    [Senate Hearing 113-108, Part 3]
    [From the U.S. Government Publishing Office]

                                                     S. Hrg. 113-108, Pt. 3

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2014 AND THE FUTURE YEARS DEFENSE PROGRAM

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1197

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2014 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
       MILITARY PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR, AND FOR OTHER
                                    PURPOSES

                                   ----------

                                     PART 3

                        READINESS AND MANAGEMENT SUPPORT

                                   ----------

                             APRIL 18 AND 24, 2013

             Printed for the use of the Committee on Armed Services
    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
       2014 AND THE FUTURE YEARS DEFENSE PROGRAM--Part 3  READINESS AND
                               MANAGEMENT SUPPORT

                                                      S. Hrg. 113-108 Pt. 3

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2014 AND THE FUTURE YEARS DEFENSE PROGRAM

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1197

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2014 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
       MILITARY PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR, AND FOR OTHER
                                    PURPOSES

                                   __________

                                     PART 3

                        READINESS AND MANAGEMENT SUPPORT

                                   __________

                             APRIL 18 AND 24, 2013

                                   __________

             Printed for the use of the Committee on Armed Services

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

                                     ______

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                          COMMITTEE ON ARMED SERVICES

                         CARL LEVIN, Michigan, Chairman

    JACK REED, Rhode Island              JAMES M. INHOFE, Oklahoma
    BILL NELSON, Florida                 JOHN McCAIN, Arizona
    CLAIRE McCASKILL, Missouri           JEFF SESSIONS, Alabama
    MARK UDALL, Colorado                 SAXBY CHAMBLISS, Georgia
    KAY R. HAGAN, North Carolina         ROGER F. WICKER, Mississippi
    JOE MANCHIN III, West Virginia       KELLY AYOTTE, New Hampshire
    JEANNE SHAHEEN, New Hampshire        DEB FISCHER, Nebraska
    KIRSTEN E. GILLIBRAND, New York      LINDSEY GRAHAM, South Carolina
    RICHARD BLUMENTHAL, Connecticut      DAVID VITTER, Louisiana
    JOE DONNELLY, Indiana                ROY BLUNT, Missouri
    MAZIE K. HIRONO, Hawaii              MIKE LEE, Utah
    TIM KAINE, Virginia                  TED CRUZ, Texas
    ANGUS KING, Maine

                        Peter K. Levine, Staff Director

                    John A. Bonsell, Minority Staff Director

                                     ______

                Subcommittee on Readiness and Management Support

                    JEANNE SHAHEEN, New Hampshire, Chairman

    CLAIRE McCASKILL, Missouri           KELLY AYOTTE, New Hampshire
    MARK UDALL, Colorado                 SAXBY CHAMBLISS, Georgia
    JOE MANCHIN III, West Virginia       DEB FISCHER, Nebraska
    JOE DONNELLY, Indiana                ROY BLUNT, Missouri
    MAZIE K. HIRONO, Hawaii              MIKE LEE, Utah
    TIM KAINE, Virginia                  TED CRUZ, Texas

                                      (ii)
    ?

                                C O N T E N T S

                                  ----------

                        CHRONOLOGICAL LIST OF WITNESSES
                      The Current Readiness of U.S. Forces
                                 april 18, 2013

                                                                       Page

    Campbell, GEN John F., USA, Vice Chief of Staff, U.S. Army.......     6
    Ferguson, ADM Mark E., III, USN, Vice Chief of Naval Operations,
      U.S. Navy......................................................    14
    Paxton, Gen. John M., Jr., USMC, Assistant Commandant, U.S.
      Marine Corps...................................................    18
    Spencer, Gen. Larry O., USAF, Vice Chief of Staff, U.S. Air Force    27

        Military Construction, Environmental, and Base Closure Programs
                                 april 24, 2013

    Conger, John C., Acting Deputy Under Secretary of Defense,
      Installations and Environment..................................   112
    Hammack, Hon. Katherine G., Assistant Secretary of the Army,
      Installations, Energy, and Environment.........................   126
    Natsuhara, Roger M., Principal Deputy Assistant Secretary of the
      Navy, Energy, Installations, and Environment...................   135
    Ferguson, Kathleen I., Acting Assistant Secretary of the Air
      Force, Installations, Environment, and Logistics...............   144

                                     (iii)

     DEPARTMENT OF DEFENSE AUTHORIZATION OF APPROPRIATIONS FOR FISCAL YEAR
                   2014 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                            THURSDAY, APRIL 18, 2013

                               U.S. Senate,
                      Subcommittee on Readiness
                                and Management Support,
                                   Committee on Armed Services,
                                                        Washington, DC.

                      THE CURRENT READINESS OF U.S. FORCES

        The subcommittee met, pursuant to notice, at 2:38 p.m. in
    room SR-222, Russell Senate Office Building, Senator Jeanne
    Shaheen (chairman of the subcommittee) presiding.
        Committee members present: Senators Shaheen, Donnelly,
    Kaine, and Ayotte.
        Majority staff members present: Jason W. Maroney, counsel;
    Mariah K. McNamara, special assistant to the staff director;
    Michael J. Noblet, professional staff member; and John H. Quirk
    V, professional staff member.
        Minority staff member present: Lucian L. Niemeyer,
    professional staff member.
        Staff assistant present: John L. Principato.
        Committee members' assistants present: Jason Rauch,
    assistant to Senator McCaskill; Chad Kreikemeier, assistant to
    Senator Shaheen; Marta McLellan Ross, assistant to Senator
    Donnelly; Karen Courington, assistant to Senator Kaine; and
    Brad Bowman, assistant to Senator Ayotte.

         OPENING STATEMENT OF SENATOR JEANNE SHAHEEN, CHAIRMAN

        Senator Shaheen. Good afternoon, everyone. Welcome. I'm
    sorry to be a little late; I'm not quite on military time yet,
    so you have to bear with me.
        At this point, I'd like to call the hearing to order and
    point out that this is this subcommittee's first hearing of the
    year. I'm very pleased to be taking over as chair of the
    Readiness and Management Support Subcommittee and sharing the
    leadership with my colleague from New Hampshire, Senator
    Ayotte. I hope--and I'm confident--that we'll continue to lead
    the subcommittee in the strong bipartisan way in which she and
    Senator McCaskill did when Senator McCaskill chaired the
    subcommittee. I'm sure you will be pleased to know that we will
    bring you, from time to time, concerns we have from the Granite
    State of New Hampshire. [Laughter.]
        So, that, I'm sure, won't come as any surprise to any of
    you.
        I think it's also important to note that we are continuing
    the successful partnership of having the chair and ranking
    member of this subcommittee both be women. I think that's
    fitting, since New Hampshire is the first State to send an all-
    female delegation to Washington.
        So, we're very pleased to be joined this afternoon by
    General John F. Campbell, USA, Vice Chief of Staff for the
    Army; Admiral Mark E. Ferguson III, USN, Vice Chief of Naval
    Operations; General John M. Paxton, Jr., USMC, Assistant
    Commandant of the Marine Corps; and General Larry O. Spencer,
    USAF, Vice Chief of Staff for the Air Force.
        So, gentlemen, we very much thank you for coming this
    afternoon, and look forward to a fruitful discussion. I should
    say at the start that we also thank you very much for your
    service to this country and for the job that you do for the men
    and women who serve under you. Thank you.
        The Readiness and Management Support Subcommittee meets
    today at a pivotal moment to discuss the current readiness of
    our forces. Our men and women in uniform continue to be
    burdened by sequestration cuts enacted by the Budget Control
    Act (BCA) of 2011, which, if they remain in place, as I'm sure
    you all will testify today, will significantly impact the
    Services' ability to conduct training and maintenance, and to
    sustain their readiness.
        Currently, the Department of Defense (DOD) will incur
    several billions of dollars in reductions to its vital
    operation and maintenance (O&M) budget accounts in fiscal year
    2013. As we've learned from our many past Readiness and
    Management Support Subcommittee hearings, for the last several
    years, readiness rates have consistently declined. However, I
    worry that this new crisis represents an even greater loss of
    surge capability, risks the grounding of pilots who may lose
    flight certification, erodes aircrew readiness, and foreshadows
    the hallmarks of a hollow force if our ground troops can't
    train above the squad level.
        It's important to note that the impact of sequestration
    will be felt, not only in our Active components, but also in
    our National Guard and Reserve.
        As we know, our uniformed personnel are not the only ones
    at risk under sequestration. DOD has announced that it will
    furlough civilian employees up to 14 days. I understand from
    the Navy that, while these furloughs may garner about $308
    million in sequestration reductions, it would also delay
    shipyard maintenance availabilities approximately 85 days and
    risk putting our ships behind schedule and possibly not
    available for deployment when we need them. Even worse, for the
    Navy, several accidents over the past year require unscheduled
    and unbudgeted repair work, such as with the USS Miami, which
    we're very familiar with because of its location at the
    Portsmouth Naval Shipyard, the Guardian, the Porter, and
    others.
        The capital investment for the modernization of our
    shipyards will likely continue to suffer over fiscal year 2013.
    I know I speak for Senator Ayotte when I say we eagerly await
    the shipyard modernization plan that we required in the
    National Defense Authorization Act for Fiscal Year 2012. We're
    interested in hearing from Admiral Ferguson on its status and
    how much risk you and all of the Vice Chiefs plan to take in
    your installation sustainment accounts.
        In addition, we'd like to hear whether or not the Navy and
    the other Services funded the 6 percent of capital investment
    program, as required by law, in the fiscal year 2014 budget
    request.
        We've recently learned that the agency responsible for
    purchasing fuel for DOD, the Defense Logistics Agency, will
    increase the price of fuel on May 1 from $156.66 per barrel to
    $198.24 per barrel. This fuel bill will cost DOD an additional
    $1.8 billion. The fact remains that fossil fuels continue to be
    a strategic and financial vulnerability, not only to the DOD,
    but also to our Nation.
        Perhaps the most overlooked aspect of sequestration is that
    the cuts are not short-term savings for DOD, nor are they
    realized savings for the taxpayers. In reality, sequestration
    merely increases operational and strategic risk by deferring
    vital maintenance and canceling necessary training. I believe
    the consequences of sequestration will, unfortunately, end up
    costing us more in the long run. I remember the testimony of
    Deputy Secretary of Defense Ash Carter, when he talked about
    the fact that the unit cost of everything we purchase through
    DOD will go up as the result of sequestration. We are
    unnecessarily making it harder on our forces to prepare for
    deployment by reducing flying hours for our squadrons, delaying
    maintenance, and reducing training.
        I understand that there are no easy tradeoffs for the
    witnesses here today. Chasing resources to meet military
    requirements is nothing new. I'm not advocating that it's
    financially responsible to have unlimited military spending.
    But, as we all know, sequestration was designed to be onerous
    because it was never supposed to get enacted. We should solve
    the problem now, before we reach a time when our ships,
    aircraft, troops, and equipment can no longer train or deploy.
        However, I know there's also hope. There are always ways to
    improve the way we operate, and there are many initiatives that
    continue to succeed. For example, the continued commitment to
    pursue greater energy efficiencies and renewable energy sources
    offers an enhanced combat capability to the DOD. I had the
    opportunity to see some of the efforts that are underway--the
    more efficient generators, the solar blankets, the installation
    energy investments--last year, when I conducted a hearing down
    at Norfolk on the USS Kearsarge. It was really impressive what
    all of you are doing in each branch of our military to save on
    energy and to move to alternative sources of energy. I think
    that these energy policies should not be partisan. They reduce
    the burden upon those in combat. I thank you, General Campbell,
    for all of the great work that the Army is doing, along with
    all of the other branches, in this regard.
        So, even in these challenging times, I remain confident and
    encouraged that we still have the most resilient fighting force
    in the world today. I remain optimistic, because, even after a
    decade of war and the severe stress from all angles, each of
    you find ongoing ways to improve how you operate. For the past
    11 years, our military has consumed readiness as quickly as
    they've been able to create readiness. We're beginning to see
    some operational relief as we draw down from Afghanistan.
        I thank all of you, particularly the Army and the Marine
    Corps, for recommitting to training for the full spectrum of
    operations in your fiscal year 2014 budget request.
        Again, I sincerely thank each of you for being here. I
    thank your hardworking staffs for taking time to join us in
    this critical readiness discussion. We ask that you include
    your full statements for the record and, if you would,
    summarize what you have to say, hopefully within a 7-minute
    timeframe, so we can have more time for discussion.
        So, thank you all very much. I'll turn the discussion over
    to my colleague, Senator Ayotte.

                   STATEMENT OF SENATOR KELLY AYOTTE

        Senator Ayotte. Thank you very much, Madam Chairman. It was
    really truly an honor to be in the leadership of this committee
    with you and to serve with you on behalf of the people of New
    Hampshire. I very much look forward to working with you to make
    sure that we work together to do the very best for our men and
    women in uniform to ensure their readiness in very challenging
    times.
        This has always been one of the things I truly enjoy about
    the Senate Armed Services Committee--the strong bipartisan
    support and work that we do together. I look forward to doing
    that, certainly, with you, Senator Shaheen. So, thank you so
    much.
        I also want to thank very much our witnesses for your
    dedication and your distinguished service to our Nation.
    Despite these difficult times and all that we have asked of our
    servicemembers, recruiting and retention remains strong, and
    our units continue to accomplish their missions. This is a
    testament to the quality of our men and women in uniform, but
    it is also a testament to your leadership. So, thank you very,
    very much.
        The tragic events in Boston this week remind us that,
    despite the heroic efforts of our military forces and also
    efforts on our homeland security over the past 12 years, our
    country still remains vulnerable to terrorist attacks. We
    heard, this morning, from Director of National Intelligence
    James Clapper, that, ``national security threats are more
    diverse, interconnected, and viral than at any time in
    history.'' When faced with this ever-increasing range of
    threats, our Nation expects that our men and women in uniform
    will have the very best equipment and training that they need
    to protect our Nation. When our loved ones and fellow citizens
    step forward to serve, raise their right hand, and agree to
    deploy and face danger to protect the rest of us, we owe it to
    them to give them the very best support they can to accomplish
    their mission and to come home safely. When we fail to provide
    our servicemembers the very best training and equipment, we
    neglect our most fundamental constitutional duties as a
    Congress: to provide for the defense of this Nation.
        Allies, rivals, and potential enemies around the world are
    watching. When we allow our military readiness to deteriorate,
    friends and potential foes, alike, begin to question our
    resolve and capability, reducing the credibility of our
    deterrent. Potential enemies need to know that we have the
    capability to decisively respond to any attack on our Nation
    and on our citizens.
        To solidify this deterrence, we need our military forces to
    be constantly ready to defend and protect our interests and
    those of our allies. Our military remains the very best in the
    world, and we are so proud of our military. But, as General
    Dempsey testified yesterday, ``When budget uncertainty is
    combined with the mechanism and magnitude of sequestration, the
    consequences could lead to a security gap, vulnerability
    against future threats to our national security interests.''
        That is exactly what my concerns are, and I echo the
    concerns that were discussed by the chairman about the impact
    of sequestration.
        In January 2013, the Marine Corps reported that over 50
    percent of its nondeployed combat units were rated with
    degraded readiness, while the Army is reporting that over 70
    percent of those same forces have significantly degraded
    readiness. The Air Force has reported that less than half of
    its combat forces are ready, and there is a significant risk in
    its ability to meet contingency requirements. General Spencer,
    when we met the other day you talked about the impact of
    sequestration in 2013 as being an 18 percent reduction in
    sorties, that's really jaw-dropping.
        By the end of October, a majority of the Navy's nondeployed
    ships and aviation squadrons, nearly two-thirds of the fleet,
    will be less than fully mission-capable and not certified for
    major combat operations.
        These are alarming trends for our force readiness, given
    the threats we confront around the world and given the
    challenges that we have asked our men and women to do in
    conflicts we've been involved in, both in Iraq and Afghanistan
    and other conflicts we've supported around the world. They've
    done their very best. But, of course, that has taken a toll on
    our readiness, and we need to reset.
        Yet, here we are, faced with sequestration, which is
    devastating cuts to--we just talked about flying hours,
    steaming days, and other core training requirements, as well as
    reduced maintenance for military systems and equipments that
    will result in declining readiness.
        As the prepared statements of our witnesses today describe,
    the military is increasingly consuming readiness faster than it
    is being produced, resulting in a declining margin of safety
    for the American people and also, of course, our men and women
    in uniform. We are standing down flying units, canceling major
    unit rotations and carrier group deployments, deferring depot
    and shipyard work, curtailing facility repairs, and extracting
    limited savings from the paychecks of dedicated DOD civilians
    through furloughs. We all know that it's not just our men and
    women in uniform, but those who work in the civilian sector
    have a critical role in supporting our men and women in
    uniform.
        We are creating a bow wave of reduced readiness and
    increased risk that will take years to recover. We cannot
    continue to accept this. The ultimate price for reduced
    readiness will be paid by the men and women serving on the
    front lines for our country around the world.
        I want to close by quoting General Dempsey from a hearing
    the full committee recently held in an attempt to shed light on
    the devastating impacts of sequestration to our national
    security and the real prospect of a hollow force. He said,
    ``Sequestration will redefine our military security role in the
    world. It will reduce our influence and our ability to secure
    our national interests. The erosion in military capacity will
    be manifested in our ability to deter adversaries, assure
    allies and partners, sustain global presence, and surge for
    contingencies.''
        Madam Chairman, I share the concerns you have echoed about
    our military's readiness trends, particularly in light of
    sequestration. I look forward to our witnesses this afternoon
    providing a candid and specific assessment as to the damage to
    their Services' readiness being caused by budget uncertainty
    and sequestration. I hope this hearing will demonstrate to
    Congress and the American people the urgent need to craft a
    bipartisan compromise this year, to identify alternative
    spending reductions that will allow us to eliminate Defense
    sequestration, and provide our men and women in uniform the
    certainty and support that they deserve.
        I thank you so much for holding this important hearing,
    Madam Chairman.
        Senator Shaheen. Thank you very much, Senator Ayotte.
        We're going to begin with you, General Campbell, and go to
    your left. I misspoke earlier when I said you had 7 minutes. I
    think you only have 6 minutes. The 7-minute round is for our
    questions. [Laughter.]
        As it should be. So, thank you, General----
        General Campbell. I can beat that standard, ma'am.

     STATEMENT OF GEN JOHN F. CAMPBELL, USA, VICE CHIEF OF STAFF,
                               U.S. ARMY

        General Campbell. Madam Chairman Shaheen, Ranking Member
    Ayotte, distinguished members of the subcommittee, thank you
    very much for the opportunity to appear before you today to
    discuss the readiness of your U.S. Army.
        On behalf of Army Secretary John McHugh and the Army Chief
    of Staff Ray Odierno, I would also like to take this
    opportunity to thank all of you for your support and your
    demonstrated commitment to our soldiers, our Army civilians,
    and our families.
        I have submitted my written testimony for the record, and I
    will keep my opening remarks here very brief, and look forward
    to answering, candidly, the questions that you will ask us
    today on readiness.
        We certainly do appreciate the continued support from
    Congress by the enactment, last month, of the fiscal year 2013
    DOD appropriations bill. Although these measures provided DOD
    some transfer authority to mitigate the risk to readiness and
    alleviate nearly $6 billion of the Army's O&M account shortfall
    for fiscal year 2013, it doesn't resolve the remaining Overseas
    Contingency Operations (OCO) account shortfall that the Army
    has. That is very, very significant, and I can talk through
    that as we go through the questions.
        With the events in the world today, with Korea, Syria,
    Iran, the continued fight in Afghanistan--ma'am, as you said,
    in Boston--a discussion on readiness could not come at a more
    critical time. I've only been the vice chief for a little over
    a month, but I was the Army's G-3, the operations officer, for
    18 months prior to that, and I was a division commander in
    Afghanistan with the 101st for a year. So readiness is always
    on my mind.
        For combat experience, the Army remains the world's best-
    trained and -equipped land force in the world. However, as you
    said, our Army is currently experiencing severe fiscal
    challenges that have serious implications for our ability to
    provide trained and ready forces for our combatant commanders
    and for our Nation.
        The reality is that, if sequestration continues as it is
    and does not change between fiscal year 2014 through fiscal
    year 2021, the Army will simply not have the resources to
    support the current Defense Strategic Guidance, and we risk
    becoming a hollow force.
        Maintaining a ready Army is not cheap, and we realize that,
    and we're not looking for more readiness than we need or that
    we can afford. But, we cannot afford, from a national security
    perspective, an Army that is unable to deploy, fight, and win
    our Nation's wars. Here are just a few examples of how
    sequestration is impacting your Army today:
        The Army will reduce its force by 89,000 Active soldiers
    through fiscal year 2017. This is in accordance with the fiscal
    year 2011 BCA. Full sequestration will result in the
    significant loss of additional soldiers from the Active, the
    National Guard, and the Army Reserve.
        [The information referred to follows:]

        The Army will reduce its force by 80,000 Active soldiers through
    fiscal year 2017.

        General Campbell. To meet the sequester targets to protect
    warfighter funding in fiscal year 2013, we're currently
    curtailing training for 80 percent of our ground forces for the
    next fiscal year. We've canceled six combat maneuver training
    exercises at the National Training Center, in the Joint
    Readiness Training Center, and this impacts our readiness.
    We're focusing only on those that go to Afghanistan, those that
    follow them, the forces in Korea, and then homeland defense.
        Sequestration will also result in delays to every 1 of our
    10 major modernization programs, including Ground Combat
    Vehicle, the Network, and the Joint Light Tactical Vehicle. In
    most cases, this will increase their costs. It will create an
    inability to reset our equipment after 12 years of war. We've
    also canceled the majority of our third- and fourth-quarter
    depot maintenance. This will result in the termination of
    employees and a significant delay in equipment readiness for 6
    of our 10 Active divisions.
        Finally, while the Army will make every effort to protect
    critical Army family programs, they will be unavoidably
    affected by workforce reductions, cuts to base sustainment
    funding, the elimination of contracts, and the widespread use
    of soldiers in base support tasks. This will also detract from
    training from our wartime mission. This will further complicate
    our efforts for the requirement that the Army has to operate
    for long stretches underneath a Continuing Resolution (CR). To
    a limited extent, the impact of spending reductions can be
    mitigated a little if funding remains timely and predictable,
    enabling the Army to plan, resource, and manage programs that
    yield a ready force.
        As always the Army will do our utmost to efficiently
    utilize the resources that Congress has appropriated for the
    remainder of fiscal year 2013.
        If I sound concerned, it is because we live in a world
    where strategic uncertainty is increasing. Ma'am, you heard
    that today in the hearings. With that in mind, and knowing that
    the United States will have interests in a range of conflicts,
    I am certain that our soldiers will be called upon to deploy
    and fight in the future. The lessons of history on this point
    are very compelling.
        While we recognize there will be tough choices and
    necessary sacrifices in the days ahead, we also recognize that
    we must act responsibly in order to ensure that what remains is
    a capable force successfully meeting our national security
    requirements. Whatever its size, our Army must remain highly
    trained, equipped, and ready.
        Maintaining credibility based on capability, readiness, and
    modernization is essential to averting miscalculations by
    potential adversaries. Our Nation can accept nothing less.
        Yesterday, General Dempsey stated, ``There are plenty of
    constituents for infrastructure, compensation, and weapons, but
    not readiness.'' The members of this subcommittee, you really
    understand readiness, and we appreciate you taking the time to
    ensure that readiness remains a priority for our Nation.
        Chairman, Senator Ayotte, and the members of the
    subcommittee, I thank you again for your steadfast support of
    your Army, of our outstanding men and women, Army civilians,
    and our families. I look forward to your questions.
        Thank you.
        [The prepared statement of General Campbell follows:]

                Prepared Statement by GEN John F. Campbell, USA

        Chairman Shaheen, Ranking Member Ayotte, distinguished members of
    the subcommittee, thank you for the opportunity to appear before you
    today to discuss the readiness of your U.S. Army.
        On behalf of our Secretary--the Honorable John McHugh and our Chief
    of Staff General Ray Odierno, I would also like to take this
    opportunity to thank you for your support and demonstrated commitment
    to our soldiers, Army civilians, and families.
        This discussion of readiness could not come at a better time. Our
    battle-tested Army remains the world's best trained, led, and equipped
    land force in the world. However, the Army is currently experiencing
    severe fiscal challenges which have serious implications to our ability
    to provide trained and ready forces for the Nation. Here is the reality
    we face: If the reductions to discretionary caps as outlined in current
    law are implemented for fiscal year 2014 through fiscal year 2021, the
    Army may not be able to support the current Defense Strategic Guidance
    and we risk becoming a hollow force.
        What do I mean by a hollow force? A hollow force occurs when the
    three critical areas of end strength, readiness, and modernization are
    out of balance. If we under-resource any one area, the Army will not be
    ready when called upon. For example, a large Army that lacks training
    and modernized equipment is not an Army we would want to send into
    battle. It might look good on paper, but it would be hollow. Here are
    just a few examples of how sequestration is impacting the force:
        Additional cuts to the Army's budget, of the magnitude associated
    with sequestration, may drive our Active component end strength down
    below 490,000. If the Army is forced to take additional cuts due to the
    reduction in the outyear discretionary caps, we would need to reduce
    further the number of soldiers out of the Active component, National
    Guard, and U.S. Army Reserve.
        To meet sequester targets and protect warfighter funding in fiscal
    year 2013, we curtailed collective training for 80 percent of our
    ground forces for the rest of the fiscal year. This will impact unit
    basic warfighting skills, induce shortfalls across critical
    specialties, including aviation, intelligence, engineering, and even
    our ability to recruit new soldiers into the Army. For example, we have
    canceled six Maneuver Combat Training Exercises at the National
    Training Center and the Joint Readiness Training Center combat
    training, which impacts the future readiness of our force.
        Sequestration will result in impacts to every 1 of our 10 major
    modernization programs including the Ground Combat Vehicle, the
    Network, and the Joint Light Tactical Vehicle. Potential impacts
    include delays in fielding and increased unit costs. Given the timing
    of the fiscal year 2013 cuts, the uncertainty of how they will be
    applied in fiscal year 2014 and the 10 year span of reductions, we
    continue to assess the magnitude of the impacts to all of our programs.
    It will also create an inability to Reset our equipment employed during
    years of war. In the third and fourth quarters of fiscal year 2013, we
    have canceled the majority of depot maintenance, which will result in
    the termination of an estimated 5,000 employees, a significant delay in
    equipment readiness for 6 divisions and an estimated $3.36 billion
    impact to the surrounding communities.
        Finally, while the Army will make every effort to protect critical
    Army family programs, they will be unavoidably affected by workforce
    reductions, cuts to base sustainment funding, the elimination of
    contracts and the widespread use of soldiers in base support tasks that
    detract from training for wartime missions. This could have a negative
    impact on recruiting and retention, which would degrade readiness.
    Similarly, our Department of the Army civilians face the prospect of
    furloughs which, once implemented, will certainly disrupt thousands of
    activities and have a negative impact on our missions and morale of the
    force around the world.
        To a limited extent, the impact of spending reductions can be
    mitigated if funding remains timely and predictable, enabling the Army
    to plan, resource, and manage programs that yield a ready force. The
    Army will do our utmost to efficiently utilize the resources enacted in
    the fiscal year 2013 Consolidated Appropriations and Further Continuing
    Appropriations Act in the remaining time for this fiscal year.
        In the future, the Nation will once again call upon the Army to
    deploy, fight, and win in support of vital national interests and the
    American people will expect the Army to be ready. We must avoid defense
    cuts that will ultimately have a long-term negative effect on
    readiness, increase the level of risk to our soldiers, and cause us to
    relook whether we can accomplish what is required under the national
    security strategy.

              STRATEGIC CONTEXT AND THE DEMAND FOR U.S. LANDPOWER

        In addition to the fiscal constraints, we must also account for a
    second, equally difficult challenge: strategic uncertainty. The United
    States will undoubtedly have interests in a range of conflicts in the
    years ahead to include deterrence, humanitarian crises, terrorism,
    regional crises, and other potential conflicts. The world we live in is
    increasingly dangerous and complex. Our charge then is to ensure we
    maintain a range of options, and that we remain prepared and ready to
    respond in support of Global Combatant Command requirements.
        Maintaining a ready Army is not cheap--we realize that. However,
    the cost of a ready Army is miniscule in comparison to the cost in
    terms of national treasure and global prestige of committing an unready
    Army in the future. We are not looking for more readiness than we need
    or can afford--but we cannot afford, from a national security
    perspective, an Army that is unable to fight and win the Nation's wars.
    Support to the Current Fight
        The strategic transition in Afghanistan continues to prove
    challenging. Building the capacity and self-sufficiency of Afghan
    forces is critical to the transition. To meet combatant command
    requirements, the Army provides specifically-focused advisor training
    for deploying units to advise and assist the Afghan security forces. I
    am confident in the Army's role in support of equipment retrograde
    while concurrently conducting security force assistance and combat
    operations. Although the operational campaign plan drives the pace of
    retrograde operations, our goal remains to have all non-enduring
    equipment out of Afghanistan by the end of 2014.
        Although we have the policies, authorities, and processes in place
    to support retrograde goals, appropriate funding levels are required to
    maintain operational flexibility during retrograde. The Army faces up
    to a $7.8 billion shortfall in emerging warfighter requirements in
    Operations and Maintenance, Army (OMA) funding within our Overseas
    Contingency Operations (OCO) account for fiscal year 2013. This impacts
    the preparation of units about to deploy, current operations in support
    of Operation Enduring Freedom (OEF), and our ability to reset equipment
    and personnel. In order to ensure our soldiers are prepared, we have
    paid and will continue to pay operation and maintenance requirements
    out of base funding for next deployers when not covered by OCO funds.
    This erodes necessary funding from our base budget that guarantees our
    future readiness.
        The recently enacted Consolidated and Further Continuing
    Appropriations Act of 2013 provides the Department of Defense some
    transfer authority to mitigate the risks to readiness; this action does
    not solve the entirety of the OCO shortfall.

    Current Readiness
        The Army's readiness continues to center on supporting soldiers
    committed to operations around the world. At no other time in history
    has our Nation committed soldiers to war for as long. Our battle-tested
    All-Volunteer Army remains the world's best-trained, led, and equipped
    land force in the world. However, sequestration in fiscal year 2013 has
    a cascading effect on the readiness of our next-to-deploy forces and
    the forces behind them in the queue for operational employment. If
    further reductions are implemented for fiscal year 2014 through fiscal
    year 2021, the Army may not have the resources to support the current
    Defense Strategic Guidance without assuming greater risk.
        As I appear before you today, your Army is a ready and capable
    force. Our priority is to support the 60,000 soldiers in Afghanistan
    and those next to deploy. We will focus on ensuring that they are
    properly equipped, prepared, and ready for the missions they face. We
    will also continue to provide for high levels of readiness for our
    forces in Korea. The latest tensions reinforce the importance of
    maintaining a ready and vigilant deterrence. We will do our best to
    prioritize training and equipping for the Army's Global Response Force,
    which is the Nation's rapid response, forcible entry capability for
    unforeseen contingencies. Finally, the Army is prepared to defend the
    Homeland and routinely conducts critical Defense Support of Civil

    Authorities operations.
        For the vast majority of the rest of the force--those not scheduled
    for an Afghanistan rotation, supporting Korea or part of the Global
    Response Force--we will simply have to curtail, delay, or cancel
    training. This will have a negative effect on both unit and basic
    warfighting skills and may result in 80 percent of Brigade Combat Teams
    (BCTs) funded only to train to squad level proficiency. This level of
    funding prevents collective training above squad level. Some specialty
    skills may be especially hard-hit due to the length of time required to
    recoup lost skills. This atrophy will begin as soon as the fourth
    quarter of fiscal year 2013 and, once underway, the Army will have to
    redouble its efforts in order to regain rapidly lost readiness.

    Regionally Aligned Forces
        In order to elevate the overall level of Army readiness, be more
    responsive to our geographic combatant commanders and better enable our
    joint, interagency, intergovernmental and multinational partners, the
    Army is regionally aligning its forces to provide tailored
    capabilities. Joint exercises and operations with partners and allies
    are paramount to Secretary McHugh and General Odierno's vision of the
    Army's role in protecting American interests at home and abroad.
    Soldiers who receive regionally-specific training and equipment and
    participate in regionally-focused missions will effectively contribute
    to the shaping of the security environments. Adequate resources are
    required to ensure that as missions evolve and new threats emerge,
    aligned forces are trained, ready, and tailored to support the required
    mission.

    Future Force Generation
        Army Force Generation (ARFORGEN) put the Army on a rotational
    readiness cycle, which enabled us to provide cohesive units to
    combatant commanders for the enduring missions in Iraq and Afghanistan.
    We adjusted the training, equipping, and manning of our units to suit
    the requirements of emerging missions. Over the past several years as
    we have transitioned from Iraq and prepare to do the same in
    Afghanistan, the Army is applying lessons learned to develop an
    ARFORGEN model that reflects the current defense strategy and future
    missions.
        The Army is in the final stages of modifying its ARFORGEN model and
    realigning our institutional systems. The new model will prioritize
    training for the future complex environment with a focus on combined
    arms maneuver. Combined arms maneuver training is essential after a
    prolonged period of focus on counterinsurgency operations and remains
    key and essential to Army capability. The Future Force Generation model
    intends to apply scarce resources and project manpower at the correct
    time and place to minimize risk, ensure readiness, and specifically
    identify those capabilities critical to meeting strategic requirements.
    The Army can only focus resources on those units deployed, deploying,
    or with critical contingency response missions.

    Total Army Force Policy
        The Army is committed to both the Army Total Force Policy as
    approved by the Secretary of the Army and the Chief of Staff of the
    Army and to the proper force mix to support the National Security
    Strategy. Our Total Army Force derives from the integration of Active,
    Reserve, and National Guard capabilities. The past 12 years of war have
    resulted in many experienced Army National Guard and Army Reserve
    formations which proved effective in combat, especially in Combat
    Support and Combat Service Support roles.
        Now, after 12 years of persistent conflict, the Army must tailor
    its Force Generation requirements and deployments to meet the new
    budget realities and ensure we provide the optimal force required by
    the combatant commanders in support of the National Defense Strategy.
    To shape the force requires extensive analysis consisting of cost
    modeling and war gaming informed by our combat experiences to match
    specific timelines and readiness-capability levels.
        For war plans and other demands that need more immediate,
    responsive forces for complex, combined arms maneuver, we rely on
    Active component (AC) BCTs and a mix of AC and RC enablers. For
    requirements that do not have the same immediacy or high difficulty
    from a collective training level, we rely on the RC for much of that
    capability. The added time provides the opportunity to invest
    additional money and training time to increase a RC unit's capability
    prior to deployment. Therefore, most RC forces are not kept at the same
    level of capability because they are not needed as quickly; this
    optimizes cost for the Nation.
        All three components have important and distinct functions and have
    to be manned, trained, and equipped appropriately to meet those
    demands.

                  ESSENTIAL INVESTMENTS: PEOPLE AND EQUIPMENT

        The Army of 2013 is the most experienced force in a half century
    and is immeasurably stronger than the Army of 2001. Not since the 1950s
    has the Army had a cadre of noncommissioned officers (NCO) and officers
    with an equivalent depth of combat experience. However, our Nation has
    been at this crossroads before. In the late 1940s, the early 1970s and
    early 1990s, the decision to draw down the Army resulted in a hollow
    force. In the latter two cases, the hollowness wasn't exposed in a
    war--but cost the Nation billions of dollars to return the Army to a
    readiness posture necessary to meet the security strategy of the time.
    In the first case, the Korean War exposed an Army that was unready by
    any measurable standard. The result was the unnecessary loss of life--
    and the near loss of the war. As the Army draws down this time, it is
    imperative that we do so in a way that preserves human capital and
    modernization to acceptable standards.

    Soldiers, Families, and Army Civilians
        We are focused on the many challenges and opportunities resulting
    from combat deployments. These include preserving and sustaining the
    health of the force--addressing issues, to include behavioral health
    injuries, suicide, the disability evaluation system, and transition
    services. The reality is the demand on our people and equipment has
    been tremendous. We are taking the steps necessary to address the full
    range of health and discipline issues to include strengthening
    soldiers' resiliency and coping skills through our Ready and Resilient
    Campaign that guides the full range of our support efforts. This
    campaign will aim to change and modify Army culture over the long term
    and we remain committed to helping soldiers and families better deal
    with the stressors and challenges they face in the current operational
    environment. Soldiers and their families deserve a quality of life
    commensurate with their service.
        Ultimately, our goal is to sustain the high quality of our All-
    Volunteer Force--Active, Guard, and Reserve--in order to defend the
    United States and its interests. This we will do while reshaping our
    Force to prepare for a wider range of contingencies in the complex and
    unpredictable environments we find ourselves in today and for the
    foreseeable future. We also recognize we must accomplish all of these
    various tasks with significantly fewer resources and less people.
        Throughout the past 12 years, Army families and Department of the
    Army civilians have likewise served and sacrificed. I note with pride
    for the profession of arms that children of soldiers have grown up to
    serve in our ranks as well. In spite of the heavy demands placed on
    them, our Force is remarkably resilient. As a brigade commander, deputy
    commanding general, and division commander in combat, I can attest to
    the expertise and maturity of the soldiers, and junior and senior
    leaders I've been honored to serve with, who routinely adapt to
    complete any mission given them. This resilience is evident in the
    current strength of the All-Volunteer Force with high re-enlistment
    rates and the quality of soldiers recruited. It is evident in the
    increasing numbers of soldiers that voice concerns over their
    behavioral health with confidence that their chain of command and our
    medical system will stand by them.

    Equipment Reset
        Equipment Reset is defined as actions taken to restore equipment to
    an acceptable level of readiness through a combination of repair,
    replacement, recapitalization, and transition. Reset is a vital means
    for maintaining Army equipment readiness in order to sustain a force
    that is ready for any contingency. In order to return the force to
    required readiness levels, funding must continue as long as we have
    forces deployed and for 3 years after the last piece of equipment
    returns from Afghanistan to ensure readiness for the future. The
    analysis of retrograde timelines, capacity at industrial facilities,
    carry-over work and Reset actions to date supports the need for Reset
    funds for 3 years after the last piece of equipment leaves theater.
        A fully-funded Reset program ensures that equipment worn by
    prolonged use in harsh environments is returned to a fully ready state,
    mitigating the effects of delayed desert damage. In the forecast for
    fiscal year 2013, the Army expects to Reset (repair) approximately
    100,000 items at its industrial facilities, in addition to over
    600,000 pieces of equipment on site where units are stationed
    (including over 400 aircraft). However, fiscal year 2013 budget
    reductions have already forced the cancellation of significant amounts
    of depot maintenance which will delay repairs and upgrades. Due to
    sequestration, we have lowered our level of maintenance for ground
    equipment from 10/20 standards to fully mission capable maintenance
    standards and additional safety standards.

    Modernization
        A key part of the Army's current and future readiness is our
    equipment modernization strategy. The Secretary of the Army and Chief
    of Staff, Army recently published an updated modernization strategy
    that focuses our efforts on empowering our soldiers and small unit
    formations, while maintaining the capacity to deter and defeat
    potential adversaries by: (1) identifying achievable requirements;
    applying best practices in acquisition and sustainment; seeking
    incremental improvements; and harnessing network enabled capabilities
    to solve near-term capability gaps, while (2) investing in military-
    unique revolutionary and evolutionary technologies to solve future
    capability gaps.
        The centerpiece of our equipment modernization program is the
    soldier and the squad. Our investment plan provides our small units
    with a range of equipment including individual and crew-served weapons,
    next generation optics and night vision devices, body armor and
    advanced individual protection equipment, providing lethality and force
    protection to the soldier on the ground. Tactical overmatch will be
    facilitated by a suite of small-unit systems including unmanned
    aircraft systems, ground-based robots, counter-IED devices, and the
    latest surveillance systems.
        To deliver the Network capabilities to the soldier, we will
    continue to invest in Warfighter Information Network-Tactical;
    Distributed Common Ground System-Army; the Family of Networked Tactical
    Radios; Nett Warrior; and Joint Battle Command-Platform. Finally, we
    will provide increased lethality and mobility, while optimizing
    survivability through the use of incremental improvements and mature
    technologies in developing the Ground Combat Vehicle, the Joint Light
    Tactical Vehicle, Armored Multi-Purpose Vehicle and Paladin Integrated
    Management Artillery system and upgrading our aviation fleet.

    Army Organic Industrial Base
        During time of war, the Army requires the Organic Industrial Base
    to repair and manufacture equipment as quickly and efficiently as
    possible to ensure it is available to train and support next deployers
    as well as those deployed. The Army Organic Industrial Base (AOIB)
    Depots and Arsenals surged to double, and in some cases, triple our
    pre-war output. As the AOIB transitions from wartime production to
    peacetime requirements, we must ensure it remains effective, efficient,
    and capable of meeting future Army contingency requirements. Last year,
    the Army published an updated AOIB Strategic Plan to help us make
    informed decisions on these issues. This plan provides the strategy and
    management framework needed to ensure that the AOIB remains viable,
    effective, and efficient. The current fiscal uncertainty could
    drastically impact our strategy and threatens retaining an AOIB that is
    a modern, reliable, cost effective, and highly responsive enterprise
    which meets both wartime and peacetime requirements, while maintaining
    the ability to surge during contingency operations.
        Canceled maintenance repairs will remain reversible; however, the
    work that is not accomplished before the end of the fiscal year will
    result in increased carryover. Deferring maintenance could also cause
    production gaps in the industrial base and supply chain requiring 2-3
    years to recover. These gaps greatly impact equipment readiness,
    industrial partnerships, and sub-vendors supporting the supply chain.
        Given our budget uncertainty, we must ensure that we are using
    appropriated resources legally, effectively, and efficiently. Our audit
    readiness efforts focus on our responsibility to be good stewards of
    the funds appropriated to us. We are making great progress in audit
    readiness, to include implementing auditable enterprise-wide resources
    planning systems. In addition to improving systems and controls,
    compliance is monitored via a Commander's Checklist. As our funding
    decreases, it is critical that we improve the effective and efficient
    use of funds, so that readiness is properly resourced.

