes, yes.
    Ms. Hammack. And so, I cannot commit to anything because as 
we are shrinking to 490,000 and shrinking perhaps even down as 
low as 420,000 if sequestration continues the way it is, we are 
not going to be re-stationing anything. We are going to be 
decommissioning units.
    Senator Udall. Yes. But as you said, I mean, this is the 
premiere testing facility and this airspace is absolutely 
crucial. And so, we have no doubt whatever we go through that 
it will still be very, very important to the Army.
    Thank you very much and really appreciate it.
    Ms. Hammack. And sir, I welcome your endorsement for BRAC 
authorization that enables us to do the analysis.
    Senator Udall. Yes. That you do not have.
    Senator Johnson. General Bobeck, the Army National Guard is 
assured Federal and State resources. It is the key component of 
State response to emergencies.
    What is the potential size of the Guard under current 
funding scenarios for a further reduction in end strength? And 
how much does this affect the ability of States to respond to 
local emergencies?
    General Bobeck. Sir, thank you for that question.
    Sir, right now the Army National Guard is expected to be 
350,200 soldiers in fiscal year 2015, and under the planned BCA 
to reduce to 315,000 in fiscal year 2019.
    We are certainly concerned with any reductions in looking 
across the Army National Guard and how that might impact our 
States and territories should we go to that level of reduction.
    Senator Johnson. I understand from the staff that the time 
has been put back to 4:30.
    Secretary Hammack, the Army MILCON budget request is barely 
half of the fiscal year 2014 request. I understand that the 
Army is downsizing, but given the fact that the Army has 
identified nearly $1 billion in fiscal year 2015 unfunded 
MILCON requirements, what is the real impact of this 
artificially low MILCON request on meeting the new and current 
mission needs of the Army?
    Ms. Hammack. Sir, thank you for the question.
    When you take a look at the Army's budget, fully 50 percent 
goes to military personnel and other benefits. And so that 
means that the remaining funds are divided among training, 
modernization, and installations.
    And so, because we do not want to deploy a soldier who is 
not appropriately trained, because there is risk of life, we 
took reductions in the MILCON program, appropriately so, 
because we can focus the limited funds on life, health, safety 
and we know that there is no risk of loss of life from a 
soldier occupying a building that might have a broken toilet.
    So when we look at risk, we believed it is acceptable risk 
within the budget constraints that we have. Acknowledging that 
we do have military construction requirements, so should there 
be additional funds available, we want to make available to 
this committee and to Congress a list of our next set of 
priority projects should there be incremental funding 
available.
    But within the Army budget, we do not have the funding for 
those next set of projects.
    Senator Johnson. General Aycock, General Bobeck, and Mr. 
Balocki, would you also comment on the adequacy of the fiscal 
year 2015 requests from your perspective? Starting with you, 
General Aycock.
    General Aycock. Sir, first and foremost, we are making sure 
that we have soldiers who have everything they need to deploy, 
and we have families who have services back here in the United 
States so the soldiers who do deploy do not have to worry about 
them. And with that readiness focus, I believe that we are 
taking prudent risk in the military construction area.
    I am the first and foremost of those on the Army who 
advocate that we maintain sustainment, restoration, and 
modernization at the appropriate levels during this time. I 
oftentimes use the FRAM oil filter commercial that you can pay 
me now or pay me later. I get good reaction from that amongst 
the staff.
    And just to give you an idea, last year in 2013, we 
actually started off our sustainment budget much lower, 50 
percent; we were able to raise it up to 62 percent of that. 
This year, we are working on 77 percent, and we are working in 
that in terms of changing what is in the palm out in the budget 
year, so we adjust as we move along.
    I believe that we have chosen the right projects for the 
amount of money that we have, so that our soldiers have what we 
need in the Army.
    Thank you, sir.
    Senator Johnson. Mr. Balocki.
    Mr. Balocki. Mr. Chairman, thank you for the question.
    The Army Reserve, along with the rest of the Army, is 
assuming risk in its facility capital investments to maintain 
the readiness of our formations. The Army Reserve is 
continuously evaluating its portfolio of facilities to ensure 
that we provide the best possible support for soldier and unit 
readiness. And while we have deferred a number of important 
projects beyond the current FYDP to achieve the Budget Control 
Act, this will impact our facility investments.
    As a former Directorate of Public Works charged with 
maintaining those facilities, I saw directly the impact of 
sustainment funding on our installations' infrastructure. We 
will not be able to sustain high facility rating levels with 
reduced sustainment funding. We address urgent life, health, 
and safety needs, and break down repairs using our best 
professional judgement each and every day.
    Our goal, though, is to sustain those facilities for their 
life.
    Senator Johnson. General Bobeck.
    General Bobeck. Chairman, sir, thank you for your question.
    Sir, the Army National Guard is addressing critical 
requirements in fiscal year 2015. We are fixing our worst 
first. We are also applying sustainment, restoration, and 
modernization funds as a bridging strategy to maintain or 
manage degradation and mitigate risk, and we are closely 
monitoring life, health, safety requirements, and will apply 
risk mitigation measures as they arise, sir.