                          WHERE WE NEED CONGRESS' HELP

        Critical to our success will be Congress' continued support of
    operations ongoing in theater. As we learned in Iraq, the costs
    associated with transition and retrograde, to include closing bases and
    transferring equipment, are not directly proportional to unit
    redeployment. In many cases, as our forces leave, costs will increase.
    Our need to Reset does not end when troops leave the theater of
    operations. In fact, it will likely continue for 3 years after our
    troops return home to ensure equipment readiness is restored for future
    contingencies. Reset is an inherent cost of war.
        The lack of predictability in recent budget cycles and continuing
    uncertainty about the outyear reductions associated with sequestration-
    related provisions adds significant stress on our ability to mitigate
    cuts. The Army will certainly do its part to mitigate the effects of
    the sequestration, but to be clear, we are now facing dramatic cuts to
    personnel, readiness, and its modernization processes and programs.
        Our Chief of Staff General Odierno has said, ``We cannot take the
    readiness of our force for granted. We cannot send our soldiers into
    combat unprepared. If we don't have the resources to ensure their
    readiness, our soldiers will be the ones who pay the price. It is
    inconceivable to me that we will put this burden on the shoulders of
    those who have sacrificed so much during nearly 12 years at war.''

                                   CONCLUSION

        With Congress' support, we have built a remarkable force that has
    performed magnificently under a sustained high operations tempo for the
    past 12 years of war. It is better trained and equipped and our young
    leaders are better prepared than at any other time in history. Your
    Army, together with our Joint partners, will continue to serve as a
    rampart against the compounding risks inherent in an uncertain and
    rapidly changing world. Leaders throughout our Army remain focused on
    effectively addressing current challenges, particularly with respect to
    fiscal demands and health of the Force, while also determining the
    needs of the Force for the future.
        Until recent years, the Army's view of readiness has focused on the
    application of resources at the unit level to produce ready forces. The
    Army is expanding our view of Service Readiness beyond the traditional
    aggregation of tactical to include metrics and indicators that enable a
    strategic assessment of the total force and nominate a strategic action
    to mitigate future impacts. This process will allow us to see ourselves
    in a more holistic manner. Our strategic view will include past trends
    and current status, analyzed to project impacts of current resourcing
    decisions on our production of ready forces in future years.
        The Army understands the fiscal landscape and is committed to doing
    its part to limit expenditures. While we recognize there will be tough
    choices and necessary sacrifices in the days ahead, we also recognize
    that we must do so responsibly in order to ensure that what remains is
    a force capable of successfully meeting our national security
    requirements. Whatever its size, our Army must remain highly-trained,
    equipped, and ready to meet the needs of the National Defense Strategy.
    Maintaining credibility based on capacity, readiness, and modernization
    is essential to averting miscalculations by potential adversaries. Our
    Nation can accept nothing less.
        Madam Chairman Shaheen, Ranking Member Ayotte, and members of the
    subcommittee, I thank you again for your steadfast and generous support
    of the outstanding men and women of the U.S. Army, our Army civilians,
    and their families.

        Senator Shaheen. Thank you very much, General Campbell.
        Admiral Ferguson.

    STATEMENT OF ADM MARK E. FERGUSON III, USN, VICE CHIEF OF NAVAL
                         OPERATIONS, U.S. NAVY

        Admiral Ferguson. Madam Chairman, Senator Ayotte, and
    distinguished members of the subcommittee, I appreciate the
    opportunity to testify today on Navy readiness and our fiscal
    year 2014 budget request. It's my great honor to represent the
    men and women of the U.S. Navy.
        With the high global demand for naval forces, we are
    appreciative of the support of Congress in passing a fiscal
    year 2013 appropriations bill. This legislation provided us the
    necessary authorities and reduced the shortfall in our
    readiness accounts from $8.6 billion to $4.1 billion for this
    fiscal year.
        As we reconcile our spending plan for the remainder of this
    fiscal year, it is clear that sequestration has impacted our
    ability to train our people, maintain our existing force
    structure, and invest in future capability and capacity. By the
    end of this fiscal year, two-thirds of our nondeployed ships
    and aviation squadrons will be less than fully mission capable
    and not certified for major combat operations. Due to
    sequestration, we reduced funding in fiscal year 2013 for our
    investment accounts by $6.1 billion. This will mean reducing
    quantities of procurement, delaying the introduction of new
    systems into the fleet, and incurring increased costs to
    complete systems development.
        At our shore bases, we have deferred about 16 percent of
    our planned facilities sustainment and upgrades, about $1
    billion worth of base operating support and improvements. We
    continue to reduce expenditures in other areas, as well. In
    coordination with the combatant commanders, the Secretary of
    Defense has approved selected deployment delays and
    cancellations to conserve operating funds. Civic outreach
    efforts, such as the Blue Angels and U.S. port visits, have
    been canceled to preserve funds for our deployed and next-to-
    deploy units.
        As we address the shortfalls in fiscal year 2013, we intend
    to address them with the following priorities. We have to fund
    our must-pay bills, such as utilities and leases; fund fleet
    operations to meet the adjudicated combatant command
    requirements; provide fleet training, maintenance, and
    certification for next-to-deploy forces; and fund necessary
    base operations and renovation projects to support training,
    operations, and our sailors and their families.
        Our fiscal year 2014 request continues the Chief of Naval
    Operations' readiness priorities of warfighting first,
    operating forward, and being ready, and is especially focused
    on supporting our shift to the Pacific and supplying ready
    forces for the combatant commanders. To meet our full readiness
    requirements, we are dependent upon the baseline budget, as
    well as supplemental funding. With fiscal year 2014 OCO
    funding, we anticipate meeting our projected operational
    requirements, and we will make every effort to recover the
    deferred maintenance on our ships and aircraft. Our budget
    request, with OCO, will allow the Navy to retain the ability to
    train, certify, and deploy two carrier strike groups and two
    amphibious ready groups, fully mission capable and certified
    for major combat operations. We will also retain an additional
    carrier strike group and amphibious ready group, fully mission
    capable and available for surge response.
        If agreement is not reached to avoid the BCA reductions,
    our fiscal year 2014 obligation authority could be reduced by
    $10 to $14 billion, with approximately $5 to $6 billion coming
    from our readiness accounts. This would compel the Navy to
    again dramatically reduce operations, maintenance, and
    procurement, preventing us from meeting combatant command
    requirements, and negatively impacting our industrial base.
        As exemplified by recent events in the Middle East and
    Western Pacific, our Navy must continue to operate where it
    matters, when it matters, to conduct the missions our Nation
    expects of us. We see no lessening of combatant commander
    requirements in the future.
        We look forward, Madam Chairman and Senator Ayotte, to
    working with the committee as we advance through the budget
    process to ensure our Navy stands ready to protect and defend
    America's interests at sea. On behalf of all our men and
    women--Active, Reserve, and civilian--I thank you for your
    support, and I look forward to your questions.
        Thank you.
        [The prepared statement of Admiral Ferguson follows:]

              Prepared Statement by ADM Mark E. Ferguson III, USN

        Madam Chairman Shaheen, Senator Ayotte, and distinguished members
    of the Senate Armed Services Subcommittee on Readiness and Management
    Support, I appreciate the opportunity to testify on the current state
    of Navy readiness and our fiscal year 2014 budget request for
    Operations and Maintenance (Navy) (O&M(N)).
        My testimony before the Senate Armed Services Committee on February
    12th addressed the potential readiness impacts due to the combined
    effects of emergent requirements and fuel price increases, a year-long
    Continuing Resolution, and sequestration. With the passage of
    Consolidated and Further Continuing Appropriations Act of 2013 (Public
    Law 113-6), Congress restored $4.5 billion of the projected $8.6
    billion shortfall to our O&M(N) account and enacted authorities
    necessary to execute our fiscal year 2013 appropriations. We appreciate
    congressional support for the readiness of our force.
        My testimony today will focus on the current readiness of the force
    as we complete fiscal year 2013 and our readiness budget request for
    fiscal year 2014.

                                 OUR NAVY TODAY

        With the passage of Public Law 113-6, our Navy has sufficient
    funding to meet the requirements of the adjudicated fiscal year 2013
    Global Force Management Allocation Plan (GFMAP). We will train those
    forces required for operational deployments in fiscal year 2014, while
    accepting some risk in nondeployed forces and infrastructure. When
    compared to the President's 2013 budget request, our appropriated
    funding represents a $4.1 billion reduction in our O&M(N) account. This
    reduction, when combined with emergent requirements and fuel price
    increases, necessitated we take a thoughtful and prudent approach to
    readiness accounts for the remainder of the fiscal year. We have
    therefore established the following priorities: retain adequate funding
    for mandatory reimbursable accounts; sustain the readiness of forces to
    meet the adjudicated fiscal year 2013 GFMAP; prepare forces to meet the
    projected fiscal year 2014 combatant commander requirements; sustain
    base infrastructure and operations that support deployed forces and
    those preparing to deploy; and maintain an appropriate level of funding
    for critical sailor and family support programs.
        Sequestration will result in lower readiness levels in the fleet
    and ashore. We have reduced training and steaming days for nondeployed
    surface ships and flying hours for nondeployed aviation squadrons. In
    fiscal year 2013, we will reduce intermediate-level ship maintenance,
    defer an additional 84 aircraft and 184 engines for depot maintenance,
    and defer 8 of 33 planned depot-level surface ship maintenance
    availabilities. At our shore bases, we have deferred about 16 percent
    of our planned fiscal year 2013 shore facility sustainment and
    upgrades, about $1 billion worth of work.
        We continue to reduce O&M(N) expenditures in other areas. We have
    reduced our civic outreach efforts, such as the Blue Angels and U.S.
    port visits. In coordination with the combatant commanders, the
    Secretary of Defense has approved selected deployment delays and
    cancellations to conserve operating funds.
        By the end of fiscal year 2013, a majority of our nondeployed ships
    and aviation squadrons--nearly two thirds of the fleet--will be less
    than fully mission capable and not certified for Major Combat
    Operations. Until we restore the readiness of forces impacted in this
    fiscal year, we will see reduced availability of forces for full
    spectrum operations in fiscal year 2014 and beyond.
        Furloughs of our civilian workforce will impact our ability to
    generate ready aircraft carriers (CVNs), ballistic missile submarines
    (SSBNs), guided-missile submarines (SSGNs), and attack submarines
    (SSNs) through fiscal year 2014 by slowing completion of maintenance in
    public shipyards. The lost work due to furloughs would also create a
    ``domino'' effect to maintenance schedules for the next several years
    that could impact ship and aircraft availability. The Department of the
    Navy is exploring options to minimize these impacts.
        We have focused our base operating funds on delivering required
    services for Fleet port and air operations with restricted operating
    hours. In the event of a furlough, we will have no choice but to make
    additional restrictions in the support of Fleet operations.

                               OUR NAVY TOMORROW

        Our fiscal year 2014 budget request continues the CNO's readiness
    priorities of Warfighting First, Operate Forward, and Be Ready, which
    are specifically focused on ensuring the readiness of the Navy. Our
    budget, with continued OCO funding, meets projected operational
    requirements and builds future capabilities, while sustaining the
    readiness of our ships and aircraft over the course of their expected
    service lives. It continues to support the Defense Strategic Guidance,
    expands forward presence through both traditional and innovative
    approaches, and ensures the Fleet is where it matters, when it matters,
    to achieve the security interests of the Nation.
        The Navy will retain the ability to support the fiscal year 2014
    GFMAP with two carrier strike groups (CSG) and two amphibious ready
    groups (ARG) fully mission-capable and certified for Major Combat
    Operations. We will also retain one additional CSG and ARG in the
    United States that are fully mission capable, certified for Major
    Combat Operations and available for surge within 1 to 2 weeks. We
    anticipate sustaining a 1.0 carrier presence in the U.S. Central
    Command (CENTCOM) Area of Responsibility (AOR) and slightly less in
    U.S. Pacific Command. Our submarine force will continue to meet
    adjudicated combatant commander requirements. Until we restore the
    readiness of those nondeployed forces impacted by fiscal year 2013
    reductions, we will be limited in our ability to respond for full
    spectrum operations.

    Generating the Force
        Navy manages force generation using the Fleet Response Plan (FRP).
    This plan establishes a sustainable cycle of maintenance, training, and
    operations for both individual units and task groups. With this
    process, Navy generates the ready forces required to meet global
    presence requirements and also develops the capacity for surge response
    for contingencies and homeland defense. The plan operates as a cycle,
    so that forces undergo maintenance, training, and then deployment/
    sustained surge readiness in defined periods. The flexibility of this
    approach enables Navy to develop greater surge capacity in response to
    contingencies than did earlier approaches to force generation.
        For over 10 years, Navy forces have been operating at a war-time
    pace, essentially expending our surge capacity. We are evaluating
    enhancements to the FRP to meet higher levels of operational
    availability within the operating cycle. We are mindful that operating
    the fleet at a sustained high tempo could reduce the service life of
    our platforms and place a high level of stress on our sailors and their
    families.

    Ship Operations
        The baseline Ship Operations request for fiscal year 2014 supports
    the highest priority presence requirements of the combatant commanders.
    Our budget request supports generating 2.0 global presence for carrier
    strike groups, 2.4 amphibious ready groups and an acceptable number of
    deployed submarines. The baseline request provides for 45 days of
    deployed operations per quarter and 20 days of non-deployed operations
    per quarter.
        It will be necessary to direct funding to recover the readiness of
    nondeployed forces impacted by funding reductions in fiscal year 2013
    to meet surge requirements in fiscal year 2014.

    Air Operations (Flying Hour Program)
        The Flying Hour Program (FHP) funds operations, maintenance, and
    training for 10 Navy carrier air wings, 3 Marine Corps air wings, Fleet
    Air Support aircraft, training squadrons, Reserve Forces and various
    enabling activities. The fiscal year 2014 baseline FHP meets funding to
    maintain required levels of readiness for deployment or surge
    operations, enabling the Navy and Marine Corps aviation forces to
    perform their primary missions as well as funding the enduring T2.5/
    T2.0 USN/USMC readiness requirement in the base budget.

    Fleet Training, Training Ranges and Targets
        We are sustaining investments in key training capabilities,
    including Fleet Synthetic Training, Threat Simulation Systems, and the
    Tactical Combat Training System. Our request continues procurement of
    high speed, maneuverable surface targets to provide live fire training
    for operator proficiency.

    Readiness Investments Required to Sustain the Force--Ship and Aircraft
            Maintenance
        Our fiscal year 2014 budget request seeks a balance between
    maintenance requirements and our investment accounts. The request is
    built upon our proven sustainment models for nuclear aircraft carriers
    and submarines, our ongoing investment in the readiness of our surface
    combatants, and plans for the integration of new capabilities into
    naval aviation.
        Surface ship maintenance is executed in both public and private
    sector shipyards. We have instituted the same processes used for many
    years for aircraft carriers and submarines into our surface ship depot
    availabilities in fiscal year 2014. In this updated process,
    availability planning, execution, and certification are codified; all
    required maintenance actions are tracked to completion; and all
    proposed maintenance deferrals are formally reviewed. This
    comprehensive process ensures adjudication by the appropriate technical
    authority and rescheduling in a follow-on availability or other
    appropriate maintenance opportunity.
        In fiscal year 2014, the budget request, with anticipated
    supplemental funding, will meet Navy readiness requirements for
    aircraft carrier, ship, submarine, and aircraft maintenance.
    Additionally, our revised surface force maintenance process has
    identified the backlog of maintenance in these ships resulting from the
    recent years of high operational tempo and deferred maintenance. These
    requirements are now incorporated into our maintenance plans.

    Supporting Reset of the Joint Force
        Navy expeditionary forces support enduring global missions by
    deploying security, construction, explosive ordnance disposal,
    logistics and training units operating with ground combat units of the
    other Services. Our baseline funding request in fiscal year 2014
    represents 43 percent of the enduring requirement, while supplemental
    funding must be applied to meet the full requirement. As U.S. Force
    Management Levels (FML) in Afghanistan reduce and infantry units return
    home, Navy Seabees and EOD operators will be instrumental in the
    retrograde and reset of equipment and personnel, providing engineering
    and maneuver support to the joint ground combat elements.

    Readiness Investments Required to Sustain the Force--Shore
            Infrastructure
        The Navy's shore infrastructure--both in the United States and
    overseas--provides essential support to our Fleet. In addition to
    supporting operational and combat readiness, it is also a critical
    element in the quality of life and quality of work for our sailors,
    Navy civilians, and their families.
        Our planned fiscal year 2014 investment of $425 million in our
    naval shipyards, Fleet Readiness Centers, and Marine Corps depots
    complies with the 2012 National Defense Authorization Act requirement
    for 6 percent investment infrastructure. We continue to sustain and
    recapitalize our shipyards within today's fiscally constrained
    environment, focusing on mission-critical facilities such as production
    shops, piers, wharves, and dry docks. We mitigate the level of
    deliberate risk we take in the sustainment of our infrastructure by
    prioritizing projects for repair.

                            OUR NAVY INTO THE FUTURE

        As we look to the future, we see theaters of operation around the
    world increasingly assume a maritime focus. Our naval presence is
    important to regional stability in the deterrence of aggression and the
    assurance of our allies. Over the last year, we have responded to
    demand for naval forces in both the Middle East and in the Pacific. Our
    Navy is operating where it matters, when it matters--and we see no
    lessening of requirements to do so in the future. As a result, the
    demand for ready forces will not abate in the near future.
        Our sailors are the highest quality, most diverse force in our
    history and continue to make us the finest Navy in the world. On behalf
    of all these men and women of the U.S. Navy--Active, Reserve, and
    civilian--thank you for your continued support.

        Senator Shaheen. Thank you very much.
        General Paxton.

        STATEMENT OF GEN. JOHN M. PAXTON, JR., USMC, ASSISTANT
                     COMMANDANT, U.S. MARINE CORPS

        General Paxton. Good afternoon, Madam Chairman Shaheen,
    Ranking Member Ayotte, and the members of the subcommittee.
    Thank you for the opportunity to report on the readiness of
    your U.S. Marine Corps.
        Right now, more than 23,000 marines are forward deployed
    and forward engaged. More than 9,000 are in Afghanistan, while
    others, partnered with our closest joint partner, the U.S.
    Navy, are globally deployed, protecting influence, deterring
    aggression, building partner capacity, and poised for crisis
    response.
        With the submission of the President's budget, your Corps'
    next deployers--those who are due to leave between June and
    October to Operation Enduring Freedom, on our Marine
    Expeditionary Units (MEU), on our Unit Deployment Program, and
    for tactical aviation integration--those next deployers will
    remain fully trained, equipped, and ready. We anticipate the
    same for the deployers due to leave after that, between
    November and February. However, after that point, we are less
    confident about our sustained readiness.
        With the onset of sequestration in March, we commenced a
    deliberate, yet unfortunately unplanned and uncoordinated
    series of cuts to Defense programs and capabilities. The
    Secretary of Defense, both the current and the former, and the
    Chairman of the Joint Chiefs of Staff, our Commandant, and my
    own predecessor, have repeatedly counseled that sequestration
    effects will be quick, stark, often unanticipated, and
    potentially devastating in the long term. As we have scrubbed
    our operations, sustainment, and modernization plans over the
    past 3 to 4 months, I can assure you that the effects of
    sequester will be serious, prolonged, and difficult to quickly
    reverse or repair.
        Some of these sequestration impacts are in areas neither
    Congress nor DOD would have liked to have had adversely
    impacted--most notably, on the forward deployment of
    individuals and units ready for combat. I look forward to
    explaining examples of anticipated adverse impacts on our
    training proficiency, on equipment maintenance, and on unit
    readiness. In all of these areas, the impacts will be slow to
    predict, difficult to localize, and challenging to reverse.
        As we navigate the current fiscal environment, we will
    strive to maintain balance across the five pillars of readiness
    for your U.S. Marine Corps:
        Pillar number one is to recruit and retain the highest
    quality people. Pillar two is to maintain a high state of unit
    readiness. Pillar three is the ability to meet combatant
    commanders' requirements with marines. Pillar four is to ensure
    that we maintain appropriate infrastructure investment. Pillar
    five is to keep an eye towards the future by investing in the
    capabilities we'll need for tomorrow's challenges--
    modernization.
        As we begin this hearing, I would like to highlight a few
    points from my written statement.
        With regard to high-quality people, your U.S. Marine Corps
    continues to achieve 100 percent of its officer and enlisted
    recruiting goals for both the Active and the Reserve
    components, while exceeding DOD quality standards for high
    school graduates and mental categories.
        Within the ranks of our civilian marines, an integral part
    of our force, they face potential readiness and human impacts
    associated with potential furloughs.
        With regard to the second pillar, unit readiness, the
    Marine Corps has, and always will, sourced the best-trained,
    most ready forces to meet combatant commander requirements.
    Equipment readiness of our nondeployed units is of great
    concern to us. We have taxed our home station units as the
    billpayer to ensure that marines in Afghanistan and in our MEUs
    have everything that they need. As a result, the majority of
    our nondeployed forces are reporting degraded material
    readiness levels.
        Additionally, the tempo of operations and the harsh
    environments in which we have been operating over the past
    decade has accelerated the wear and tear on our equipment.
    Money to reset and rebuild the Marine Corps will be required
    for several additional years after the end of the war. This
    will have the added impact of delaying our rebalance to the
    Pacific until well after the 2017 projections.
        Finally, we continue to proudly support the DOD colleagues
    at 152 embassies and consulates around the world. Our fiscal
    year 2014 budget request funds 1,635 marines for this program.
    In the aftermath of events at some of our diplomatic missions,
    and as requested by Congress, we are working with the
    Department of State, DOD, and the Joint Staff, and we seek your
    continued support as we determine the need for additional
    manning of approximately 1,000 marines, and the associated
    funding to support them. We will report back to you and the
    committee by October 1 on this initiative.
        I thank each of you for your faithfulness and your
    bipartisan support to our Nation's military. I request that my
    written testimony be accepted for the record.
        Your Corps remains committed to providing a Nation--the
    Nation a ready force capable of handling today's crisis today.
        I look forward to your questions. Thank you very much.
        [The prepared statement of General Paxton follows:]

              Prepared Statement by Gen. John M. Paxton, Jr., USMC

        Today's marines are thoroughly trained, combat proven and are
    meeting all Operation Enduring Freedom (OEF) and combatant commander
    requirements. The approximately 7,400 marines deployed in Helmand
    Province under Regional Command South-West remain our top priority.
    Rotation after rotation, their professionalism, training, and morale
    remain high. In the last several years they have successfully created
    the conditions for the Afghan National Security Forces to grow and
    mature, and they have given the Afghan people an opportunity for a
    better future.
        Outside of Afghanistan, marines have participated in more than 120
    security cooperation engagements (in 2012), developing partner nation
    capabilities and building up stores of goodwill among our global
    neighbors. Additionally, our forces at home and abroad have been ready
    and able to respond to a range of incidents from natural disasters to
    civil uprisings. Marines were sent to Libya in the wake of the
    assassination of our Ambassador and other U.S. personnel. Marines
    deployed to reinforce the security of our embassies in Egypt and Yemen
    following the attempted breach of the embassy walls by protestors.
    Marines supported Hurricane Sandy relief efforts here in our Northeast
    and super typhoon Pablo relief efforts in the Philippines. In short,
    marines stand ready and able to respond to future incidents that
    threaten our Nation's interests regardless of the location or the
    nature of the occurrence.

                               CURRENT READINESS

        The readiness of our force is integral to our ethos; it's a state
    of conditioning that marines work hard to maintain. Our crisis response
    mission is incompatible with tiered readiness. Marines don't get ready
    when a crisis occurs, we must be forward deployed and ready to respond
    immediately; that's the most important aspect of who we are and what we
    do.
        Readiness comes at a cost and the high readiness of the deployed
    forces comes at the expense of our nondeployed units' readiness. The
    Marine Corps can sustain its current operational requirements on an
    enduring basis; however, to maintain the high readiness of our forward
    deployed units, we have globally sourced equipment and personnel for
    Afghanistan and other emerging threats from our nondeployed units. The
    nondeployed forces' principal readiness detractor is the reduced
    availability of equipment at home stations with which to outfit and
    train units. Currently, slightly more than half of nondeployed units
    are experiencing degraded readiness due to portions of their equipment
    being redistributed to support units deployed forward. The manning of
    our home station units also suffers due to the need to meet the
    personnel requirements for deploying units, Individual Augments and
    Security Force Assistance Teams. The primary concern with the out-of-
    balance readiness of our operating forces is the increased risk in the
    timely response to unexpected crises or large-scale contingencies,
    since the nondeployed forces likely would be the responders. Efforts to
    maintain the readiness of the deployed force and correct the readiness
    imbalance of the nondeployed forces could be further exacerbated by
    sequestration if our Operations and Maintenance (O&M) account is
    diminished.
        In addition to ensuring units are properly manned and marines are
    properly equipped, training of marines is an equally important
    component of readiness. As part of ensuring marines are appropriately
    trained and are able to maintain currency in their required skills, we
    must ensure training ranges are available and suitable to meet those
    needs. In the near term, that means ensuring the plans to expand our
    Marine Corps Air Ground Combat Center under the Twentynine Palms Land
    Expansion initiative are executed.

                              RESETTING THE FORCE

        Reset is a subset of reconstitution and comprises the actions taken
    to restore units to a desired level of combat capability commensurate
    with the units' future missions. After more than a decade of combat,
    this will require an unprecedented level of effort. The Marine Corps is
    resetting its forces ``in stride'' while fighting the war in
    Afghanistan and transitioning to the new Defense Strategic Guidance.
    Unlike previous post-conflict periods, such as after Operation Desert
    Storm, we do not anticipate taking an ``operational pause'' to reset as
    we transition from OEF.
        The Marine Corps' Operation Enduring Freedom Ground Equipment Reset
    Strategy, released in January 2012, serves to identify the equipment we
    will reset or divest. The reset strategy prioritizes investment and
    modernization decisions to develop our middleweight force. Last year
    our reset liability was approximately $3.2 billion. We estimate it will
    be something less, however; we are unsure exactly what that number is
    until we can get a better picture on both the totality of the costs
    associated with returning our equipment from Afghanistan and the
    detailed costs associated with resetting our gear after 10 years of
    combat.\1\ This revised forecast is primarily based on the replacement
    of combat losses, the restoration of items to serviceable condition,
    and the extension in service life of selected items. The liability
    accounts for execution of reset dollars provided in fiscal year 2012
    and the first quarter of fiscal year 2013 and the establishment of the
    Marine Corps' enduring Mine Resistant Armored Protected (MRAP) vehicle
    requirement of 1,231.
    ---------------------------------------------------------------------------
        \1\ This reset liability is our ``strategic'' reset liability; or
    simply, the cost to reset our Afghanistan equipment set to a like new
    condition. In addition to strategic reset, we have requested $1.3
    billion in OCO in fiscal year 2013, primarily to cover cost of war
    issues, but some of which is slated for strategic maintenance for
    reset. How much of the $1.3 billion will be used for reset is dependent
    on both the quantity of equipment that flows out of Afghanistan and our
    depot capacity.
    ---------------------------------------------------------------------------
        The Marine Corps 1,231 enduring MRAP requirement strikes the right
    balance between capabilities immediately available to the operating
    forces, those geographically positioned for crisis response and MRAPs
    placed in a cost-effective long-term storage capacity for enduring
    conflict. The 609 MRAPs in short-term storage within our strategic
    prepositioning stocks afloat, in Norway and Kuwait will be maintained
    at a heightened state of readiness; available for crisis response with
    little notice. Four hundred and sixty-three MRAPs will move into long-
    term storage at our organic depot facility in Barstow, CA. The
    remaining 159 MRAPs will reside within our operating forces and
    supporting establishment; available for training and immediate
    response.
        The Retrograde and Redeployment in support of Reset and
    Reconstitution Operational Group (R4OG) is a vital element to the
    Marine Corps' responsible drawdown from Afghanistan and the successful
    execution of the Ground Equipment Reset Strategy. The R4OG which began
    in May 2012 is the Marine Corps' component to the U.S. Central Command
    Materiel Recovery Element and is tasked with preserving the operational
    capacity of combat units shouldering the load of clearing the battle
    space of equipment, supplies, and sustainment stocks. The R4OG is
    focused on accountability and efficiency within the redeployment and
    retrograde process. This process includes retrograding more than $324
    million of equipment, repairing more than 1,200 shipping containers,
    and processing more than 230,000 pounds (net explosive weight) of
    ammunition, and has overseen the retrograde of more than 4.5 million
    square feet of aviation AM2 matting and more than 5,700 equipment
    items. The Marine Corps has retrograded 60 percent of its equipment
    items; 70 percent of the supplies, repair parts, and ammunition; and 85
    percent of its AM2 matting in Afghanistan. Additionally, the R4OG
    brings discipline to the retrograde process ensuring Marine Corps
    combat units can dutifully withdraw from Afghanistan concurrent with
    the directed redeployment of Marine Corps forces.

                                 DEPOT CAPACITY

        The bulk of reset execution occurs in our depots. The continued
    availability of our ground equipment depot capacity at both Barstow, CA
    and Albany, GA is essential for reset for our ability to both self-
    generate readiness and surge in response to demand. As the Marine Corps
    shifts from OEF sustainment to execution of our reset strategy, more
    equipment is returning to the depot in battle worn condition and
    requiring of extensive and overdue depot maintenance repairs. Based on
    the current funding levels provided by Congress in H.R. 933 we will be
    able to remain on schedule with our reset plan in fiscal year 2013,
    however; the long-term impacts of reductions on reset may result in
    cuts to depot maintenance and procurement accounts, which may hinder
    the Marine Corps' ability to reconstitute in stride by fiscal year
    2017.
        If planned funding is reduced, a ``Depot Lag'' or a backlog of
    equipment requiring depot maintenance is expected to occur. Due to the
    reset workload, depot maintenance requirements--both sustainment and
    reset requirements--are at peak levels for fiscal year 2014 and fiscal
    year 2015. In these times, we require maximum throughput of our organic
    depot capability and also rely on other sources of repair to include
    other service depots and commercial options. Reduced funding defers the
    maintenance requirements to out-years, thus increasing the backlog of
    equipment requiring service. Sustained funding reductions cause a
    ripple effect eventually leading to a backlog that will adversely
    affect near- and long-term readiness. Compounding this problem, depot
    capability could be impacted by permanent workforce furloughs.
        The long-term impact of sequestration is deferred maintenance. We
    will have to closely scrutinize and determine equipment maintenance
    priorities, assume risk in mission-essential weapon system readiness,
    delay normal depot sustainment, and, as stated, delay reset operations.
    For example, the Marine Corps will have 44 scheduled aircraft depot
    inductions across all type/model/series that will not occur as a result
    of sequestration reduction to the fiscal year 2013 budget. Of the 44
    aircraft, 23 are F/A-18A-D aircraft. This will result in less aircraft
    available for assignment to Marine F/A-18 squadrons and reduce the
    assets available for training and operational support. Each operational
    F/A-18 squadron should be equipped with 12 aircraft. Of the 12 USMC F/
    A-18 squadrons, 5 are deployed--4 Unit Deployment Program/Request for
    Forces (UDP/RFF) and 1 carrier air wing (CVW). The 4 UDP/RFF squadrons
    have 12 aircraft and the 1 CVW squadron has 10 aircraft. The reductions
    to depot throughput will cause the 7 nondeployed squadrons to each have
    6 aircraft available. The long-term effect on nondeployed F/A-18
    squadrons is the inability of the unit to achieve and maintain minimum
    combat readiness required for follow-on deployments. The training
    squadron will be maintained constant at 33 aircraft to meet training
    requirements for Navy and Marine Corps F/A-18 A, C, and D pilots and
    Weapons System Operators.

                                 RECONSTITUTION

        The Marine Corps has a strategic trajectory to reconstitute to a
    ready force by fiscal year 2017. Our reconstitution efforts will
    restore and upgrade our combat capability and will ensure our units are
    ready for operations across the range of military operations.
    Additionally, reconstitution will rebalance and sustain home station
    readiness so that our units are ready to deploy on short notice. To
    ensure we are organizing for the emerging security environment and its
    inherent and implied challenges, the Commandant directed a Total Force
    Structure Review in 2010. This review aligned our force to meet the
    needs of the Nation and took into consideration the realities of
    constrained spending levels; the Defense Strategic Guidance; and the
    lessons learned from 10 years of war, particularly the requirements to
    conduct distributed operations. Then in 2012, the Commandant directed
    another internal-look, a Force Optimization Review, to prioritize
    potential future cuts.
        To meet the Defense Strategic Guidance within the fiscal realities,
    we are decreasing our active duty end strength. From a wartime-high
    force level of 202,100 we are conducting a drawdown to 182,100 by the
    end of fiscal year 2016. We are currently at approximately 194,280
    marines. We will retain our Reserve component at 39,600 marines. The
    active duty end strength reductions will occur at the rate of no more
    than 5,000 per year. We have no plan to conduct a reduction-in-force.
    These end strengths will retain our capacity and capability to support
    steady state and crisis response operations; while the pace of the
    reductions will account for the completion of our mission in
    Afghanistan, provide the resiliency that comes with sufficient dwell
    times, and keep faith with our marines. Reshaping the Active Duty
    component to 182,100 marines will entail some risk relative to present
    and future capacity requirements; but it's manageable, particularly as
    we maintain the Reserve component's operational capability. Further
    force level reductions would cause us to reevaluate the Marine Corps'
    role in the National Defense Strategy.

                             FIVE READINESS PILLARS

        To achieve institutional readiness, sustain operational
    requirements, and be prepared for crisis and contingency response, we
    must restore and maintain a balance for our Marine Corps across five
    pillars:

             High quality people
             Unit readiness
             Capacity to meet combatant commander requirements
             Infrastructure sustainment
             Equipment modernization

                              HIGH QUALITY PEOPLE

        The recruiting and retention of high quality people remain
    essential to attain a highly ready and professional force. We need the
    right quantities and occupational specialties to fulfill our role as an
    expeditionary force in readiness. In fiscal year 2012, the Corps
    achieved 100 percent of its officer and recruiting goals for the Active
    and Reserve components, while exceeding DOD quality standards for Tier
    1 High School Graduates and Mental Categories I-IIIa. We expect to
    achieve the same in fiscal year 2013. The Marine Corps also achieved
    its retention mission in fiscal year 2012 and anticipates doing so
    again in fiscal year 2013. A critical enabler of recruiting and
    retaining a high quality force is appropriate compensation and
    benefits; we thank Congress for its focus on this issue through the
    decade of war. We rely on Congress' continued support of pay and
    benefits, incentive pays, and selective reenlistment bonuses to meet
    future recruiting challenges, position the force for the impending
    drawdown, and shape the All-Volunteer Force to meet the new defense
    strategy.
        Civilian marines are an integral part of our Total Force,
    supporting the Corps' mission and daily functions. Marine civilians are
    a ``best value'' for the defense dollar, are shaped to support the
    Corps into the future, and are the leanest appropriated funded civilian
    workforce within DOD, with only 1 civilian for every 10 marines. Fewer
    than 5 percent work in the Pentagon. The vast majority of our civilian
    marines, more than 95 percent, work at our installations and depots.
    Sixty-eight percent are veterans who have chosen to continue their
    service to our Nation. If furloughed, our civilian marines could lose a
    substantial amount of pay during the last quarter of fiscal year 2013.
    The potential readiness and human impacts associated with furloughing
    our civilian marines are significant. While we would like to believe
    that a discontinuous furlough will reduce the impact on our employees,
    most will not be able to easily absorb the loss of income, even over a
    14-week period should it come to that.
        The Marine Corps' Wounded Warrior Regiment (WWR) is a fundamental
    component of the Marine Corps' pledge to ``keep faith'' with those who
    have served. The WWR supports marines wounded in combat, those who fall
    severely ill, and those injured in the line of duty. The regiment
    administers the Marine Corps' Recovery Coordination Program that
    ensures medical and nonmedical needs fully integrate with programs such
    as the Warrior Athlete Reconditioning Program. Facilities such as our
    new Warrior Hope and Care Centers provide necessary specialized
    facilities allowing us to support our wounded warriors and their
    families.
        Key to this care is ensuring marines execute recovery plans that
    enable their successful return to duty or reintegration to their
    civilian communities. Around the country we have established District
    Injured Support Coordinators whose duty is to assist marines
    transitioning from active duty to veteran status. Our WWR Medical Staff
    provides medical subject matter expertise, advocacy, and liaison to the
    medical community. The Sergeant Merlin German Wounded Warrior Call
    Center conducts an average of 7,000 outreach calls per month and
    receives calls for assistance 24 hours a day from both active-duty and
    veteran marines. Our contact centers also conduct outreach to marines
    who remain with their parent command to ensure their needs are met.
    Depending upon the individual marine's requirements, these programs and
    services are coordinated for optimal care delivery, proving that
    Wounded Warrior care is not a process, but a persistent relationship
    between the Marine Corps and our marines.
        The Marine Corps is greatly concerned about the long-term care and
    support for our wounded veterans. Many of our young men and women have
    sustained injuries that will require support for the remainder of their
    lives. Given the youthfulness of this wounded population, this
    represents a debt to our Nation's warriors that will have to be paid
    for several decades. Our wounded warrior capabilities are an enduring
    measure of our commitment to keep faith with our young men and women,
    and we expect this capability will continue well beyond our return from
    Afghanistan.

                                 UNIT READINESS

        This pillar upholds maintaining and shaping the readiness of the
    operating forces, to include the necessary O&M funding to train to core
    missions and maintain equipment. The Marine Corps has, and always will,
    source our best trained, most ready forces to meet combatant commander
    requirements. The challenge is to maintain the readiness of the
    nondeployed forces so they can respond to crises and contingencies with
    the proper balance of equipping, manning, and training.
        As our forces return from Afghanistan, our focus will be on
    training to our core expeditionary and amphibious mission capabilities.
    We anticipate incremental increases in the core training readiness of
    units as marines and equipment flow back from Afghanistan over the next
    12-24 months.
        After the drawdown from Afghanistan, we expect to be increasingly
    engaged around the world--training, engaging, deterring, and responding
    to all manner of crises and contingencies. O&M funding is essential for
    our readiness to conduct steady state operations, including amphibious
    and Maritime Prepositioning Ships Squadron (MPSRON) operations, provide
    support to the combatant commanders, and provide for our supporting
    establishment's sustainment for the operating forces. The battlefields
    of today and tomorrow necessitate more distributed operations and
    decentralized command--both of which will drive training costs higher.
    We know that these future requirements to maintain readiness will
    increase demand on O&M funding.
        Also, sufficient O&M funding is essential in the Pacific to support
    our unit deployment program in Japan; provide rotational forces in
    Australia and Guam; and engage throughout the region. It is also needed
    to cover the transportation costs for bringing together the widely
    dispersed Marine Expeditionary Brigade and Marine Expeditionary Force
    elements for training and exercises.

               CAPACITY TO MEET COMBATANT COMMANDER REQUIREMENTS

        Force-sizing to meet geographic combatant commander (GCC)
    requirements, with the right mix of capacity and capability, is the
    essence of our third readiness pillar. The GCCs continue to register an
    increased demand for crisis response and amphibious forces in order to
    meet requirements across the range of military operations (ROMO).
    Decisions made in our Force Structure Review and Force Optimization
    Review will provide a better breadth and depth of Marine forces capable
    of executing a regional major contingency operation and optimized for
    current operations and crisis/contingency response. The capacities of
    our organic intelligence, surveillance, and reconnaissance; command and
    control; and unmanned aircraft systems will be increased.
        Our critical capacity versus requirement concerns include: shifting
    forces to III Marine Expeditionary Force in the Pacific, ensuring we
    retain a global crisis response capability, and ensuring the
    availability and readiness of amphibious shipping and maritime
    prepositioned assets to meet increased training and contingency
    requirements. The primary challenge of the Marine Corps from a
    logistics standpoint is the ``tyranny of distance'' inherent in the
    laydown of forces across the Pacific covering an area thousands of
    miles wide and linkable only by airlift and sealift. To sustain our
    forces in the Pacific and mitigate gaps, we will rely on our own
    organic capabilities and external support from other Services, the
    Defense Logistics Agency, and U.S. Transportation Command. This
    combination of support will provide flexibility, agility, and
    responsive support to the operating forces.
        Marine Expeditionary Units (MEUs), coupled with their Amphibious
    Ready Group (ARG) partners, continue to remain one of the key means by
    which the Marine Corps provides rapid response to emerging global
    crises. Their composition and capabilities see them frequently
    requested by combatant commanders to fulfill various theater
    engagements; most often they support Central Command and Pacific
    Command requirements. We have assumed some risk in the Mediterranean
    but do still maintain the capability to respond to crises in European
    Command and Africa Command (the Mediterranean). This response
    capability also includes our Fleet Anti-Terrorism Support Teams (FAST)
    from Marine Corps Security Forces Regiment deployed to Rota, Spain and
    Special Purpose Marine Air Ground Task Force-Africa stationed in
    Sigonella, Italy. In order to further mitigate the risk and in response
    to the ``new normal'' of an enhanced baseline of security at U.S.
    diplomatic facilities, we are looking to form a crisis response force
    whose primary duty will be to cover that region. This force will be
    specifically designed to provide embassy reinforcement and fixed site
    security in addition to other limited crisis response capabilities. As
    with all our MAGTFs it will be forward deployed; rotational; and be
    self-contained with inherent ground, aviation, logistics, and command
    and control capabilities. This capability does not replace a MEU but
    serves to provide presence where MEUs are not currently located.

                           INFRASTRUCTURE SUSTAINMENT

        Infrastructure sustainment, our fourth readiness pillar, is the
    investment in real property, facilities maintenance, and base
    infrastructure to support the missions and readiness of our operating
    forces and other tenant commands. The quality of life for our marines,
    sailors, and families is measurably impacted by the condition of our
    facilities. As such, the Marine Corps is committed to the proper
    stewardship of our bases and stations to include the natural resources
    they encompass. We must adequately resource their sustainment to
    maintain our physical infrastructure and the complimentary ability to
    train and deploy highly ready forces. Additionally, as we rebalance
    toward the Pacific, we will strive to make the proper investments in
    ranges and facilities to maintain the training readiness of deployed
    forces to and within that area of operations.
        Funding for our facilities sustainment, recapitalization, and
    modernization, as well as military construction and operations is
    required to provide and maintain quality infrastructure for our future
    force. We request Congress' continued support for facilities
    sustainment and demolition, family housing, environmental management,
    energy conservation and essential MILCON funding to support critical
    programs, units and institutions such as the Joint Strike Fighter, MV-
    22, Marine Corps Security Forces, Marine Corps University, Marine Cyber
    Forces, and the Townsend Bombing Range.

                            EQUIPMENT MODERNIZATION

        In this austere fiscal environment, we are conducting only
    essential modernization, focusing especially on those areas that
    underpin our core competencies. We are mitigating costs by prioritizing
    and sequencing our equipment modernization and sustainment programs to
    maintain their readiness in a fiscally responsible manner. To maintain
    operational capabilities and readiness, modernization is critical in
    the areas of ground combat tactical vehicles; aviation; amphibious and
    pre-positioning ships along with their associated connectors;
    expeditionary energy; and intelligence, surveillance, and
    reconnaissance. Our modern expeditionary force will require fixed wing
    aircraft capable of flexible basing ashore or at sea in support of our
    Marine units. The Joint Strike Fighter is the best aircraft to provide
    that support today and well into the future. Likewise, a core
    capability of our expeditionary forces is the ability to project forces
    ashore from amphibious platforms and to maneuver once ashore. We remain
    committed to developing and fielding an Amphibious Combat Vehicle that
    meets this critical need.
        While we have not cancelled or extended any programs as a result of
    the fiscal year 2013 budget decisions, the uncertainty associated with
    fiscal year 2014 and out-year budgets could require us to continually
    review and adjust our program plans consistent with the changing budget
    environment. Decreasing budgets within ongoing acquisition programs
    would necessarily lead to a review of the programs' ability to execute
    approved cost, schedule, and performance parameters. Our HMMWV, AAV,
    LAV, and tank modification programs, which are critical to maintaining
    the operational availability of these vehicles, would likely be slowed
    significantly yet remain essential to our medium- and long-term
    operational readiness. Critical survivability and mobility upgrades to
    the AAV and LAV fleets would be delayed. These delays would ultimately
    impact our ability to support our forward and deployed marines with
    ready, relevant, and capable combat systems. We request Congress'
    continued support for modernization to maintain the high level of
    future readiness our Nation will need.

            PREPARED TO SUPPORT THE DEFENSE STRATEGIC GUIDANCE (DSG)

        Last month, Secretary Hagel launched a Strategic Choices and
    Management Review to help define the major decisions that must be made
    in the decade ahead to preserve and adapt defense strategy and
    management under a range of future strategic and budgetary scenarios.
    We are confident the Navy-Marine Corps team and our inherent naval
    forward basing, crisis response capabilities and theater engagement
    capacity make us ideally suited to support the current strategic
    guidance and any future reiteration of it, particularly any focus on
    the Pacific Command region. The Marine Corps will rebalance its unit
    deployment program to 2001 levels during fiscal year 2013 and fiscal
    year 2014. Last year we deployed a company of marines from Hawaii to
    Australia to usher in a rotational presence that will grow to a Marine
    Expeditionary Unit sized Marine Air Ground Task Force, with associated
    units and equipment, during fiscal year 2016 to fiscal year 2017. Our
    rotational presence throughout Asia serves to reassure our allies,
    strengthen our ties, and demonstrate our commitment to the region. The
    sea-basing capability provided by our MPSRONs provides the flexibility
    to deploy forces anywhere, without reliance on mature infrastructure
    such as ports and airfields. Simply, sea-basing is uniquely suited to
    this theater where a vast amount of the area is water and does not have
    readily available port infrastructure to support a less expeditionary
    capability.
        Our prepositioning programs are a unique strategic capability,
    giving us the ability to quickly respond to a wide scale of global
    crises and contingencies.
        The MPSRONs are an afloat asset capable of providing global support
    to operational forces across the entire spectrum of military
    operations. A MPSRON provides an increased sustainment capacity and
    also supports the establishment of a Marine Expeditionary Brigade
    (MEB). Increasing strategic flexibility, the MPSRONs provide near
    immediate closure of equipment and supplies to the combatant commander
    to meet any contingency from combat operations to humanitarian
    assistance and disaster relief. This strategic program will require
    continued congressional support. In order for sea-basing to be
    effective, using both amphibious ships and MPSRONs, the amphibious
    ship-to-shore connectors will also require modernization.
        The Marine Corps Prepositioning Program-Norway prepositions
    equipment and supplies ashore in caves. While available for global
    employment, they are particularly important assets for use in the
    European and African theaters. In a cost-sharing partnership with the
    Norwegian Ministry of Defense, we have built a viable capability that
    has been used in recent years to support theater security cooperation
    as well as several humanitarian relief efforts. Originally designed to
    hold the equipment and supplies to support a MEB, we are reorganizing
    the program to maintain its relevancy. Of note, we are adding
    communications and ordnance assets not previously prepositioned.

                            PARTNERED WITH THE NAVY

        Sea-based and forward-deployed naval forces provide day-to-day
    engagement, crisis response, and assured access for the joint force in
    a contingency. Partnered with the Navy, we will continue to pursue
    innovative concepts for maritime expeditionary operations with
    platforms such as the Joint High Speed Vessel (JHSV) and the Mobile
    Landing Platform. As new maritime prepositioning force ships are
    integrated into the MPSRONs, they will provide additional operational
    benefits to the combatant commanders, such as an over-the-horizon
    surface connector capability and better selective access to equipment
    and supplies.
        A critical component in building, training, and maintaining an
    expeditionary forward presence is the availability and readiness of
    amphibious ships. The combat readiness of our amphibious ships is a
    foundational requirement for expeditionary force presence, and when
    required, amphibious force projection. As such, the Navy has
    acknowledged that low amphibious ship availability and readiness can
    present a significant challenge to the training readiness of our Naval
    Expeditionary Forces and is addressing maintenance readiness
    shortfalls. Since 2010, the average deployment length for a West Coast
    and East Coast Amphibious Ready Group/Marine Expeditionary Unit has
    been 219 days and 292 days respectively. The increased duration of
    deployment combined with a high operational tempo, reduced ship
    inventory, and deferred/compressed maintenance periods demonstrates the
    imperative to maintain planned/scheduled maintenance cycles and to
    build to adequate inventory. This has a direct impact on the readiness
    of the amphibious fleet and on ensuring the ships reach their service
    life. Continued congressional support for the Navy's shipbuilding and
    surface ship-to-shore connector plans is vital to the Nation's ability
    to retain and maintain an adequate fleet of modern combat-ready
    amphibious ships, which can provide continuous naval expeditionary
    presence and project power across the globe whenever and wherever
    needed.
        Providing our Nation's leaders with ``offshore options'', naval
    aviation enables global reach and access regardless of changing
    circumstances. Through our partnership with the Navy, Marine Corps
    aviation continues to transition from 13 to 6 aircraft with current
    deployed forces successfully utilizing transition aircraft: the MV-22,
    AH-1Z, and UH-1Y. Top priorities for naval aviation include investing
    in fifth generation strike fighter capability (F-35B/C); persistent
    multi-role intelligence, surveillance, and reconnaissance; supporting
    capabilities such as electronic attack and vertical lift; robust strike
    weapons programs; and targeted modernization of the force for relevance
    and sustainability.

                             ADDITIONAL COMMITMENTS

        In addition to providing the Nation well-trained, forward-deployed,
    and forward-engaged units of marines, the Marine Corps supports other
    national imperatives. In Indian Head, MD, the Marine Corps maintains a
    nationally engaged and pre-eminent Chemical Biological Incident
    Response Force capable of responding to chemical, biological,
    radiological, nuclear, or high yield explosive incidents.
        Around the clock, our Marine Corps Security Forces Regiment marines
    guard a substantial portion of America's strategic arsenal. Marine
    Security Forces also encompass the deployment of Fleet Antiterrorism
    Support Teams to the Commanders of Pacific Command, European Command,
    and Central Command. These teams serve as a crisis-response force and
    guard high value American assets.
        We are reshaping organizations, capabilities, and capacities to
    increase aggregate utility and flexibility across the range of military
    operations, to include enhanced support to U.S. Special Operations and
    Cyber Commands. We now have 759 Marine Special Operators and 549 Marine
    Critical Skills Special Operators of the 3,171 total Active Force
    marines, sailors, and civilians currently serving at Marine Corps
    Forces Special Operations Command (MARSOC), U.S. Special Operations
    Command (SOCOM). We will continue to complete our build of MARSOC,
    reaching full operating capability in fiscal year 2016 with an active-
    duty end strength of 3,113. Additionally, we currently have 308 marines
    assigned to Headquarters, SOCOM and its subordinate joint commands.
    From training, command and control and operational employment, all of
    these marines provide a critical role in realizing geographical
    combatant commander requirements in support of our National Security
    Strategy
        At Cyber Command we have created an assigned company of marines.
    The mission of this company, Company L, is to plan and execute
    cyberspace operations in order to support joint and Marine Corps
    requirements. Company L is planned to grow significantly to meet Marine
    Corps Forces Cyberspace Command requirements by 2016.
        Finally, Marine Corps Embassy Security Guards support 152 U.S.
    embassies and consulates around the globe and our fiscal year 2014
    budget request funds 1,635 marines for this program. As requested by
    Congress, we are working with the Department of State to determine the
    appropriate number of marines and will report to Congress by October 1,
    2013.

                                    SUMMARY

        On behalf of the marines and sailors who provide this Nation with
    its versatile, reliable, middleweight force in readiness, I thank
    Congress for your constant interest in and recognition of our
    challenges. Readiness contains a temporal aspect and with 32,000 to
    38,000 new regular accessions a year, currency in our readiness is a
    state we continuously work to maintain. Without the ability to transfer
    money among accounts and the restricted ability to make choices
    regarding where to take cuts, the impact of reduced funding will end up
    disproportionally affecting our five pillars of readiness. Your
    continued support is requested to provide a balance across the five
    readiness pillars so that we can maintain our institutional readiness
    and, as you charged more than 60 years ago, ``be most ready when our
    Nation is least ready''.

        Senator Shaheen. Thank you.
        General Spencer.

    STATEMENT OF GEN. LARRY O. SPENCER, USAF, VICE CHIEF OF STAFF,
                             U.S. AIR FORCE

        General Spencer. Good afternoon, Madam Chairman, Ranking
    Member Ayotte, and distinguished members of the subcommittee.
    Thank you for the opportunity to share the Air Force's current
    readiness posture.
        The cornerstone of our airmen's ability to provide airpower
    for the Nation at a moment's notice anywhere in the world is
    their readiness. Today, we are concerned about readiness for
    two reasons. First, 2 decades of sustained combat operations in
    missions around the world have stressed our force, decreased
    our readiness, and limited our ability to train for the full
    spectrum of missions our combatant commanders might call upon
    us to provide. Second, just as we were about to take a step
    forward in our fiscal year 2014 President's budget submission
    to arrest that decline in training and return to full-spectrum
    readiness, sequestration took us several steps back, and its
    impacts are not only affecting us now, but will continue to do
    so in the future.
        You have already heard that sequestration will force us to
    induct 60 less airplanes and 35 less engines into our depots.
    This will have a direct impact on the aircraft available for
    our missions.
        You may also be aware that sequestration has forced us to
    reduce approximately 200,000 flying hours in the last 6 months
    of the year. This reduction in flying hours and related support
    forced us to recently standdown nine fighter squadrons and
    three bomber squadrons. These standdowns are a direct hit to
    our readiness posture.
        To put a face on this, last week I spoke with the wing
    commander at one of our three F-15E Wings. In addition to
    having two combat-coded fighter squadrons, one of which has
    been stood down, she also has two squadrons which are part of
    the Formal Training Unit (FTU) that trains new F-15E pilots and
    weapons systems operators. Since the remaining F-15E squadrons
    in the Air Force are either stood down or preparing to deploy,
    she has the only remaining squadron that is currently flying to
    full combat readiness.
        Graduating from FTU is the final step before our young F-
    15E pilots and weapons systems operators move on to one of our
    three wings to begin their career in the jet that they dreamed
    of it is the reason they joined the Air Force. The commander
    worries about the morale of her fighter pilots and weapons
    systems operators with no jets to fly. Depending on how long
    the jets remain stood down, she worries about how she and her
    fellow wing commanders will get their pilots and weapons
    systems operators requalified.
        Before I completed my college degree and became a
    commissioned officer, I spent 8 years in the Air Force as an
    enlisted member. I can tell you first hand that all my fellow
    airmen and myself wanted was to ensure we could launch and
    maintain airplanes and space satellites so that we can fly,
    fight, and win as our Nation expects us to do. Whether we guard
    at the front gate, worked in finance, maintained the base
    infrastructure, or turned a wrench on an aircraft, we all got
    goosebumps when the Earth seemed to shake beneath a space
    vehicle launch or the roar of a jet engine, something we refer
    to as the ``sound of freedom.''
        While our focus today is on readiness, we cannot forget
    that a ready force also needs to be modern and technologically
    advanced. Not modernizing our force in a timely manner will
    likely increase unit costs and drive inefficiencies for our
    long-term programs, like the F-35, KC-46, and long-range strike
    bomber, that are so critical to our continued ability to hold
    targets at risk around the globe.
        Nearer term, modernization is also necessary to conduct our
    core missions. For example, we must modernize our fourth-
    generation F-15s and F-16s until we have sufficient fifth-
    generation aircraft to continue to provide the joint team with
    the air superiority on which they and America rely.
        Madam Chairman and committee members, our Nation is
    fortunate to have world-class people who work hard to produce
    world-class airpower every day. Despite the current challenges
    we face, our airmen are the finest in the world, and they
    have--throughout our history, are stepping up to the challenge
    to deliver global vigilance, global reach, and global power for
    America.
        The Air Force supports combatant command missions that
    require 24/7 availability and attention. Many of our high-
    priority missions cannot be done adequately, and in some cases
    cannot be done safely, at low readiness levels. Allowing the
    Air Force to slip to a lower state of readiness that requires a
    subsequent long buildup to full combat effectiveness will
    negate the essential strategic advantages of airpower and put
    the joint forces at increased risk.
        America's Air Force remains the most capable in the world,
    but we cannot allow readiness levels to decline further, and
    modernization cannot wait for the next cycle of increased
    defense spending.
        The U.S. Air Force and our sister Services comprise the
    premier fighting force on the planet, and our Air Force
    leadership team is fully committed to ensuring that we remain
    so.
        Thank you, and I look forward to your questions.
        [The prepared statement of General Spencer follows:]

               Prepared Statement by Gen. Larry O. Spencer, USAF

                                  INTRODUCTION

        America's Air Force has conducted 22 years of sustained combat
    operations and is continuing to meet high operational tempo demands to
    support today's fight. This has inevitably taken a toll on our weapons
    systems and people, and since 2003 has strained and degraded the
    overall readiness of the force. The Air Force fiscal year 2014 budget
    request attempts to align resources to slow our readiness decline and
    set the stage for restoring full-spectrum readiness. However, the
    current fiscal environment threatens to derail these efforts and put
    into jeopardy the Air Force's ability to meet combatant commander
    requirements. The rebalance to the Asia-Pacific and our continued
    presence in the Middle East and Africa indicate that the demand for Air
    Force capabilities will remain constant, or perhaps even rise, over the
    next decade. To ensure that our airmen can continue to contribute our
    five enduring core missions to the joint team, our readiness must
    improve.

                                   READINESS

        The Air Force provides Global Vigilance, Global Reach, and Global
    Power for America through its five core missions of air and space
    superiority, intelligence, surveillance, and reconnaissance (ISR),
    rapid global mobility, global strike, and command and control. By
    integrating capabilities across these core missions, we bring a unique
    set of options to deter war, deliver rapid, lifesaving responses to
    threatened areas anywhere on the planet, and strike hard and precisely
    wherever and whenever the national interest demands.
        The cornerstone of our airmen's ability to provide airpower to the
    Nation and contribute our core missions to the joint team is their
    readiness. ``Readiness'' is the ability of a unit to provide its
    designed operational capabilities within the required timeframe. It is
    comprised of personnel requirements, training (to include flying
    hours), weapon system sustainment, facilities, and installations. A
    responsive readiness posture depends on good health in all of these key
    areas. While protecting future readiness includes modernizing weapons
    systems and equipment, creating combat readiness in the near-term is a
    complex task involving the intersection of personnel, materiel, and
    training. It includes balancing time between operational and training
    commitments, funding from multiple sources, informed levels of risk,
    and effectively managing resources to achieve the desired state of
    readiness.
        Mitigating the risk associated with a smaller military requires a
    ready force. If we attempt to sustain current force levels while
    personnel and operational costs rise, there will be progressively fewer
    resources available to support our current number of installations,
    maintain existing aircraft inventories, vital equipment and weapons,
    and invest in future capabilities--the definition of a hollow force.
        The Air Force supports combatant command missions that require 24/7
    availability. Space operations, command and control, cyber defense,
    ISR, special operations, personnel recovery, and nuclear deterrence are
    all high priority missions that cannot be done adequately, and in some
    cases cannot be done safely, at low readiness levels. In support of
    U.S. defense strategy, our air forces must be capable of quickly
    responding and shifting between theaters of operation. Allowing the Air
    Force to slip to a lower state of readiness that requires a long
    buildup to full combat effectiveness negates the essential strategic
    advantages of airpower and puts joint forces at increased risk.
        The Consolidated and Further Continuing Appropriations Act, 2013,
    combined with sequestration reductions, results in approximately $4.4
    billion less than our request from our operations and maintenance
    accounts from which we fund some of our foundational readiness
    programs, including weapons system sustainment (WSS) and our flying
    hour program (FHP). We project that sequestration will reduce WSS and
    FHP by about $2.1 billion from our original fiscal year 2013 budget
    request. These cuts will affect fiscal year 2014 and beyond by driving
    down aircraft availability rates, and potentially preventing our
    ability to fly additional hours even if funded.
        The President's budget includes balanced deficit reduction
    proposals that would allow Congress to replace and repeal sequestration
    in fiscal year 2013 and the associated cap reductions in fiscal year
    2014-2021. If sequestration is not replaced, the Air Force will have to
    rebuild degraded unit readiness, accept further delays to
    modernization, absorb the backlog in depot maintenance inductions, and
    invest additional funding to restore infrastructure. However, because
    sequestration impacts are already occurring, even if our readiness
    programs are funded to the levels requested in the fiscal year 2014
    President's budget (PB), our readiness levels may still not recover to
    pre-sequester levels in fiscal year 2014. If the post-sequester Budget
    Control Act funding caps remain in effect, the Air Force will be unable
    to reinvigorate readiness and align with the Defense Strategic
    Guidance. In both the short- and long-term, sequestration will have
    devastating impacts to readiness, will significantly affect our
    modernization programs, and may cause further force structure
    reductions.

    Weapons System Sustainment
        WSS is a key component of full-spectrum readiness. Years of combat
    demands have taken a toll across many weapon systems, and we continue
    to see an increase in the costs of WSS requirements, which are driven
    by sustainment strategy, complexity of new weapon systems, operations
    tempo, force structure changes, and growth in depot work packages for
    aging, legacy aircraft. With recent force structure reductions, we must
    carefully manage how we allocate WSS in order to avoid availability
    shortfalls. We are planning to fund WSS to 81 percent of the fiscal
    year 2014 requirement using funds from the base budget as well as
    overseas contingency operations (OCO) funds.
        Sequestration has further set back our efforts to improve WSS.
    Depot delays will result in the grounding of some affected aircraft.
    The deferments mean idled production shops, a degradation of workforce
    proficiency and productivity, and corresponding future volatility and
    operational costs. It can take 2 to 3 years to recover full restoration
    of depot workforce productivity and proficiency.
        Moreover, WSS funding requirements for combat-ready air, space, and
    cyber forces have consistently increased at a rate double that of
    inflation planning factors. Although service life extension programs
    and periodic modifications have allowed our inventory to support 22
    years of unabated operations, the cost of maintenance and sustainment
    continues to rise. WSS costs still outpace inflationary growth, and in
    the current fiscal environment, our efforts to restore weapons system
    availability to required levels will be a serious challenge. Although
    the fiscal year 2014 PB adds baseline funds for WSS, we continue to
    rely on OCO funding for global contingency operations.

    Flying Hour Program
        The emphasis on readiness in the Defense Strategic Guidance
    reinforced the Air Force focus on the importance of maintaining our FHP
    as part of our full-spectrum readiness. For the fiscal year 2014 budget
    request, the Air Force balanced the allocation of flying hours across
    the Total Force to maintain--and in some cases--incrementally improve
    readiness levels.
        However, as with WSS, sequestration affects our ability to improve
    readiness, and in fact, readiness levels are already declining. Lost
    flight hours will cause unit stand-downs which will result in severe,
    rapid, and long-term unit combat readiness degradation. We have already
    ceased operations for one-third of our fighter and bomber force. Within
    60 days of a stand down, the affected units will be unable to meet
    emergent or operations plans requirements. Lost currency training
    requires 6 months to a year to return to current sub-optimal levels,
    with desired flying proficiency for crewmembers requiring even longer.
        The flying hour program will continue to rely on OCO funding to
    support Operation Enduring Freedom and the redeployment of combat
    forces from Afghanistan. With the expectation of decreasing OCO flying
    hours, we have programmed increasing operations and maintenance (O&M)-
    funded flying hours in fiscal year 2015 and throughout the Future Years
    Defense Program (FYDP). Beginning in fiscal year 2015, the program
    meets approximately 90 percent of the peacetime training requirement to
    attain full-spectrum readiness across the Total Force.
        The Air Force is committed to a long-term effort to increase our
    live, virtual, and constructive operational training (LVC-OT)
    capability and capacity by funding improvements in LVC-OT devices
    (e.g., simulators and virtual trainers) and networks. Adjustments to
    the flying hour program will continue to evolve as the fidelity of
    simulators and LVC-OT capabilities improve. Increasing our virtual
    capabilities will minimize fuel consumption and aircraft maintenance
    costs while ensuring high quality training for our aircrews.
        Full-spectrum training also includes the availability and
    sustainability of air-to-air and air-to-ground training ranges. Many of
    our ranges are venues for large-scale joint and coalition training
    events and are critical enablers for concepts like Air-Sea Battle. In
    fiscal year 2014, we are increasing funding to improve and sustain
    these crucial national assets to elevate flying training effectiveness
    for the joint team, which in turn improves individual and unit
    readiness levels.

    Readiness and Modernization
        The decline in future budgets does not allow us to maintain force
    structure and continue all planned investment programs while also
    improving readiness. To prioritize readiness, we have made a conscious
    choice to assume additional risk in some modernization programs.
    Although we have been more effective in our use of operating resources
    and garnered savings from better business practices, the Air Force has
    been forced to terminate or restructure several programs. Program
    restructures and terminations include terminating the Space Based
    Surveillance Block 10 follow-on, freezing Gorgon Stare at Increment II,
    terminating Air Force participation in the Joint Precision Approach and
    Landing System land-based segment, and divesting the UAV (unmanned
    aerial vehicle) Battlelab. In addition, several key modernization
    priorities were deferred, including a replacement for the aging T-38
    trainer and the Joint Surveillance and Target Attack Radar System
    surveillance aircraft.
        To achieve the readiness levels we desire, the Air Force needs
    sustained modernization. For example, our legacy, or fourth generation,
    fighter fleet has secured more than 20 years of an air superiority
    advantage, but may lose its ability to operate as effectively in
    contested environments. Weapon systems like the F-22, with
    contributions from the F-35, are what will carry America's Air Force
    forward to continue to provide air superiority. During F-35
    development, it is imperative that we maintain our fourth-generation
    fighter fleet. Therefore, at least 300 F-16s will undergo a service
    life extension program and a capability enhancement called Combat
    Avionics Programmed Extension Suite, which permits them to remain
    relevant in the near-term threat environment until the F-35 is
    available in sufficient numbers. We are also upgrading the F-15 fleet's
    radar and electronic warfare capabilities that will permit it to
    operate in conjunction with fifth-generation aircraft in the future
    threat environment.
        Other top modernization programs include the KC-46A and the Long-
    Range Strike Bomber (LRS-B). Because the future will likely call for us
    to provide rapid global mobility to remote, austere locations in
    contested environments, we will require a very capable tanker fleet.
    The KC-46A program will ensure that our Nation retains a tanker fleet
    able to provide crucial air refueling capacity worldwide for decades to
    come. The LRS-B is a key piece of the development of our long-range
    strike family of systems, the capabilities of which are critical to our
    ability to carry out our global strike mission.
        America's Air Force remains the most capable in the world, but we
    cannot allow readiness levels to decline further and modernization
    cannot wait for the next cycle of increased defense spending. We have
    important production lines underway and development programs that are,
    or will soon be, mature enough for production. Cancelling programs in
    anticipation of a future generation of technology would be wasteful
    and, in some cases, risk the loss of critical engineering talent and
    technological advantage. New threats and corresponding investment needs
    are not theoretical future possibilities. They are here, now. Air
    superiority and long-range strike capabilities cannot be assumed.
    Significant investment in fifth-generation platforms and munitions is
    essential to address these threats. The future success of the Nation's
    military and the joint team depends on modernizing our Air Force and
    keeping it ready to fight.

                                   CONCLUSION

        The Air Force's core missions will continue to serve America's
    long-term security interests by giving our Nation and its leadership
    unmatched options against the challenges of an unpredictable future. In
    the last several decades, Air Force airpower has been an indispensable
    element of deterrence, controlled escalation, and, when so tasked by
    the Nation's leadership, destruction of an adversary's military
    capability--all accomplished with minimal casualties to U.S. service
    men and women and civilians. However, investments in Air Force
    capabilities and readiness remain essential to ensuring that the Nation
    will maintain an agile, flexible, and ready force. This force must be
    deliberately planned and consistently funded, as reconstitution of a
    highly sophisticated and capable Air Force cannot occur quickly if
    allowed to atrophy.
        Today's Air Force provides America an indispensable hedge against
    the challenges of a dangerous and uncertain future, providing viable
    foreign policy options exclusive of a large military commitment on
    foreign soil. Regardless of the future security environment, the Air
    Force must retain and maintain its unique ability to provide America
    with Global Vigilance, Global Reach, and Global Power.