                      MILITARY CONSTRUCTION BUDGET

    Senator Johnson. General Aycock, this committee has to 
consistently emphasize how MILCON underpins force readiness. 
Yet, this is the third year in a row that the Army MILCON has 
taken a significant funding reduction.
    From a commander's perspective, what is the level 
operational and mission risk the Army is incurring down the 
road by delaying MILCON projects to fund other requirements?
    General Aycock. Sir, I thank you for the question.
    First, we always look at the operational requirement as we 
determine how to spend money, and we try to make sure that the 
military construction projects that we do, have the highest 
operational value.
    So I believe that our selection of projects, for example, 
putting together hangars for the aerial drones that were 
deployed overseas but now have to come back in all the right 
strategic locations so that our soldiers can train with them 
onsite is a prudent decision and that was raised up to the 
highest priority.
    I also believe, as we move out, we have, internal the Army, 
a very open and transparent system where commanders can come 
forward to us and discuss, at every level, what their 
priorities are. And those priorities can be elevated all the 
way up to the Secretary and to the Chief to adjudicate.
    And so, using those two principles, always looking at the 
operational requirement and making sure we have an open and 
transparent system within the Army to always raise the highest 
priority first. I believe that given the current budget, we are 
making the right decisions for the soldiers and for their 
ability to deploy and operate.
    Thank you, sir.

                  BASE REALIGNMENT AND CLOSURE (BRAC)

    Senator Johnson. Secretary Hammack, I understand that the 
Army has embarked on an assessment of the implications of 
reducing the force to an end strength of 440,000 or fewer. This 
is likely to have a major impact in future MILCON requirements.
    Can you comment on the goals and assessment, and when we 
might see the recommendations from it?
    Ms. Hammack. Thank you, sir.
    Yes, currently we are doing a programmatic environmental 
assessment to assess the impact of how low we could get to. So 
we are assessing the impact of an Army of 420,000 recognizing 
that we hope to not shrink below 490,000 but we may have to.
    That programmatic environmental assessment will be 
completed sometime this summer where we will hold listening 
sessions with the various communities that have the potential 
to be impacted. It is a dramatic reduction and it will affect 
virtually every base.
    A base realignment and closure authorization enables us, 
then, to determine where to appropriately reposition the 
remaining forces. If we do not have that authorization, we will 
have a Swiss cheese of bases where we will have empty buildings 
that still cost us to maintain and are not of productive use to 
the community.
    Base closure and realignment allows us to consolidate, 
invest, and divest in an appropriate manner that is of highest 
and best value to the communities around us. And so that 
authorization enables us to do an appropriate analytical 
assessment in conjunction with Congress because you appoint a 
BRAC commission that oversees this, and then gives you the 
ability to vote on the recommendations that come out of that 
analytical process.
    Senator Johnson. Secretary Hammack, DOD has indicated that 
it hopes to reinstate out year MILCON funding to levels that 
are better able to meet the service's facility needs.
    Do you expect Army MILCON levels to rebound next year? If 
not, how will the Army balance between current and future 
mission MILCON priorities so that the mission readiness will be 
minimally impacted?
    Ms. Hammack. Should sequestration be changed, should the 
Army's top line increase, then two areas that will have funding 
restored will be MILCON and sustainment, restoration, and 
modernization to enable us to maintain our facilities.
    I agree. We are taking risk. We are taking prudent risk at 
this point in time. We have identified those projects that have 
had to be pushed out. We feel those are still critical projects 
as do Guard and Reserve, as we all sit down together to look 
and determine what our limited funding can afford.
    We hope to have MILCON funding restored to a level that is 
sustainable in the long term. But we are taking short term risk 
with the current budget levels.
    Senator Johnson. I thank all of our witnesses for appearing 
before this subcommittee today. We will look forward to working 
with you this year.

                     ADDITIONAL COMMITTEE QUESTIONS

    For the information of members, questions for the record 
should be submitted by the close of business on April 8.
    [The following questions were not asked at the hearing, but 
were submitted to the Departments for response subsequent to 
the hearing:]
             Questions Submitted to Hon. Michael J. McCord
               Questions Submitted by Senator Tim Johnson
    Question. As U.S. forces draw down in Afghanistan, the United 
States is relinquishing millions of dollars' worth of infrastructure 
that has been built over the past decade of war. Last summer, the 
Special Inspector General for Afghanistan reported on a $34 million 
headquarters building in Afghanistan that was completed in 2013 but has 
never been occupied, is not needed, and is basically in a caretaker 
status.
    What steps is the Department taking to ensure that any planned, 
ongoing, or recently completed MILCON projects reflect the reality that 
U.S. forces are leaving? How can Congress ensure that additional 
taxpayer dollars are not squandered on projects that are no longer 
needed given the situation on the ground?
    Answer. The Department understands the serious responsibility for 
sound financial management of funds appropriated for Afghanistan. The 
attached U.S. Forces-Afghanistan (USFOR-A) information paper entitled, 
``DOD Oversight of Taxpayer Dollars In Afghanistan'', elaborates on 
mechanisms designed to ensure effective oversight and stewardship of 
taxpayer funds.
    Specific to military construction (MILCON) funded projects, USFOR-A 
conducted six rounds of formal reviews of MILCON projects between 
November 2011 and December 2013 to determine if ongoing projects should 
be canceled or de-scoped to align with the changing strategic 
environment. Most recently, round six resulted in the cancellation of a 
$5.2 million Special Operations Forces Headquarters facility located on 
Kandahar Air Field. Overall, USFOR-A has canceled or de-scoped 123 
ongoing or planned projects with a total program value of approximately 
$1.6 billion. Pending an enduring presence decision, the impact and 
disposition of facilities will be further adjusted.
    Of note, the Department has not requested MILCON funds in the 
Overseas Contingency Operations (OCO) budget since fiscal year 2011. 
All OCO MILCON funds are now expired.

                              (ATTACHMENT)

                           INFORMATION PAPER

            DOD Oversight of Taxpayer Dollars in Afghanistan

                            08 December 2013

    Good stewardship of taxpayer dollars is a command priority. 
Therefore, USFOR-A has taken an aggressive and proactive approach in 
implementing requirement-to-resource cost cutting initiatives. As a 
requirements-driven command, USFOR-A is aligning legitimate mission 
needs with the reality of a decreasing budget. We believe by thoroughly 
reviewing all requirements to ensure they are properly scoped to actual 
needs, cost savings and cost avoidance will follow. This assertive and 
comprehensive strategy has proven successful. Considering only a 
fraction of the total innovative efforts to reduce overall costs, 
USFOR-A has achieved a cost savings and avoidance of approximately $6.7 
billion to date in fiscal years 2013 and 2014. This small 
representation of the overall efforts demonstrates significant cost 
savings and cost avoidance in advance of the troop drawdown of fiscal 
year 2014 and transition to Resolute Support Mission (RSM).
    In order to achieve these cost savings and cost avoidances, USFOR-A 
developed and implemented a five-point strategy for fiscal year 2013 
and 2014.

1. Synchronize financial resources with command priorities and 
        operational necessities.

    The careful balance of requirements to financial resources achieves 
good stewardship of U.S. taxpayer dollars. Command requirements are 
continually evaluated in order to properly represent existing need, and 
excesses are eliminated in budget execution. Additionally, USFOR-A 
synchronizes financial resources with command priorities and 
operational necessities. Synchronization is achieved with thorough 
analysis and coordination of both financial and operational 
considerations, resulting in cost-informed senior leader decisions. 
When financial plans are in synch with key strategic and operational 
requirements, such as base closures, personnel drawdown, and the 
evolving mission throughout the Combined Joint Operations Area- 
Afghanistan (CJOA-A), cost savings are realized.
    In order to fully align mission requirements with financial 
resources, USFOR-A relies on several collaborative groups, boards, and 
updates, including: (1) the Warfighter Senior Integration Group; (2) 
the Strategic Targeting and Influence Board; (3) the Strategic 
Environment Update; and (4) the Commander's Roundtable. These 
collaborations provide the environment for the USFOR-A Commander to 
shape the strategic landscape and to present a clear focus with a 
common message for subordinate commands to implement in funding 
requirements. Through these key leader engagements, operational 
decisions on the critical issues of current force levels and 
reductions, continuing train-advise-assist (TAA) requirements, on-going 
redeployment and retrograde operations, and the enduring presence 
beyond 2014 are balanced with good stewardship of taxpayer dollars.