        Senator Shaheen. Thank you very much, everyone.
        You've all spoken very eloquently to the potential impact
    of sequestration. One of the things that I have been struck by
    as I've listened to you and talked to other of our leaders in
    the military is that this is not just a problem for 2013, but
    it becomes an increasingly difficult problem as we go into 2014
    and beyond. So, I wonder if you could talk about what our
    forces are going to look like at the beginning of 2014 if
    sequestration remains in place. Then, assuming we can address
    it by the beginning of 2014, how long will it take us to
    restore readiness to the levels that you all would like to see?
        I don't know if someone would like to go first or--I'm
    going to ask all of you to address that.
        General Spencer. Sure, Senator, I'll start.
        First of all, we don't know what our budget is in 2014, so
    there is a lot of uncertainty there. There's the law--current
    law, which is sequestration; and there's the President's budget
    submission; and there is a House and Senate version. So, we
    don't know yet what our future is. That uncertainty is very
    unsettling.
        But, let me give it a couple of examples. If you stand--I
    mean, I--at home, I have a 1972 Chevrolet Monte Carlo. Because
    it's old, I have to start that car at least once a week to get
    the transmission and everything working, or it won't run very
    well. It gets cranky. Airplanes are similar. If you sit
    airplanes down and you don't turn the engines, they don't taxi,
    they don't takeoff, they don't work very well. So, if you stand
    down airplanes over several months, that's a problem.
        Next, obviously the aircrews are not flying those
    airplanes. So, over time, their currency degrades and
    deteriorates.
        The same with the maintenance troops that fix those
    airplanes. If they aren't fixing airplanes, if they aren't
    working on airplanes, then they are not as sharp as they need
    to be.
        So, that's airplanes. On the other--just to give you
    another example, I mentioned that we're going to send 60 fewer
    aircraft and 35 fewer engines in the depot. I used to be the
    vice commander of the depot in Oklahoma City. For a KC-135,
    which is a tanker, it takes a little over 200 days to get that
    airplane in, get it stripped down, fully redone, and out. So,
    that's 200 days for just that airplane.
        When you start backing up that line of airplanes that are
    stuck--so, first of all, you have those airplanes who can't fly
    in, so now, depending on how many hours they have on them, they
    too will be grounded and are sitting around. You have the
    civilians there who potentially could be furloughed. So--and
    you have those engines, now, that are backed up. So, you have
    this whole clogged system of airplanes and engines and people
    that need to move and need to be active to be sharp.
        So, it's almost like a weight or an anchor, if you will,
    that we're going to pull, now, from 2013 cross the 2014 line.
    So, regardless of what happens in 2014, if sequestration goes
    away and we cross that line into 2014, we still have those
    airplanes and those pilots and those maintenance people and
    those engines and those aircraft that didn't go into depot
    sitting on our doorstep. So, we have to start, first in that
    hole, to try to dig ourselves out.
        Senator Shaheen. Thank you.
        Anyone want to add to that at all?
        General Paxton. If you wanted us to go by Service, Madam
    Chairman, and--just a few things on the Marines side. I would
    echo what General Spencer said, in that, with the fiscal cuts,
    the degradation may be linear, but the restoration is not
    linear. Because once you bottom out, things don't repair that
    quickly, either the equipment or the lack of training for the
    individual or the training for the cohesed unit, if you will.
        As an example, I would take, on the Marines side, our F-16
    aircraft--our F-18 aircraft. Right now, we have 5 of our 12
    squadrons deployed, and we have another squadron that's a
    training squadron. Those are fully manned, organized, trained,
    and equipped. As I said in my written and oral statements, we
    believe that those squadrons will stay that way, not only for
    the current deployment, but at least for the next two
    deployers, the one that will go in the fall and the one that
    will go late winter, early spring.
        What that means, though, is, for the seven squadrons who
    are back at home, that they have aircraft that are not going
    into their phased maintenance, and they're what we call out-of-
    cycle reporting. So, with the passage of time, those aircraft
    will stay off the line. Their gripes or their maintenance
    complaints will go up, and then the repairs will go down.
        So, what we will have is pilots who need to train on those
    aircraft who will not get their minimums. So, what--right now,
    we have 12 average aircraft per squadron, and normally we have
    about 9 or 10 that are up and ready. Our prediction is that, a
    year from now, those squadrons will only have five or six
    aircraft that are up and ready, about half of that number. The
    19 pilots who are in the queue waiting to train will then be
    vying for minimal hours on those aircraft. Plus, if you tie it
    in with the Navy, if they have reduced steaming days, some of
    those pilots will need to get night-vision operations or deck
    bounces on the aircraft. So, it's a compounding effect.
        So, the linear degradation won't get restored the same way,
    ma'am.
        Senator Shaheen. Thank you.
        Admiral?
        Admiral Ferguson. I would just add, is that, as you look at
    sequestration, the impacts on both the readiness accounts,
    where we're adjudicating $4 billion in reductions in--so, we've
    deferred some of that maintenance, and we've moved that
    training into this year. On our shore infrastructure, we've
    deferred about $1 billion worth of work, and so that will take
    about 5 years to recover. On our depot maintenance, if we get
    the fiscal year 2014 levels, we can try and eliminate or--that
    backlog in about a year or 2, on the ship side.
        But, this cumulative effect of introducing new
    capabilities, because a $6 billion reduction in investments and
    then there's another reduction next year--it's going to be very
    difficult to catch up. The effects, I would agree, are
    cumulative, particularly on the readiness side. It does take
    longer, and more expensive, for you to recover that readiness
    later.
        Senator Shaheen. Thank you.
        General Campbell. Yes, ma'am, I'd agree with all my
    colleagues, here. We're really compounding risks. So, as we
    continue to move to the right, your Army--our Brigade Combat
    Teams (BCT)--I'll use that as a measurement; easier to do
    that--if they're trained at a brigade level, which is what we
    would send them to go fight, we talked about 80 percent by the
    first quarter fiscal year 2014 being at squad level. So, that
    will take more time, more resources to get them up to a level
    to be able to deploy. It's--and it is about time, and it is
    about risk.
        An example would be if General Thurman, in Korea, had to
    deploy BCTs for an operation plan. Without going into great
    numbers, if we continue on the path we're at, he said, ``I need
    X amount of BCTs,'' probably by the first quarter of 2014, we'd
    be able to provide him the one that's already on the ground in
    Korea, because we'll continue to fund that where it is today;
    we have the global response force that we'll continue to fund;
    we may have one or two other BCTs who are at a level they can
    rapidly respond. The rest of them will take more time, more
    resources to build out of that hole. We'll continue to dig that
    hole in 2013; it'll carry over into 2014.
        On the aviation piece, as far as the Army's concerned, on
    pilots, the same issues with pilots and being able to train in
    the time. An example: 2 years ago, we had a backlog of pilots
    at Fort Rucker of about 300. It took us about 3 years to get
    them back up to speed. We're looking at now about 700 pilots,
    based on fiscal year 2013 numbers, that we're going to have to
    carry over into 2014. We anticipate probably 3 to 4 years to
    get them back up to a level they need to be.
        Senator Shaheen. Thank you. Thank you all.
        Senator Ayotte.
        Senator Ayotte. Thank you very much, Madam Chairman.
        I wanted to ask, to follow up on Senator Shaheen's question
    on sequestration, and particularly wanted to ask about the
    concept of a hollow force. Something that we've talked about,
    heard about, I think we've seen, historically--for example, the
    examples of Task Force Smith, in Korea, when we've previously
    reduced defense spending and been brought to a hollow force.
    Can you please let me know, on your testimony--probably
    starting with the--certainly, each of the branches, but
    starting with the Army, what are the indicators of a hollow
    force? What--based on those indicators, how--as we go forward
    with sequestration, how close are we to a hollow force? When
    does that risk become grave?
        General Campbell. Thank you, ma'am.
        For a hollow force, we really look at three components: end
    strength, modernization, and then readiness. As you noted Task
    Force Smith, after Korea--after every conflict, we continue to
    bring our Armed Forces down. The difference today is that we
    live probably in the most dangerous times of our life, we are
    in a continued fight for the next couple of years, and, as
    we're trying to bring down that force, we have to continue to
    supply that force.
        So, we have to balance both modernization, which we're not
    able to do, with sequestration, to the level that we think is
    required. End strength, we're already coming down 80,000 on the
    active side. At 490,000, based on the Defense guidance now, we
    believe that we can accomplish the missions that are required.
    But, with sequestration, we will definitely go below 490,000.
        For the Active and for the Guard and for the Reserve: For
    the Guard, we cut 8,000, but no end strength. For the Reserve,
    we cut 1,000, and no end strength. That was based off the BCA.
    Under sequestration, we'll have to go back to the National
    Guard and to the Reserve and take a proportional cut from those
    forces, as well.
        So, when we get end strength, the modernization, and the
    readiness out of balance--you could have a very large end
    strength, but you can't modernize, you can't get them trained--
    then you become hollow.
        Senator Ayotte. Any other comments on that? [No response.]
        Just so our colleagues understand, even beyond this
    committee, isn't that--this concept of a hollow force is a
    real, tangible risk of sequestration, that, if we follow
    through with this, we could end up in this position, given,
    right now, I think, the readiness of our forces; meaning we've
    fought valiantly in Iraq and Afghanistan, and they're
    phenomenal, but this is a real risk that we face if we continue
    on this.
        Admiral Ferguson. Senator, I would just add, there's one
    other element, for us, because we're a very capital-intensive
    service. We rely on our industrial base and the ability to
    create the new weapon systems, maintain our ships and aircraft.
    That is an element, as well, in addition to the three that
    General Campbell mentioned that I agree with.
        Senator Ayotte. Admiral Ferguson, following up on that,
    where are we with our fleet size? We've said that we need, I
    believe, 306, is it, as a fleet size for the Nation to meet all
    of the requirements of our Strategic Guidance for the Nation
    and for, obviously, our shift to the Asia-Pacific region. So,
    where are we now with that, with sequestration? Where does our
    fleet end up if we continue with these cuts, going forward,
    over the--not only the Future Years Defense Program (FYDP), but
    going over to the 10-year period?
        Admiral Ferguson. Senator, I think if you--when we submit
    our 30-year shipbuilding plan with this budget, you'll see that
    we project to be at approximately 300 ships by 2019, is what
    our current projections are, assuming that level of funding.
    With sequestration, that number will have to come down to keep
    the readiness of the force in balance so that the ships we have
    are ready. We see that number in the FYDP period falling to
    about 260, I would believe; and then, over the long term, the
    fleet size would decrease even smaller than that.
        Senator Ayotte. Previously, I had heard that number of--if
    we keep going over the--to the 10-year period, that it could
    get down to 230-235. Is that true, Admiral?
        Admiral Ferguson. That is a correct number, yes, ma'am.
        Senator Ayotte. Thank you for that.
        I also wanted to understand, in thinking about the
    Virginia-class submarine program--first of all, how is that
    program performing, operationally?
        Admiral Ferguson. The Virginia-class is performing
    extraordinarily well, operationally. It's very stealthy, it's
    valuable, it contributes across a whole range of joint force
    missions. We're very happy with it. In terms of production,
    it's coming in on its cost targets, and it's even being
    produced ahead of schedule by the builders. So we're----
        Senator Ayotte. How often can we say that around here?
    That's great.
        What percentage right now of combatant commander
    requirements for attack submarines was the Navy able to support
    in fiscal year 2012?
        Admiral Ferguson. We're meeting 100 percent of what the
    Joint Staff adjudicates. But, of the actual combatant commander
    requests, it's about half of those, about 50----
        Senator Ayotte. So, half of the requested attack submarine
    support by combatant commanders is met?
        Admiral Ferguson. That's correct.
        Senator Ayotte. Obviously, if our fleet were to go down
    substantially, that would be even a more diminished number,
    based on what they think they need in the field.
        Admiral Ferguson. That's correct, Senator.
        Senator Ayotte. How important is it that we go forward with
    the Virginia payload module as it is now----
        Admiral Ferguson. Well, as you----
        Senator Ayotte.--to the attack submarine fleet?
        Admiral Ferguson.--as you look at our force structure, we
    are--the SSGN fleet will reach the end of its service life. So
    we're investing in the research, development, test, and
    evaluation project to add a Virginia-payload module, which
    would give us a strike capability from that vessel. We're
    targeting the Block 5 buy to finish the design work to make the
    decision to install it. But, we think it's important to replace
    that strike capability from the submarine force.
        Senator Ayotte. Thank you.
        General Campbell and General Paxton--so, at this point, as
    we're reducing the size of our forces--you talked about,
    General Campbell, us going to 490,000 with an 80,000 reduction
    in the Army. Are we in a place where we have to do any
    involuntary separations? As we move forward and we have to
    make--if we continue with the sequestration and have to make
    further reductions to our forces, will there have to be
    involuntary separations, which, of course, so people
    understand, we're--we would be issuing these, sometimes, to
    individuals who have served multiple tours, who have done what
    we've asked of them, and then, here we are, saying, ``We'd like
    you to go.''
        So, General, can you tell us what the possibility of that
    is?
        General Campbell. Yes, ma'am. For the 80,000 decrease we're
    going through right now, we really worked hard to get the
    personnel policies to make sure we could take care of all of
    our soldiers and families, working most of that reduction by
    regular attrition, but we will have to take down involuntary
    separations for colonels and for lieutenant colonels. We'll try
    to keep that number low. At some point, we'll probably have to
    go to the captain level and reduce some of our captains, as
    well. So, these could be young captains that served two or
    three, maybe multiple tours, either in Afghanistan and/or Iraq.
    We are working that very hard with our leadership. We will be
    very compassionate. But, again, that's 80,000. We will have to
    do some involuntary separation. We will have to do a lot more
    of those through sequestration.
        General Paxton. Yes, thank you, Senator Ayotte.
        Much in line with the Army, we have a planned reduction.
    With the--after September 11, the Marine Corps went from about
    185,000 or 186,000 up to 202,000. We're on our way down to
    186,000 now. We thought, prior to sequestration, and certainly
    in the immediate aftermath, that we may have to go down to
    about 182,000. So--General Amos has articulated that in his
    testimony. So, we have a drawdown plan, if you will, to get
    from 202,000 to 186,000 and perhaps to 182,000.
        Right now, our cohorts that have come in through entry
    level are leaving, probably, at about the rate of 3,500 to
    5,000 a year. We can manage that over the handful of the next
    couple of years.
        It's obvious that recruiting and retention at the entry
    level will not be sufficient. We have to grade-shape the force.
    This past year, for the first time in many years, we did do
    selective early retirements. So, at the lieutenant-colonel-to-
    colonel and major-to-lieutenant-colonel level, those who had
    been looked at and not selected, we did do some selective early
    retirements. Very modest number, but we predict that we will
    probably have to do that again.
        We're about 65 percent first-term. So, most of the marines
    are under the age of 25. So, it becomes important, then, as we
    do what General Campbell said, which is to balance our
    readiness and our modernization, that we're going to have to
    grade-shape those who are there. Many have stayed and served
    most admirably in Iraq and Afghanistan, but at some point, some
    of the ones--whether they're a master gunnery sergeant,
    sergeant major or a lieutenant colonel/colonel, we just won't
    be able to keep them around.
        Senator Ayotte. Thank you all for being here.
        Senator Shaheen. Thank you.
        Senator Donnelly.
        Senator Donnelly. Thank you, Madam Chairman.
        Thank all of you for your efforts.
        One of the areas we've been working on is the tragedy of
    suicide in our military. I would like to thank each of the
    Services and the Veterans Administration (VA) for recognizing
    the damage that this causes. Currently our mental health system
    relies on the servicemember's or veteran's willingness to self-
    report. The backup to the system is relying on peers and
    coworkers and--to make judgment calls as to the mental health
    of the servicemember.
        Suicide mental health is often considered a personnel
    issue, but I also consider it to be a readiness issue. This is
    something, when we looked--it breaks your heart that more
    committed suicide than were killed in Afghanistan last year. We
    don't want to lose anybody at any time, but you think of that
    figure, and it is staggering. As we try to solve this problem--
    to each of you--what do you see as the leading cause of this
    within the military?
        Admiral Ferguson. Well, Senator, we've done a lot of work
    on that recently. We appointed a task force, headed by a two-
    star, that really looked at the Navy issues, followed on the
    work of the Army and the other Services.
        Senator Donnelly. By the way, I just want to mention very
    quickly, General Chiarelli, who was formerly Vice Chief, has
    done an extraordinary job working on this. It is his passion, I
    know that.
        Admiral Ferguson. Yes. What we're seeing, it's--they're not
    Service- or Navy-unique. It's relationship problems,
    psychiatric history, discipline, legal problems, and physical
    health. We don't see a tie, in the Navy cases, to operational
    tempo (OPTEMPO), and we actually don't see a generational
    divide, in terms of millennials being more susceptible than
    other generations. They're actually not. They're bringing our
    rates down.
        We see the main risk factors of those that lose a feeling
    of belonging--to an organization or to a family. They feel
    overwhelming hopelessness, and they've overcome the fear of
    hurting themselves, to make the pain that they're experiencing
    go away. So, we think we have to address those factors as we go
    forward. That's what we see as the causes.
        General Campbell. Senator, I'd just echo that, as well. We,
    a couple of weeks ago, started our Ready and Resilient
    Campaign. Really, we have to look at it from a cultural change
    in the Army, on suicides. It is about education. You're
    absolutely right. It is all about readiness, and we have to
    make that tie. We have to continue to work to make sure that
    people understand the trends that we see out there; the same
    ones that the Navy just talked about are the same ones that we
    see.
        This is not a Service issue, this is a national issue. If
    you take a look at our Nation, I think it's one every 14 or 18
    minutes, somebody commits suicide in our Nation. If you take a
    look at the Services and look at that population of young men
    and women in the 17 to 24-25, we're probably commensurate with
    the rest of the Nation.
        But, it is a national problem. We all have to work together
    to get the mental health professionals, be able to afford that,
    get them down to the lowest level. I think, for the Army, we
    continue to work that very hard. General Chiarelli has led that
    force. He continues to do that in the civilian world now. I
    will champion that for the Army, as well as the Secretary and
    the Chief, on health of the force.
        But, financial--we have not really seen that it's
    deployments/not-deployments. It's about 50-50. There are people
    that have come into the Service, I think, that have stressors
    already, and they come in, and they lose a sense of belonging.
    We have to just continue to work that from the lowest levels.
    It's about knowing every single soldier, and it's--it is a
    command responsibility. We just have to get back into knowing
    everything we can about every single soldier, about their
    family. I think leadership will get us through this.
        General Paxton. I was going to add, Senator--thank you--
    that I agree with, obviously, my two colleagues here, and I
    think all the Services have, not only service-unique, but a lot
    of the shared ideas and a lot of shared data about campaign
    plans on how to tackle this. It is about small-unit leadership.
    It's about some intrusive leadership and really getting to know
    your soldiers, your sailors, and your marines.
        I think, germane to today's testimony, in the issue of
    sequester and fiscal resources, I know, in the specific case of
    the Marine Corps, and, I believe, all the Services, we're
    committed to apply resources--fiscal resources to keep these
    programs alive. Because, for us, this is all about the most
    important thing, which is that individual soldier, sailor,
    airman, and marine, and the actual Americans that go out and
    execute these hard missions.
        Senator Donnelly. We are working on legislation to
    integrate annual mental health assessments into the
    servicemembers' overall health assessment. As you said, almost
    bringing it down to knowing your marines, knowing your airmen,
    your sailors, and your soldiers, and would appreciate it very
    much if, in the process of this, we can lean on you for your
    recommendations and for your advice in this process.
        I just want to switch, very quickly, to the National Guard.
    We just had a situation where a number of our Indiana Army
    National Guard groups were off-ramped with 6 weeks to go before
    they were to be deployed. It's been extraordinarily difficult
    on their families--on the soldiers, but also on the families,
    as well. We were just wondering, when the Army off-ramps a
    National Guard unit and moves it to the bottom of the patch
    chart, what does this do to the unit's readiness?
        General? General Campbell?
        General Campbell. Yes, sir, thanks for your question, sir.
        Both Active and National Guard and Reserve soldiers are
    being off-ramped. As the President announced a while back,
    we're going to cut 34,000 in Afghanistan, so we really depend
    on U.S. Central Command (CENTCOM) and International Security
    Assistance Force to provide us where they want to take those
    soldiers, those units out, and then we continue to work that
    piece. So, it is something that we do not want to do,
    especially to the National Guard, because of the unique nature
    that they have to be able to get ready. We try to do that and
    give them as much notice as we can. We try to work that at
    least 180 days out. In the case we're referring to, I know we
    did not do that, and that was compounded by a year or 2 ago, as
    we came out of Iraq very quickly, we had to off-ramp some
    units. When we came out of Iraq, we were able to put some folks
    in Kuwait, we were able to transfer some folks into
    Afghanistan. At this point in time, we're not able to do that.
        As we took a look at the severity of the budget impacts, we
    had to look everywhere we could. We were able to use an Active
    component, as opposed to National Guard in this case, and it
    saved us upwards of $80-plus-million to be able to do that. We
    understood the impact that that would have on the National
    Guard. It was a very, very tough decision. But, again, we're
    making those decisions, taking everything into consideration.
    Both the Active, the Reserve, and National Guard have----
        Senator Donnelly. On such a short notice, 60 days out--I
    know that has been changed to make it 120 days now--but, to
    those soldiers who in--who it did happen to, how do you ever--
    what do you say to them to convince them they are still
    considered a partner and a teammate in this effort?
        General Campbell. Sir, as on the suicide piece, leadership
    can make anything happen, here. You have to get down to small-
    level unit, you have to talk to them about how important they
    really are. This was a timing issue. This is nothing against
    National Guard, verse Indiana, verse another State, verse
    Active. It was all about timing. I think that the leadership
    needs to grab those soldiers, sit them down, tell them we
    appreciate what they've been doing for the past year and a half
    to get ready to go, and that we need them to continue to stay
    ready. The next time that they are asked to go, that they will
    be ready, and that they have value--that we value their
    service. But it's hard for me to do it up here. I need the
    leadership down on the ground level to grab them, look them in
    the eyes and talk about that. Again, we have to do that across
    the force.
        Senator Donnelly. Thank you all for your service.
        General Campbell. Thank you, sir.
        Senator Shaheen. Thank you, Senator Donnelly.
        Senator Kaine.
        Senator Kaine. Thank you all for being here today.
        One of the things that I've been doing to climb the
    learning curve as the new guy is--on this committee and in the
    Senate--during recess weeks, traveling around to installations
    around Virginia. I've been to, let's see, Belvoir and Lee, and
    at Oceania and Norfolk Naval Base, Quantico, Langley, Guard
    armories, VA hospitals, military contractors--to just kind of
    climb the learning curve. One of the things I think we've said
    about sequester, for example, is that the warfighter is exempt.
    We're protecting warfighting. Obviously that means that--the
    operations in Afghanistan or--and elsewhere. But, it does seem
    as I travel around to the installations and I found out what
    the actual effect is, that it's a pretty thin line. I mean, I
    think we need to say we're protecting the warfighter, and we
    are, if you define it pretty narrowly, but some of the things
    that we're allowing to degrade have a pretty direct effect on
    warfighting.
        So, for example, each of you--each of your Service branches
    makes extensive use of civilians for very important and
    critical missions. Am I right about that? You use them in
    different ways, and you have different strategies about how to
    manage things like furloughs. But, I mean, the--a civilian
    could be a nurse at an Army hospital at Fort Belvoir that's
    taking care of warfighters, that are in a Wounded Warrior
    Brigade, or it could be a maintainer of F-22s at Langley, that
    are pretty critical. So, the fact that it's--``Oh, it's just
    civilians,'' I mean, this is pretty critically related to the
    warfighting mission.
        The effect on contracting and capital--you mentioned,
    Admiral, you're pretty capital heavy on the Navy side, and the
    shipyards in Virginia, the shipyards in New Hampshire and
    Maine, and these are directly connected to our ability to
    forward-deploy force. When maintenance or other things get
    delayed, or we decide not to deploy the Truman or something, I
    mean, it has a direct impact upon the support for warfighting
    missions.
        I was wondering about this, General. You referred briefly
    to the embassy security, which, we know, in the aftermath of
    Benghazi, how important that is. I visited the Marine security
    guard training facility at Quantico, and you're in a phase-up
    there. You're both doing a--physical infrastructure phase-up,
    with a mock embassy compound. But, you're supposed to
    significantly increase the number of Marine security guards
    that you're training. Is that a warfighting mission that's
    protected from sequester, or is that something that's subject
    to sequester?
        General Paxton. No, sir. In the short term, it's not--it is
    protected, because it's the next-to-deployer. So, we will take
    a look at those classes of watch-standers and those classes of
    noncommissioned officers that are going through, and we will
    pull them out of--most of them have probably done two, three
    deployments--Afghanistan or Iraq; they've just recently
    reenlisted, or are about to; probably a corporal at the 4- or
    5-year mark. So, that's the talent pool that will go to the
    school. So, we will ask the commands, as they look at
    reenlistment stuff, to send that talent to Quantico, and we'll
    keep the next couple of classes going.
        So, in the short term, it is protected. In the long term,
    you're absolutely right, it's like everything else. What--we
    want to increase the number of Marine security guards out
    there. We have a master plan with the State Department, where I
    think we have 13 that are projected to grow, and 4 of which we
    will source by the end of this calendar year.
        But, there's a larger appetite there, a larger requirement,
    for both consulates that have not been protected or embassies
    that need additional protection, that we are--we feel obliged
    to support, that we are ready to support, operationally, but
    it's going to require extra end strength; or, if we take the
    end strength out of existing end strength, as we have on hand
    now, then those are other missions that we have not--that we
    may not be able to do.
        So, this is--it's an ongoing discussion. It's part of the
    initiative that Congress asked us to take a look at, and
    they're working with the State Department. But, we're going to
    have to carve out our way ahead, in any set of circumstances,
    and now it's aggravated by sequestration.
        Senator Kaine. The Accountability Review Board, in the
    aftermath of Benghazi, suggested not only that the Marines bulk
    up, but that the foreign affairs security training also bulk
    up, on the State Department side. The State Department had
    proposed, or were pursuing, that recommendation to do a
    significant coordinated training center. They had an
    Environmental Impact Statement out, they were about to make an
    announcement, this month, of that, down at Fort Pickett, and
    they've pulled that back in and said that we're going to have
    to delay doing this. Again, the sequester effect, either on
    your side or on the--we may be protecting the warfighter, but
    if we're not doing the--all the things we need to do to--with
    dispatch about embassy security--we know that's a
    vulnerability; we've been made painfully aware of it----
        General Paxton. We're--continue to look at it, Senator. We
    have a good model. We can predict the number of people we need.
    We can predict the facilities that we need. We can predict the
    training pipeline and everything. So, now it's a matter of the
    resources. Consequently, when you get to the resource piece and
    sequestration is in effect, how you fund that and how you take
    care of that is going to be----
        Senator Kaine. How much of the readiness in each of your
    divisions is related to the issue of the retrograding of
    equipment back from Afghanistan and then refurbishing and
    reusing that equipment? To the extent that there's delays or
    that that's a challenge, how does that affect the readiness
    issue?
        General Campbell. Sir, I think it's going to be huge. For
    the Army, we have about 80 percent of the equipment over there.
    It's about $28 billion worth of equipment. We need about $22
    billion back here to make sure that we can maintain readiness
    for our Army in the future. It's a little bit more difficult
    than Iraq. In Iraq, we could drive it out. We had Kuwait as
    sort of a catcher's mitt. Afghanistan, landlocked, the problems
    we have with Pakistan--we developed some routes through the
    Northern Distribution Network--will help. We're flying a lot
    more out, so that's much more expensive. But, the equipment
    that we have here, we can--that we have there, we cannot afford
    to just leave it there and then buy new equipment. We just
    can't do that. So, we need $22 billion worth of equipment out
    of Afghanistan, here in the next 18 or so months. So, I'm very
    concerned about that. But, we need that for the readiness of
    our Army to continue in the future.
        Senator Kaine. Just to kind of cross X or go a little
    farther, so you need to have $22 billion of that back. Then
    you've factored in--because it's been there and been in use. I
    mean, it's not just about getting it back and then you can
    immediately use it. You have to get it back, you have to then
    put some investments into making it----
        General Campbell. Yes, sir.
        Senator Kaine.--suitable for the next deployment. To the
    extent that we're delayed getting it back or the dollars for
    the investments are not there or it's delayed--you're----
        General Campbell. Sir, we've been very consistent, the last
    3 or 4 years, that we need 3 years of OCO money after the last
    piece of equipment's out of Afghanistan--3 years.
        Senator Kaine. That's largely around the equipment issue?
        General Campbell. It's around the equipment, yes, sir.
        Senator Kaine. General Paxton, were you going to----
        General Paxton. Yes, sir. Army and the Marine Corps have
    been pretty much in step on this, sir. So, it is 3 years from
    the time the last individual, last piece of equipment comes out
    of Afghanistan. That's about the time we estimate that it'll
    take to reset. The Marine bill is about $3.2 billion right now,
    sir. We also have indicated that, because we have so much of
    our--so many of our equipment sets in Afghanistan, as well,
    that, with the sequestration, that'll mean less equipment to do
    home-station lane training with here. If the depots are
    adversely impacted with sequestration, it's a slower rebuild
    and restoration of the equipment that comes back. A real issue
    to the committee and to Congress is, we have pledged to
    rebalance to the Pacific, in line with the Defense Strategic
    Guidance, and we think that that--the rebalance to the Pacific
    will now be delayed beyond 2017, unless we get all the
    equipment out and then can maintain all the equipment.
        Senator Kaine. Thank you.
        Thank you, Madam Chairman.
        Senator Shaheen. Thank you.
        Senator McCaskill.
        Senator McCaskill. Thank you.
        Thank you all for being here, and thank you for the work
    that you have done and others have done along with my
    colleagues on the Senate Armed Services Committee, some of whom
    are here today, on our effort at getting at--after sexual
    assault in the military.
        But, today I want to talk about the Distributed Common
    Ground System (DCGS). As you all know, DCGS is about a 15-year
    project from concept to today, around $4 billion. The idea was,
    we were going to integrate hardware and software, and take all
    the decision items and put them in a package that would make it
    interoperable platforms in each branch, be able to do
    everything from intelligence, communication, to weather, all in
    one package with a bow around it.
        Your lab, last year, General Campbell, said that it was not
    operationally effective, not operationally suitable, and not
    survivable. Their words. In spite of that report--its
    strongest--by the way, the strongest criticism was around the
    intelligence capability, on top secret, which obviously is
    incredibly important to our fighters, that they know what we
    know about what danger there is in any environment they're in,
    based on our intelligence. We're spending an awful lot of money
    on intelligence, and the notion that we've spent this kind of
    money on this system, and we can't get that intelligence
    information to them in an effective way is, frankly,
    unacceptable.
        What really worries me is that acquisition, technology, and
    logistics (AT&L) went ahead and approved it, in December, for
    full deployment, calling it Release 1. Obviously, a budget
    justification for this was--for DCGS--was operating a networked
    environment at multiple security levels. I'm disturbed,
    confused as to how this could be deployed at this point.
    There's $270 million in the budget for 2014 for more money for
    DCGS. I--it has been reported, and I have personal awareness
    from folks, that units have filed urgent needs--the ones who
    have gotten DCGS have filed urgent needs--these are
    warfighters--saying, ``Please give us this different program
    that has additional capability,'' and the Army has resisted
    that.
        If we--if there is a program out there that is off-the-
    shelf and has this capability, in light of these programs and
    problems, shouldn't we be offering that to our units that are
    asking for it, who have used it and said, ``This is what we
    need right now''?
        General Campbell. Yes, ma'am. I mean, I've been a
    beneficiary of the operational needs statement, of rapid
    equipping fielding, as a division commander, as a brigade
    commander, and as a deputy division commander in both Iraq and
    Afghanistan. The ability to grab a piece of equipment off the
    shelf, provide that to the warfighter, is critical. So, I've
    been a beneficiary; it has saved lives.
        In the particular case you're talking about, on DCGS, on
    the TS, or the top-secret piece, that's a very, very small
    percentage of the capability of DCGS. I want to say less than
    10 percent. So having seen DCGS in combat myself as a
    commander, although I didn't make that decision with AT&L, I
    would support that 100 percent.
        The system you're talking about, I believe, is Palantir.
    DCGS takes over 500 feeds, as a system of systems, to be able
    to integrate the intel and fuse that. Palantir is just a
    complementary piece of it. It is a easy-to-read piece. If
    you're down at a small combat operating post and you just need
    a localized area, if you hook Palantir into DCGS, that'll give
    the young soldier on the ground a better picture, it will help
    him out, but he may be missing a lot of the intel feeds that
    DCGS would get him. So, if they use that by itself, you're
    going to put more people at risk. I'm telling you that, from my
    experience on the ground, that is the case.
        My son is a soldier in the 82nd. He's a specialist. He
    deployed to Afghanistan. He was one of the units that asked for
    DCGS--or his brigade did, not him, himself. All the units that
    have asked for Palantir, which is a complementary piece that
    fits into DCGS, the Army has been able to give that to them,
    and the training, for the most part. The ones that they did
    not--I believe there's about three units--there was an
    exception why they didn't, that either they didn't have enough
    time in country to get the training, they were in an area that
    it would not work, and then one I think a request was put in,
    and, again, they just couldn't get the equipment to them in
    time. But, all the units that asked for that, both the
    Secretary and the Chief wanted to make sure, if it was out
    there, we're going to give that to them, and we'll continue to
    work that piece of it.
        So, I'm a believer in DCGS. I'm a believer that Palantir
    and DCGS, if they continue to work together, that they can make
    that system more effective. But, Palantir is a very, very small
    part of DCGS. It does--you can't even compare the two; it's
    like apples and oranges.
        Senator McCaskill. Well, I'm not here to push anything.
        General Campbell. Right.
        Senator McCaskill. I'm here to get to the bottom of whether
    or not we should have a system that has been deployed without
    full capability after we spent $4 billion.
        General Campbell. Ma'am, DCGS has saved lives. I mean,
    that's----
        Senator McCaskill. I'm all for that, but I still want it to
    work and do everything that the budget justification said it
    would do.
        General Campbell. Absolutely.
        Senator McCaskill. Frankly, that intelligence piece that
    it's missing right now would also save lives.
        General Campbell. It would.
        Senator McCaskill. So that's what I'm focused on, how do we
    get to that place? What is the--what's it going to cost to get
    to that place? What is the problem? Is--was it a good idea for
    it to be pushed forward in December, even after the finding by
    your own lab that it was a problem?
        General Campbell. Ma'am, I believe it was a good decision.
    Again the top-secret piece is a very small piece. That's about
    a year-old data. Most of those corrections have been made to
    that system. I think we deploy a lot of systems into combat
    that we can incrementally improve, and we learn as they're in
    country, and we apply lessons learned, and we continue to add
    to that. If we didn't do that, we'd have people asking for
    stuff over there. If we wait for the 100 percent perfect
    solution, we'd put more lives at risk. So, I'm----
        Senator McCaskill. Is the intelligence piece fixed now?
        General Campbell. Ma'am, I don't have the exact answer of
    the particular problem you're talking about. I know we've done
    a lot of improvements on that. I can get somebody to come back
    and talk to you----
        Senator McCaskill. That'd be great.
        General Campbell.--specifically on the top-secret piece----
        Senator McCaskill. That'd be great. I'd love to learn
    more--we've had a little difficulty on this one. I wrote to
    General Odierno and Secretary McHugh about it. But, I'd really
    like to know about the integration and how the other systems--
    regardless of what it is, are there other systems off-the-shelf
    that can complement, in a way that's less expensive than going
    back and doing some reconfiguration of DCGS? Because, I mean,
    here's--the good news and the bad news is, after 6 years of
    this, you guys are given a job, you figure out how to do it.
    You just do.
        General Campbell. Ma'am, we'll get the folks over----
        Senator McCaskill. That's----
        General Campbell.--to come----
        Senator McCaskill:--that's what the military does. On the
    other hand, you are so good at getting the job done, it's very
    hard sometimes for you guys to say, ``Maybe we need to stop
    here and not go further with this, because maybe we're not
    going to get it where it needs to be in a cost-effective way.''
    In a way, I'm glad that happens, because that just means
    everybody has such a determination to get something done that
    we start, that no one wants to stop. I want to make sure that
    we're not so wedded to DCGS, that's been very expensive, that
    we're not complementing with whatever is available off-the-
    shelf.
        General Campbell. Yes, ma'am. No, we're with you, ma'am.
        Senator McCaskill. Okay.
        General Campbell.--I'll make sure we get the right folks
    here----
        Senator McCaskill. Okay.
        General Campbell.--to give you a more in-detail depth of
    it.
        Senator McCaskill. Thank you all for your service.
        Senator Shaheen. General, if you could also share that with
    the rest of the subcommittee, we would appreciate that.
        General Campbell. Yes, ma'am.
        [The information referred to follows:]

        The Distributed Common Ground System-Army (DCGS-A) is the Army's
    system for tasking, processing, exploiting, and disseminating
    intelligence at Coalition Releasable, Secret, and the Top Secret/
    Sensitive Compartmentalized Information (TS/SCI) levels. The DCGS-A
    program currently connects the Army to the Intelligence Community at
    the TS/SCI classification level through multiple fielded systems,
    including the Analysis and Control Element Block II, DCGS-A Enabled
    Tactical Exploitation System, DCGS-A Fixed sites, and the Guardrail
    Integrated Processing Facility. Consequently, there is no TS/SCI
    capability gap.
        However, the use of multiple programs to search across a wide range
    of intelligence information at the TS/SCI level is extremely
    inefficient and time-consuming. Moreover, the Secret and TS/SCI systems
    do not currently cross-talk, which further adds to a labor intensive
    process. The next release of the program, DCGS-A Release 2, will
    address this inefficiency by integrating intelligence from multiple
    sources and will be interoperable with the DCGS-A Release 1 software,
    currently operating successfully at the Secret level. Moreover, the
    common software platform in the DCGS-A program will simplify the
    necessary training and associated learning curve as analysts use the
    system.
        The DCGS-A software baseline 1.0 initial testing in May through
    June 2012 was not successful. However, it is important to note that the
    majority of the issues identified were within the TS/SCI software
    domain. Ninety-five percent of our operations in Operation Enduring
    Freedom are conducted below TS/SCI, where DCGS-A Release 1 successfully
    operates.
        Following this initial testing, the DCGS-A program moved rapidly to
    correct and retest each major issue prior to the December 2012 review,
    and deferred incorporation of the TS/SCI capability to the next release
    (Release 2). The Army also reconfigured the program to fully address
    other risks identified during the earlier testing. The Director,
    Operational Test and Evaluation (DOT&E) tested this modified
    configuration and concluded that the system would provide users
    capabilities at least as good as those provided by the versions of
    DCGS-A utilized by deployed units. This assessment, coupled with the
    Army's inclusion of a number of incremental upgrades within the
    modified configuration, led the DOT&E to concur with the Army's Full
    Deployment Decision (FDD). Furthermore, the Office of the Under
    Secretary of Defense (Acquisition, Technology and Logistics) reviewed
    the program on December 7, 2012, and approved DCGS-A for its FDD. The
    cost to conduct the additional testing ($2.3 million) was offset by
    program efficiencies.
        The DCGS-A acquisition strategy has always planned for an iterative
    delivery of software, and had already included plans to enhance the TS/
    SCI capability originally included within Release 1 through an improved
    version in Release 2. The deferral of all TS/SCI software
    implementation to Release 2 results in minimal impact to the DCGS-A
    program and long-term fielding approach. An operational test of Release
    2, to include planned full TS/SCI capability, will be conducted in the
    second quarter of fiscal year 2014. Release 2 will begin fielding in
    the fourth quarter of fiscal year 2014. The cost to develop, test, and
    integrate Release 2 is $38.9 million.

        Senator Shaheen. I want to follow up--we're going to do at
    least one more round. I have some additional questions. I'm
    sure that others here do, as well. But, I want to follow up on
    the issue that Senator Kaine was raising about furloughs,
    because--General Campbell, I was struck, in your testimony,
    when you talk about canceling the majority of depot
    maintenance, that--for third and fourth quarters--that that
    will result in the termination of an estimated 5,000 employees
    and a--not only a delay in equipment readiness for 6 divisions,
    but also an estimated $3.36 billion impact to the surrounding
    communities. Now, given what everyone has said about the
    potential for furloughs and--I'm assuming that we can multiply
    that impact across the Services and see that that will have a
    significant impact on the civilians that we count on to keep
    our forces ready and also the communities in which they work. I
    know it's an issue at the Portsmouth Naval Shipyard, because
    I've heard from shipyard workers there.
        So, I wonder if you all could talk about any mitigation
    plans that you have in place to prevent the furlough of
    civilian workers, and how hopeful you are that those will be
    successful.
        General Campbell. I'll go first, ma'am. Again, we value our
    great civilians; I know all the Services do. We could not do
    what we do every single day without their great support. I
    understand the uncertainty, the stress of furlough/no-furlough,
    21 days, 14 days, will put on them and their families. I would
    hope that we wouldn't have to put them through that.
        For the Army--and I think it's different for each Service,
    but for the Army, our biggest issue--we have a huge, huge hole,
    and it comes from our OCO piece, and it's about $2.8 billion
    after--if we get all the reprogramming that we think we may
    get. So, if you look at a $2.8-billion hole that we do not know
    how we're going to fill, and then you rank-order everything out
    there and kind of create a one-to-end list, and furloughs is on
    there, and you take a look and prioritize, again, to the
    warfight, to Korea, to global response force, where furloughs
    come, and it's below providing to the warfight. We just have to
    rack and stack that way.
        Out of our O&M account, it's a little over $500--about $530
    million for the Army. There's some RDA piece here, based on
    some other furloughs, that take it up into the neighborhood of
    $700-plus million for the Army. So, if we were to buy back $700
    million on furloughs, we would, again, eat up $700 million of
    readiness, potentially for next deployers going into
    Afghanistan, because that's why the Army really is looking at
    that very hard. We're working through the Service Secretaries
    and through the Joint Staff at the Office of the Secretary of
    Defense (OSD). This is not a place we want to go, but it's a
    place that we really have to look hard at based on the
    prioritization of everything else we have out there.
        Senator Shaheen. Well, based on some of the testimony, are
    you not concerned, all of you, that, in the short term, the
    savings from those furloughs are going to get added on in the
    long term because we're going to lose those skills and
    capabilities? Then, of course, the impact on maintenance from
    the equipment that's going--that's not going to get done? Is--
    have you figured out the long-term impact of that?
        General Campbell. Again, ma'am, we don't know what our
    budget is for 2014, as was discussed earlier by General
    Spencer, but we have, we've looked at all that. Again, we
    have--it's about prioritization, it's about risk, and so, we've
    taken a hard look at that. Right now, the decision--there has
    not been a decision made. I think this will be a department-
    level decision, not a Service decision. We do realize and
    understand that morale, productivity, all those things will
    continue to go down. It's not a decision that we'll take
    lightly.
        Senator Shaheen. Thank you.
        Admiral?
        Admiral Ferguson. Senator, I would say that we're--all of
    us are involved in a very productive dialogue with OSD on this
    issue. Secretary Hagel's made it clear that if we can do
    better, we will do better.
        From our perspective, furloughs impact mission readiness,
    and it's especially critical in our shipyards. It is critical
    as we look at the nuclear repair work that's done on our
    submarines and our aircraft carriers. There's a cascading
    effect that takes place that will reduce operational
    availability of those forces in the future. Second, if we
    attempt to recover later, there's a higher cost through the use
    of overtime and other means, at that point, to try and recover
    it.
        It directly affects several carrier availabilities in the
    Norfolk Naval Shipyard and submarine work up at Portsmouth. For
    us, we recognize each Service is in a different place, and we
    have to make--and we're compelled to consider the furloughs,
    because of the O&M reductions that we're seeing under
    sequestration. So we're looking at a range of options because
    of the impact on readiness that we see.
        Senator Shaheen. Are there other efforts that you all are
    undertaking, General Paxton, General Spencer?
        General Paxton. Senator, I think the other efforts--as
    General Campbell alluded to, this is--it's an issue of
    prioritization and rank order. None of these are palatable----
        Senator Shaheen. Right.
        General Paxton.--solutions. We would prefer not to do any
    of them. But, as you and Senator Ayotte brought up earlier,
    none of us, by our DNA--we're not in the business of saying no.
    So, we're going to, unfortunately, mortgage long-term readiness
    to guarantee short-term readiness, because we really think
    that's what we're in the business to do for the Nation, to be
    ready if the balloon went up tomorrow, each Service to a
    different degree.
        Admiral Ferguson brought up a great point; that when you
    look at CRs, sequestration, and OCO, each of the four Services
    is really in a unique place. We're not radically different, but
    the impacts of those three different fiscal constraints affect
    each Service differently. So, you're not going to get a one-
    size-fits-all. In the issue of furloughs, you won't get a one-
    size-fits-all. I think both the Chairman and the Secretary
    talked yesterday about the trade space they're trying to carve
    out between short-term fiscal gain, the long-term fiscal
    problem, and what's good for both the performance and sometimes
    good for the optics for the team. So, these are just tough
    decisions, ma'am.
        Senator Shaheen. Thank you.
        General Spencer?
        General Spencer. Senator, I really appreciate your
    question, because I think all the Services are in a similar
    place, in that 80 to 90 percent of our civilians don't work in
    the Pentagon, they work out in the field. I'm not sure
    everybody quite understands that.
        As an example, at our training bases, where we train pilots
    to--for pilot training--at several of our bases--I'll just pick
    one: Laughlin Air Force Base, in Texas--100 percent of the
    maintenance on those airplanes is performed by Civil Service
    civilians. So, if you talk about a furlough--I mean, that's a
    direct cut to the amount of airplanes they can provide and the
    amount of pilots we can train.
        I think--and, on top of that, if you add onto that--we've
    stopped overtime. We have a hiring freeze on. So, it's really a
    bad problem. We all are in a little bit different place. But, I
    think, as Admiral Ferguson said, we are trying to work through
    this as best we can with OSD to see what is possible. We're at
    a point where we're looking at our checkbook, if you will, and
    we have flying hours, furlough, depots--we're trying to balance
    all of that. The issue is--and I don't, frankly, separate--I
    don't draw any distinction between Civil Service--we call them
    civilian airmen--I don't draw any distinction between civilian
    airmen and readiness, because they are so key to readiness.
        So, trying to balance all that is really pretty difficult
    and is something that we're fighting every day.
        Senator Shaheen. Thank you.
        Senator Ayotte.
        Senator Ayotte. Thank you very much.
        I just wanted to follow up briefly, General Campbell, just
    to clarify one point that you made earlier. I think you said,
    at one point, the Army faces a $2.8 billion shortfall in O&M
    funds without OCO for 2013. Is it actually $7.8 billion? I just
    want to make sure that we get all the----
        General Campbell. It's $7.8 right now. Yes, ma'am.
        Senator Ayotte. Okay.
        General Campbell. It's fluctuating a little bit. We're
    looking, hopefully, to maybe get some reprogramming,
    potentially at $5 billion. That would put it at $2.8. That's
    not guaranteed at all. So, $7.8 is really the OCO shortfall.
        Senator Ayotte. Okay. I just wanted to make sure. Thank
    you.
        In fact, as we look at the testimony, certainly both of
    you, General Paxton and General Campbell, you've both testified
    that DOD will need 3 years of OCO funding post the last piece
    of equipment from Afghanistan. One of the things that I worry
    about is that--I sit on other committees here, and there have
    been a lot of people trying to claim that OCO money for other
    purposes. So it may be news to some people around here, outside
    of the Senate Armed Services Committee, that you're going to
    continue to need the OCO money for the reset, the 3 years.
        So, is it clear, the 3--I assume that the 3-years reset
    requirement, that's been made clear to OSD. So just making sure
    that everyone here within Congress understands that so that we
    don't try to designate that money for other purposes. This is
    absolutely critical to our readiness, not something we can
    skimp on or use for other purposes.
        General Campbell. Ma'am, I think we've been very
    consistent. I would tell you, I was a colonel, executive
    officer to the--our Chief of Staff, Pete Schoomaker, in 2003,
    2004, 2005. At that time, we were saying we needed OCO reset, 2
    to 3 years. As we've looked at it over the last several years,
    we've moved toward 3 years, as that equipment has been in
    country much longer than people may have thought, years ago.
        We've been able to mitigate a lot of that, based on the
    great support we've had from this committee and Congress with
    the OCO, to reset in theater, reset back here. As kind of--
    people think, as you bring down the number of forces, that the
    OCO should come down. If you take a look at Iraq, at the end of
    that, we came down very quickly. The price of bringing soldiers
    out increased.
        We've closed all of the small combat operation posts, all
    of those. The ones we have left to do to get out by the end of
    2014 are the big ones--the Bagrams, the Shanks--those type of
    things. It's going to cost a lot more. We expect that has to
    come out of OCO. What we're doing right now, because we already
    have an OCO shortfall, is, we're taking from our base to pay
    some of those bills, putting us farther into the hole.
        But, 3 years OCO for reset, yes, ma'am.
        Senator Ayotte. Could I follow up, as well, on this OCO
    issue, going forward, with respect to the Navy and the Air
    Force? Because I certainly understand you have some of the same
    issues with OCO, as I understand it. So, if you could make sure
    that that's clear to all of us.
        Admiral Ferguson. If you look at our base budget
    submission, compared to the OCO submission, we require,
    absolutely, the OCO funds both to sustain operations forward as
    well as depot maintenance during depot maintenance
    requirements. So, about 20 percent of the depot maintenance on
    aircraft and ships is funded in OCO for us. So, we're
    absolutely dependent on it.
        Senator Ayotte. Admiral, as we think about winding down in
    Afghanistan--obviously, but with what else is happening in the
    world--that 20 percent, is that something that we're going to
    have to incorporate in the base for the Navy going forward or
    is there a period of time? We've heard obviously from the
    Marine Corps and the Army, the 3-year period.
        Admiral Ferguson. Right. We've been on a path to reduce our
    dependence on OCO for that enduring maintenance. You've seen
    reductions in that from 2011 to 2013. We are going to need some
    period of transition as we come out of Afghanistan for us to
    make that migration, or an increase in the top line for the
    readiness accounts, for us to accommodate it.
        General Spencer. Senator, we're about in the same place as
    the Navy. We have a lot of our weapon systems support, depot
    support, if you will, in OCO that would, at some point, have to
    roll to the base. We also have about a 2- to 3-year--we think--
    about a 3-year period after we draw down Afghanistan, for
    reset, as well.
        Senator Ayotte. Well, I appreciate it--and that's certainly
    something we want to work on with you, because that is a core
    part of readiness. When we have a conflict, we're involved, the
    OCO piece goes well beyond just the immediate conflict, because
    we have to reset. Sir, I appreciate that and your giving us
    that.
        When you think about where we are right now--and I'm just
    going to ask you all a very straightforward question. What is
    it that most keeps you up at night with your responsibilities
    and the challenges you've faced?
        General Campbell. We have no certainty on where we're going
    with the budget. As we talked about earlier, you have three of
    them out there. You're going to ask us which one we would give
    you prioritization on. It's hard for us to answer that. We have
    great planners who'll continue to work it. As you said, it's
    not in our DNA. We're going to do the best we can. The problem
    we have is, we never say no. At some point, we're going to have
    to tell you, ``We can't do that. We can't continue to do more
    with less,'' and--or else we're going to put soldiers, marines,
    airmen, sailors' lives at risk. So, I'm worried that too many
    people here in Washington forget that we're in a fight.
        Senator Ayotte. Right.
        General Campbell. We're going to be there for several more
    years. Tonight there's 60,000 people--troops in Afghanistan
    that are in harm's way. We can never forget that. We can't
    forget the sacrifice of their families.
        Senator Ayotte. Also, less than 1 percent of our Nation
    defending----
        General Campbell. Yes, ma'am.
        Senator Ayotte.--defending the rest of us, gratefully.
    Thank you.
        Admiral Ferguson. I would echo that concern about the
    fiscal uncertainty. For us, it's coupled with the
    extraordinarily high operational tempo that we're operating the
    fleet at. Over the last decade, we've decreased the fleet size
    by about 10 percent, while our deployed presence has remained
    about the same. We're seeing squadrons and ships spending an
    average of about 15 percent more days away from home per year
    than they did 10 years ago. You're seeing deployment lengths go
    up, in terms of the average carrier. An amphibious-ready group
    will deploy, 7 to 8 months. Eisenhower came home, turned around
    and went back for an additional deployment. Several will go for
    9 months, and our ballistic missile defense ships are at 9
    months.
        This cumulative stress, with a very high OPTEMPO, fiscal
    uncertainty, and decreasing resources, from my perspective, is
    the one that I spend the most time thinking about.
        General Paxton. Yes, Senator Ayotte, three things, if I
    may.
        First, on your previous question on the OCO, like--as with
    the Army, we've been fairly clear and consistent about the
    first 2 to 3, and now closer to 3 years, OCO after the closure
    of operations and activities in Afghanistan. But, I would just
    caution that that's not time-driven, that's event-driven.
        So, you can actually finish something over there, and you
    can have the Pakistan ground lines of communication closed for
    15 months because of negotiations and movement of vehicles.
    That will further delay things.
        Senator Ayotte. Right.
        General Paxton. So, we are obviously obligated, in terms of
    the way we do our fiscal planning in Washington, or the way we
    do our recruiting and training, to look at things in quarters
    and years, but it's an event-driven issue instead of----
        Senator Ayotte. Obviously, we have a bilateral security
    agreement that has to be worked out----
        General Paxton. Right.
        Senator Ayotte.--and there are so many other contingencies,
    yes.
        General Paxton. Then, in terms of, Senator, the things that
    keep me up at night, as General Campbell said, the
    unpredictability of the fiscal environment is one thing. It's
    easy to get lulled into a sense that the only big thing we have
    going on is Afghanistan. There's a lot of unease and unrest and
    potential danger elsewhere around the world that you expect
    your soldiers, your sailors, your airmen, and your marines to
    be ready for. Indeed, in the case of the Marine Corps, where we
    think, since 1950-1952, that's our mandate. With the Navy,
    we're supposed to be most ready when the Nation's least ready.
        So, I worry that if we continue to focus on Afghanistan,
    then the gradual and seemingly negligible, but obviously
    compounding-over-time impact on home station training and the
    readiness of the next-to-deploy units, if the balloon goes up
    and you're relying on a home-surge capability, it's not going
    to be there. Unfortunately, the readiness--I worry less about a
    hollow force than I do about, particularly, broken units, and
    you won't see it until it's in the rearview mirror.
        General Spencer. Senator, along with my colleagues, I'm
    really concerned about the uncertainty of our budgets going
    forward. But, that's sort of a Pentagon worry for me.
        As I mentioned to you, I haven't always been a general. I
    started off as an E-1. So when I go visit a base, although we
    can't visit that much anymore, we don't have much money to
    travel, but I go right to those E-1s and E-2s and E-3s. I don't
    want to talk to the colonels.
        If you visit a base that's had a--one of their squadrons
    stood down, I mean, they look at us and say, ``What in the
    world is going on? What are we doing?''
        I'm going to be very honest. I mean, everyone at this table
    could get out of the military and go make more money. But,
    we're here for one reason; it is those troops that are out
    there getting the mission done, and that's all they want to do.
    As you mentioned, only 1 percent of the public are even
    eligible to serve, and they don't deserve that. I mean, all
    they want to do is come in and serve. They watch the news, and
    they know the threats as well as you do. We're going to--if we
    get called to go do something, we want to go trained and ready,
    we want the best equipment we can have, and we want to go over
    there and get the thing done and come back. That's all that
    troops want to do. We owe it to them, I think, to make sure
    that we're doing everything we can to get them the training and
    the equipment that they need. That's what keeps me up at night.
        Senator Ayotte. Thank you.
        Senator Shaheen. Thank you.
        Senator Kaine.
        Senator Kaine. General Spencer, just one question real
    quick to connect a couple of the points. It really picks up on
    what you just said.
        You talked about your maintenance folks are all civilians
    in Texas, a high number of civilians at Langley in Virginia.
    This tiered readiness structure, where you're standing down
    combat wings without saying more than you should--I mean, I--
    we're doing a lot of contingency planning for things like Syria
    or North Korea or Iran right now I would be fair to assume that
    the Air Force has pretty significant roles in all that
    contingency planning.
        General Spencer. Yes, sir.
        Senator Kaine. If any of those contingencies or, God
    forbid, more than one, were to come to pass, there would be a
    pretty immediate need for an awful lot of Air Force activity.
        General Spencer. That's correct.
        Senator Kaine. That depends upon training and maintenance
    and folks being ready to roll right at the moment.
        General Spencer. Yes, sir.
        Senator Kaine. Yes, that's what keeps me up at night. Thank
    you.
        Senator Shaheen. Thank you, Senator Kaine.
        Apropos your comments, General Campbell, about, ``At what
    point might we have to say no when the country comes and
    asks?''--one of the things that I'm not going to ask you all
    about, but I just want to put on for the record today, is, as
    you all know, we're changing over the system by which you
    report on readiness to this committee and to Congress. I know
    there have been some challenges in getting that new system up
    and running. I just think, given the comments that you and--all
    of you really have had, testifying about the readiness
    challenges, that it's incumbent on all of us to figure out how
    to get that reporting system done in a way that better reflects
    the real circumstances that you're experiencing so that
    Congress can better understand what's going on and, hopefully,
    be very responsive to that.
        I just want to follow up with one more question about
    energy because, as I said in my opening statement, it's one of
    the things that has significantly affected your budgets. While
    over the last 10 years, there's not been much fluctuation in
    DOD's fuel consumption, there has been tremendous volatility in
    the price of--the cost of fuel. I wonder if you all could talk
    about the link between readiness and fuel price volatility and
    how--what you think is going to suffer in this budget because
    of the additional cost of fuel, because of the increases.
        Admiral Ferguson, do you want to begin?
        Admiral Ferguson. We're very, very dependent on fuel, and
    we're facing a bill due to this recent price jump of about $450
    million that we have to resolve. A good rule of thumb for us
    is, every dollar change in the price of oil is $30 million to
    me and my readiness accounts. So, it ends up we have to curtail
    existing operations, start to curtail some other base operating
    support, and move the money within the account to cover it.
    We're going to be relying on a reprogramming action, I think,
    to cover some of these costs this year for that. But that's
    kind of our rule of thumb, when you see those dollar amounts
    change.
        Senator Shaheen. Thank you.
        General Spencer. Senator, the Air Force uses the bulk of
    the fuel in the DOD, and we've done a lot of work in that area.
    Since 2006, we've reduced our requirement by about 12 percent,
    which is actually 2 percent ahead of where we thought we would
    be.
        To sort of put a dollar on that, if we were to pay for the
    same amount of fuel today that we did in 2006, we're paying,
    now, a billion and a half less, based on those efforts. So,
    we've really taken a--we've gone to these metrics--for example,
    large airplanes, the ton-mile-per-gallon. I don't know if
    you've flown in a C-17 lately. I had that experience. I was up
    in the cockpit with the pilots, and a young--former C-17 pilot,
    here--and I was pleasantly surprised; as I was sitting there
    looking around in the cockpit, they were talking to each other
    about optimum fuel load, optimum speed, optimum altitude to get
    the best fuel efficiency. So, it is becoming a culture. We're
    really working hard at that.
        The thing that bothers me about sequestration, frankly, is
    we have about 220 energy projects in our facilities,
    sustainment, restoration, and modernization budget, or our
    installation support budget, that we can't get to now because
    we've had to cut that account by about 50 percent, and we're
    only doing emergency repairs. So, that's a problem. We aren't
    able to now fund a lot of those energy projects that we have.
        Senator Shaheen. Thank you.
        Any--General Campbell?
        General Campbell. Yes, ma'am. A lot of our fuel really is
    embedded in our OPTEMPO, and--but, I think we will see an
    increase in costs for U.S. Transportation Command or secondary
    destination transportation costs will come up that'll impact
    retrograde, as well.
        But, at a different level, at the tactical level, the
    investment that we're making in the operational energy piece--
    and you talked a little bit about that--whether it's battery
    packs or solar panels we put on soldiers to decrease the weight
    by 40 percent, by changing out--40 percent of the fuel we use
    in Afghanistan is in generators for the Army. By investing in a
    different type generator, by putting a different type fuel cell
    in at different forward operating bases, I mean, we really
    reduce the fuel dependability on the soldiers there. So, I
    think, at that level, we've been doing a lot of great work
    there to help out, and we'll continue to work that very hard.
        Senator Shaheen. Thank you.
        General Paxton, do you want to add anything?
        General Paxton. Yes, ma'am. It's the same thing. Because
    you get--fuel benefits will be seen tactically, operationally,
    and strategically. I mean, you'll have--you'll be able to lift
    more people further distances if you have less load to carry.
    You'll be able to have less dependency on the internal lines of
    communication for the amount of fuel you need to support an
    operation, and then you'll have greater flexibility to move
    strategically. So, we all pay attention to it at all three
    levels.
        Senator Shaheen. Yes. I think the story of what you all
    have done with addressing your fuel consumption is an amazing
    story that's really little known to the public, as a whole. It
    really provides a great model for where I think the private
    sector is going. They've figured out what you all have figured
    out, is that it's not just a cost to your bottom line, but
    there are other benefits, as well.
        So, I hope we're going to continue to tell that story
    because I think it's very impressive.
        So, thank you all. I don't have any further questions.
    Anyone else?
        Thank you very much for being here. We will continue this
    discussion and look forward to working with you.
        The hearing's adjourned.
        [Questions for the record with answers supplied follow:]