2. Obligate funds according to cost analysis results and decisions of 
        review boards.

    Review boards consist of multi-functional teams with 
representatives from joint and special staffs focused on analyzing and 
validating requirements for optimal balance of cost to benefit. The 
mission of the validation review board is to ensure the good 
stewardship of resources through a thorough requirements review for all 
requested goods, services, and construction efforts. The validation 
reviews are multi-faceted consisting of: (1) refinement of cost 
analysis; (2) Afghan Business Advisors; (3) synchronization with 
drawdown efforts; (4) responsible contract management; and (5) de-scope 
or termination of construction projects. USFOR-A currently conducts 
numerous boards and working groups to provide oversight and stewardship 
in the expenditure of funds and resources, including:

    a.  Joint Acquisition Requirements Board (JARB).--The efforts of 
the JARB have resulted in the cost avoidance and cost savings of over 
$1.9 billion to date in fiscal year 2013 and 2014. The JARS's mission 
is to validate Operations and Maintenance (O&M) requirements and 
associated funding requests across the CJOA-A. On a weekly basis, the 
team reviews services, construction costs, commodities, and leases to 
identify the best value without compromising the mission. For example, 
significant contributions to these cost savings and cost avoidances 
were realized by a thorough review of the aviation support contract and 
a line-by-line analysis of personal communication device requirements. 
Recent efforts to consolidate approval authority for requirements at 
the USFOR-A Deputy Commander-Support level allow the command to 
leverage key professional enablers to further contribute to the good 
stewardship of taxpayer dollars.

    b.  Joint Facilities Utilization Board (JFUB).--The JFUB's mission 
to evaluate theaterwide requirements for construction and repair 
projects has resulted in over $3.2 million in cost avoidance over the 
last 8 months. This is in addition to the $67 million in Operation 
Maintenance, Army (OMA) funded construction and repair projects 
cancelled in fiscal year 2013 and 2014. Further, the Commander USFOR-A 
and Commander ISAF Joint Command (IJC) directed that approval authority 
for projects over $10,000 will reside with USFOR-A Deputy Commander-
Support level to ensure synchronization with RSM footprint.

    c.   The Construction and Facilities Engineering (CAFE) Working 
Group (WG), has realized a cost savings totaling over $65 million in 
the first quarter of fiscal year 2014: $5 million in the MILCON program 
and $60.5 million in the Afghan Security Force Fund for Afghan National 
Security Force (ANSF) facilities. The CAFE WG is an internal General 
Officer review board, reviews in-progress construction projects within 
the Regional Commands (North, East, Capital, South, Southwest, and 
West) to confirm or deny the enduring need and scope of the projects.

    d.  Commander's Emergency Response Program (CERP) Review is a 
centralized commanders' review board that to date has recouped or 
offset $169.2 million. This USFOR-A initiative served as a Commander's 
forum to systematically review the hundreds of on-going CERP-funded 
projects throughout CJOA-A to ensure proper closure and/or transfer to 
the Afghan people. For example, a project that is stalled or unlikely 
to be completed in a manner worthy of transfer to the Afghan people 
will be halted with all unexpended funds returned to the Government. To 
date USFOR-A has closed 136 projects recouping $12.2 million for the 
U.S. Army as a direct result of this board. CERP obligated $43 million 
of a $200 million appropriation, returning $157 million to the U.S. 
Government.

    e.  The Non-Tactical Vehicle (NTV) Program Management Office 
(PMO).--The NTV PMO has achieved a savings of $92 million in fiscal 
year 2013 and 2014 by replacing leased NTVs with Government Services 
Agency (GSA) NTVs. The NTV PMO uses the Vehicle Management Allocation 
Review Board (VMARB) to reduce leased NTVs across the CJOA-A. The KBC 
VMARB has reduced the amount of leased NTVs to 25, a reduction of over 
400 leased NTVs. This represents a cost savings of $28.5 million a 
year. GSA maintenance also has allowed USFOR-A to cancel several other 
maintenance contracts resulting in a savings of approximately $21 
million over the last 2 years.

    f.   Foreign Excess Personal Property (FEPP) and Foreign Excess 
Real Property (FERP) programs have provided $1.2 billion in cost 
avoidance. The FEPP and FERP programs speed base closure, foster 
goodwill with GIROA, and prevent unnecessary deconstruction and 
transportation cost to the U.S. Government.

3. Detailed cost analysis and review of estimates and contractor 
        proposals.

    USFOR-A relies on dedicated cost analysts who develop empirical, 
comparative, and/or statistical cost models to analyze major cost 
drivers and to determine whether proposals are within an acceptable 
range. Typically, cost analysts will discover rates that are not fair 
and reasonable or cost elements that should not be applied. These 
efforts result in significant cost savings and elimination of 
unnecessary or duplicated costs.
    In addition to dedicated cost analysts, USFOR-A brought in an 
Afghan Business Advisor to provide critical cultural advice and saved 
$5.1 million with knowledge of local business practices and appropriate 
rates for procuring goods and services from Afghan contractors. For 
example, a road project in the Ghazni province was initially estimated 
by the U.S. design team to cost $10.6 million. Through the Afghan 
Business Advisor's efforts in coordinating with the Afghan Ministry of 
Public Works, new designs were developed and vendors located to reduce 
the cost to $4.9 million, a 54 percent cost savings. Although on a 
smaller scale, another example of his contributions in analyzing and 
negotiating appropriate cost resulted in a 43 percent decrease of 
payment from $400,000 to $230,000 for an Afghan Hands contract. The 
Afghan Business Advisor has proven invaluable due to his knowledge of 
the Afghan people, the terrain, and the Afghan financial environment.

4. Continual review of new and open contracts and contractors 
        accompanying the force.

    The LOGCAP Prioritization Board (LPB) validated requirements for 
LOGCAP services. To provide a common level of service, a General 
Officer reviews all new requirements over $50,000. The LPB has saved 
over $22 million in unnecessary or potentially duplicative requirements 
to date in fiscal year 2013 and 2014. Also, the C-JTSCC and Army 
Contracting Command--Rock Island aggressively addressed the backlog of 
190,000 open contracts releasing over $281.5 million back into the 
Treasury.
    USFOR-A also increased Contracting Officer Representatives (COR) 
coverage to 100 percent on all services and contracts over $150,000. In 
addition, CORs increased monthly reporting from 62.4 percent this 
summer to 100 percent in October covering 267 contracts.
    Actions by the Operational Contract Support Drawdown Cell (OCSDC), 
in conjunction with the CENTCOM-Joint Theater Support Contracting 
Command (C-JTSCC), have resulted in the reduction of the theater 
contractor footprint by 43 percent or 54,609 contractor personnel. 
Further, the OCSDC synchronizes, advises, and assists in the removal of 
all excess Contractor Managed Government Owned (CMGO) equipment in the 
CJOA-A. The OCSDC's initiatives directly led to a 19 percent decrease 
in CMGO equipment in theater via four different disposal methods: (1) 
Consumed by Base Operations (consumables); (2) Transferred to another 
base on space available basis; (3) FEPP conveyance; and (4) Disposal 
through the Defense Logistics Agency Disposal Service.

5. Intensify Management Internal Control Program (MICP) and Audit 
        Readiness.

    USFOR-A exercises several command internal controls that have saved 
over $708 million in fiscal year 2013 and 2014. Efforts to identify 
excess military equipment and property deemed not cost-effective to 
retrograde avoided approximately $388.4 million in transportation 
costs. Task Force Power is responsible for Base Energy and Fuel 
Efficiency and has completed 68 projects at an estimated savings of 
$19.4 million. USFOR-A commands have MICP Unit Managers to evaluate and 
execute operational and financial assessments for key functional areas 
and to provide corrective actions to maximize financial and operational 
efficiencies through management, negotiated savings, and prevention of 
fraud , waste, and abuse.
    The Coalition Support Cell (CSC) recouped costs associated with the 
U.S. military providing transportation and movement support to non-lift 
and sustain coalition countries in support of their retrogrades and 
redeployments. The CSC is also tracking reimbursement needed from non- 
lift and sustain coalition countries for the use of CENTCOM Materiel 
Recovery Elements in support of their retrograde and redeployments. 
$301 million has been billed or recouped from non-lift and sustain 
coalition countries in fiscal year 2013 and 2014.
    Audit Readiness is a process to increase stewardship. USFOR-A is 
conducting a bottom up review with our acquisition processes and 
property accountability to ensure our operations are within full 
compliance with DOD's Financial Improvement and Audit Readiness (FIAR) 
guidance. End state is USFOR-A will meet the SECDEF goal of producing 
audit ready financial statements ahead of congressional suspense of 
2017.