                 Questions Submitted by Senator Kelly A. Ayotte

                    IMPACT OF FISCAL YEAR 2013 SEQUESTRATION

        1. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, due to sequestration, the Department of
    Defense (DOD) is faced with an immediate reduction of $41 billion for
    the rest of fiscal year 2013. As you have discussed in your opening
    statements, the immediate impact of these cuts to the readiness of your
    forces will be severe and long lasting, creating a bow wave of reduced
    readiness and increased risk for years to come. Are additional funds
    budgeted for fiscal year 2014 in your operation and maintenance (O&M)
    accounts to recover from the sequestration cuts in 2013?
        General Campbell. No, the fiscal year 2014 President's budget (PB)
    request does not contain additional funds in our accounts to recover
    from the sequestration cuts in 2013. We developed the fiscal year 2014
    PB request prior to the start of sequestration on March 1, 2013.
        Admiral Ferguson. No. The fiscal year 2014 budget submission does
    not include additional funds to recover from all of the readiness
    impacts of sequestration in fiscal year 2013. For example, civilian
    furloughs, restructured ship construction, and maintenance schedules
    are irreversible once they are executed. Similarly, deployment
    schedules would preclude a fiscal year 2014 recovery of deferred fiscal
    year 2013 maintenance that was deferred by sequestration funding
    reductions. This deferred ship/aircraft maintenance will have to be
    funded and rescheduled at the next major maintenance availability.
    Recovery of this maintenance, in some cases, will take several years
    and could be at risk due to future funding levels.
        General Paxton. No, the Marine Corps did not budget additional
    funds in our operation and maintenance appropriation in fiscal year
    2014 to recover from sequestration cuts in fiscal year 2013. Despite
    the constrained funding resulting from sequestration, the passing of
    H.R. 933 mitigated most of the near-term operational impacts of
    sequestration in fiscal year 2013. The Marine Corps will meet near-term
    readiness commitments for deployed and next-to-deploy forces and will
    continue to rebalance to the Pacific and support the Marine Rotational
    Force Darwin and the Unit Deployment Program.
        While the Marine Corps is capable of meeting near-term readiness
    commitments in fiscal year 2013, we have taken risks in our long-term
    infrastructure sustainment and the unit readiness of our home station
    units. We cannot continue to sustain these levels of reductions in
    fiscal year 2014 without immediate impact to our deployed and next-to-
    deploy forces and our nondeployed crisis response forces at home.
        General Spencer. No. The Air Force submission for the fiscal year
    2014 budget request was compiled prior to sequestration and did not
    take into account sequestration impacts on readiness caused by an
    approximate $3 billion reduction to critical readiness accounts in
    fiscal year 2013.

        2. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, how will you reverse the damage caused in
    these 6 months?
        General Campbell. The Army's fiscal year 2014 President's budget
    does not include all the resources needed to recover from lost
    readiness in fiscal year 2013. The impact of sequestration reductions
    is an atrophy of readiness due to cancelled training, deferred
    equipment maintenance, and delayed procurements. Any new unfunded
    directed missions will also negatively impact our OPTEMPO accounts and
    our ability to build readiness for all except the top priority units of
    those next to deploy, rotating to Korea, or a part of the Global
    Response Force. Funding above the amounts requested in the fiscal year
    2014 President's budget would help buy back some of the lost readiness.
        The Army has significant unfunded Operation and Maintenance, Army
    (OMA) requirements needed to recover lost training and rebuild lost
    readiness. Adding funds to those OMA accounts and to procurement
    accounts would be a positive step toward rebuilding readiness in fiscal
    year 2014. This would not, however, address the need to restore the
    Army's base funding for Overseas Contingency Operations (OCO)-funded
    training, sustainment, and procurement that supported the Army at war
    for nearly 12 years. As more soldiers return to home stations, the
    restoring base funding is among the biggest challenges in an
    environment of continued fiscal uncertainty.
        As soon as we can provide forces with the resources they need to
    execute their full training strategies, they will be able to
    progressively build readiness for a broader range of missions. It takes
    an Army Brigade Combat Team (BCT) approximately a full year to reset
    from a deployment and train-up for another mission. Even with full
    funding, a unit's training progression is generally linear, which
    limits acceleration. Units must go through the steps of building
    proficiency from smaller units to larger formations, from easy
    conditions to ambiguous or varied conditions, from basic tasks to
    synchronization of more complex operations. A BCT is not considered
    fully ready for decisive action until it has completed a training
    rotation at a maneuver combat training center (CTC). The Army will
    manage limited training assets (like CTC rotations) as best we can to
    support the training progression of priority units. Even with
    additional funding for CTC rotations, units at squad-level proficiency
    at the end of fiscal year 2013 would not have time to adequately
    prepare and benefit from a CTC rotation early in fiscal year 2014.
        Admiral Ferguson. We continuously assess the damage of
    sequestration to our readiness and are in the process of determining
    the actions necessary to recover from its impact and the associated
    cost; however, we will not be able to reverse all of the effects of
    sequestration.
        For example, we cancelled the deployment of a second carrier strike
    group to U.S. Central Command in February and have cancelled other
    operational training and deployments to U.S. European Command, U.S.
    Pacific Command, and U.S. Southern Command. We have also reduced our
    parts purchases, lowering our ability to surge forces and maintain our
    readiness levels while deployed. Nondeployed readiness will continue to
    decline over the remainder of the fiscal year and can only be recovered
    at a higher funding level.
        For our deferred maintenance, deployment and maintenance facility
    schedules will result in some maintenance being deferred for several
    years or cancelled altogether. Where possible, we will attempt to
    recover the most critical maintenance requirements.
        Much of our reduction was focused on shore infrastructure, where we
    have both reduced base operating support and curtailed repairs. For
    example, we have deferred noncritical dredging in places such as San
    Diego, Pearl Harbor, Guam, and Japan. This dredging must be done in the
    future to maintain safe port operations, and will cost more when we do
    it. To remain within future budgets, other dredging projects will be
    deferred. This creates a continued rightward push of projects for what
    amounts to a one-time, nonrepeatable savings. As such, future budgets
    will not have the trade space available to address the readiness damage
    incurred. In fact, should sequestration continue and the Department is
    placed on a lower funding path, the readiness impacts will increase
    disproportionately, as shore infrastructure degrades and all the one-
    time cost deferments are used up.
        For our acquisition programs, we have reduced quantities and
    deferred payment of certain program costs into fiscal year 2014.
    Without an increase in funding, we will see higher unit costs, lower
    purchase quantities, and longer time to introduce new capabilities into
    the fleet.
        General Paxton. Despite the constrained funding resulting from
    sequestration, the passing of H.R. 933 mitigated most of the near-term
    operational impacts of sequestration in fiscal year 2013. The Marine
    Corps is capable of meeting all near-term readiness commitments in
    fiscal year 2013; however, we have taken risks in our long-term
    infrastructure sustainment and the unit readiness of our home station
    units by incurring significant reductions in facilities sustainment.
        These reductions in facilities sustainment are not sustainable and
    could degrade home station training and quality of life for marines and
    their families. As such, the Marine Corps' facilities sustainment in
    fiscal year 2014 fully funds the maintenance and upkeep of our vital
    facilities as we continue to strive to be good stewards of the
    infrastructure we have.
        An additional impact of sequestration and the uncertainty of the
    fiscal year 2013 budget during the first 6 months of the year is that
    the Marine Corps has been directed to furlough our civilian workforce.
    Although these furloughs have not yet begun, the continual uncertainty
    associated with lost pay damages our workforce's morale and the trust
    they have in the institution. This trust, once lost, cannot easily be
    recovered.
        General Spencer. We estimate between 3 to 6 months are needed for
    stood-down, combat-coded units to regain pre-sequester readiness
    levels. The Air Force estimates approximately a 10 percent increase in
    flying hours is needed in fiscal year 2014 above the current budgeted
    program for these stood-down units. In addition, there are weapon
    system sustainment costs and a multi-year recovery period from the bow
    wave created in fiscal year 2013.

        3. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, how does this affect the risk to our
    military members?
        General Campbell. Fiscal year 2013 budget uncertainty has delayed
    the Army's ability to refocus the training of contingency forces on
    conventional threats and required the Army to accept risk in meeting
    force deployment timelines in Combatant Commander Operational Plans.
    Only units with high-priority missions are able to fully prepare. Lower
    priority units will not be able to fully execute broader-focused
    training strategies since they must constrain training activity to the
    squad/crew/team level. These forces will require additional time to
    prepare for an unforeseen contingency, or will have to be deployed at
    less than full effectiveness. If units are deployed before being fully
    trained, operational commanders will have to use all available time to
    continue to prepare and assess whether mission requirements warrant the
    risks of force employment or offer alternatives. All military members
    would, however, have the personal skills needed to protect themselves
    with their individual weapon and equipment within context of any
    operation.
        Admiral Ferguson. In the near term, the fiscal year 2013
    sequestration has impacted our ability to train our people, maintain
    our existing force structure, and invest in future capability and
    capacity. While we have made every effort to protect family and sailor
    programs, these programs will be affected through reduced operating
    hours and availability of support.
        In addition to reducing the readiness levels of our nondeployed
    forces and bases, sequestration will mean lower levels of training and
    maintenance. It will place a premium on safety and risk management, as
    our sailors are asked to do more with resources that are being
    stretched and with less operational proficiency. We will carefully
    monitor the safety performance of the force to minimize risk.
        Over the long term, sequestration presents additional risk with
    respect to the capability of the force and its operational proficiency.
        General Paxton. Despite the constrained funding from sequestration,
    the passing of H.R. 933 mitigated most of the near-term operational
    impacts of sequestration in fiscal year 2013; the Marine Corps will
    meet near-term readiness commitments for deployed and next-to-deploy
    forces. In order to meet these commitments, the Marine Corps has been
    forced to reduce other accounts such as long-term infrastructure
    sustainment, Warrior and Family Support programs, and civilian
    personnel funding.
        The Marine Corps has taken risk in our long-term infrastructure
    sustainment by incurring significant reductions in facilities
    sustainment and thus degrades unit readiness of our home station units.
    Reductions in facilities sustainment are not sustainable in the long-
    term and will degrade home station training and quality of life for
    marines and their families.
        Although Warrior and Family Support Programs will be protected to
    the greatest extent feasible, the long-term effects of sequestration
    will impact these programs. The Marine Corps' approach to sequestration
    cuts will be focused on preserving programs that support the health and
    welfare of our marines, including the Wounded Warrior Regiment and
    Combat Operational Stress Control for those returning from Afghanistan.
    We will prioritize our resources to ensure we maintain these programs
    while taking risk in lower priority programs, such as our leisure and
    recreation programs.
        As a result of sequestration, the Secretary of Defense has directed
    implementation of up to 11 days of furlough, which will have a
    significant impact on not only the affected employees and their
    families, but also to uniformed marines and overall readiness of the
    Marine Corps. The impact of an 11 workday furlough in the final quarter
    of this fiscal year will result in an approximate 20 percent pay
    reduction for affected employees and a commensurate reduction in work.
    Of our civilian marines, 68 percent are veterans that have chosen to
    continue to serve our Nation, and of those, 16 percent have a certified
    disability. As a result of this loss of income, employee stress will
    increase, morale will decline, productivity will suffer, and the burden
    on military personnel will increase--all of which translates to reduced
    readiness.
        Civilian furloughs will also impact the Marine Corps bases and
    stations with a commensurate reduction in services to our personnel, as
    these civilians provide critical functions that support our marines,
    sailors, and their families. With a ratio of 1 civilian to every 10
    marines, the Marine Corps already maintains the leanest civilian
    workforce--each of these civilians are an integral part of our total
    workforce. Ninety-five percent of civilian marines work outside the
    headquarters and support critical missions at our depots, bases, and
    stations in a multitude of roles that serve our active duty personnel
    and their families. Missions such as depot maintenance and training
    range operations directly support the warfighter and the Marine Corps'
    mission to provide the best-trained and -equipped marines.
        Sequestration's impacts include degradation to infrastructure
    sustainment, Warrior and Family Support Programs, and civilian Marine
    contributions due to furloughs--all of which affects our All-Volunteer
    Force and reduces readiness.
        General Spencer. Sequestration diminishes ready forces for steady
    state and emergent requirements. Sequestration has introduced
    heightened risk to current and emergent missions due to fewer trained
    and ready aircrew, maintenance, and support personnel.

        4. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, do you believe your Service will have the
    opportunity to advocate for a higher budget in fiscal year 2015, if the
    impacts to readiness from sequestration become too severe?
        General Campbell. We expect we will have an opportunity to advocate
    for a higher budget in fiscal year 2015 informed by fiscal year 2013
    and fiscal year 2014 sequestration readiness impacts and DOD Strategic
    Choices Management Review (SCMR). However, as an Army, we share the
    sacrifice of all Americans during this period of fiscal uncertainty and
    must shape the Army of 2020 with an understanding of both our national
    security obligations and the fiscal constraints we all share.
        Admiral Ferguson. We will articulate the funding requirements
    necessary to meet the National Defense Strategy and to meet the
    readiness requirements of the force. Our planning and recommendations
    must be informed by the discretionary budget caps enacted into law.
        General Paxton. The fiscal year 2015 budget is still under
    development; however, given current expectations the Budget Control Act
    caps will remain in place during coming fiscal years, it is unrealistic
    to expect larger budgets in the out-years.
        General Spencer. While the Air Force has made every effort to
    minimize impacts to readiness and people, the bow-wave of reductions,
    deferments, and cancelations will challenge the strategic choices made
    in the fiscal year 2014 request.
        The exact impact of sequestration on readiness in fiscal year 2014
    and beyond is still being assessed. We do know that more reductions
    will drive additional risks to our readiness, force structure, and
    ability to modernize our aging aircraft inventory. As we navigate the
    uncertain way ahead, we will continue to work with Congress.

                               CIVILIAN FURLOUGHS

        5. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, as you may know, many of us in the Senate
    tried for more than a year to get firm details on the impact of defense
    sequestration with little cooperation from the administration. Now that
    we are experiencing sequestration, there is still some uncertainty
    regarding the real effects, including the need to furlough civilian
    employees. Not only do furloughs put our skilled DOD civilians in a
    difficult financial position, but I am concerned that furloughs will
    inflict serious damage to our military readiness. What would be the
    readiness impact of furloughs on your Service?
        General Campbell. Civilian furloughs will impact the training
    capability at the Army's training institutions. Most U.S. Army Training
    and Doctrine Command (TRADOC) and non-TRADOC schools use Department of
    the Army civilians as instructors and their absence will require the
    training institutions to implement less than optimal training
    alternatives, in part all or in. These alternatives could include
    extending the program of instruction time period and creating a student
    throughput delay or backlog, or accepting risk in training standards.
    Degraded administrative support such as resource management, quality
    assurance, and course program management may cause a disruption to
    student services. Furloughs will also degrade the capability to provide
    development of doctrine, training, concepts, and requirements
    determination.
        Civilian furloughs will impact Army training support system
    capabilities as well. Maintaining training support, range operations,
    and airfield operation capabilities will require qualified borrowed
    military manpower to replace DA civilian shortfalls. Some of these
    training support capabilities include the use and/or maintenance of
    simulators (flight and ground vehicle, weapon, tactical, etc.),
    distributed learning facilities, and training aids, devices, and
    simulations, for which soldiers are not normally trained in their
    Military Occupational Specialty (MOS) to use or maintain. Furloughs
    limit Army civilians available to offset reductions as incremental
    funding of Mission Command Training contracts reduce workforce
    available to support units' preparations for future training exercises.
        The impact on Combat Training Center (CTC) rotations is expected to
    be manageable. All CTCs will work with their respective DA civilians to
    schedule furloughs around CTC rotations. This will ensure training
    units are adequately supported while at the CTCs. Currently there are
    842 DA civilians working at the 4 different CTCs. The primary effect of
    furloughs will be a reduction in the ability of the CTC staff to react
    to changes during a rotation. While uniformed personnel can, in many
    cases, cover down on a furloughed civilian position, the military
    personnel often lack the technical expertise or required certifications
    necessary to perform certain tasks expeditiously. Furloughing civilian
    employees at our organic depots and arsenals will slow production,
    increase repair cycle time, and potentially result in increased
    carryover.
        Admiral Ferguson. Furloughs, combined with the ongoing hiring
    freeze and overtime restrictions, will have an extended impact on Fleet
    maintenance capacity. Over time, it is our assessment furloughs will
    impact the morale of our civilian workforce, our ability to retain that
    workforce, and our ability to recruit new skilled workers into Federal
    service.
        Specifically, the combination of the civilian hiring freeze,
    overtime restrictions, and 11 furlough days at the aviation depots is
    expected to delay the delivery of approximately 66 aircraft and 370
    engines and modules from fiscal year 2013 into fiscal year 2014.
    Recovery of the delayed work will drive additional unbudgeted costs.
        The naval shipyards have been exempted from the furlough but
    capacity is still being impacted by overtime restrictions and the
    hiring freeze. This capacity reduction will result in maintenance
    availability completion delays.
        If the hiring freeze continues through the end of fiscal year 2013
    it will prevent the naval shipyards from hiring approximately 1,030
    production artisans and engineers. Fiscal year 2013 capacity would be
    reduced by 87,000 mandays, resulting in a 2 month delay for 1 aircraft
    carrier maintenance availability; a 2 month delay for 1 ballistic
    missile submarine maintenance availability; and a total of 8 months
    delay for 2 fast attack submarine maintenance availabilities.
        General Paxton. The full impact of civilian furloughs has yet to be
    determined since they are not scheduled to begin until July 8, 2013.
    However, once furloughs are implemented, it is expected that the lost
    days of labor from our civilian marine workforce will begin to affect
    overall Marine Corps readiness in the last quarter of fiscal year 2013.
    Furloughs will not only affect the overall readiness of the total force
    in terms of morale, stress, and quality, it could more specifically
    cause undue and immeasurable readiness impacts to organizations and
    entities that rely heavily on civilian workforces to complete their
    mission.
        Civilian marines comprise the leanest appropriated funded civilian
    workforce within DOD, with only 1 civilian for every 10 marines. Less
    than 5 percent of civilian marines work at the Headquarters elements in
    the Pentagon; most work at bases, stations, depots, and installations.
    Veterans comprise 68 percent of civilian marines and 13 percent of
    these veterans have a certified disability. Many civilian marines, who
    have already gone 3 years without salary increases, will not be able to
    easily absorb the loss of income from furloughs. Prolonged budgetary
    uncertainty extending into fiscal year 2014--regarding furloughs--will
    increase employee stress, reduce morale, and could be detrimental to
    retaining quality civilian personnel.
        As mentioned, the effect on organizations and entities that rely on
    a proportionally heavy civilian workforce may be significant. For
    instance, productivity at maintenance depots and Fleet Readiness
    Centers (FRCs) will suffer because of reduced labor hours.
    Approximately 20 percent of the remaining fiscal year 2013 depot and
    FRC organic capacities will be lost, resulting in requirements to shift
    post-combat reset workload completions into fiscal year 2014 and
    beyond. Equipment shortages are the biggest readiness detractors for
    the Corps and furloughs will exacerbate that problem. Aviation
    readiness is already decremented due to aircraft, engines, and
    components awaiting depot work. The furlough of civilian employees at
    FRCs is anticipated to create up to a 1-month delay for aircraft,
    engine, and component deliveries in the remainder of fiscal year 2013.
    These delays would affect the aircraft materiel readiness condition and
    availability for training of F/A-18, AV-8B, CH-53E, MV-22B, AH-1, and
    UH-1 aircraft. Should civilian furloughs continue into fiscal year
    2014, the impacts would be extended across the operating forces,
    Reserves, and the supporting establishment. The impacts to depots and
    FRCs will result in deferred inductions, degraded overall materiel
    condition, reduced aircraft and equipment availability for training,
    and increased risk to safety and combat readiness. Units with aircraft
    inducted into the maintenance cycle would be impacted first, followed
    by training and operational units that would be forced to defer
    maintenance actions and training and readiness requirements that are
    imperative to producing qualified aircrews and being deployment-ready.
        General Spencer. The Air Force is comprised of over 170,000
    civilian employees (one third of the entire Air Force) with the vast
    majority currently expecting to be impacted by furloughs. The entire
    Air Force will be affected. The most significant impact will be felt in
    those areas that rely primarily on civilians. For example, the depot
    workforce is 77 percent civilian, and the depot role is vital to
    aircraft sustainment and modernization. Civilians also contribute
    invaluable expertise in the staffs at major commands and headquarters
    and their absence will further increase the workload on our uniformed
    force.

        6. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what will be the impact to the morale of
    our civilian employees?
        General Campbell. On January 10, 2013, the Deputy Secretary of
    Defense directed the components to take necessary steps to mitigate the
    impact of a financial shortfall, which resulted in an immediate freeze
    on civilian hiring. Not only does this freeze hinder the civilians'
    ability to support the soldier and the mission, it also limits the
    promotional opportunities for our workforce. The Army has also released
    temporary employees and allowed term appointments to expire, which only
    places increased workload and demands on our existing workforce. These
    actions, in addition to the continued freeze on civilian pay, the
    limitations placed on overtime, the discontinuance of monetary awards,
    and the implementation of furlough are having significant impact on the
    morale of our civilian workforce, particularly because it impacts their
    financial stability.
        All of these actions are a reflection of budgetary constraints and
    in no way reflect the outstanding quality and performance of the Army
    civilian professionalism.
        Admiral Ferguson. Furloughs present an immediate challenge to our
    workforce in terms of morale, retention, and recruiting. Navy civilians
    enable the Navy and Marine Corps team to operate forward around the
    globe, as the majority directly supports the readiness of our force.
    DOD will execute up to 88 hours, or approximately 11 furlough days, by
    the end of the fiscal year. Civilian employees will incur a 20 percent
    reduction in their pay due to the furlough. In addition to previous pay
    freezes, this adversely affects morale, will likely result in
    recruiting and retention challenges of skilled personnel in the future,
    and will impact the performance of the workforce overall. Through
    exemptions and other actions, we have attempted to reduce the impacts
    to readiness and operations where possible and consistent with DOD
    policy.
        General Paxton. Our civilian marines support the mission and daily
    functions of the Marine Corps and are an integral part of our Total
    Force. Serving alongside our marines throughout the world, in every
    occupation and at every level, our civilian appropriated funded
    workforce remains the leanest of all Services, with a ratio of 1
    civilian to every 10 active duty marines. More than 93 percent of our
    civilians do not work in Headquarters' elements in the Pentagon; they
    are at our bases, stations, depots, and installations. Sixty-eight
    percent are veterans who have chosen to continue to serve our Nation;
    of those, a full 13 percent have a certified disability.
        The potential human impact associated with furloughing our civilian
    marines is significant. While we would like to believe that a
    discontinuous furlough will reduce the impact on our employees, most
    will not be able to easily absorb this sudden loss of income, even over
    a period of several months. With prolonged budgetary uncertainty,
    including the possibility of additional furloughs in fiscal year 2014,
    employee stress is increasing, civilian morale is declining, and at
    some point productivity will begin to suffer.
        General Spencer. We have a dedicated and professional civilian
    force that serves our Nation proudly. However, our civilian employees
    are concerned about lost pay due to the furlough and potential future
    reductions due to sustained budget cuts; all of this negatively impacts
    the morale of our civilian airmen.

        7. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, within your current budget constraints,
    could your Service find a way to avoid civilian furloughs without
    taking unacceptable risks in other budget areas?
        General Campbell. The current budget constraints do not permit us
    to avoid a civilian furlough without taking unacceptable risks in
    readiness. From the outset of the budgetary uncertainty, the Army
    identified significant shortfalls in its OMA account. The shortfalls
    were due to the effect of the Continuing Resolution, the impact of
    sequestration, and the higher than expected costs related to Operation
    Enduring Freedom.
        On March 1, sequestration went into effect across the Federal
    Government. DOD's budget was reduced by $37 billion, including $20
    billion in the O&M accounts that pay many of our civilian workers.
        Because our wartime budget is also subject to sequestration, we
    must utilize funds originally budgeted for other purposes in order to
    provide troops at war with every resource they need. These factors lead
    to a shortfall in all Defense O&M accounts of more than $30 billion--a
    level that exceeds 15 percent of the DOD budget request, with fewer
    than 6 months left in the fiscal year in which to accommodate this
    dramatic reduction in available resources. At this time, we simply do
    not have a lot of flexibility to account for the large shortfalls in
    O&M dollars. However, we will continue to closely monitor funding for
    the remainder of the fiscal year, and if the funding situation permits,
    we will avoid or end furloughs.
        Admiral Ferguson. Yes. The Department of the Navy presented fiscal
    options to avoid the necessity of furloughs for the Navy and Marine
    Corps. These options were considered but not authorized by DOD.
        General Paxton. Given current funding levels, the Marine Corps
    could avoid civilian furloughs. However, because of the overall funding
    deficiencies of DOD, the Secretary of Defense has directed
    implementation of furloughs. Implementing furloughs will have a
    significant impact to Marine Corps readiness.
        General Spencer. There are limited options to absorb sequestration
    reductions of this magnitude during the year of execution. The Air
    Force has maximized every option to minimize the risk to readiness
    which includes our civilians. The Air Force is highly leveraged and
    furloughing our civilians is not a desirable option, but unfortunately
    necessary.

        8. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what is the total projected savings in
    2013 for your Service for both a 14-day and a 7-day furlough, and could
    that savings be found elsewhere?
        General Campbell. Based our current estimates we believe that we
    could save approximately $726.5 million across all appropriations with
    a 14-day furlough. If we are directed to reduce the number of furlough
    days to 7, our savings would be reduced to approximately $363.3
    million. Continuing to reduce the number of furlough days will force us
    to assume increasing risk in other parts of the budget, such as taking
    further reductions to unit training or reducing services our
    installations provide to our soldiers and their families. This would
    also be on top of the emerging OCOs shortfall of approximately $8.3
    billion with which we are currently grappling. We planned to use the
    furlough as a tool of last resort, and I think we have reached that
    point. We could find the savings elsewhere, but based on Army
    priorities, that would force us to assume additional and unacceptable
    risk in our readiness accounts, further affecting our ability to
    provide ready forces in the case of emerging contingencies.
        Admiral Ferguson. The most current estimates of projected savings
    are for the 11-day furlough announced by the Secretary of Defense on 14
    May 2013. Estimated savings in Operation and Maintenance, Navy and
    Operation and Maintenance, Navy Reserve are approximately $130 million
    and $2 million, respectively.
        For Navy, savings could be found elsewhere within the Department of
    the Navy. However, Department-wide civilian furloughs were directed on
    14 May 2013 to prioritize military missions and minimize adverse
    mission effects, and subject to that criterion, to ensure reasonable
    consistency and fairness across the Department.
        General Paxton. Per the letter dated 14 May 2013, the Secretary of
    Defense has directed up to 11 days of furlough for all DOD civilian
    employees with limited exceptions. The Marine Corps projects the
    savings from an 11-day furlough to be approximately $58 million and
    will implement furloughs as directed. The passage of H.R. 933 helped
    mitigate some of the near-term impacts of sequestration. Consequently,
    the Marine Corps could prioritize its available funding to meet near-
    term readiness commitments for deployed and next-to-deploy forces,
    while taking risk in other areas to otherwise find the $58 million that
    would be made available by furlough.

        General Spencer. The savings associated with furlough are $409
    million for 14 days and $205 million for 7 days.
        The Air Force has taken every action to live within our reduced top
    line and reduce the adverse impact sequestration is having on
    readiness. The Air Force has stood down flying squadrons to include
    one-third of combat coded squadrons, deferred depot inductions, and
    deferred critical facility projects as well as implemented a hiring
    freeze. Unfortunately, after taking all these actions, we still had to
    make the extremely difficult decision to furlough civilians for 11
    days.

                      LONG-TERM IMPACTS FROM SEQUESTRATION

        9. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, the President's budget for fiscal year
    2014 does not take into consideration the potential impact of the
    sequestration of $53 billion to defense accounts in 2014. What is your
    assessment regarding the readiness impact of a continuation of
    sequestration in 2014?
        General Campbell. If sequestration continues into fiscal year 2014,
    the Army will potentially have to reduce the ground OPTEMPO and flying
    hour programs. This can impact the Army's ability to provide units
    trained for decisive action by limiting the training events at home
    stations and combat training centers. Less training will reduce
    required repairs of depot level reparable components and the workforce
    required to make those repairs. The Army may curtail units scheduled to
    train at the combat training centers or send only portions of those
    units, limiting the benefits of world class opposing forces, after
    action reviews by observer controllers, and an operational environment
    with training in multiple environments against hybrid threats. The Army
    will be challenged to prepare for a variety of contingencies and may
    require more time to prepare forces for deployment.
        Potential reductions could also impact the Army's ability to
    execute home station individual and collective gunnery training by
    limiting the availability of ranges and deferring replacement of
    damaged targets. Range modernization efforts may be impacted as several
    projects will not have unexploded ordnance clearance completed. Reduced
    mission training complex capabilities will limit battalion, brigade,
    division and corps staff proficiency on their mission command systems
    in a realistic environment. Training support centers may not be able to
    provide instructor/operator support for numerous complex virtual
    trainers, including flight simulators and medical simulation training.
        Potential reductions may impact the Army's institutional training
    capability to conduct Initial Military Training and critical functional
    skills training. This could result in a backlog of recruits awaiting
    training at the institutional training base. Soldiers may not receive
    duty-specific skill training required by the soldier's unit, thus
    contributing to degraded unit readiness. Additionally, funding
    reductions may impact the Army's ability to develop agile and adaptive
    leaders by reducing the opportunities for Professional Military
    Education.
        Significant reductions to training accounts will reduce jobs for
    Department of the Army civilians and contractors who maintain and
    operate key training enablers to include ranges, mission command
    training centers, training aids, devices, simulators, and simulations.
        Admiral Ferguson. While we have not yet completed our assessment of
    the potential readiness impacts of sequestration in fiscal year 2014,
    we expect to take similar actions as those in fiscal year 2013 to
    address an estimated $5.7 billion reduction to our Operation and
    Maintenance Navy accounts.
        These potential actions include:

             Reductions in operational deployments;
             Reductions in readiness levels of nondeployed units;
             Deferred or reduced maintenance availabilities for
            ships and aircraft;
             Reduced base operating support and improvements in
            shore infrastructure; and
             Reductions to investment accounts.

        Our priorities for O&M, Navy expenditures in fiscal year 2014 will
    be:

             Fund our must pay bills;
             Fund fleet operations to meet adjudicated combatant
            commander requirements;
             Provide required training, maintenance, and
            certification for next-to-deploy forces;
             Fund necessary base operations and renovation projects
            to support training and operations; and
             Sustain sailor and family support programs

        By the end of this fiscal year, two-thirds of our nondeployed ships
    and aviation squadrons will be less than fully mission capable and not
    certified for major combat operations. Should sequestration continue
    through fiscal year 2014, this percentage will likely increase.
        General Paxton. DOD and the Marine Corps are still examining the
    implications of sequestration continuing into fiscal year 2014. Budget
    complexities and a lack of details pertaining to sequestration and/or a
    Continuing Resolution in fiscal year 2014 make it difficult to predict
    detailed impacts. The Marine Corps maintains the long-term health and
    readiness of its force by balancing resources across five broad
    pillars: high quality people, unit readiness, capability and capacity
    to meet requirements, infrastructure sustainment, and equipment
    modernization. Maintaining balance across all five pillars is critical
    to achieving and sustaining Marine Corps readiness. Given the impacts
    of sequestration for fiscal year 2013, the Corps ensured its short-term
    readiness with actions such as transferring facilities sustainment
    funding, delaying military construction (MILCON) to support operations,
    and delaying equipment maintenance and modernization. These actions
    created an imbalance across the readiness pillars that resulted in both
    near- and far-term readiness shortfalls and concomitant impacts with
    respect to long-term readiness. Sequestration in fiscal year 2014 would
    underfund the readiness needed to execute the National Defense
    Strategy, potentially leading toward a hollow force.
        The Marine Corps is drawing down to an Active Duty end strength of
    182,100 by the end of fiscal year 2016, at the rate of no more than
    5,000 a year, and it will be retaining the Reserves at 39,600 marines.
    This will allow it to retain the capacity and capability to support
    steady state and crisis response operations; complete the mission in
    Afghanistan; provide sufficient dwell times; and keep faith with its
    marines. Further force reductions, due to sequestration, would cause
    the Corps to reevaluate its role in the National Defense Strategy and
    break faith with its marines.
        The Marine Corps anticipates a significant reduction in deployable
    readiness due to reduced funding for the flying hour program, to the
    extent that by fiscal year 2015, approximately half of all aviation
    squadrons would not meet the minimum requirements for combat
    deployment. Reductions in training and maintenance would put more than
    50 percent of tactical units at unacceptable levels of readiness for
    deployment. The curtailment of training and maintenance due to
    sequestration would further degrade the readiness of nondeployed crisis
    response forces. Nearly half of the Marine Corps' ground units and one-
    third of its aviation combat units would remain below acceptable
    readiness levels. Sequestration would also have adverse impacts on the
    availability and combat readiness of amphibious and maritime
    prepositioning ships, which are a foundational requirement for training
    and executing expeditionary force presence and amphibious force
    projection capabilities. Sequestration would decrease Service, joint,
    and combined training opportunities since the Corps would be forced to
    reduce its scale, scope, and participation in operations and exercises
    for geographic combatant commanders.
        Facilities sustainment reductions in fiscal year 2014 and beyond
    due to sequestration would be unsustainable, hinder the rebalance to
    the Pacific, degrade training range sustainment, and reduce the quality
    of life for marines and their families. Equipment shortages are a
    principal readiness detractor for the operating forces and
    sequestration's impacts on depots would adversely impact the
    modifications, critical survivability and mobility upgrades, and
    modernization programs for equipment. Sequestration also would
    significantly delay the modernization programs essential to our medium-
    and long-term operational readiness.
        General Spencer. Sequestration has created significant readiness
    shortfalls and reduced our ability to meet future steady state and
    surge requirements. A sequestered 2014 budget will exacerbate those
    impacts. Examples of current sequestration impacts include stood-down,
    combat-coded flying units, postponement of field-level maintenance and
    depot inductions, reductions in depot production, and interruption of
    aircraft modification and modernization efforts. Under ideal budget
    scenarios, achieving full mission readiness goals will be a multi-year
    effort beyond what is achievable in fiscal year 2014. If fiscal year
    2014 is sequestered, readiness recovery is not possible and the
    downward readiness trend will continue.

        10. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, if sequestration is allowed to occur in
    2014, in your professional military judgment, what changes to our
    National Military Strategy (NMS) will have to occur for your Service?
        General Campbell. If sequestration occurs, we will necessarily have
    to revisit the Defense Strategic Guidance announced by the President in
    January 2012. Our existing service strategy to support the Defense
    Strategic Guidance was predicated on pre-sequestration manning of the
    force, but did include force reductions mandated under the 2011 Budget
    Control Act. The drastic cuts necessitated by sequestration will
    warrant a comprehensive review of the defense strategy. That process is
    underway as part of the SCMR directed by Secretary Hagel on 15 March
    2013.
        Admiral Ferguson. Under this scenario, Navy would be unable to meet
    the National Defense Strategy as presently written. We are working with
    the Office of the Secretary of Defense (OSD) in the SCMR to inform the
    major decisions that must be made in the decade ahead to preserve and
    adapt our defense strategy, our force, and our institutions under a
    range of future budgetary scenarios. The results of this review will
    frame the Secretary's fiscal guidance and will ultimately be the
    foundation for the Quadrennial Defense Review due to Congress in
    February 2014.
        General Paxton. DOD and the Marine Corps are still examining the
    implications of sequestration continuing into fiscal year 2014. Under
    sequestration, we may be forced to do less, but that does not
    invalidate the guidance provided in our NMS. Some of our customary
    `ways' and `means' may have to be revisited, because we will have less
    capacity, but sweeping changes to strategic goals (or `ends') do not
    seem to be warranted. The Marine Corps does not believe a radical
    departure from the broad goals articulated in our current strategic
    guidance is necessary until we have exhausted every effort to achieve
    these goals within a reduced resource environment.
        As the Nation's principal crisis response force, maintaining a high
    state of readiness across the entire force is necessary in order to
    ensure the security of our country's global interests. This readiness
    comes at a cost and the high readiness of our deployed forces has come
    at the expense of the Corps' nondeployed unit readiness. To maintain
    the high readiness of our forward deployed forces, we have had to
    source equipment globally while sourcing personnel for Afghanistan and
    other emerging threats from our nondeployed units. These nondeployed
    forces' principal readiness challenge is the reduced availability of
    equipment at home stations with which to outfit and train units, due
    largely to portions of their equipment being redistributed to support
    units deployed forward. The manning of home station units also suffers
    due to the need to meet enhanced personnel requirements for deploying
    units, Joint Force Individual Augments, and Security Force Assistance
    Teams. The primary concern with the out-of-balance readiness of the
    Corps' operating forces is the increased risk it creates in the timely
    response to unexpected crises or large-scale contingencies, since these
    nondeployed forces will likely be the responders.
        General Spencer. With the fiscal year 2013 sequestration ongoing,
    we have already noticed serious concerns with respect to readiness and
    response capability. We have stood down a number of our frontline
    active-duty fighter and bomber squadrons and have made unavoidable cuts
    in other operations and training budgets, and to our modernization
    accounts. As we continue into fiscal year 2014--if sequestration
    continues--I believe we will be challenged to provide a ready joint
    force with the proper capabilities and capacities to execute the NMS.
    Our senior leaders will be faced with some very difficult choices.