Conclusion

    USFOR-A recognizes the importance and necessity of good stewardship 
of taxpayer dollars. The command and supporting organizations are 
working together to meet the warfighter needs, protect soldiers, and 
accomplish the mission in a manner that is judicious, fiscally 
responsible, and flexible to the very fluid operational environment. 
Every opportunity is used to improve processes, reduce costs, match 
resources only to the must-have requirements, and quickly adapt as 
decisions evolve. The $6.7 billion in cost savings and cost avoidance 
examples discussed above demonstrate USFOR-A's commitment and 
obligation to the American taxpayers that will continue throughout the 
fiscal year 2014.

                          (END OF ATTACHMENT)

      
    Question. Please provide an inventory of all major MILCON projects 
in Afghanistan built to support the war effort, with the year of 
appropriations, cost, status, and planned disposition of each project.
    Answer. The Department has carried out approximately $2.8 billion 
of military construction in Afghanistan. An inventory of the projects, 
by location, with the year of appropriations, cost, and status is 
attached.
    Decisions regarding the disposition of each project will be made 
once the status of the U.S. presence in Afghanistan after December 2014 
has been determined. Disposition of projects may also be made as 
operational conditions require.
    In addition to the $2.8 billion of military construction 
appropriations, the Department has used approximately $582 million of 
operation and maintenance appropriations to carry out contingency 
construction projects in Afghanistan under the authority provided by 
section 2808 of the fiscal year 2004 National Defense Authorization 
Act, as amended.

                              (ATTACHMENT)


















                          (END OF ATTACHMENT)

                                 ______
                                 
                Question Submitted by Senator Mark Kirk
                     missile defense infrastructure
    Question. There is no funding in this year's request to support 
Missile Defense infrastructure needs. We have invested billions of 
dollars on Guam infrastructure the past 5 years, and there is another 
$128 million in the request before us. Yet, we still do not have a plan 
for a permanent missile defense system to protect this investment. 
There is also need for concern in Europe given recent events in Central 
Europe and the continued unrest in the Middle East which raise 
questions about whether we are doing enough to protect and re-assure 
our NATO Allies.
    Mr. McCord, can you update us on missile defense infrastructure 
needs in the Pacific particularly Guam and in Europe? In addition, 
given current threats and recent developments, should consideration be 
given to accelerating our efforts in these regions?
    Answer. Regarding the missile defense infrastructure for Guam, the 
U.S. Army is currently in its second year of supporting a Terminal High 
Altitude Area Defense (THAAD) deployment to Guam in defense of U.S. 
assets. The U.S. Army is working closely with the U.S. Navy and U.S. 
Pacific Command to not only sustain this support, but to transition it 
to a permanent duty station for soldiers and their families. We expect 
to see this transition take effect on or about April 2015.
    We continue to implement the European Phased Adaptive Approach 
(EPAA). The first AEGIS Ashore facility in Romania will be declared 
operational in 2015 and the Poland site is on track to become 
operational in 2018. This timeline ensures that both systems will be 
equipped with the more effective AEGIS BMD 5.1 load, which will be 
available in 2018. We continue to monitor and evaluate the threat in 
the region and will examine options for deployment of mobile BMD 
systems in the event of a credible threat in the region.
                                 ______
                                 