        11. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, please provide a detailed assessment of
    the impacts to military readiness and capabilities if sequestration
    continues into 2014.
        General Campbell. If sequestration continues into fiscal year 2014,
    the Army will potentially have to reduce the ground OPTEMPO and flying
    hour programs. This can impact the Army's ability to provide units
    trained for decisive action by limiting the training events at home
    stations and combat training centers. Less training will reduce
    required repairs of depot level reparable components and the workforce
    required to make those repairs. The Army may curtail units scheduled to
    train at the combat training centers or send only portions of those
    units, limiting the benefits of world class opposing forces, after
    action reviews by observer controllers, and an operational environment
    with training in multiple environments against hybrid threats. The Army
    will be challenged to prepare for a variety of contingencies and may
    require more time to prepare forces for deployment.
        Potential reductions could also impact the Army's ability to
    execute home station individual and collective gunnery training by
    limiting the availability of ranges and deferring replacement of
    damaged targets. Range modernization efforts may be impacted as several
    projects will not have unexploded ordnance clearance completed. Reduced
    mission training complex capabilities will limit battalion, brigade,
    division and corps staff proficiency on their mission command systems
    in a realistic environment. Training Support Centers may not be able to
    provide instructor/operator support for numerous complex virtual
    trainers, including flight simulators and medical simulation training.
        Potential reductions may impact the Army's institutional training
    capability to conduct Initial Military Training and critical functional
    skills training. This could result in a backlog of recruits awaiting
    training at the institutional training base. Soldiers may not receive
    duty-specific skill training required by the soldier's unit, thus
    contributing to degraded unit readiness. Additionally, funding
    reductions may impact the Army's ability to develop agile and adaptive
    leaders at all levels by reducing the opportunities for Professional
    Military Education.
        Significant reductions to training accounts will reduce jobs for
    Department of the Army civilians and contractors who maintain and
    operate key training enablers to include ranges, mission command
    training centers, training aids, devices, simulators, and simulations.
        Admiral Ferguson. Should sequestration continue in 2014, Navy would
    continue to apply the general principles we used to assess readiness
    options in fiscal year 2013. Based upon the CNO's three tenets,
    ``Warfighting First, Operate Forward, and Be Ready,'' Navy would have
    the following impacts:

             Navy forces on the ground engaged in combat operations
            and those forces forward providing direct support to combat
            operations would be at full readiness.
             Navy forces scheduled to deploy or forward deployed
            would be provided the resources to complete essential
            maintenance and training to meet their deployment date. The
            number of deployed forces would decrease.
             Beyond these first two criteria, hard choices would
            again be required with respect to the readiness of the
            remainder of the force.
             These choices would include:

                     Prioritizing support for the fiscal year 2014
                    Global Force Management Allocation Plan (GFMAP),
                    cancelling additional deployments;
                     Reducing operating funding (Flying Hours/
                    Steaming Days) for forward deployed forces not directly
                    engaged in combat operations or supporting combat
                    operations, reducing the level of operations by forward
                    forces;
                     Deferring ship depot and intermediate
                    maintenance below that is required to efficiently
                    sustain expected service life. Ships deploying in
                    fiscal year 2014 or fiscal year 2015 would be
                    prioritized, but maintenance deferred would need to be
                    completed later at a higher cost;
                     Deferring induction of airframes and engines
                    for aviation depot maintenance, building a significant
                    backlog into future years, and increasing cost;
                     Reducing training, technical support, repair
                    parts, and admin support for forces not scheduled to
                    deploy in fiscal year 2014 or early fiscal year 2015;
                     Imposing a hiring freeze or conducting limited
                    furloughs of the civilian workforce. We would also
                    assess the necessity to conduct a reduction in force;
                     Continuing deferral of facility sustainment
                    and modernization, prioritizing projects involving
                    life, health and safety, critical infrastructure,
                    mission critical shipyard projects, and high return
                    energy projects. Overall condition of shore
                    infrastructure will deteriorate; and
                     Reducing quantities and cancelling selected
                    procurement programs.

        General Paxton. DOD and the Marine Corps are still examining the
    implications of sequestration continuing into fiscal year 2014. Budget
    complexities and a lack of details pertaining to sequestration and/or a
    Continuing Resolution in fiscal year 2014 make it difficult to predict
    detailed impacts. The Marine Corps maintains the long-term health and
    readiness of its force by balancing resources across five broad
    pillars: high quality people, unit readiness, capability and capacity
    to meet requirements, infrastructure sustainment, and equipment
    modernization. Maintaining balance across all five pillars is critical
    to achieving and sustaining Marine Corps readiness.
        Given the impacts of sequestration for fiscal year 2013, the Corps
    ensured its short-term readiness with actions such as transferring
    facilities sustainment funding, delaying MILCON to support operations,
    and delaying equipment maintenance and modernization. These actions
    created an imbalance across the readiness pillars that resulted in both
    near- and far-term readiness shortfalls and concomitant impacts with
    respect to long-term readiness. Sequestration in fiscal year 2014 may
    underfund the readiness requirements necessary to execute the National
    Defense Strategy, potentially leading toward a hollow force.
        The Marine Corps is drawing down to an Active Duty end strength of
    182,100 by the end of fiscal year 2016, at the rate of no more than
    5,000 a year, while retaining a trained Reserve component of
    approximately 39,600 marines. This force structure balance will enable
    your Corps to retain a capacity and capability to support steady state
    and crisis response operations; complete the mission in Afghanistan;
    provide sufficient dwell times; and keep faith with our marines.
    Further force reductions due to sequestration may cause the Corps to
    break faith with its marines and have to revisit its role in the
    National Defense Strategy because we have less capacity (ways and
    means) to support the strategic goals (ends).
        The Marine Corps anticipates a significant reduction in deployable
    readiness due to reduced funding for the flying hour program to the
    extent that by fiscal year 2015, approximately half of all aviation
    squadrons would not meet the minimum requirements for combat
    deployment. Reductions in training and maintenance will put more than
    50 percent of tactical units at unacceptable levels of readiness for
    deployment. The curtailment of training and maintenance due to
    sequestration would further degrade the readiness of nondeployed crisis
    response forces. Nearly half of the Marine Corps' ground units and one-
    third of its aviation combat units would remain below acceptable
    readiness levels. Sequestration would also have adverse impacts on the
    availability and combat readiness of amphibious and maritime
    prepositioning ships, which are a foundational requirement for training
    and executing expeditionary force presence and amphibious force
    projection capabilities. Sequestration would decrease Service, joint,
    and combined training opportunities, as the Corps may be forced to
    reduce its scale, scope, and participation in operations and exercises
    with the geographic combatant commanders.
        Facilities sustainment reductions in fiscal year 2014 and beyond
    due to sequestration would be unsustainable, hinder the rebalance to
    the Pacific, degrade training range sustainment, and reduce the quality
    of life for marines and their families. Equipment shortages are a
    principal readiness detractor for the operating forces and
    sequestration's impacts on depots would adversely impact the
    modifications, critical survivability and mobility upgrades, and
    modernization programs for equipment. Sequestration would also
    significantly delay the modernization programs essential to our medium-
    and long-term operational readiness.
        General Spencer. If we do not receive sufficient funding in fiscal
    year 2014, we may have to rotationally stand down flying units, or fly
    them at a reduced rate, similar to the actions we've taken in fiscal
    year 2013. This sequester-induced non-combat ready posture of a portion
    of our fleet will impact our ability to fill our operation plan and
    Secretary of Defense-ordered missions, continue to degrade our depot
    maintenance and modernization programs, and will significantly erode
    our training and force development efforts creating long-term readiness
    shortfalls. Detailed assessments are ongoing and will require a
    classified venue for presentation.

                                PUBLIC SHIPYARDS

        12. Senator Ayotte. Admiral Ferguson, you state in your written
    testimony regarding the impact of sequestration, that, ``In fiscal year
    2014, we will reduce intermediate-level ship maintenance and defer 8 of
    33 planned depot-level surface ship maintenance availabilities.''
    Previously, the Navy announced the need to defer essential maintenance
    that allows our public shipyards to provide our combatant commanders
    the well-maintained fleet they require to protect our country. Can you
    explain how the Navy plans to minimize the disruption sequestration
    will cause the workforce at our public shipyards--which play such a
    critical role in maintaining our fleet's readiness?
        Admiral Ferguson. Navy plans to continue to meet the requirements
    in title 10, U.S.C., to provide the essential organic capability to
    perform depot- and intermediate-level maintenance, modernization,
    emergency repair work, and in-activations on nuclear-powered aircraft
    carriers and submarines. Additionally, to mitigate the impact of
    sequestration on maintenance availabilities for our ships, we requested
    and the OSD approved furlough exemptions for over 29,000 general and
    nuclear shipyard workers. Where possible, we will commence rehiring
    workers in the shipyards.
        We will continue to manage public depot civilian employment on the
    basis of workload and the funds available for such depot maintenance,
    remaining within the limitation that no more than 50 percent of depot-
    maintenance funds can be contracted out to the private sector.

        13. Senator Ayotte. Admiral Ferguson, if sequestration goes forward
    in 2014, will it become increasingly difficult to shield our public
    shipyards from the impacts of sequestration?
        Admiral Ferguson. Yes. Navy will continue to do everything possible
    to protect the naval shipyards from the impacts of sequestration due to
    the immediate readiness impacts to our nuclear powered submarines and
    aircraft carriers. While we will be able to sustain their workload in
    the near-term, eventually shortfalls will accrue to the point where
    even nuclear work will have to be deferred. At that point, the public
    shipyards would experience similar funding shortfalls as those
    currently seen in the private sector depots.

                                  HOLLOW FORCE

        14. Senator Ayotte. General Paxton and General Spencer, the
    Chairman of the Joint Chiefs recently testified that if Congress allows
    major across-the-board spending cuts to go forward, the military
    eventually will be asked to deploy troops who are unready and ill-
    equipped. He said, ``if ever the force is so degraded and so unready,
    and then we're asked to use it, it would be immoral.'' Each of you have
    testified about severe long-term degradations of nondeployed unit
    readiness by the end of the fiscal year. These same forces could be
    called upon to respond to an unanticipated major regional contingency
    like an attack by North Korea. What are the first indicators that your
    Service is becoming a hollow force?
        General Paxton. A critical measure of the effectiveness of the
    Marine Corps is its institutional readiness. This readiness is
    preserved through a careful balance of high quality people, well-
    trained units, modernized equipment, well-sustained installations, and
    a force level sufficient to accomplish its many missions. Failure in
    any one of these pillars of readiness begins to set the conditions for
    an eventual hollowing of the force. Lessons learned from past post-war
    budget patterns (e.g. Korea, Vietnam, Cold War, etc.) have been
    institutionally inculcated. Some of the warning signals of approaching
    ``hollowness'' were such things as reductions in defense spending
    without reductions in forces, reductions in unit readiness levels,
    infrastructure and installations that could not support unit
    warfighting requirements, and reduced morale and retention.
    Additionally, safety and mishap rates could be an indication of
    inadequate training associated with reduced readiness. The Marine Corps
    is attuned to such indicators and is carefully watching for them.
        Through close and continual Service command interactions and
    communications, the Defense Readiness Reporting System-Marine Corps
    (DRRS-MC), and Service-level personnel, materiel, installation,
    medical, and other data systems are utilized to inform Marine Corps
    leadership with respect to the status of the five institutional
    readiness pillars. Service-level readiness is further integrated into
    the Joint DOD community through the Chairman's Readiness System to
    measure the military's preparedness to achieve objectives as outlined
    by the NMS. These processes will inform the Marine Corps and enable it
    to inform Congress before the Service reaches a readiness crisis.
        General Spencer. A hollow force is one that looks good on paper,
    but has more units, equipment, and installations than it can support,
    lacks the resources to adequately man, train, and maintain them, and is
    not provided with enough capable equipment and weapons to perform its
    missions. We believe we've already seen the first indicators of a
    hollow force. Readiness is down, we are unable to train, our
    installations are not being maintained, and our weapons inventory is
    inadequate. The Air Force has been able to meet all Secretary of
    Defense-ordered missions remaining in fiscal year 2013, by maintaining
    combat-ready status for only select units. However, sequester
    jeopardizes our ability to surge additional forces to meet contingency
    and emergent combatant commander requirements. Based on our global
    intelligence, surveillance, and reconnaissance mission, the sequester-
    induced readiness deficit we are currently experiencing has placed us
    beyond the red line, or tipping point, in terms of risk. This will,
    however, only be evident outside of DOD in the event of a crisis
    requiring rapid and robust response.

        15. Senator Ayotte. General Paxton and General Spencer, what
    percentage or status of nondeployed unit readiness will be the red line
    or tipping point for your Service?
        General Paxton. As the Nation's principal crisis response force,
    maintaining a high state of readiness across the entire force is
    necessary in order to ensure the security of the country's global
    interests. Readiness comes at a cost and the high readiness of our
    deployed forces has come at the expense of the Corps' nondeployed unit
    readiness. To maintain the high readiness of our forward deployed
    forces, we have had to globally source equipment and personnel for
    Afghanistan and other emerging threats from our nondeployed units.
    These nondeployed forces' principal readiness challenge is the reduced
    availability of equipment at home stations with which to outfit and
    train units. The manning of home station units also suffers due to the
    need to meet enhanced personnel requirements for deploying units, Joint
    Force Individual Augments, and Security Force Assistance Teams. The
    primary concern with the out-of-balance readiness of the Corps'
    operating forces is the increased risk in the timely response to
    unexpected crises or large-scale contingencies, since these nondeployed
    forces will likely be the responders.
        Financing near-term readiness has caused the Corps to decrement
    continually its modernization and infrastructure accounts. Over the
    long-term, resourcing short-term readiness by borrowing-forward from
    long-term investment resources is unsustainable, and will eventually
    degrade unit readiness to an unacceptable level. Full implementation of
    sequestration and the associated cap reductions in the coming years may
    require a top-to-bottom re-examination of priorities, missions, and
    what it will take to continue to be your Nation's Expeditionary Force
    in Readiness.
        General Spencer. Hollowness is best described in terms of risk.
    Under sequester, the Air Force is experiencing heightened risk that is
    exceptionally difficult to manage as we continue to meet the Defense
    Strategic Guidance. Based on our mission requiring global intelligence,
    surveillance, and reconnaissance, the sequester-induced readiness
    deficit we are currently experiencing has placed us past the red line
    or tipping point in terms of risk. This will, however, only be evident
    outside of DOD in the event of a crisis requiring a rapid and robust
    military response.

        16. Senator Ayotte. General Paxton and General Spencer, how close
    is your Service to becoming a hollow force?
        General Paxton. A critical measure of the effectiveness of the
    Marine Corps is its institutional readiness. This readiness is
    preserved through a careful balance of high quality people, well-
    trained units, modernized equipment, well-maintained installations, and
    a force level sufficient to accomplish our many missions. Failure in
    any one of these pillars of readiness begins to set the conditions for
    an eventual hollowing of the force. Lessons learned from past post-war
    budget patterns (e.g. Korea, Vietnam, Cold War, etc.) have been
    institutionally inculcated. Some of the warning signals of approaching
    ``hollowness'' were such things as reductions in defense spending
    without reductions in forces, reductions in unit readiness levels,
    infrastructure and installations that could not support unit
    warfighting requirements, and reduced morale and retention.
    Additionally, safety and mishap rates could be an indication of
    inadequate training associated with reduced readiness. The Marine Corps
    is attuned to such indicators and is carefully watching for them.
        Through close and continual Service command interactions and
    communications, coupled with the DRRS-MC and Service-level personnel,
    materiel, installation, medical, and other data systems, Marine Corps
    leadership remains informed with respect to the status of the five
    institutional readiness pillars. Service-level readiness is further
    integrated into the Joint DOD community through the Chairman's
    Readiness System to measure the military's preparedness to achieve
    objectives as outlined by the NMS. These processes inform the Marine
    Corps and enable it to inform Congress before the Service reaches a
    readiness crisis.
        General Spencer. As we enter fiscal year 2014, we will focus on
    returning units that have been stood down to operational levels of
    readiness to prevent further erosion in their capabilities. However, if
    we do not receive sufficient funding in fiscal year 2014, we may have
    to again rotationally stand down units, or fly them at a reduced rate,
    similar to the actions we've taken in fiscal year 2013 while under
    sequester. A hollow force is one that looks good on paper, but has more
    units, equipment, and installations than it can support; lacks the
    resources to adequately man, train, and maintain them; lacks sufficient
    logistical support to employ forces effectively; and is not provided
    with enough capable equipment and weapons to perform their missions.
        We believe we have already seen the first indicators of a hollow
    force. Readiness is down, we are unable to train, our installations are
    not being maintained, and our weapons inventory is inadequate. A
    sequester-induced non-combat ready posture of a portion of our fleet
    will impact our ability to fill operational plans and Secretary of
    Defense-ordered missions, as well as significantly erode our training
    and force development efforts, creating long-term readiness shortfalls.
    Overall, this lack of readiness creates increased and significant risk,
    and is incompatible with the Defense Strategy.

        17. Senator Ayotte. General Paxton and General Spencer, are your
    forces ready today to defend South Korea and Japan from the full range
    of possible North Korean attacks?
        General Paxton. A Marine Active-Duty Force of 182,100 will
    absolutely retain the capacity and capability to support current and
    crisis response operations through rotational deployments, and to
    rapidly surge in support of major contingency operations.
        The Marine Corps' ability to execute our expeditionary crisis
    response role is based on one word--Readiness. This requires trained
    marines, ships at sea, and aircraft in the air. With fewer ready
    amphibious ships and fewer well-trained Marine units, we will still
    respond to crises, but the Nation's response options may be more
    limited, and our response times dramatically slowed.
        General Spencer. Under sequestration, we have preserved the flying
    hours for Pacific Air Force's squadrons to ensure these ``fight
    tonight'' forces are ready. Detailed descriptions of the Air Force's
    ability to meet South Korea and Japan defense requirements are
    classified and may only be presented in a classified venue.

                               WORLDWIDE THREATS

        18. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, do you agree with Director Clapper, the
    Director of National Intelligence, that national security threats are
    ``more diverse, interconnected, and viral than at any time in
    history''?
        General Campbell. Together with his remarks to this subcommittee,
    Director Clapper's statement is consistent with and supports the Army's
    view of the current and future operational environment. In his remarks
    Director Clapper expanded on the statement quoted above saying, ``I do
    not recall a period in which we confronted a more diverse array of
    threats, crises, and challenges around the world.'' On 16 November
    2012, in response to the Chairman of the Joint Chiefs of Staff in the
    Comprehensive Joint Assessment, General Odierno stated, ``we face a
    complex and interconnected global operational environment characterized
    by a multitude of actors. This presents a wide range of possible
    threats.'' The Army agrees with Director Clapper and further asserts
    that conditions across the future strategic environment will range in
    scope from major conventional fights to limited contingency operations
    such as humanitarian assistance, stability missions, and cyber
    operations. Potential adversaries will range from conventional forces
    to unconventional forces; from international terrorist to homegrown
    violet extremist; and from foreign intelligence entities to trusted
    insiders and criminal elements.
        Admiral Ferguson. Yes.
        General Paxton. We concur with Director Clapper's characterization
    of the nature of the national security threats we are currently facing.
    Moreover, his view is reflective of the threat perceptions that have
    been driving Marine Corps combat and doctrine development for the last
    several years. In the U.S. Marine Corps Service Campaign Plan 2012-
    2020, our principal strategic planning document, we envisioned a
    ``world of increasing instability and conflict, affected by competition
    for resources, urbanization, overpopulation, poverty, and extremism.''
    Over the last several years, analysts within the Marine Corps
    Intelligence Enterprise have, in fact, shared this view with their
    Intelligence Community counterparts. Further, we assess that failing
    and failed states or those that cannot adequately govern their own
    territory have strong potential to become safe havens for terrorist,
    insurgent, and criminal groups that threaten the United States and its
    allies. These combined stresses will not help to simplify the threat
    forecast Director Clapper outlined.
        General Spencer. Yes, as Director Clapper points out, we face an
    unprecedented array of threats. Because of this rapidly evolving and
    highly complex operating environment, we continue to invest in world-
    class intelligence, surveillance, and reconnaissance capabilities
    focused on reducing uncertainty for combatant commanders as well as
    Joint and Allied Forces.

        19. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, how would you assess the readiness of your
    force to respond to the full range of diverse threats?
        General Campbell. Fiscal year 2013 budget uncertainty has delayed
    the Army's ability to refocus the training of contingency forces on
    conventional threats and required the Army to accept risk in meeting
    force deployment timelines in Combatant Commander Operational Plans.
    The Army does have a professional core of combat-tested leaders, but
    that will decay without further training challenges.
        For the past decade, the Army's focus has primarily been on
    preparing forces to support operations in Iraq and Afghanistan. We
    learned and institutionalized much about conducting unified operations
    as part of whole-of-government campaigns in contemporary operating
    environments against asymmetric threats. In the process, we have forged
    a combat hardened core of Army leaders in both our Active and Reserve
    Forces. We understand the importance of mastering core tasks from which
    leaders and forces can adjust to unexpected and evolving assigned-
    mission circumstances.
        As forces are on longer needed to deploy, we will use available
    resources to prepare them for the missions they were doctrinally
    designed to perform, that is, for decisive action in unified operations
    across a broader range of military missions and against a range of
    diverse contemporary threats. As forces are able to fully execute
    broader-focused training strategies, they will regain experience
    against conventional adversaries as well as irregular ones. The
    President's fiscal year 2014 budget will largely enable the Army to
    sustain leader core competencies through professional military
    education and begin building broadbased unit readiness. It takes an
    Army BCT approximately a full year to reset from a deployment and
    train-up for a broad range of missions. In the face of fiscal year 2013
    budget uncertainty, the Army will ensure units with high-priority
    missions have the resources they need to be fully prepared and must
    accept risk in lower-priority units. Lowest priority forces may not be
    able to fully execute broader-focused training strategies and will only
    be able to achieve training proficiency up to the squad/crew/team
    level. If sequestration continues in fiscal year 2014, the Army will
    not have the resources to support the current Defense Strategic
    Guidance, placing readiness at risk. The Army will be unable to meet
    the range of missions in the existing strategic guidance if
    sequestration requires us to further reduce end strength.
        Admiral Ferguson. Our deployed forces are fully ready to support
    the President's Defense Strategic Guidance and operate forward in
    accordance with the adjudicated Global Force Management Plan.
        Due to the impact of sequestration, by the end of this fiscal year,
    two-thirds of our nondeployed ships and aviation squadrons will be less
    than fully mission capable and not certified for Major Combat
    Operations. Additionally, we remain able to support 2.0 carrier strike
    groups deployed.
        The most immediate impact is a reduction in the number and
    availability of fully-trained surge forces to support combatant
    commander crisis response requirements.
        General Paxton. The Marine Corps can sustain its current
    operational requirements into fiscal year 2014; however, to maintain
    the high readiness of our forward deployed forces the Corps has
    globally sourced equipment and personnel for Afghanistan and other
    emerging threats from its nondeployed units. These nondeployed forces'
    principal readiness challenge is the reduced availability of equipment
    at home station with which to outfit and train units. The manning of
    home station units also suffers due to the need to meet enhanced
    personnel requirements for deploying forces, Joint Individual
    Augmentation requirements, and manning Security Force Assistance Teams.
        The primary concern with the out-of-balance readiness of the
    operating forces is increased risk in the timely response to unexpected
    crises or large-scale contingency, since those nondeployed forces will
    likely be the responders. Efforts to maintain the readiness of all of
    our forces may be further exacerbated if the O&M account is diminished
    and an annualized Continuing Resolution or sequestration is implemented
    in fiscal year 2014.
        An annualized Continuing Resolution and/or sequestration in fiscal
    year 2014 would also adversely impact the availability of amphibious
    and maritime prepositioning ships. The combat readiness of these ships
    is a foundational requirement for training to and executing
    expeditionary force presence and amphibious force projection.
        General Spencer. Sequestration negatively affects Air Force full-
    spectrum readiness at a time when we have been striving to reverse a
    declining readiness trend. While the Air Force has met the demands of a
    high operational tempo in support of today's fight, this has inevitably
    taken a toll on our weapons systems and people, putting a strain on the
    overall readiness of the force. The effects of sequestration on
    readiness create heightened risk for the Air Force to respond to the
    full range of threats with ready forces.

        20. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what would you consider to be your
    Service's greatest capability gaps?
        General Campbell. Our greatest capability gaps come if we are
    challenged concurrently by multiple major events. Additionally, when
    rapidly declining resources cause us to ramp down too quickly, we will
    be unable to balance modernization, readiness, and end strength
    appropriately, resulting in a hollow force.
        Admiral Ferguson. One of the most important characteristics of our
    naval force is that we operate forward where it matters. Some of our
    most significant capability gaps are where potential adversaries
    develop or invest in Anti-Access/Area Denial (A2/AD) systems and
    strategies. The gaps that the Navy faces from A2/AD threats include:

             Mines
             Small boat attacks
             Anti-ship missiles
             Undersea threats from adversary submarines and
            torpedoes
             Air threats from advanced aircraft and aircraft
            targeting systems
             Cyber attack capabilities
             Denying access to coastal areas and port facilities

        The Navy's fiscal year 2014 budget submission prioritizes
    developing future capabilities in the above domains to address these
    capability gaps. Our development of future capability is bench-marked
    to support our rebalance toward the Asia-Pacific and is guided in large
    part by the Air-Sea Battle concept, which implements the Joint
    Operational Access Concept. Both these concepts are designed to assure
    U.S. forces freedom of action and access to support deterrence,
    assurance of our allies and partners, and the ability to respond to
    crises. Our investments (detailed in question #21) focus on assuring
    access in each domain, often by exploiting the asymmetric capability
    advantages of U.S. forces across domains.
        General Paxton. The Marine Corps' greatest capability gap concerns
    the ability to project ground maneuver forces to inland objectives from
    amphibious ships positioned over-the-horizon at distances of 12
    nautical miles or greater. As certified in 2007 by the Chairman of the
    Joint Chiefs of Staff, and in light of projected future threats and
    operational scenarios, an amphibious capability remains essential to
    our national security.
        Today, the Amphibious Assault Vehicle (AAV), originally fielded in
    the mid-1970s, provides a limited amphibious capability for Marine
    Corps infantry. The vehicle has several component obsolescence issues
    which make it increasingly difficult and expensive to maintain and,
    beyond that, it was not designed to operate in the way we now require
    it to. Specifically, when the AAV's capabilities are measured against
    current and future operational requirements and threat capabilities the
    vehicle's performance falls critically short in water and land
    mobility, personnel protection, lethality, communications, navigation,
    and situational awareness.
        We are addressing this critical capability gap with the Amphibious
    Combat Vehicle (ACV) program which is now in the requirements
    definition phase of development. An ACV is a key capability for the
    Nation's expeditionary force-in-readiness. The capability to project
    power from the sea ensures joint freedom of maneuver against
    increasingly sophisticated A2/AD strategies across the range of
    military operations in areas vital to our national interest. To this
    end, an ACV creates operational and tactical options through rapid
    maneuver on sea and land, provides for the seamless transition of
    combat power from sea to land, enables rapid response to crisis,
    enables the introduction of joint follow-on forces and can impose
    disproportionate costs on our enemies who must extend their defenses.
        General Spencer. The ability to penetrate, operate, hold targets at
    risk, and persist in highly contested environments is our Service's
    greatest challenge. The long-term Air Force commitment is to maintain
    the world's best air force and sustain the capability to operate
    anywhere the Nation requires, including highly contested airspace.
    Near-term improvements and acquisitions will bolster the Air Force's
    capability to support our Joint Forces. Specifically, the Air Force
    must continue to move forward with force modernization of key weapon
    systems and inventory fulfillment of preferred munitions.
        Our legacy, or fourth-generation, fighter fleet has secured more
    than 20 years of an air superiority advantage, but may lose its ability
    to operate as effectively in highly contested environments. Air
    superiority and long-range strike capabilities cannot be assumed. New
    threats and corresponding investment needs are not theoretical future
    possibilities; they are here, now. Significant investment in fifth-
    generation platforms and preferred munitions is essential to address
    these threats. The future success of the Nation's military and the
    joint team depends on modernizing our Air Force and keeping it ready to
    fight. Weapon systems like the F-22, with contributions from the F-35,
    are what will carry America's Air Force forward to continue to provide
    air superiority. The Long-Range Strike Bomber is a key piece of the
    development of our long-range strike family of systems, the
    capabilities of which are critical to our ability to carry out our
    global strike mission. There are also areas of research and development
    which have the potential to sustain and extend America's edge in
    aerospace technology, which will be delayed and perhaps not achieve
    fielding given current resource constraints. Potential specifics would
    be in the area of ballistic missile defense and advanced jet engine
    development.

        21. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what funding is included in the fiscal
    year 2014 budget request to address those capability gaps?
        General Campbell. The 2014 budget request reflects what would be
    required to execute the January 2012 Defense Strategic Guidance.
    However, that assessment predates sequestration or any changes to the
    guidance necessitated by sequestration-imposed budget cuts. The
    capability gaps we will face will be caused, if not compounded, by the
    steepness of those cuts above the gradual reductions now programmed
    within the budget.
        Admiral Ferguson. The fiscal year 2014 budget submission improves
    capabilities in our ability to counter A2/AD threats and address
    vulnerabilities in our capabilities and provides our forces with proven
    technologies that limit the adversary's ability to defeat our ability
    to project power.

             Mine threat: Countering potential enemy ability to use
            mines to deny access to naval forces continues to be a
            significant emphasis in the near term. The Navy budget request
            funds Littoral Combat Ship MCM Mission Package development to
            include MH-60S helicopter Airborne Laser Mine Detection System
            and Airborne Mine Neutralization System systems, MCM hull-
            mounted sonar, and accelerates fielding of the MK-18 UUV and
            Seafox mine neutralization system;
             Small boat and anti-ship missile threat: Small boats
            with explosives and anti-ship missiles remain a potential
            threat to our forces in the constrained waters of the Arabian
            Gulf. The Navy budget request funds integration of an Advanced
            Precision Kill Weapon System into our MH-60R helicopters to
            counter small boats with explosives or anti-ship missiles. The
            Laser Weapons System is also being tested in the Arabian Gulf
            onboard USS Ponce and we are investing in development and
            testing of near-term modifications to existing weapons on our
            larger surface combatants;
             Undersea threat: Navy's dominance of the undersea
            domain provides U.S. forces their most significant asymmetric
            advantage. Our investments continue to improve our capability
            to deny the undersea to adversaries, while exploiting it for
            our own operations. The Navy budget request sustains and plans
            production of proven Anti-Submarine Warfare (ASW) platforms
            including MH-60R Seahawk helicopters, P-8A Poseidon maritime
            patrol aircraft, and DDG-51 and Virginia-class nuclear
            submarines. The request also funds capabilities such as
            advanced airborne sensors for the P-8A Poseidon, accelerates
            torpedo defense systems for CVN, improves Navy's Undersea
            Surveillance system, continues development of the Large
            Displacement Unmanned Underwater Vehicles and additional
            payloads for existing submarines. We also continue to practice
            and refine warfighting in wargames and real-world exercises
            including Valiant Shield and Rim of the Pacific which practices
            high-end ballistic missile defense, surface warfare and ASW in
            simulations and live-fire missile and torpedo events;
             Air threat: Air power is a key component of the naval
            force, and improving the capability of our CSGs to project
            power despite threats to access closes a key gap. The Navy
            budget request funds the continued development and low rate
            production of the new F-35C Lighting II and capability
            improvements such as infra-red sensors and weapons that provide
            air-to-air capability that are not susceptible to radio
            frequency jamming. The request also funds improvements to
            further network sensors and weapons in the Navy Integrated Fire
            Control Counter Air capability that uses a network between
            Aegis ships and the E-2D aircraft to seamlessly share threat
            information. Lastly, the budget funds the development and
            testing of the Unmanned Combat Air System Demonstrator;
             Electromagnetic Spectrum and Cyber: Future conflicts
            will be fought and won in the electromagnetic spectrum and
            cyberspace, which are converging to become one continuous
            environment. This environment is becoming increasingly
            important to defeating threats to access, since through it we
            can disrupt adversary sensors, command and control and weapons
            homing. The Navy budget request funds two additional squadrons
            of EA-18G Growler electronic warfare aircraft, the Next
            Generation Jammer, seven SLQ-32 Electronic Warfare Improvement
            Program (SEWIP) block I upgrades, accelerates research and
            development on SEWIP Block 3, fields new deployable decoys to
            defeat anti-ship missiles and continues procurement of
            improvements to Navy's Ships Signal Exploitation Equipment to
            provide protection from electronic attack; and
             Amphibious warfare: The flexibility to come ashore in
            unexpected areas or from less predictable directions is an
            asymmetric advantage against adversary anti-access efforts. The
            Navy budget request funds training to conduct integrated
            operations with the Marine Corps, construction of an 11th ``big
            deck'' amphibious assault ship (LHA-8), which will bring
            enhanced aviation capacity and a traditional well deck to
            expand its ability to support the full range of amphibious
            operations, improvements to extend the life of USS Peleliu
            through fiscal year 2015, and sustaining our ship-to-shore
            connector capacity through life extensions and
            recapitalization.

        General Paxton. Many of the Marine Corps' ground combat tactical
    vehicles show signs of age, but none more than the current AAV which
    has been in service since the mid-1970s. The legacy AAV has served the
    Corps well for more than 40 years, but faces multiple component
    obsolescence issues that affect readiness, sustainment costs, safety,
    and our ability to respond from the sea. The ACV is needed to replace
    this aging fleet. To meet the demands of both amphibious crisis
    response and forcible entry, the ACV program will develop and field an
    advanced generation, fully amphibious, armored personnel carrier for
    Marine Corps expeditionary forces.
        The ACV will provide the ability to maneuver from the sea and to
    conduct amphibious and combat operations ashore by providing the
    capability to self-deploy from amphibious ships and to seamlessly
    transition between sea and land domains. The ACV will enable the
    efficient, tactical mobility of infantry combat forces from ships to
    inland objectives across beach landing zones under uncertain, non-
    permissive, or hostile conditions in order to facilitate the rapid
    buildup of combat power ashore. Our objective in the ACV acquisition
    program is to provide a sufficient quantity of vehicles to ensure we
    can meet the requirement of the surface assault force for forcible
    entry and sustain Marine Air Ground Task Force (MAGTF) operations. To
    support this program, the Marine Corps has requested $137 million for
    research and development of the ACV in fiscal year 2014.
        During the interval in which we design, build, and field the ACV,
    we must ensure the continued safety, reliability, and operational
    capability of our ``legacy'' AAV. The current AAV platform faces
    significant maintenance challenges and obsolescence issues.
    Accordingly, AAV sustainment efforts remain a top Marine Corps
    recapitalization effort priority until fielding of the ACV. As such,
    the Marine Corps has requested $70 million for AAV sustainment in
    fiscal year 2014.
        General Spencer. The Air Force fiscal year 2014 budget request is
    strategy-based, fiscally informed, and sets a course toward full-
    spectrum readiness of the force to execute the Defense Strategic
    Guidance (DSG). Furthermore, the fiscal year 2014 request addresses
    modernization challenges and keeps the Air Force ``Big 3''
    modernization programs (Long-Range Strike Bomber, KC-46A, and F-35A) on
    track. These are critical programs to ensure the Air Force can operate
    and win in highly contested environments worldwide.
        Specifically, the fiscal year 2014 research, development, test, and
    evaluation appropriation request includes $1.6 billion for the KC-46A
    and $800 million to support development of the F-35A Joint Strike
    Fighter. It also funds $400 million towards efforts to develop a new
    long-range, nuclear capable, optionally-manned, penetrating bomber. The
    fiscal year 2014 procurement portfolio delivers both immediate and
    future capabilities through investments across four specific
    appropriations: aircraft, missile, ammunition, and other procurement.
    In fiscal year 2014, the Air Force procures 19 F-35As and 3 CV-22B
    Ospreys in addition to various upgrades and modifications to the
    existing fleet.
        The priorities articulated and funded in the fiscal year 2014
    budget request balance the Air Force's requirement to support the
    current DSG with today's fiscally constrained environment. We will
    continue making tough trade-offs to preserve our core capabilities and
    deliver on our commitment to national defense.

                      BREAKING FAITH--MORALE OF OUR FORCES

        22. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, I am concerned that continuing to ask our
    military members and DOD civilians to assume more risk by doing more
    with less will eventually break faith with our troops. How would you
    assess the trends in the morale of the military members and civilians
    working in your Service?
        General Campbell. The current source of morale data is from the
    Spring 2012 Sample Survey of Military Personnel (SSMP). The SSMP was
    distributed between May and August 2012 and contains the responses of
    over 12,000 Active Army, Army National Guard, and U.S. Army Reserve
    soldiers. Results for Active Army respondents were not significantly
    different from previous data collected in 2011. Since this was the
    first distribution of the SSMP to the Reserve component (RC), previous
    RC survey data are not available for comparison. When asked how they
    would rate their current morale, 35 percent-54 percent of Active, U.S.
    Army Reserve, and Army National Guard soldiers responded ``high'' or
    ``very high,'' 33 percent-38 percent responded ``moderate,'' and 10
    percent-28 percent responded ``low'' or ``very low.'' When asked how
    they would rate the morale in their unit, 21 percent-45 percent of
    Active, U.S. Army Reserve, and Army National Guard soldiers responded
    ``high'' or ``very high,'' 38 percent-48 percent responded
    ``moderate,'' and 12 percent-40 percent responded ``low'' or ``very
    low.''
        Although furlough is only a short-term fiscal mitigation tool, it
    may pose long-term financial implications for our civilian workforce.
    The continued freeze on civilian pay, limitations placed on overtime,
    discontinuance of monetary awards, and implementation of furlough are
    having significant impact on the morale of our civilian workforce,
    particularly because it impacts their financial stability.
        Admiral Ferguson. By our most recent surveys, overall health of the
    force is good, morale remains near historic high levels, and work
    satisfaction has increased over the last 12 years. Aggregate retention
    remains strong, though some areas of highly skilled sailors are showing
    indications of reduced retention. The 2012 Quality of Life Survey and
    Behavioral Health quick polls revealed positive feedback with standard
    of living, income and job satisfaction, while concern was expressed
    about manning shortages, long work hours, and high operational tempo.
        These surveys were taken before the force had observed the impact
    on readiness and operating schedules due to reduced funding, and
    potential force structure cuts. We do not presently see a trend in
    morale after a few months of sequestration. We anticipate a more
    negative trend to emerge as furloughs are enacted, maintenance is
    cancelled or deferred, and operational tempo changes for the force. We
    will continue to monitor this closely.
        General Paxton. Marines and their families are resilient and morale
    remains high; however, talk of looming budget cuts and the possible
    impact those cuts will have on marines' quality of life, families, and
    jobs all take a toll. In the fiscal year 2013 Enlisted Retention
    Survey: 76 percent of respondents said they are either satisfied or
    very satisfied with being a marine, which is in line with what we have
    seen over the past 2 years; and 57 percent of respondents said they are
    either likely or very likely to reenlist, which also is in line with
    what we have seen over the past 2 years. In the most recent Officer
    Satisfaction Survey, 85 percent of respondents said they are satisfied
    with the military lifestyle.
        Our civilian marines support the mission and daily functions of the
    Marine Corps and are an integral part of our Total Force. Serving
    alongside our marines throughout the world, in every occupation and at
    every level, our civilian appropriated funded workforce remains the
    leanest of all Services, with a ratio of 1 civilian to every 10 active
    duty marines. More than 93 percent of our civilians do not work in
    Headquarters' elements in the Pentagon; they are at our bases,
    stations, depots, and installations. Sixty-eight percent are veterans
    who have chosen to continue to serve our Nation; of those, a full 13
    percent have a certified disability.
        The potential human impact associated with furloughing our civilian
    marines is significant. While we would like to believe that a
    discontinuous furlough will reduce the impact on our employees, most
    will not be able to easily absorb this sudden loss of income, even over
    a period of several months. With prolonged budgetary uncertainty,
    including the possibility of additional furloughs in fiscal year 2014,
    employee stress is increasing, civilian morale is declining, and at
    some point productivity will begin to suffer.
        General Spencer. We have a dedicated and professional force that
    serves our Nation proudly. However, with many of our pilots not flying,
    our civilian employees worried about lost pay due to the furlough, and
    the future of our morale, welfare, and recreation and quality of life
    programs in question, all of this negatively impacts the morale of our
    airmen.