              Questions Submitted by Senator Daniel Coats
    Question. Do you believe that centralizing financial management and 
accounting services in DFAS serves the goals of cost effectiveness, 
efficiency and auditability? How might decentralization impact these 
goals?
    Answer. Centralization of finance and accounting within DFAS has 
clearly paid dividends and served our goals of improved effectiveness 
and efficiency since DFAS was established in 1991. Since that time, 
DFAS has consolidated more than 300 installation-level offices into 
nine DFAS sites and reduced the number of systems in use from 330 to 
111. Even so, the Services and DFAS are always pursuing ways to improve 
and transform processes and systems to support financial auditability, 
greater effectiveness and lower cost.
    To my knowledge, it is not the intent of the efforts the Army is 
contemplating to decentralize functions or tasks. Yet, in DOD, there 
are complex interdependencies. The implementation of new compliant and 
modern financial systems provides significant enhancements in 
automation and capturing data at the source that also enhance 
auditability. As such, workload over the years has become less labor 
intensive and more streamlined, as we pursue the elimination of errors 
and of redundant and inefficient processes.
    Question. Do you believe that the Army bringing some financial 
management and accounting functions in-house could set a precedent for 
other services that would encourage or allow further decentralization?
    Answer. To my knowledge, the Army is not planning on bringing 
finance and accounting functions, currently being performed by DFAS, 
in-house. The implementation of new modern financial systems, the 
current demands to improve and strengthen processes to achieve 
financial auditability, and existing fiscal realities require the Army, 
as well as DOD, to look at how and where functions are performed. My 
understanding is the Army is looking to consolidate its own internal 
processes in order to better align and use the strengths of its new 
financial system and meet the challenges of the changing fiscal 
environment, while enhancing auditability. As it does so and performs 
its analysis, DOD and DFAS intend to stay closely engaged.
    Question. How important is maintaining a robust civilian workforce 
in financial management accounting? Do you see a reason that these 
functions should be handled by military personnel instead of civilian 
personnel?
    Answer. Executing DOD financial support functions requires a strong 
professional civilian and military workforce. The majority of functions 
associated with finance and accounting are best suited to a 
professional civilian workforce, from both a cost and continuity 
perspective. However, military uniformed personnel are often best-
suited to perform operational theater functions in deployed 
environments. In order to ensure these uniformed personnel are trained 
to accomplish these operational contingency missions, we need to ensure 
they are trained and ready when needed. As such, the services and DOD 
have always integrated the military into the workforce mix, training in 
their professional functions (e.g. medical, military police, cooks, 
etc.) until called on for the next contingency. Each of the services 
makes these decisions as part of its Title 10 responsibilities.
    Question. While reductions in civilian personnel must occur with 
our drawdown in forces, do you believe that financial management and 
accounting personnel should be handled differently as they are 
responsible for ensuring auditability by 2017, as mandated in the 2010 
NDAA? How might reductions in DFAS personnel impact auditability?
    Answer. Support to the audit effort must be a priority even as we 
make the required reductions in civilian personnel strength. DFAS will 
always be a critical element supporting the financial audit. However, 
the mix and number of personnel due to the complex shifting of workload 
and changing support requirements is always a focus of DOD and the 
services. As we move into a financial audit regimen, there is an 
increased focus and level of effort by our financial management 
workforce. We must ensure business practices can improve to sustain an 
auditable environment and support the audit itself. As such, we try to 
ensure that we optimally realign the resources already in place, while 
we also improve efficiency and the quality of our work.
    Part of ensuring auditability, is getting the work done accurately 
and in a timely manner. Much of this is getting things right the first 
time, without manual or redundant efforts. For example, to the extent 
the services improve the quality of their inputs and automated system 
ensure the data is correct, then we can limit workload on DFAS while 
auditors can better rely on the financial information produced.
                                 ______
                                 
                   Questions Submitted to John Conger
               Questions Submitted by Senator Tim Johnson
    Question. The European Infrastructure Consolidation, or EIC, 
initiative is intended to produce long term savings by reducing excess 
infrastructure in Europe. What is the overall projected investment-to-
savings ratio of the EIC?
    Answer. We are still in the process of conducting analyses and 
developing recommendations. We will have a better sense of the 
investment to savings ratio once that effort is complete.
    Question. Do you have an estimate of the total MILCON investment 
that will be required to implement the EIC?
    Answer. We are still in the process of conducting analyses and 
developing recommendations. We will have a better sense of the total 
MILCON investment required for implementation once that effort is 
complete.
    Question. It is asking a lot of this subcommittee to implement the 
EIC piecemeal before we see the recommendations in their entirety and 
the total estimate of investment versus savings, especially given the 
up-front cost of the project at Croughton. When will we see the big 
picture--the sum total of the consolidations and reductions in 
infrastructure, and the cost and savings associated with each of the 
proposals? And why should this committee move forward with the one 
project at Croughton until we have seen the entire package?
    Answer. The Department's decision to consolidate intelligence 
analysis functions at Croughton pre-dated the initiation of EIC and 
represents the savings possible through astute recapitalization that we 
hope to more broadly achieve through the EIC effort. In an effort to 
move the Croughton project forward (so as not to delay realization of 
the associated $74 million annual savings) we revalidated the project 
in the early stages of the EIC process and again more recently to 
ensure implementation would not preclude or negatively impact any other 
potential actions.
    Although the results of the EIC are not expected until late Spring 
we have already determined there are no conflicts with the Croughton 
project, and every year the project is delayed will cost the Department 
an additional $74 million in projected savings.
    Question. EIC will require buy-in by the State Department and the 
host nations. We have seen before the political difficulty of reducing 
personnel and operations at overseas bases. Do you expect the 
heightened tensions in Europe over Russia's threat to Ukraine to impact 
the timing or ability to implement EIC?
    Answer. Our review is based on a defined force structure provided 
by the Joint Staff and does not involve any changes to that force 
structure or associated capabilities. In fact, the results of our 
efforts will enhance our presence in Europe by more efficiently 
supporting our existing force structure.
                                 ______
                                 
                Questions Submitted by Senator Mark Kirk
                     missile defense infrastructure
    Question. There is no funding in this year's request to support 
Missile Defense infrastructure needs. We have invested billions of 
dollars on Guam infrastructure the past 5 years, and there is another 
$128 million in the request before us. Yet, we still do not have a plan 
for a permanent missile defense system to protect this investment. 
There is also need for concern in Europe given recent events in Central 
Europe and the continued unrest in the Middle East which raise 
questions about whether we are doing enough to protect and re-assure 
our NATO Allies.
    Mr. Conger, can you update us on missile defense infrastructure 
needs in the Pacific particularly Guam and in Europe? In addition, 
given current threats and recent developments, should consideration be 
given to accelerating our efforts in these regions?
    Answer. Regarding the missile defense infrastructure for Guam, the 
U.S. Army is currently in its second year of supporting a Terminal High 
Altitude Area Defense (THAAD) deployment to Guam in defense of U.S. 
assets. The U.S. Army is working closely with the U.S. Navy and U.S. 
Pacific Command to not only sustain this support, but to transition it 
to a permanent duty station for soldiers and their families. We expect 
to see this transition take effect on or about April 2015.
    We continue to implement the European Phased Adaptive Approach 
(EPAA). The first AEGIS Ashore facility in Romania will be declared 
operational in 2015 and the Poland site is on track to become 
operational in 2018. This timeline ensures that both systems will be 
equipped with the more effective AEGIS BMD 5.1 load, which will be 
available in 2018. We continue to monitor and evaluate the threat in 
the region and will examine options for deployment of mobile BMD 
systems in the event of a credible threat in the region.
 housing privatization--proposed changes to basic allowance for housing
    Question. The budget request proposes slowing the growth in the 
Basic Allowance for Housing until out-of-pocket costs for 
servicemembers and their families' average 5 percent. We have already 
experienced housing privatization projects with financial difficulties. 
I am concerned this proposal if implemented would create even more 
vulnerabilities with the financial viability of these projects.
    Mr. Conger, the longstanding policy of the Defense Department has 
been that the Basic Allowance for Housing would cover 100 percent of a 
military servicemembers' housing expense. How can you assure us that 
proposed changes to the housing allowance rate would not have a 
significant impact on the future financial sustainability of our 
privatization projects?
    Answer. Absent any change to current project agreements, slowing 
the growth in Basic Allowance for Housing (BAH), as proposed in the 
President's budget, will likely negatively affect project income 
streams. However, the Department has sufficient authority, within the 
Military Housing Privatization Initiative (MHPI) authorities, to 
mitigate any negative impacts on project financial health.
    We are currently holding discussions with the Military Departments 
about possible strategies to adjust for the proposed changes to BAH. 
Since the privatization project structures vary between services, and 
sometimes from project to project, solutions may also vary. Once actual 
implementation of the proposed changes is finalized, we will assess the 
extent of the impact and choose the appropriate course of action. We 
need to ensure our military families continue to have quality housing 
and avoid a return to the unacceptable conditions that existed when the 
MHPI program commenced in 1996.

                          SUBCOMMITTEE RECESS

    Senator Johnson. This subcommittee will reconvene on 
Wednesday, April 9, to hear testimony on the fiscal year 2015 
budget request for the Departments of the Navy and the Air 
Force.
    This hearing is adjourned.
    [Whereupon, at 4:24 p.m., Wednesday, April 2, the 
subcommittee was recessed, to reconvene Wednesday, April 9, at 
a time subject to the call of the Chair.]