        23. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, are you concerned that the steep decline
    in DOD budgets will eventually erode morale for military members and
    DOD civilians, ultimately having an insidious effect on readiness?
        General Campbell. Yes, I am concerned that steep budget cuts could
    lead to a decline in morale, which could impact readiness. Our soldier
    survey data does not indicate a drop in morale now, but the data was
    collected too early to take into account sequestration. If soldiers are
    continually asked to do more with less, it will have an impact. I am
    also concerned that civilian morale will be affected by furloughs, pay
    and hiring freezes, curtailment of training opportunities, and overtime
    limitations. Any decrease in morale in our civilian workforce will have
    a negative impact on readiness.
        Admiral Ferguson. Overall, the health of the Active Duty and
    Reserve Force is good and morale as determined through our surveys
    remains positive. We continue to monitor the force to measure the
    impact of fiscal uncertainty, budget reductions, and furloughs on their
    morale and propensity to serve.
        We continue to meet overall active duty recruiting and retention
    goals, though we are beginning to see some impacts to the retention of
    highly skilled sailors and a slight drop in recruit quality as the
    economy improves. Anecdotally, the multi-year pay freeze, hiring
    freeze, and pending furloughs have begun to impact the morale of our
    civilian workforce. We will continue to monitor this closely to assess
    the impact of funding reductions.
        General Paxton. Marines and their families are resilient and morale
    remains high; however, talk of looming budget cuts and the possible
    impact those cuts will have on marines' quality of life, families, and
    jobs all take a toll. In the fiscal year 2013 Enlisted Retention
    Survey: 76 percent of respondents said they are either satisfied or
    very satisfied with being a marine, which is in line with what we have
    seen over the past 2 years; and 57 percent of respondents said they are
    either likely or very likely to reenlist, which also is in line with
    what we have seen over the past 2 years. In the most recent Officer
    Satisfaction Survey, 85 percent of respondents said they are satisfied
    with the military lifestyle.
        Our civilian marines support the mission and daily functions of the
    Marine Corps and are an integral part of our Total Force. Serving
    alongside our marines throughout the world, in every occupation and at
    every level, our civilian appropriated funded workforce remains the
    leanest of all Services, with a ratio of 1 civilian to every 10 Active
    Duty marines. More than 93 percent of our civilians do not work in
    Headquarters' elements in the Pentagon; they are at our bases,
    stations, depots, and installations. Sixty-eight percent are veterans
    who have chosen to continue to serve our Nation; of those, a full 13
    percent have a certified disability.
        The potential human impact associated with furloughing our civilian
    marines is significant. While we would like to believe that a
    discontinuous furlough will reduce the impact on our employees, most
    will not be able to easily absorb this sudden loss of income, even over
    a period of several months. With prolonged budgetary uncertainty,
    including the possibility of additional furloughs in fiscal year 2014,
    employee stress is increasing, civilian morale is declining, and at
    some point productivity will begin to suffer.
        General Spencer. Sequestration reductions are already negatively
    affecting Air Force readiness and morale. Currently nine combat-coded
    fighter units and three combat-coded bomber units are stood down and
    have ceased flying operations. Seven combat-coded units are flying at
    basic mission capable levels and will only return to combat mission
    ready status if funding becomes available. Flying hour reductions will
    halt training for the rest of the year in many units and will take up
    to 6 months to restore pilot proficiency. Additionally, there is the
    furlough of our valued civilian workforce, significantly reducing
    civilian pay and slowing productivity.

        24. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, how will this impact retention and
    recruitment?
        General Campbell. By shifting funding, the Army addressed the risk
    of military recruitment mission failure in fiscal year 2013 due to
    sequestration. Future civilian furloughs will not affect the ability of
    Army accessioning agencies to achieve fiscal year 2013 accession
    missions. However, if the U.S. Military Entrance Processing Command
    curtails operations in fiscal year 2013 due to civilian furloughs, some
    delays in contracting new servicemembers for entry into the Army, Navy,
    Air Force, and Marine Corps in fiscal year 2014 may occur. The Army
    plans to mitigate these delays by processing these soldiers after the
    beginning of the new fiscal year.
        Sequestration has impacted retention in terms of reenlistment
    rates, training, and Selective Retention Bonuses. Since 2012, the Army
    has observed a slight decline in retention rates that is attributable
    to a general loss of predictability in benefits, assignments, and
    promotion opportunities in consequence of sequestration and the ongoing
    Army drawdown. An indicator of this emerging trend is the fiscal year
    2013 Expiration Term of Service mission to retain 7,800 Active
    component enlisted soldiers. We anticipate that the Army will only
    retain around 7,500 soldiers in this particular category. The Army
    National Guard is also anticipated to fall short of its fiscal year
    2013 retention mission. The impact of these retention mission
    shortfalls will be somewhat mitigated as the Army decreases its force
    structure. Sequestration has constrained the conduct of essential
    training that develops career counselors' abilities and effectiveness
    to advise commanders at all levels on retention policies and issues.
    Sequestration has also constrained future funding of the Army's
    Selective Retention Bonuses and Critical Skill Retention Bonuses. These
    monetary incentives are employed to retain and attract soldiers into
    the most critical skills that either have higher attrition rates and/or
    require a higher level of skill and training. The Army's continued
    investment in these critical skills is essential to mission success.
        On January 10, 2013, the Deputy Secretary of Defense directed the
    Services to take necessary steps to mitigate budget execution risks,
    resulting in an immediate freeze on civilian hiring and the release of
    personnel on temporary appointments. Not only does the freeze hinder
    Army Commands' ability to support their missions, it limits the
    civilian workforces' promotional opportunities. This may negatively
    affect retention rates, especially those deemed hard to fill (e.g.,
    medical and behavioral health occupations) and immediately impact the
    retention for our temporary workforce. The ultimate result of these
    actions could drive civilians to see DOD as not a viable career.
        Admiral Ferguson. Economic conditions for the past several years
    have favored recruitment and retention in our Active-Duty Forces.
    Reductions in funding, the impact of reduced training, last minute
    deployment cancellations, and extended deployments may hinder our
    ability to recruit and retain high quality individuals to meet
    aggregate and critical skill manning requirements in the future. A
    prolonged sequestration would likely inhibit recruiting efforts and
    reduced training opportunities would be felt across increasingly larger
    segments of the force.
        General Paxton. Severe budget constraints related to sequestration
    that result in reductions in recruiters and recruit advertising, and
    potential civilian furloughs at our recruit processing stations will
    degrade the quality of our recruit pool, cause disruptions in our
    pipeline of recruits, and place added stress on our recruiters, 71
    percent of whom already work in excess of 60 hours per week. Reductions
    to our recruit advertising budget jeopardizes our established market
    share and awareness with prospects and their influencers. All service
    recruiting will be impacted by civilian furloughs at Military Entrance
    Processing Stations (MEPS) because 80 percent of MEPS personnel are
    civilians. The mandated civilian furlough reduces their available
    processing capacity. Implementation of a 4-day processing week will
    therefore degrade our accession efforts. Similarly, additional cuts to
    our retention programs, such as re-enlistment incentive pays, will
    impact our ability to shape our force to meet continuing mission
    requirements and retain critical MOSs with the most qualified marines.
        General Spencer. We have enjoyed a robust recruiting and retention
    environment in recent years mostly due to the relatively high
    unemployment rate and a struggling economy. Youth studies, such as
    those done by Joint Advertising Market Research and Studies already
    indicate that youth are less likely to serve in our Nation's military
    then they have been in the past. The study also indicated that 47
    percent of new recruits were undecided about a career choice and were
    influenced to consider the military within a year of joining the
    Service. Budget cuts to advertising, marketing, and outreach programs
    will jeopardize the Air Force's ability to meet career field and DOD
    quality requirements within a shrinking recruiting pool. Additionally,
    respondents to these surveys also indicate pay and educational
    opportunities as two of the major reasons for their decision to enlist
    and DOD budget cuts are a perceived threat to these benefits.

                          NAVY FLEET OPERATIONS TEMPO

        25. Senator Ayotte. Admiral Ferguson, last year at our hearing, I
    asked you about the unsustainable pace of surged fleet operations as
    high demand for ships and submarines was taking its toll. You responded
    that the Navy was taking measures to ensure appropriate levels of
    readiness by shifting to a more sustainable deployment model including
    fully funding ship maintenance and midlife modernization periods. The
    Navy has been through a lot in the past year, including sequestration,
    the loss of a minesweeper, and other significant, unanticipated ship
    expenses. Can you provide me an update on efforts in fiscal year 2013
    to prevent further degradation to fleet readiness?
        Admiral Ferguson. As reflected in our initial fiscal year 2013
    budget, Navy remains committed to performing the necessary ship depot
    maintenance to sustain the readiness of the Fleet. Our budget fully
    funded surface ship maintenance availabilities in fiscal year 2013. We
    also funded the Total Ship Readiness Assessment program to improve ship
    readiness through the earlier identification of material readiness
    deficiencies, and the Surface Maintenance Engineering Planning Program
    to provide centralized life cycle maintenance engineering and class
    maintenance planning and management for the surface fleet.
        Because of sequestration's impact to surface ship maintenance
    funding, we were unable to execute eight of the planned fiscal year
    2013 availabilities. Those eight remain a top priority and we are
    pursuing options in conjunction with OSD Comptroller to fund them this
    year. Aircraft carrier and submarine availabilities were fully funded
    in fiscal year 2013, and the impacts of sequestration have been
    mitigated by exempting the public shipyard workforce from furlough.
    Despite these efforts to reduce the impact of sequestration on
    readiness, by the end of this fiscal year, two-thirds of our
    nondeployed ships and aviation squadrons will be less than fully
    mission capable and not certified for Major Combat Operations.

        26. Senator Ayotte. Admiral Ferguson, will any of this work be
    recovered in the Navy's budget request for fiscal year 2014?
        Admiral Ferguson. No. The Navy's fiscal year 2014 budget is based
    on the assumption that all fiscal year 2013 work is completed as
    planned. Any work deferred from fiscal year 2013 will either displace
    planned fiscal year 2014 work, be deferred into a future year, or be
    cancelled. It could be executed should the Navy receive additional
    funding in the O&M account.

        27. Senator Ayotte. Admiral Ferguson, can you provide a list of
    unplanned or unbudgeted ship repairs identified in fiscal year 2013 and
    the Navy's plan to fund those repairs?
        Admiral Ferguson. Navy prioritizes scheduling and funding of
    unplanned, emergent requirements as necessary to return ships to full
    service as soon as practicable. The following emergent work has
    occurred or is in progress in fiscal year 2013. All listed work has
    been funded or obligated with fiscal year 2013 Operation and
    Maintenance, Navy funds.

             USS Porter (DDG 78) collision repairs

                     $77 million firm-fixed-price contract awarded
                    to BAE Systems Norfolk Ship Repair for the fiscal year
                    2013 extended dry-docking selected restricted
                    availability to complete final permanent repairs as
                    well as previously scheduled maintenance and
                    modernization

             USS Montpelier (SSN 765) collision repairs

                     Newport News Shipbuilding/Huntington Ingalls
                    Industries is in the process of repairing the ship with
                    a current cost estimate of approximately $52 million

             USS San Jacinto (CG 56) collision repairs

                     Repaired in BAE Systems in Mayport, FL, at a
                    cost of approximately $13 million

             USS Guardian (MCM 5) grounding damage

                     Repair not economically feasible,
                    decommissioned on 6 Mar 2013
                     Dismantling and disposal cost an estimated $45
                    million

             USS Miami (SSN 755) fire damage

                     Repair estimates are currently under review.
                     $45 million for USS Providence availability
                    cost (associated with shift to private sector)

             USS Nimitz (CVN 68) cooling pump repairs

                     $32 million for repairs

        28. Senator Ayotte. Admiral Ferguson, how would you assess the
    readiness of our carrier force to meet combatant commanders'
    requirements?
        Admiral Ferguson. Our carrier forces are meeting operational
    demands and required readiness levels, but are operating under strain.
        For the past 3 years, carrier forces have met adjudicated Global
    Force Management presence requirements; however, in doing so, they have
    been deployed at unsustainable rates, deferring maintenance and
    increasing the risk of significant cost growth in subsequent
    maintenance availabilities. The deployment rates have also exceeded
    original CVN force structure plans, thereby increasing the risk of not
    reaching expected CVN service lives. The combination of increased CVN
    operational tempo and current budgetary constraints has resulted in
    accumulating pressures on personnel, CVN material condition, and
    service life.
        With respect to surge requirements, the fiscal year 2014 budget
    request would support only a single carrier strike group available for
    worldwide surge. This is a reduction from previous years, when
    generally three carrier strike groups were fully trained and available
    for surge operations.

                   CONTRACTS FOR ESSENTIAL MILITARY SERVICES

        29. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, on April 1, 2013, U.S. Transportation
    Command (TRANSCOM) issued a $50 million solicitation to procure
    contractor services for short take-off and landing services for
    military casualty evacuation, military personnel airlift, cargo
    airlift, and military air drops in the Trans-Sahara area of Africa for
    the next 4 years to support high-risk military operations. According to
    the solicitation, the Services shall be based from Burkina Faso and be
    capable of conducting operations from various temporary forward
    operating locations, to include primitive field accommodations such as
    tents. I have some fundamental concerns about this solicitation. In
    your experience, is the use of a commercial contract for these types of
    services common in the military?
        General Campbell. TRANSCOM, a unified combatant command, is
    responsible for managing air and surface lift utilizing an appropriate
    mixture of organic and contracted commercial capabilities. The Army
    routinely utilizes TRANSCOM managed capabilities for the movement of
    cargo, passengers, and casualties worldwide to include contingency
    operations support. The Army is confident that TRANSCOM will maintain
    the appropriate mix of organic and commercial capabilities and will
    provide the appropriate asset to meet Army mission requirements.
        Admiral Ferguson. The Navy's contracting authority is limited to
    support of the Navy's core mission. The Navy has no contracting
    authority to procure commercial contractor services for short take-off
    and landing services for military casualty evacuation, military
    personnel airlift, cargo airlift, and military air drops to support
    high-risk military operations overseas.
        General Paxton. The use of commercial contract airlift support has
    evolved into a standard practice since its inception during Operation
    Iraqi Freedom (OIF) and continued use during Operation Enduring
    Freedom-Afghanistan (OEF-A); it is a viable and often cost effective
    transportation capability that compliments operational and tactical
    airlift resources. United States Forces-Afghanistan (USFOR-A) manages
    ISAF Contracted Air Transportation (ICAT) which provides support to
    each regional command in Afghanistan. The program has been successful
    in providing relief to Marine Corps assault aircraft that would
    otherwise be required to support these usually non-priority/regularly
    scheduled logistics runs of bulk items to outlying Combat Outposts.
        AFRICOM engaged TRANSCOM to leverage contracting authority to
    satisfy a gap in current medical coverage from Level I to Level V in
    their area of responsibility. Currently, there is inadequate capability
    for short-term intervention for injured, wounded, and ill
    servicemembers in a geographically huge theater with numerous remote
    locations. Specifically, there are no personnel, aircraft, or in-
    patient medical facilities. DOD has historically contracted for
    services not available in the Military Health System in the continental
    United States (CONUS) or outside CONUS.
        DOD Aeromedical Evacuation using U.S. military airlift is designed
    to function in contingencies with large casualty numbers. In regional
    areas and when moving single casualties from regions with a low level
    of activity, military airlift is expensive and challenging to access
    since it is unlikely in the region. The use of smaller, more agile
    contract aircraft is often more efficient and effective (timelier) for
    the patient.
        General Spencer. Yes. Utilizing current military assets is normally
    the preferred method to fulfill requirements, but is not always
    appropriate given competing operational requirements and diplomatic
    sensitivities. Diplomatic concerns regarding a large U.S. military
    presence in the region played a significant role in the selection of
    this course of action to support the warfighter. The use of military
    aircraft not only introduces overtly marked U.S. military aircraft to
    the region, it also requires a larger footprint of U.S. military
    enablers. Contracted airlift meets this requirement without adding to
    our military presence. Additionally, organic military aircraft cannot
    access the smaller airfields in the region, and diplomatic clearance
    timelines for military aircraft range from 7 to 21 days (based on
    country), whereas contracted lift processes clearances through the
    commercial channels which greatly reduces this timeline (in some cases
    gaining clearance in 48 hours or less).

        30. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, wouldn't you consider medical casualty
    evacuation and air drops in a high risk area to be an inherently
    military function?
        General Campbell. We always plan to utilize military means when
    developing the medical evacuation plan in support of our conventional
    forces. We go to great lengths to ensure our commanders are properly
    resourced for this critical lifesaving mission and will not compromise
    the safety of our soldiers. Likewise, our preferred method for air drop
    is also via military means, however, under exceptional circumstances if
    the contractor is certified, we do make exceptions for both casualty
    evacuation and air drop operations.
        Admiral Ferguson. While the Navy does not have the authority to
    contract for commercial air services, I do consider medical casualty
    evacuation and air drops in a high risk area to be an inherently
    military function. In combat or during other high risk activities, a
    commander must have the ability to personally direct personnel to
    perform certain functions.
        General Paxton. Yes, medical casualty evacuation and air drops in a
    high risk area are considered an inherently military function. The use
    of commercial contract support for aerial delivery and medical casualty
    evacuation has been in use over the past 10 years to complement
    military resources and fill shortfalls in support of combat operations.
    Medical contract support offsets our limited capabilities and serves as
    an alternative but shouldn't be used as the primary enabler if at all
    possible.
        Any designated non-kinetic environment, such as transporting
    patients from a strategic hub to Ramstein Air Force Base for further
    treatment and follow-on movement to CONUS, could be supported via a
    commercial/contracted aero evacuation solution so long as appropriate
    medical staff and equipment are included in the contract.
        Contracted aerial delivery is conducted today on a routine basis to
    support combat operations in Afghanistan and can be considered to
    support future operations in other areas of the world.
        General Spencer. Yes. However, contracted air services have proven
    more than a sufficient level of capability in certain permissive
    environments. Utilizing military assets is normally the preferred
    method to fulfill requirements, but is not always appropriate given
    competing operational requirements and diplomatic sensitivities.

        31. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, if you were commanding forces in military
    operations in that part of the world, would you be comfortable relying
    on a contractor to evacuate your wounded or to drop your commandos?
        General Campbell. Speaking as a former division commander and
    brigade commander in Iraq and Afghanistan, the care and welfare of our
    soldiers is paramount in all military operations. In planning and
    execution the preferred method of evacuating wounded is always via
    military means, as is the delivery of troops via air. In some unique
    circumstances if the contractor is certified, we do make exceptions and
    execute these missions by other means.
        Admiral Ferguson. The functions to which you are referring by
    definition fall under ``inherently governmental'' and therefore should
    not be contracted support services.
        General Paxton. Given the fact the contractor is a non-combatant,
    and extracting wounded and dropping marines in a hot zone is a military
    (combatant) function, I would not feel comfortable having to primarily
    rely on a contractor to support these types of missions. Contract
    support should be considered as a complement to military air or as an
    alternative in a benign or otherwise stable environment with military
    oversight.
        General Spencer. U.S. Africa Command (AFRICOM) created and
    validated the requirement to provide Special Operations Command Africa
    with airlift for both medical evacuation and logistical support in
    Western Africa. This contract replaces an existing contract with
    similar specifications which expires at the end of the fiscal year. To
    date, the aircraft and personnel under the existing contract have
    performed admirably in support of our operations in Africa and there is
    no reason to believe that fact will change. Personnel drops will not be
    accomplished with these assets.

        32. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, are you aware of a command request for
    forces for the missions specified in the solicitation which was denied?
        General Campbell. The Army is not aware of any Request for Forces
    for the missions specified in the TRANSCOM solicitation.
        Admiral Ferguson. I am unaware of any Navy command submitting a
    request for these services which was denied.
        General Paxton. This particular solicitation offers a TRANSCOM
    contracted solution to an AFRICOM operations and exercise capacity
    shortfall for Joint Special Operations Task Force-Trans Sahara. The
    Marine Corps has been queried by the Joint Staff on multiple occasions
    concerning our Services' ability to support AFRICOM combat search and
    rescue-personnel recovery requirements. The Marine Corps has
    consistently responded to the Joint Staff with the ability to provide a
    limited, in lieu of casualty, evacuation capability. The Marine Corps
    has not been directed to provide this limited capability to date.
        General Spencer. Requests for forces are initiated by combatant
    commanders, then routed through the Joint Staff for tasking to the
    appropriate Service. The Air Force is not aware of a denial for any
    request for forces for the missions specified in the solicitation.

        33. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, I realize that this administration's
    revised defense strategy calls for less force structure and greater
    operational flexibility in certain combatant command areas of
    responsibility, but in your opinion, will our Armed Forces need to rely
    more on contractors for these types of services in the future?
        General Campbell. The Army will not necessarily need to rely more
    on contractors to meet the needs of the combatant commands. The defense
    strategy calls for less structure and greater operational flexibility
    which requires the Army to further optimize our modular formations
    allowing them to meet a wider range of missions and provide greater
    latitude in fulfilling combatant command needs. This may increase
    reliance on contractors in some areas and decrease the reliance in
    others. Like today, where resources, force structure, or modular
    designs are inadequate, the Army will continue to consider all aspects
    of risk in determining which capabilities are built into Army force
    structure and where we can rely on contractor services.
        Admiral Ferguson. While the Navy manpower force structure supports
    the current military defense strategy, we continually assess the proper
    mix of Active, Reserve, civilian, and contractor personnel in the
    planning for our missions. I would anticipate certain missions clearly
    defined as not inherently military or governmental would be open to
    increased contractor participation in the future. Inherently military
    or governmental functions should not be opened to contractors.
        General Paxton. The Services organize, train, and equip forces for
    use by the combatant commanders. With a force of 182,100 marines, we
    are able to meet the combatant commanders' most critical needs/
    requirements. It will be up to the combatant commanders to determine
    priorities and decide which initially unfilled missions/requirements
    are delayed, are filled by contractors, or are never filled. The
    combatant commanders are in the best position to analyze operational
    risk to their assigned U.S. Forces and determine when contractors are
    utilized for certain missions, vice U.S. Active or Reserve component
    military forces.
        As the Nation's crisis response force, the Marine Corps is
    organized, trained, and equipped to conduct expeditionary and
    amphibious operations across the globe and in the most austere
    locations without the requirement of contractor or host nation support.
    We are careful to retain the right balance of logistics capabilities in
    our Active Forces to enable this expeditionary and amphibious
    character. However, in a prolonged conflict, where enduring bases are
    established and manned to support combat personnel, the answer is
    ``yes,'' we will likely be required to rely more on contractors for
    logistical sustainment services.
        Although the Marine Corps possesses varying degrees of combat
    service support force structure (equipment/personnel) to sustain our
    expeditionary and amphibious requirements, we do not possess enough
    combat service support force structure to provide the enduring level of
    support of these types of services on the scale provided by the U.S.
    Army and contractors in Iraq and Afghanistan. As we experienced in Iraq
    and Afghanistan, contractors free up military personnel and equipment
    from managing the day-to-day caretaking tasks of base management
    functions (feeding/laundry/power generation, etc). This allows the
    warfighter to focus on combat and combat support operations.
        General Spencer. Not necessarily. Utilizing military assets is
    preferred, but is not always feasible given competing operational
    requirements and diplomatic sensitivities. In every case, a rigorous
    analysis will be performed that takes into account the operating
    environment, legal requirements, availability of military assets,
    political sensitivities, and capabilities of contractor services. In
    those cases, where it makes operational and political sense,
    contractors will be used to support specific operational support
    missions.

        34. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what risk does this pose to our military
    members?
        General Campbell. Sequestration risks are putting us on the path to
    creating a hollow force. We must reduce the Army's overall structure
    through a drawdown strategy that ensures that we keep a high-quality,
    mission-capable force to achieve end strength without jeopardizing
    readiness. Civilian reductions must be determined in advance and be a
    part of planned strategic human capital decisions to avoid arbitrary
    cuts that impact readiness. Reductions implemented too quickly risk
    breaking the All-Volunteer Force social contract, and drastically
    affect readiness in the near term. Hollowing out the force will also
    incur greater costs to buy back lost readiness should the force be
    called to respond to a contingency, and directly increases the risk to
    our military members going into harm's way.
        Admiral Ferguson. Because the Navy force structure supports the
    defense strategy, there is no additional risk to Navy military members
    based on increased service contractors.
        General Paxton. Supported by our recent experiences in Iraq and
    Afghanistan and other contingencies and crises around the globe, there
    is no direct risk to our military members by using contractors to
    support enduring base operations. Although the Marine Corps possesses
    varying degrees of combat service support force structure (equipment/
    personnel) to sustain our expeditionary and amphibious requirements, we
    do not possess enough combat service support force structure to provide
    the enduring level of support of these types of services on the scale
    provided by the U.S. Army and by contractors in Iraq and Afghanistan.
    The use of contracted services frees up military personnel and
    equipment from managing the day-to-day caretaking tasks of base
    management functions (feeding/laundry/power generation, et cetera).
    This allows the warfighter to focus on combat and combat support
    operations.
        General Spencer. Contractor services are not inherently more risky
    than organic military operations. All operations are evaluated to
    ensure that acceptable levels of risk are attainable for a desired
    mission end state. It is important to understand that though contractor
    services are available, military assets will still be used if a
    particular operation warrants the required capability. This decision
    will be made during the planning phases of each operation and reflects
    the commander's analysis of operating environment and associated risk.

              FLYING HOURS IMPACT OF BUDGET CUTS AND SEQUESTRATION

        35. Senator Ayotte. General Spencer, in your written testimony you
    correctly state: ``The cornerstone of our airmens' ability to provide
    airpower to the Nation and contribute our core missions to the joint
    team is their readiness.'' You also stated: ``Readiness is the ability
    of a unit to provide its designed operational capabilities within the
    required timeframe.'' Spending cuts have eliminated 44,000 flying hours
    through September with the Air Force grounding 17 squadrons, including
    12 combat coded squadrons. Some units will be grounded upon return from
    deployment. That includes the F-22s from the 1st Fighter Wing that are
    deployed to the Pacific right now to deter Kim Jong Un and stand ready
    to take action if he makes a wrong step. Are these grounded squadrons
    tasked to fill COCOMs' operations plans?
        General Spencer. Under sequestration, we've preserved the flying
    hours for Pacific Air Force's squadrons to ensure these ``fight
    tonight'' forces are ready. Although the details of our ability to
    source Combatant Commander Operational Plans may only be discussed in a
    classified forum, it can be said that the number of stood down units
    adversely affects our ability to fulfill Combatant Commander
    Operational Plan requirements.

        36. Senator Ayotte. General Spencer, what is the impact of our
    ability to fill all COCOMs' operational requirements?
        General Spencer. The Air Force prioritized which combat-coded
    squadrons received flying hours to maintain readiness to meet the
    requirements of Secretary of Defense-ordered missions and to deter any
    potential adversaries. However, if the Air Force does not receive
    sufficient funding in fiscal year 2014, we may have to rotationally
    stand down units again or fly them at reduced readiness rates, similar
    to the actions we've taken in fiscal year 2013. This sequester-induced
    readiness deficit will impact our ability to fill operational plans and
    Secretary of Defense-ordered missions, continue to degrade our depot
    maintenance and modernization programs, and will significantly erode
    our training and force development efforts, creating long-term
    readiness shortfalls. Detailed descriptions of unit taskings and
    ability to meet operational plans are classified and may only be
    presented in a classified venue.

        37. Senator Ayotte. General Spencer, how does grounding impact the
    Air Force's ability to both deter and conduct combat operations, if
    required, outside of Afghanistan?
        General Spencer. The Air Force prioritized which combat-coded
    squadrons received flying hours to maintain readiness to meet the
    requirements of Secretary of Defense-ordered missions. Almost all of
    these mission-ready units are tasked to Secretary of Defense-ordered
    missions or forward-based, so the ability of the Air Force to provide
    requisite numbers of ready forces for emergent requirements is severely
    limited and will continue to become more difficult the longer we
    operate under these conditions. Detailed descriptions of unit taskings
    and ability to meet operational plans requirements are classified and
    may only be presented in a classified venue.

        38. Senator Ayotte. General Spencer, how many aircrew are impacted
    by the grounding; how many hours will have to be dedicated to bring all
    these aircrews back up to mission ready status; and how much will that
    cost?
        General Spencer. Approximately 750 crew members are assigned to the
    stood-down units. In order to bring units back to current, sub-optimal
    readiness levels, it is anticipated the stood-down units would need an
    additional 10 percent increase over the fiscal year 2014 budget request
    for flying hours and would require 3 to 6 months.

        39. Senator Ayotte. General Spencer, how will the student pilot
    pipeline be impacted . . . pilot training and the initial qualification
    training for each of the Air Force's weapon systems?
        General Spencer. Under the Air Force's current plan, we have
    allocated sufficient flying hours to enable our basic student pilot
    pipeline production to continue. However, we will potentially
    experience impacts if there is a civilian furlough because Air
    Education and Training Command maintenance and simulators are primarily
    run by government civilians. In addition, the absorption of these
    future graduates into operational units will be slower due to
    sequester-induced flying hour reductions. Due to sequestration, we have
    also curtailed and/or cancelled advanced training courses, such as the
    Weapons School Instructor course, which will have a significant impact
    on our ability to maintain the requisite tactical expertise in our
    operational units.

        40. Senator Ayotte. General Spencer, as the Air Force focuses its
    flying hours on getting the grounded aircrews mission-ready again, what
    is the impact on the rest of the force?
        General Spencer. There are myriad second- and third-order effects
    of sequestration, including the impact on the rest of the force as the
    stooddown crews return to fly. Since flying hours are contained within
    our significantly reduced O&M budget, freeing up additional flying
    hours will adversely impact other training and direct-support accounts
    such as base operating support, facility maintenance, and professional
    military education. Overall, the Air Force does not have sufficient O&M
    funding in fiscal year 2013, and will not in fiscal year 2014, if the
    President's 2014 budget request is sequestered. In both cases, we are
    compelled to make difficult choices that impact the whole force.

        41. Senator Ayotte. General Spencer, what are the safety risks
    associated with reducing Air Force flying hours?
        General Spencer. The Air Force flying hour model identifies
    required hours, by weapon system, for aircrews to accomplish their
    assigned missions in a safe and proficient manner. Providing fewer
    flying hours reduces the readiness of these aircrews and places them at
    higher risk if they are called upon to execute operational taskings. As
    we return stooddown units to combat mission readiness, doing so safely
    will remain a top priority.

        42. Senator Ayotte. General Spencer, we know this will impact our
    aircrews and their readiness. How will the groundings impact the
    readiness of other mission essential personnel such as munitions,
    maintenance, and life support?
        General Spencer. Units which have stood down flying operations are
    focusing their efforts on preserving skill sets vital to our
    maintenance, munitions, and life support operations. Aircraft not
    committed to flying operations, and those that have stood down, are
    being used to facilitate on-the-job training for personnel in upgrade
    training as well as for specialized field training courses. Despite the
    fact internal business rules have been put in place to ensure limited
    resources are allocated correctly across the enterprise, these efforts
    only slow the loss of proficiency and individual training progression
    remains limited. Lack of training opportunities limits our workforce's
    ability to attain and maintain required skill sets and reduces the Air
    Force's ability to cultivate a well-trained/qualified force which
    ultimately will lengthen our readiness recovery period.

        43. Senator Ayotte. General Spencer, the Air Force starts fiscal
    year 2014 with a backlog of flying hours requirements but the fiscal
    year 2014 budget does not include extra funding for these hours and it
    does not factor in sequestration. Can the Air Force return its total
    force back to required mission ready status in fiscal year 2014 given
    these budget impacts?
        General Spencer. No, the fiscal year 2014 budget does not factor in
    sequestration and was submitted before fiscal year 2013 sequestration
    was in place. Consequently, we cannot return the Active Force back to
    required readiness. The Air National Guard and Air Force Reserve
    Command readiness programs were not significantly affected by
    sequestration. We will manage our readiness levels as best we can with
    the funding provided in fiscal year 2014, but there will continue to be
    considerable negative impacts to readiness if critical readiness
    accounts (such as flying hours and weapon system sustainment) are not
    adequately funded in the future.
        As we enter fiscal year 2014, we will focus on returning units that
    have been stood down to operational levels of readiness to prevent
    further erosion in their capabilities. However, if we do not receive
    sufficient funding in fiscal year 2014, we may again have to
    rotationally stand down units, or fly them at reduced readiness rates,
    similar to the actions we've taken in fiscal year 2013. This sequester-
    induced non-combat ready posture of portions of our fleet will impact
    our ability to fill operational plans and Secretary of Defense-ordered
    missions, continue to degrade our depot maintenance and modernization
    programs, and will significantly erode our training and force
    development efforts, creating long-term readiness shortfalls. Overall,
    this lack of readiness prevents us from attaining required mission
    ready status in fiscal year 2014, creates heightened risk, and is
    incompatible with the defense strategy.

                 DEPOT IMPACT OF BUDGET CUTS AND SEQUESTRATION

        44. Senator Ayotte. General Spencer, the Air Force has been at war
    for the past decade in both Afghanistan (2001) and Iraq (2003), and it
    has been constantly deployed conducting combat operations for over 20
    years. This has taken a toll on its aircraft. The Air Force is planning
    to fund weapon system sustainment to 81 percent of the fiscal year 2014
    requirement using funds from the base budget as well as OCO funds. Do
    you know what the OCO funds will be?
        General Spencer. The Air Force has requested $1.76 billion in OCO
    funding for weapon system sustainment in the fiscal year 2014
    President's budget.

        45. Senator Ayotte. General Spencer, what have you requested?
        General Spencer. The Air Force has requested $1.76 billion in OCO
    funding for weapon system sustainment in the fiscal year 2014
    President's budget.

        46. Senator Ayotte. General Spencer, do you expect to be fully
    funded?
        General Spencer. The Air Force requests full support of the
    President's budget to fund our requirements. We will likely see
    additional unfunded requirements in fiscal year 2014 as a result of
    deferred workload in fiscal year 2013 due to sequestration.

        47. Senator Ayotte. General Spencer, as you have stated, depot
    delays will result in aircraft grounding, degradation of workforce
    proficiency and productivity, and increased costs. You have also stated
    that it can take 2 to 3 years to recover full restoration of depot
    workforce productivity and proficiency. What are the safety risks
    associated with reducing depot maintenance?
        General Spencer. There are no safety risks. The reduced depot
    maintenance is a result of fewer depot inductions, but does not affect
    quality of maintenance. Those aircraft and engines not inducted will be
    grounded (not flown) until the required depot maintenance can be
    performed.

        48. Senator Ayotte. General Spencer, the Air Force is on track to
    start fiscal year 2014 with a backlog of depot and maintenance
    requirements, but the fiscal year 2014 budget does not include extra
    funding and it does not factor in sequestration. Can the Air Force
    fully restore readiness in fiscal year 2014 given these budget impacts?
        General Spencer. No, the fiscal year 2014 budget does not factor in
    sequestration and was submitted before fiscal year 2013 sequestration
    was in place. Consequently, we cannot return the Active Force back to
    required readiness. The Air National Guard and Air Force Reserve
    Command readiness programs were not significantly affected by
    sequestration. We will manage our readiness levels as best we can with
    the funding provided in fiscal year 2014, but there will continue to be
    considerable impacts to readiness if critical readiness accounts
    (particularly weapon system sustainment, to include organic and
    contract depot maintenance programs) are not fully funded in the
    future.
        As we enter fiscal year 2014, we will focus on accomplishing
    deferred depot and maintenance activities to ensure adequate aircraft
    availability for flying squadrons to properly train and deploy. If we
    do not receive sufficient funding in fiscal year 2014, we may have to
    rotationally standdown units, or fly them at a reduced rate, similar to
    the actions we've taken in fiscal year 2013. This sequester-induced
    non-combat ready posture of a portion of our fleet will impact our
    ability to fill operational plans and Secretary of Defense-ordered
    missions, continue to degrade our depot maintenance and modernization
    programs, and will significantly erode our training and force
    development efforts, creating long-term readiness shortfalls. Overall,
    this lack of readiness prevents us from attaining required mission
    ready status in fiscal year 2014, creates heightened risk, and is
    incompatible with the defense strategy.

        49. Senator Ayotte. General Spencer, is the Air Force assuming the
    fiscal year 2014 budget becomes law on October 1, 2013?
        General Spencer. We would like to see enactment of the fiscal year
    2014 Defense Appropriations Act by October 1, 2013.

        50. Senator Ayotte. General Spencer, what happens to readiness of
    the Air Force fleet of aircraft if this does not happen?
        General Spencer. If we do not receive sufficient funding in fiscal
    year 2014 for weapon system sustainment accounts, to include depot and
    maintenance programs, aircraft availability rates across the Air Force
    will likely decrease, which will have an adverse impact on readiness.
    In addition, weapon system sustainment reductions tend to have longer-
    term impacts, e.g., depot deferrals have cascading impacts on future
    depot schedules, so reductions in fiscal year 2013 will impact fiscal
    year 2014 and beyond. These impacts cannot be solved solely by
    increased funding; depot capacity limits our ability to recover from
    deferrals.

                                 ARMY READINESS

        51. Senator Ayotte. General Campbell, the fiscal year 2014
    President's budget request for Army O&M exacerbates existing fiscal
    year 2013 readiness challenges from which it will take years to
    recover. From your written testimony, I understand that the Army has
    already curtailed or canceled seven major training exercises for those
    units not preparing to deploy and will defer depot maintenance
    activities. From your experience, how can the Army recover from the
    steps you have had to take in the current fiscal environment?
        General Campbell. Fiscal year 2013 budget uncertainty has delayed
    the Army's ability to refocus the training of contingency forces on
    conventional threats and required the Army to accept risk in meeting
    force deployment timelines in Combatant Commander Operational Plans.
    Only units with high-priority missions were able to fully prepare.
    Lower priority units will not be able to fully execute broader-focused
    training strategies since they must constrain training activity to the
    squad/crew/team level.
        As soon as we can provide forces with the resources they need to
    execute their full training strategies, as reflected in the President's
    fiscal year 2014 budget submission, they will be able to progressively
    build readiness for a broader range of missions. We will manage limited
    training assets (like CTC rotations) as best we can to support the
    training progression of priority units. A unit must go through all the
    steps of building proficiency, and a brigade combat team is not
    considered fully ready for decisive action until it has completed a
    training rotation at a maneuver CTC. Even with additional funding for
    CTC rotations, units at squad-level proficiency at the end of fiscal
    year 2013 would not have time to adequately prepare to benefit from a
    CTC rotation early in fiscal year 2014. Time required by nondeploying
    forces to restore readiness in fiscal year 2014 will depend largely on
    how far their readiness slips in fiscal year 2013.
        With additional funding, Army force readiness would benefit from
    additional maneuver CTC rotations and additional warfighter exercises
    (designed to train BCT, division and corps level staffs).
    Unfortunately, there is a time component of readiness. We are now going
    to go through a period where we need to buy back readiness to prepare
    forces for next year. Even with full access to additional training
    resources in fiscal year 2014, it will take a BCT approximately a full
    year to reset and train-up for another mission--assuming they will have
    access to required training support facilities and ranges.

        52. Senator Ayotte. General Campbell, does the Army need a fiscal
    year 2013 supplemental funding request?
        General Campbell. The Army may need a fiscal year 2013 supplemental
    funding request to ensure adequate resources are available to support
    ongoing contingency operations. The Department recently submitted two
    reprogramming actions for fiscal year 2013 that uses all the OCO
    special transfer authority and all but $200 million of general transfer
    authority for fiscal year 2013. Congressional approval of the
    reprogramming actions as submitted will help reduce Army's current OCO
    shortfall from $8.3 billion to $3.3 billion. The Army is continuing to
    work with U.S. Force-Afghanistan and all other OCO stakeholders to
    reduce the remaining $3.3 billion shortfall. If unsuccessful, the Army
    may have to submit a request for supplemental funding later in fiscal
    year 2013.

                             MARINE CORPS READINESS

        53. Senator Ayotte. General Paxton, prior to the Continuing
    Resolution, the Commandant described a steady deterioration in Marine
    Corps readiness should there be an annualized Continuing Resolution and
    the implementation of sequestration. Now that Defense appropriations
    have been passed for fiscal year 2013, DOD still must implement $41
    billion in sequestration cuts. From your experience, how do you assess
    the Marine Corps' ability to recover from the steps you have had to
    take in the current fiscal environment?
        General Paxton. America's ``Force in Readiness'' must maintain a
    high state of readiness at all times to be able to respond to
    contingencies and commitments throughout the globe. Despite the
    constrained funding resulting from sequestration, the passing of H.R.
    933 mitigated most of the near-term operational impacts in fiscal year
    2013. The Marine Corps will meet near-term readiness commitments for
    deployed and next-to-deploy forces and will continue to rebalance to
    the Pacific and support the Marine Rotational Force Darwin and the Unit
    Deployment Program.
        While the Marine Corps is capable of meeting near-term readiness
    commitments in fiscal year 2013, we have taken risks in our long-term
    infrastructure sustainment and the unit readiness of our home station
    units. We cannot continue to sustain these levels of reductions in
    fiscal year 2014 without immediate impact to our deployed and next-to-
    deploy forces and our nondeployed crisis response forces at home.
        Sequestration's impacts on the availability of amphibious and
    maritime prepositioning ships are a concern for maintaining the Marine
    Corps' forward amphibious presence. The combat readiness of these ships
    is a foundational requirement for training and executing expeditionary
    force presence and amphibious force projection operations. As such,
    reduced amphibious ship availability and readiness could present a
    significant challenge to the training and maintenance of Naval
    Expeditionary Forces, thus driving overall readiness levels lower.
    Continued congressional support for the Navy's shipbuilding and surface
    ship-to-shore connector programs is vital to retain and maintain an
    adequate fleet of modern combat-ready amphibious ships.

        54. Senator Ayotte. General Paxton, what concerns do you have for
    Marine Corps readiness as you enter fiscal year 2014?
        General Paxton. DOD and the Marine Corps are still examining the
    implications of sequestration continuing into fiscal year 2014;
    however, we believe the Marine Corps can sustain its current
    operational requirements into fiscal year 2014. To maintain the high
    readiness of our forward-deployed forces, the Corps has globally-
    sourced equipment and personnel for Afghanistan and other emerging
    threats from its nondeployed units. These nondeployed forces' principal
    readiness challenge is the reduced availability of equipment at home
    station with which to outfit and train units. The manning of home
    station units also suffers due to the need to meet enhanced personnel
    requirements for deploying forces, Joint Individual Augmentation
    requirements, and manning Security Force Assistance Teams.
        The primary concern with the out-of-balance readiness of the
    operating forces is increased risk in the timely response to unexpected
    crises or large-scale contingency, since those nondeployed forces will
    likely be the responders. Efforts to maintain the readiness of all of
    our forces may be further exacerbated if the O&M account is diminished
    and an annualized Continuing Resolution or sequestration is implemented
    in fiscal year 2014.
        An annualized Continuing Resolution and/or sequestration in fiscal
    year 2014 would also adversely impact the availability of amphibious
    and maritime prepositioning ships. The combat readiness of these ships
    is a foundational requirement for training to and executing
    expeditionary force presence and amphibious force projection.

                              READINESS REPORTING

        55. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, I am interested in knowing about readiness
    reporting requirements through the quarterly readiness reports. Are the
    reports useful to you in planning? If not, why?
        General Campbell. The Quarterly Readiness Report to Congress (QRRC)
    is useful in describing the operational overview of deployed and
    forward stationed soldiers, the Army's top readiness concerns, and
    supports the Joint Staff's effort to communicate DOD's current
    readiness posture.
        The Army is developing AR 525-XX-B, Army Strategic Readiness. This
    process will inform the quarterly readiness reports. The Army Strategic
    Readiness process will enable the Army to obtain a holistic view of
    Army Readiness. The Army staff elements will conduct detailed analysis
    of relevant readiness metrics associated with the six strategic
    readiness tenets (SRT) of manning, equipping, sustaining, training,
    installations, capacity, and capability. This analysis will encompass
    current and historical trends ranging from tactical unit readiness
    (i.e. unit status reporting trends) to aggregated analysis and
    prediction of critical elements supporting the six SRTs. Combined,
    these assessments will support Senior Leader decisionmaking processes
    across a range of DOD forums.
        Admiral Ferguson. The QRRC helps inform our fundamental analysis of
    current readiness and readiness trends and is useful to Navy's planning
    process. The QRRC information is also evaluated in concert with the
    real time readiness reporting by individual units and group commanders,
    the narrative reporting by our Fleet and Naval Component Commanders,
    and in support of assessments of the Joint Force readiness. The
    resulting comprehensive readiness analysis is used to inform our
    decisionmaking processes across the full range of Navy man, train, and
    equip responsibilities.
        General Paxton. The information contained in DOD QRRC is
    principally constructed to report military readiness to Congress per
    section 482, title 10, U.S.C. Some of the information in the QRRC,
    particularly that pertaining to the Chairman's Joint Force Readiness
    Review and Joint Combat Capability Assessment, reflect the Marine
    Corps' inputs for joint planning, readiness reporting, and risk
    assessments. Those inputs are useful both for Service planning and
    Joint Force planning.
        General Spencer. The Air Force submits our QRRC to the OSD who then
    compiles and submits the report to Congress. The QRRC requirements are
    dictated by title 10, U.S.C., and the Air Force provides the
    information required by the statute. This specific report is not used
    as a planning document; however, the Air Force closely monitors
    readiness from myriad sources and incorporates the information into
    planning, programming, and budgeting processes.

        56. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what systems do you use internally to
    track readiness trends?
        General Campbell. Unit commanders measure their unit readiness
    using the four functional areas of Manning, Equipping, Equipment
    Readiness, and Training. The unit overall readiness levels are reported
    using Core Mission (C) levels and Assigned Mission (A) levels. The C
    level assessment indicates the ability of the unit to accomplish its
    core mission while the A level assessment indicates the unit's ability
    to accomplish its directed mission currently assigned. Headquarters,
    Department of the Army uses numerous processes to measure readiness in
    addition to the Commanders Unit Status Report, the Joint Forces
    Readiness Review to Congress, the Strategic Readiness Update, and the
    QRRC. Additionally, we analyze command feedback from the Combatant
    Commanders Integrated Priorities List, Critical Needs Assessments, Mid-
    Year Review, Operational Needs Statements, Joint Manning Documents, and
    Equipment Enterprise Reuse Conference. As our processes evolve, we look
    forward to developing a tool for predictive analysis to project
    readiness changes in the budget execution and forecast readiness
    concerns across the Future Years Defense Plan.
        Admiral Ferguson. Navy uses a variety of databases and a business
    intelligence tool to mine readiness trends. The Navy Readiness
    Reporting Enterprise (NRRE) database is the primary system through
    which Navy manages a series of subsystems that collect readiness
    information. The most significant of these subsystems is the Defense
    Readiness Reporting System-Navy. To increase the breadth of information
    available for readiness analysis, data is also collected from other
    systems outside the NRRE. One example is the Maintenance Figure of
    Merit database, which provides access to shipboard systems and material
    condition readiness of ships. Additionally, the quarterly Integrated
    Fleet Readiness Report tracks Fleet platform operational availability
    and readiness production metrics for the Chief of Naval Operations
    using a variety of data sources.
        General Paxton. The system used by the Marine Corps to track
    readiness trends is the program of record DRRS-MC. Commanders'
    assessments are inherently part of the DRRS-MC reporting system and
    provide operational perspective in terms of unit design mission
    capability and readiness.
        General Spencer. The Air Force uses the Status of Resources and
    Training System (SORTS) and the Defense Readiness Reporting System
    (DRRS) to track readiness trends. SORTS focuses on resources (people,
    equipment, and training), and DRRS focuses on capabilities. Further,
    there are many other indicators of readiness that are tracked by the
    Air Force, such as funding for flying hours, weapons system
    sustainment, training resources, and personnel readiness metrics.

        57. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, do you have suggestions for alternative
    reporting mechanisms?
        General Campbell. Presently, the Army is developing AR 525-XX-B,
    Army Strategic Readiness. This regulation will define Army Strategic
    Readiness and codifies the concept for developing the Army Strategic
    Readiness Assessment. The Army will track leading indicators across the
    six strategic readiness tenets of manning, equipping, sustaining,
    training, installations, capacity, and capability in order to provide a
    holistic view of Army readiness. Upon analyzing the leading indicators
    and associated trends, the Army staff will be able make readiness
    projections and recommend courses of actions to Senior Army leaders in
    efforts to mitigate impacts upon Army readiness at the strategic level.
    The Army Strategic Readiness Assessment will inform existing external
    reports such as the Joint Force Readiness Review and the QRRC.
        Admiral Ferguson. Navy would not recommend establishing alternative
    reporting mechanisms, although we will support adjustments to current
    reporting that the OSD and Congress determine should be made. For
    example, we are currently working with OSD to provide additional
    narrative context to the information provided in the QRRC.
        General Paxton. The DRRS enterprise is the best readiness reporting
    system for DOD. The system used by the Marine Corps to track readiness
    trends is the program of record DRRS-MC. With this readiness reporting
    system, commanders' assessments are an inherent part of the reporting
    process and they provide an operational perspective in terms of a
    unit's designed mission capability and its readiness to execute those
    missions. No alternatives are currently recommended.
        General Spencer. In a constrained fiscal environment, we are
    hesitant to advocate for additional reporting systems. However, the Air
    Force continues to analyze mechanisms for aggregating and synthesizing
    data from the various existing input sources in order to provide
    decision-quality strategic level readiness input for operational
    planning, force presentation, and the programming and budgeting
    processes.

        58. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what will tell you we have reached a
    readiness crisis?
        General Campbell. There will not be one signature event to indicate
    a ``readiness crisis.'' Rather, the long-term impacts of sequestration
    and the associated out-year reductions, particularly to force structure
    and readiness, threaten the Army's ability to provide trained and ready
    forces to perform enduring and vital missions. If steep cuts are made
    in fiscal year 2014 and beyond, this will create imbalance and
    significantly compound risk. It will cause a disproportionate
    investment across manpower, O&M, modernization, and procurement,
    challenging our ability to sustain appropriate readiness in the near
    term in support of our current defense strategy. Together, these
    impacts will further negatively impact Army readiness.
        Admiral Ferguson. A ready force has properly equipped and
    maintained ships and aircraft, crewed by trained and proficient
    sailors, with adequate spare parts and technical support, sufficient
    fuel and ready ordnance to execute mission requirements and contingency
    operations. Forces should be available to meet adjudicated Global Force
    Management Plan requirements. Sufficient surge capacity should exist to
    provide the combatant commander trained forces for crisis response as
    delineated by the National Defense Strategy.
        Failure to meet these standards would cause me to have concerns
    regarding the readiness of the force.
        General Paxton. Enabling close and continual Service command
    interactions and communications, the DRRS-MC; and Service-level
    personnel, materiel, installation, medical, and other data systems help
    to inform Marine Corps leadership with respect to the status of the
    five institutional readiness pillars. Service-level readiness is then
    integrated with the Joint DOD community through the Chairman's
    Readiness System to measure the military's preparedness to achieve
    objectives as outlined by the NMS. These processes will inform the
    Marine Corps and enable it to inform Congress before the Service
    reaches a readiness crisis.
        General Spencer. The Air Force has conducted 22 years of sustained
    combat operations and is continuing to meet high operation tempo
    demands to support today's counterinsurgency-centric fight. This has
    inevitably taken a toll on our weapons systems, people, and ability to
    meet the full spectrum of current and potential warfighter
    requirements. The Air Force provides unique capabilities for rapid
    response to taskings worldwide and response times are measured in
    hours, not days.
        The proper execution of the core missions our joint and allied
    partners rely on require our forces to be ready now. Combatant
    Commander Operational Plans do not provide the time for the Air Force
    to recover from a tiered readiness posture. The net effect is a
    requirement to maintain a high state of readiness across the Total
    Force, at all times. Pre-sequestration, the Air Force was already below
    acceptable readiness levels and sequestration has significantly
    exacerbated the situation. The Air Force will require additional
    resourcing above the President's fiscal year 2014 budget request,
    operation tempo relief, and at least 2 years to recover to required
    readiness levels.

        59. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what is the plan to address these impacts?
        General Campbell. Readiness degradation will stop as soon as we can
    support execution of unit-level training strategies and protect
    professional military education, at least to the levels supported by
    the President's fiscal year 2014 budget submission. The budget
    submission protects initial military training and professional military
    education as a hedge against a hollow force, supports training in
    Active Army units at moderate risk, preserves investment in an
    operational Reserve component as required by Army force generation
    models, and supports critical requirements of the training support
    system in the near term.
        The budget submission does not provide funding to accelerate
    recovery. With additional funding, Army readiness would benefit from
    additional maneuver CTC rotations and additional warfighter exercises
    (designed to train a BCT, division, and corps level staffs).
        Admiral Ferguson. Guided by the CNO's three tenets--``Warfighting
    First; Operate Forward; and Be Ready,'' Navy has taken actions to
    ensure the readiness of our units in the fight and all those operating
    forward. We are also focused on ensuring the readiness to deploy those
    forces planned to support the combatant commanders under the
    adjudicated GFMAP for the remainder of fiscal year 2013 and through
    fiscal year 2014. The funding provided in the fiscal year 2014 budget
    submission, with anticipated OCO funding, will support improved
    readiness in our nondeployed forces by the end of fiscal year 2014.
        Should fiscal year 2014 funding be sequestered, Navy will follow
    these same general principles, but we will not be able to fully support
    the fiscal year 2014 GFMAP as currently configured, and readiness of
    nondeployed forces will further degrade rather than recover. We are
    working with OSD, the Joint Staff, and the other Services in the SCMR
    to determine what further steps may be necessary to sustain a ready
    force in those circumstances.
        General Paxton. America's ``Force in Readiness'' must maintain a
    high state of readiness at all times to respond to contingencies and
    commitments throughout the globe. Despite the constrained funding
    resulting from sequestration, the passing of H.R. 933 will mitigate
    most of this year's near-term operational impacts from sequestration.
    The Marine Corps will meet its near-term commitments for deployed and
    next-to-deploy forces. It will continue to rebalance to the Pacific and
    support the Marine Rotational Force Darwin and the Unit Deployment
    Program.
        The funding levels for depot maintenance allow for the continuation
    of planned reset activities. H.R. 933 supports recruiting, advertising,
    and restores funding for tuition assistance programs. The fiscal year
    2014 budget, if approved, would help put the Marine Corps on a
    trajectory to reconstitute its combat capability. It would continue the
    transition to a post-OEF Marine Corps that complies with strategic
    guidance and is capable across the range of military operations.
        General Spencer. Bringing the Air Force back to full-spectrum
    mission readiness goals requires one full training cycle (approximately
    2 years) and additional resources above the President's 2014 budget
    request (approximately $3.2 billion increase in fiscal year 2014 and
    approximately $3.2 billion increase in fiscal year 2015) as well as a
    reduction in the number of deployment units currently are ordered to
    fulfill. The Air Force continues to plan for alternate funding and
    operation tempo scenarios, which will drive readiness recovery beyond 2
    years and, in many cases, will not permit readiness recovery to
    acceptable levels.

        60. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, when will Congress be notified of
    mitigation measures?
        General Campbell. Given the dynamic fiscal environment, there are
    still significant risks to the areas of collective training, equipment
    readiness, personnel impacts, and facility sustainment and
    modernization. The budget submission does not provide funding to
    accelerate recovery. Therefore, at this time, we do not have a timeline
    on when any mitigation measures may be instituted.
        Admiral Ferguson. Navy's approach to mitigating the impacts of the
    initial Continuing Resolution and then sequestration of fiscal year
    2013 funding has been the subject of testimony before Congress and
    discussed widely in other venues. We are working within the OSD SCMR to
    consider broad options in response to the potential for further
    reductions in DOD's top line in fiscal year 2015 and beyond. The Navy
    will work with OSD and the other Services to develop a budget that
    maximizes capability within the limits of the funding provided to us.
    Notification of Congress will be concomitant with the budget submission
    by the Department.
        General Paxton. Congress is provided the QRRC in accordance with
    title 10, U.S.C. statutory requirements. This report is prepared by the
    Office of the Under Secretary of Defense for Personnel and Readiness.
    It contains the status of the Department's readiness and the risks it
    faces in executing the National Military Strategy. As part of the
    Chairman's Readiness System, the Marine Corps also participates in the
    Joint Combat Capability Assessment process, which assesses and reports
    on DOD's readiness to execute the National Military Strategy. The
    Marine Corps also participates in the Chairman's Risk Assessment and
    the Secretary's Risk Mitigation Plan. In the latter document, for
    instance, the Marine Corps stated in 2012 that one of its risk
    mitigations was to regain proficiency in amphibious operations and
    reposture to the Pacific. The Marine Corps will also provide testimony
    as requested.
        The Marine Corps is participating in the SCMR. The SCMR will
    examine choices underlying the defense strategy, force structure,
    investments, and institutional management. The SCMR will help define
    major decisions that will inform the 2014 budget execution, guide the
    Quadrennial Defense Review (due to Congress in February 2014), and
    inform DOD's 2015 budget submission.
        General Spencer. The Air Force will continue to inform Congress of
    our ongoing mitigation measures during future readiness and posture
    hearings.

                        VIRGINIA-CLASS ATTACK SUBMARINES

        61. Senator Ayotte. Admiral Ferguson, how is the Virginia-class
    submarine performing operationally and as a program?
        Admiral Ferguson. The Virginia-class continues to be a highly
    successful acquisition program with ships consistently delivering early
    and within budget. Nine ships have delivered, the last being USS
    Mississippi (SSN 782), delivered 1 year ahead of schedule with a Navy
    Board of Inspection and Survey (INSURV) rating of ``green'' in all 22
    areas. The last ship of the Block II increment is USS Minnesota (SSN
    783) and is on schedule for a June 2013 delivery. All eight of the
    Block III ships have been funded with seven under construction. Block
    IV is on track to be awarded in October 2013. Overall, the program
    increased production to two ships per year in fiscal year 2011,
    starting with the construction of USS Washington (SSN 787) in September
    2011, with a follow-on multi-year procurement contract for 10 ships in
    fiscal year 2014-fiscal year 2018.
        Delivered ships are exceeding expectations for operational
    performance, with five ships already completing successful full length,
    worldwide deployments: USS Virginia (SSN 774), USS Texas (SSN 775), USS
    Hawaii (SSN 776), USS North Carolina (SSN 777), and USS New Hampshire
    (SSN 778). Virginia-class ships are preferentially assigned our most
    challenging missions and have performed superbly. Specific mission
    highlights are available at the appropriate classification level.

        62. Senator Ayotte. Admiral Ferguson, what critical capabilities
    does it provide our combatant commanders?
        Admiral Ferguson. Virginia-class submarines dominate the undersea
    domain and allow us to ``tunnel underneath'' an adversary's A2/AD
    systems. Their stealth, intelligence collection capability, and combat
    power give us access with influence to maintain overmatch--the ability
    to produce asymmetric effects by operating freely in the adversary's
    backyard--and are the mainstays of the conventional deterrence provided
    by our undersea force. In peacetime, Virginia-class submarines collect
    critical intelligence in support of national, combatant commander, and
    fleet tasking, as well as providing forward presence and warfighting
    readiness and flexibility.

        63. Senator Ayotte. Admiral Ferguson, what percentage of COCOM
    requirements for attack submarines was the Navy able to support in
    fiscal year 2012?
        Admiral Ferguson. COCOM requirements, including those for
    submarines, are sourced using the Global Force Management (GFM)
    process. For fiscal year 2012, COCOM unconstrained demand was 18.77
    submarines for worldwide SSN presence. The Navy met 100 percent of the
    GFM adjudicated requirement of 9.94 submarines deployed.

        64. Senator Ayotte. Admiral Ferguson, as Los Angeles-class
    submarines retire in the coming years and we fail to replace them
    quickly enough with Virginia-class submarines, our number of attack
    submarines will drop from 54 today to 43 in 2030. As a result, how much
    will our undersea strike volume decline?
        Admiral Ferguson. Undersea strike volume will decrease by
    approximately 63 percent in the 2030 timeframe due to two factors: SSN
    force structure reductions and SSGN retirement.
        The Navy is examining options to mitigate SSN shortfall, including:
    life extension for select Los Angeles-class submarines, decreased build
    time for new construction of Virginia-class submarines, and extended
    deployments for SSNs.
        Additionally, the Navy is examining an option to increase strike
    volume via a payload module inserted into future Virginia-class SSNs
    that would restore approximately 94 percent of our current undersea
    strike volume.

        65. Senator Ayotte. Admiral Ferguson, in order to at least
    partially address this decline in undersea strike volume, how important
    is it that we go forward with the Virginia payload module (VPM)?
        Admiral Ferguson. Undersea strike contributes to our ability to
    counter adversary A2/AD capabilities while providing additional attack
    capacity in our submarine force.
        The VPM could potentially more than triple the vertical launch
    capacity in current Virginia-class ships. VPM provides an additional
    four large diameter payload tubes per Virginia-class SSNs. VPM could
    replace the undersea strike volume gap created by the retirement of the
    SSGNs. The current advanced engineering design work on VPM will enable
    the Department of the Navy to consider incorporating VPM in the fiscal
    year 2019 Block V Virginia-class buy.
        While VPM represents a significant improvement in strike capacity,
    it comes at a cost. Given the increased costs, VPM would introduce in
    the Virginia-class concurrent with our efforts to field the SSBN(X)
    replacement, it may render VPM unaffordable as we assess the future
    fiscal impact of sequestration.

                            DEFENSE INDUSTRIAL BASE

        66. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what role does our Defense Industrial Base
    (DIB) play in our military readiness?
        General Campbell. The role that the DIB plays in our military
    readiness is of paramount importance. Our DIB provides the products and
    services in a timely manner to serve the needs of the warfighter. The
    DOD is pursuing efforts to ensure robust, secure, resilient, and
    innovative industrial capabilities upon which it can rely to fulfill
    warfighter requirements. DOD is assessing the health of the industrial
    base sectors by providing detailed analyses and in-depth understanding
    of the increasingly global, commercial, and financially complex
    industrial supply chain essential to our national defense, and
    recommending or taking appropriate actions to maintain the health,
    integrity, and technical superiority of that supply chain. DOD is
    addressing the challenges of critical and fragile elements of the base
    to identify systemic and fundamental issues that can be resolved
    through engagement across the public and private sectors. DOD is also
    pursuing innovation within supply chain sectors and supports
    responsible investment to advance industrial productivity through a
    variety of authorities and programs, including the sector-by-sector/
    tier-by-tier assessment, the Defense Production Act, and the
    Manufacturing Technology program, among others.
        Admiral Ferguson. A strong DIB is vital to our Navy and Marine
    Corps sustaining our position as the preeminent naval force in the
    world. We depend on the DIB to build and maintain our weapon systems,
    develop new systems to pace evolving threats, and provide surge
    industrial capacity to meet crises.
        The human capital of the industrial base is the foundation of our
    technological advantage against potential adversaries and ensures we
    remain a dominant naval force. Competition and innovation provide us
    the ability to control costs in an environment of reduced defense
    spending. The capacity resident in our industrial base to build ships,
    aircraft, and submarines is a strategic hedge in an uncertain future.
        General Paxton. The Marine Corps' organic industrial base plays a
    critical role in our ability to sustain a high rate of equipment
    readiness in our operational forces and is central to the Marine Corps'
    role as the Nation's force in readiness. The bulk of our reset
    execution is occurring in our organic depots. The continued
    availability of our ground equipment depot capacity in both Barstow,
    CA, and Albany, GA, is essential for reset and our ability to both
    self-generate readiness and surge in response to demand. The broader
    DIB is just as critical to our Service readiness. Like our sister
    Services, the Marine Corps depends on a robust and capable defense
    industry to develop, field, and maintain high-quality equipment and
    services that provide our warfighters with unsurpassed technological
    advantage.
        General Spencer. The readiness of the Air Force to provide the
    capabilities inherent in global vision, global reach, and global power
    is sustained by the products and services purchased from the national
    technology and industrial base. Without the support of both the organic
    and the commercial components of the industrial base, the Air Force
    would not be ready to respond to the needs of the Nation. From the
    laces in our boots to the electronics in our air, space, and cyber
    systems, the Air Force draws upon a broad and diverse network of
    suppliers. Through this dynamic network, we equip our airmen; maintain
    our bases, laboratories, and ranges; modernize our current systems; and
    design, develop, and procure new capabilities to remain the world's
    preeminent Air Force.

        67. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what impact has sequestration had on our
    DIB?
        General Campbell. Sequestration has had a significant impact on our
    industrial base, especially as we face uncertainty in our long-term
    budgets. In the current fiscal year, we have deferred 50 percent of
    third and fourth quarter depot maintenance for fiscal year 2013. In the
    short term, the deferred depot maintenance requirements will have
    minimum to moderate risk on readiness, but the prospect of long-term
    fiscal uncertainty will significantly affect the industrial base with
    associated risks to equipment readiness and impact our core
    requirements and critical skills.
        Admiral Ferguson. There are several aspects to our DIB and each
    sector is being impacted differently. In the case of new ship
    construction, the near-term impacts to the prime contractors have been
    relatively minor with some slowdowns in contract awards. However, those
    slowdowns impacted subcontractors, which supply much of the material
    used by the primes. These suppliers represent, in many cases, small
    businesses that can ill afford breaks in their production lines.
        The surface ship maintenance industrial base depends on
    conventional surface ship maintenance availabilities which the Navy
    sends to the private sector. The uncertainty in available work and the
    contracting delays for this maintenance has significantly affected the
    ship maintenance industrial base. Even when we are able to restore ship
    availabilities, several of these businesses may have lost critical
    skilled trades.
        In aviation, we have already considered reduced quantities of
    aircraft, which generally causes the cost of the remaining units to
    increase, and places our aviation subcontractor industrial base at
    risk. We are seeing this trend in weapons procurement programs as well.
        For new systems, we are seeing delays to fleet introduction
    schedules, impacts to our ability to purchase systems in economic
    quantities, and higher overall program costs.
        General Paxton. The Marine Corps' depot workload is fully funded
    for fiscal year 2013; however, the recently announced 11-day civilian
    workforce furlough could potentially delay or defer scheduled
    maintenance. The challenge in mitigating the effects of the furlough
    will be maintaining the density in skill sets required to complete the
    fiscal year 2013 workload on schedule. Delayed or deferred maintenance
    caused by the furlough could result in additional carryover of fiscal
    year 2013 work into fiscal year 2014 and could create a ripple effect
    that would ultimately degrade readiness and delay completion of reset.
        General Spencer. The primary or first order impacts of
    sequestration have been on our airmen, military and civilian, on our
    readiness, and on our modernization programs. We are still in the very
    early stages of being able to identify and potentially assess the
    secondary impacts of sequestration, including those on the industrial
    base. It is similar to watching a river at flood stage. Observers can
    know exactly how high the river will crest, but not exactly where or
    when the water will spill beyond the banks. What begins as a small leak
    may lead to a cascade.
        For example, the Air Force has curtailed flying for some combat
    ready units. The readiness of the pilots and maintainers immediately
    begins to decline. The base purchases less jet fuel, uses fewer
    expendable parts and supplies, and the time interval between
    inspections based on flying hours lengthens. In turn, these reductions
    in demand flow across the organic and commercial industrial base supply
    chains. Large suppliers with a diverse customer base are like
    homeowners who live on high ground. The flood is around them but it
    doesn't touch them. Small or specialized suppliers who depend primarily
    on Air Force demand are like those who live in the flood plain watching
    anxiously as the water approaches. For them it is just a question of
    how high the water will get. Will it stop at the doorstep or leave only
    the rooftop visible? Neither the Air Force nor DOD has the ability to
    know exactly where or exactly how bad the impacts will be.
        The impacts go beyond the DIB to all those individuals and
    companies in our Nation's economy who provide goods and services to the
    Air Force. For example, the Air Force has severely limited official
    travel for temporary duty. We are making fewer airline and hotel
    reservations and have reduced the demand for food and transportation
    services at formerly frequented travel destinations. Again some
    industries will be impacted more than others, but the Air Force has no
    capability to predict which industries may be impacted and, if they
    are, to what extent.
        At this very early stage of sequestration, the Air Force can only
    accurately report on the size of the cuts, the immediate impacts to Air
    Force readiness, the delays to our modernization programs and provide
    preliminary estimates of restoring readiness and overcoming the delays
    in projects and programs. It is too soon to know the specifics of
    exactly where or exactly how significant the impacts of sequestration
    may be on the DIB and the Nation's economy.

        68. Senator Ayotte. General Campbell, Admiral Ferguson, General
    Paxton, and General Spencer, what will be the impact on our DIB if we
    allow sequestration to continue this year and next?
        General Campbell. The impact on our DIB if we allow sequestration
    to continue this year and next will be moderate to high. While it is
    too early for the Army to identify specific impacts associated with
    long-term sequestration on the DIB, the prospect of significant
    reductions and fiscal uncertainty are having some effect. Beyond fiscal
    year 2013, sequestration may result in the elimination or substantial
    modification of Army modernization programs, which will further affect
    the health of the industrial base. The Army is currently monitoring the
    stability of the DIB through active engagement in the following
    efforts:

             The Department-wide sector-by-sector/tier-by-tier
            industrial base analysis that establishes early warning
            indicators of risk, particularly at lower-tiers, to strengthen
            the supply chain and to mitigate potential points of failure;
             The Industrial Base Baseline Assessment that conducts
            a sector/sub-sector assessment of programs identified as
            critical by Program Executive Offices and Life Cycle Management
            Commands and determines the impact of reductions in funding to
            program requirements; and
             The AT Kearney industrial base assessment that seeks
            to develop viable strategic alternatives to sustain the Combat
            Vehicles Industrial Base within a constrained fiscal
            environment.

        Admiral Ferguson. As the Assistant Secretary of the Navy for
    Research, Development, and Acquisition, the Deputy Chief of Naval
    Operations and Deputy Commandant of the Marine Corps testified to the
    House Armed Services Committee in February of this year, the Department
    of the Navy's $7.8 billion sequestration investment reduction would
    potentially impact over 100,000 private sector jobs across the Nation
    considering direct and indirect impacts to the economy. If
    sequestration continues this year and the next, these impacts would
    continue to be realized with the resulting loss of industry capability
    to produce defense equipment in the long run accompanied by a
    reluctance of the capital markets to invest in the defense sector.
        General Paxton. The long-term impact of sequestration is degraded
    readiness. The Marine Corps will have to closely scrutinize and
    determine equipment maintenance priorities, assume risk in mission-
    essential weapon system readiness, delay normal depot sustainment, and
    potentially delay reset operations. Our efforts to maintain the
    readiness of the deployed force and correct the readiness imbalance of
    the nondeployed forces would be further exacerbated by sequestration if
    our O&M accounts continue to be diminished.
        General Spencer. The Air Force's primary concern is the impact that
    continued sequestration will have on our airmen, military and civilian,
    on our readiness and our modernization programs. Our country and our
    allies depend on the air, space, and cyber capabilities the Air Force
    provides through global vision, global reach, and global power. The
    immediacy and abruptness of this year's sequestration has added
    uncertainty to the concerns of our airmen, and caused us to reduce our
    readiness, defer needed infrastructure maintenance, and delay our
    modernization programs.
        The DIB, both the organic and commercial components, provide the
    goods and services that build and sustain the systems that enable the
    Air Force's core missions of air and space superiority; global strike;
    rapid global mobility; intelligence, surveillance and reconnaissance;
    and global command and control. Continued sequestration may place some
    elements of that industrial base at risk, which in turn, could impact
    Air Force capability.
        While the Air Force can accurately estimate the size of the cuts
    stemming from continued sequestration and assess their impact on Air
    Force readiness and modernization, our ability to do the same for the
    industrial base is limited. The expectation is that larger firms with
    their capital structure are better equipped to respond to continued
    sequestration. However, slightly more than half of each contracted
    dollar goes to subcontractors. Some of these are small businesses and
    may lack the financial reserves to deal with the uncertainties of
    continued sequestration.
        The key issue is uncertainty. Uncertainty increases risk, reduces
    willingness to invest in a defense-oriented portfolio, and dries up
    innovation. While the Air Force can monitor and assess the impacts of
    continued sequestration on the industrial base, we may only learn of
    the loss of a key industrial base capability when we are forced to
    replace or restore it.

                              JOINT STRIKE FIGHTER

        69. Senator Ayotte. Admiral Ferguson, General Paxton, and General
    Spencer, how important is the F-35 Joint Strike Fighter to the future
    readiness and capabilities of your Service?
        Admiral Ferguson. The F-35C will provide a significant additive
    value when brought to bear with the networked fighting concepts of the
    U.S. Navy Carrier Strike Group and in a joint/combined warfighting
    arena. The F-35C provides a fifth generation fighter aircraft to the
    Navy carrier air wing and brings with it the ability to effectively
    engage and survive a wide range of threats, both air and surface, in
    contested airspace. It provides a ``day-one'' strike capability
    enabling tactical agility and strategic flexibility required to counter
    a broad spectrum of threats and win in operational scenarios that
    cannot be addressed by current legacy aircraft, including operations in
    an anti-access/area-denied environment.
        General Paxton. The F-35 JSF is the next generation strike weapons
    system designed to meet an advanced threat, while improving lethality,
    survivability, and supportability. It will be the cornerstone of a
    multi-mission joint force possessing improved mission flexibility and
    unprecedented effectiveness to engage and destroy both air and ground
    threats. The F-35 is designed to participate in a wide variety of
    operations from routine, recurring military activities to Major Theater
    War, and peacekeeping operations.
        The short takeoff and vertical landing (STOVL) F-35B is the
    centerpiece tactical aviation aircraft needed to support our MAGTF. Our
    requirement for expeditionary tactical aviation capabilities has been
    demonstrated repeatedly, most recently with forward operating bases
    (FOBs) in Operation Enduring Freedom (OEF). The F-35B surpasses our
    current generation of aircraft in combat effectiveness and
    survivability in the current and future threat environment.
        The capability inherent in a STOVL aircraft allows the Marine Corps
    to operate in harsh conditions and from remote locations where few
    airfields are available for conventional aircraft. It is also
    specifically designed to operate from amphibious ships--a capability
    that no other tactical fifth-generation aircraft possesses. The ability
    to employ a fifth-generation aircraft from 11 big-deck amphibious ships
    doubles the number of ``aircraft carriers'' from which the United
    States can employ fifth-generation capability. The expanded flexibility
    of STOVL capabilities operating both at-sea and from austere land bases
    is essential, especially in the Pacific.
        The Marine Corps will leverage the F-35B's sophisticated sensor
    suite and very low observable fifth-generation strike fighter
    capabilities, particularly in the area of data collection and
    information dissemination, to support the MAGTF well beyond the
    abilities of current MAGTF expeditionary attack, strike, and electronic
    warfare assets. Having these capabilities in one aircraft provides the
    Joint Force Commander and the MAGTF commander unprecedented strategic
    and operational agility.
        Marine Corps alignment with the security demands articulated in the
    2012 Strategic Guidance for the 21st Century is enhanced by the F-35's
    unprecedented lethality, and survivability; capabilities that do not
    exist in today's legacy fighter attack aircraft.
        General Spencer. Only a fifth-generation fighter, such as the F-35,
    provides the Air Force the levels of lethality and survivability
    required to gain and maintain air superiority in current and evolving
    high-end threat environments, ensuring we are able to continue to meet
    our defense planning guidance-directed joint warfighting requirements.
        Since World War II, the United States has relied on its ability to
    control the skies over the battlefield, protecting friendly forces
    while holding adversary targets at risk. For the past 30 years, our
    fighter fleet remained ahead of this evolving threat, superbly
    performing all its missions and supporting the joint warfighter in
    operations such as Operations Desert Storm, Allied Force, Enduring
    Freedom, and Iraqi Freedom. We have reaped the benefits of developing
    the most powerful Air Force on the globe and adversaries are keenly
    aware of our unrivaled ability to exploit the air to achieve our
    Nation's political objectives. Evidence of the respect adversaries have
    for U.S. Air Force capabilities is seen in the proliferation of new
    threat systems designed to counter our asymmetric advantage.
        The Air Force's ability to gain air superiority remains an
    imperative for providing freedom from enemy attack while ensuring our
    own freedom of maneuver. The threats we may face continue to evolve in
    technology and complexity. Potential adversaries are acquiring advanced
    fighters on par with or better than our legacy fleet, developing
    sophisticated and networked early warning radar surveillance systems,
    and fielding surface to air missile systems with increasing range and
    lethality. These capabilities all work together to create advanced, and
    extremely dangerous, integrated air defense systems. These A2/AD
    environments seriously challenge our ability to gain air superiority
    and hold targets at risk. We already face this challenge in select
    areas of the world and these threat environments will continue to
    expand as these systems proliferate.
        Our fleet of legacy fighters is approaching the limits of both
    service life and capability modernization that permits them to survive
    and operate in these environments--they simply do not have the
    capabilities, enhanced by advanced stealth, required to defeat the
    emerging threats. Only our fifth-generation fighter fleet's combination
    of advanced stealth, precision weapons, unmatched electronic warfare
    systems, fused multi-spectral battlespace awareness, combat
    identification systems, maneuverability, and speed has the ability to
    operate and survive in these advanced threat environments. All these
    capabilities inherent in the F-35, particularly its advanced stealth
    properties, ensure the United States and our allies have an air
    superiority advantage, and will enable our combatant commanders to
    bring the full spectrum of capabilities of the joint force to the
    fight.

                       SIZE OF THE ARMY AND MARINE CORPS

        70. Senator Ayotte. General Campbell and General Paxton, if
    sequestration continues next year, do you believe it will be necessary
    to further reduce the size of the Army and the Marine Corps? If yes, by
    how much?
        General Campbell. If further budget cuts are directed and end
    strength goes below 490,000 in the Active component, the Army could be
    put on a path toward a hollow force--that is an Army that has prolonged
    and disproportionate investments across manpower, O&M, modernization,
    and procurement without corresponding adjustments to strategy.
    Sequestration will have long-term impacts that extend well beyond
    fiscal year 2013. The Army may have to reduce an additional 100,000
    soldiers across the Active Army, Army National Guard, and U.S. Army
    Reserve, and further reduce the civilian workforce in order to maintain
    a balance between end strength, readiness, and modernization.
        General Paxton. We will not have a definitive answer to this
    question until the Defense Department completes its SCMR of our current
    National Defense Strategy and analysis of a range of potential budget
    cuts. Depending upon where the Department weighs its effort, 182,100
    may or may not be sustainable. We continue to believe that the Nation
    needs a ready crises response force, forward deployed and forward
    engaged. The President's current National Defense Strategy, which
    rebalances our forces toward the Pacific, is suited to the capabilities
    and strengths of your Marine Corps. If, as a result of the SCMR, the
    Marine Corps budget is further reduced below current Budget Control Act
    levels, the Marine Corps will have to look at reducing forces below
    182,100. Determining how much below 182,100 will again depend on how
    much the Marine Corps is required to reduce their budget based on
    decisions that result from the SCMR.

        71. Senator Ayotte. General Campbell and General Paxton, how much
    would the Guard and Reserve have to be cut?
        General Campbell. The Army has yet to quantify precisely how future
    end strength reductions would impact the Reserve component, however, as
    Chief of Staff of the Army Ray Odierno recently testified, if
    sequestration is fully implemented through fiscal year 2021, it will
    require us to reduce, at a minimum, another 100,000 soldiers from the
    total Army, which will include the Active and Reserve components.
        General Paxton. We will not have a definitive answer to this
    question until the Defense Department completes its SCMR of our current
    National Defense Strategy and analysis of a range of potential budget
    cuts. Depending upon where the Department weights its effort, 39,600
    reservists may or may not be sustainable. We continue to believe that
    the Nation needs a ready operational Reserve Force. The President's
    current National Defense Strategy, which rebalances our forces toward
    the Pacific, is suited to the capabilities and strengths of your Marine
    Corps. If, as a result of the SCMR, the Marine Corps budget is further
    reduced below current Budget Control Act levels, the Marine Corps will
    have to look at reducing Reserve Forces below 39,600. Determining how
    much below 39,600 will again depend on how much the Marine Corps is
    required to reduce their budget based on decisions that result from the
    SCMR.

        72. Senator Ayotte. General Campbell and General Paxton, what would
    be the impact on your Service and your ability to support the current
    strategy if you are required to further reduce your end strength?
        General Campbell. If sequestration continues, the Army will simply
    not have the resources to support the current Defense Strategic
    Guidance, and we risk becoming a hollow force. The Army will be unable
    to meet the range of missions in the current strategic guidance if
    sequestration requires us to further reduce end strength.
        General Paxton. In 2010, the Marine Corps conducted a careful
    review of force structure requirements in the future operating
    environment. At that time, we arrived at a force requirement of 186,800
    to meet the security demands of the Nation. In anticipation of a more
    austere fiscal environment, risk was taken to reduce that number to
    182,100. Reductions below this force level will create greater risk.
        The Marine Corps, by design, is not organized to conduct extended
    land campaigns; it is organized to support forward deployed crisis
    response rotations at an aggressive deploy-to-dwell ratio and to meet
    its obligations to the Joint Force for amphibious forcible entry.
    Reductions in the number of marines available creates risk not only to
    future war scenarios, but also to the immediate demands of warfighting,
    crisis response, deterrence, humanitarian assistance/disaster relief,
    reassuring our allies, and creating options for our strategic
    leadership.
        Fewer marines means:

            - Fewer forward engagements, decreasing our deterrent effect;
            - Leaving our allies less assured, creating uncertainty with
            response to U.S. security guarantees;
            - Smaller investment in building the capabilities of our
            security partners;
            - Decreased capacity to respond to major contingency
            operations;
            - Less time to train to complex missions, putting marines at
            risk; and
            - Reduced dwell-time coupled with greater stress on military
            families.

        73. Senator Ayotte. General Campbell and General Paxton, would
    either of your Services have to utilize involuntary separations to
    achieve these end strength reductions?
        General Campbell. Yes. The Army learned some very valuable lessons
    during the drawdown of the 1990s. Therefore, a principal tenet of the
    Army's plan to reduce end strength is that the Army, not the individual
    servicemember, will make the determinations as to who continues to
    serve and who must transition. The most critical concerns are to retain
    those servicemembers with the greatest potential for future
    contribution and to provide fair and comprehensive transition
    assistance for members and families who must continue their service in
    a Reserve component or transition to civilian employment. To the extent
    that sequestration considerations increase the number of personnel
    reductions that are required, the Army will achieve a portion of those
    additional reductions through involuntary separations.
        General Paxton. The Marine Corps' plan to reduce our Active
    component end strength from 202,100 to 182,100 by the end of fiscal
    year 2016 is being conducted in a measured way. Our plan is to reduce
    our end strength by no more than 5,000 marines per year and will be
    accomplished primarily by natural attrition, voluntary separation, and
    retirement authorities. Involuntary separations will be minimized as
    much as possible, and we have no plans to conduct a reduction-in-force.
    Such an approach would do significant long-term damage to our ability
    to recruit and maintain a high quality force. Our overarching goal is
    to keep faith with our marines and their families. This plan would have
    to be re-assessed should we be given a mandate for additional end
    strength reduction and increased use of involuntary separation
    authorities would likely be required.

                                     KC-46

        74. Senator Ayotte. General Spencer, in terms of readiness, what
    are the Air Force's top modernization priorities?
        General Spencer. In order to achieve readiness levels necessary to
    meet the Defense Strategic Guidance, the Air Force must modernize its
    aging fleet. In particular, the strategic guidance directs a shift to
    the Pacific where the challenges of an A2/AD environment dictate full-
    spectrum readiness across the Air Force. The limits of our legacy
    fleet's ability to survive and operate in these environments are being
    approached by near-peer adversaries in the region that possess advanced
    fighter aircraft, networked early warning radar surveillance systems
    and integrated air defense systems. Our legacy fleet simply does not
    have the advanced capabilities required to survive and operate in the
    emerging threat environment. As such, Air Force modernization
    priorities are focused on these threat scenarios. The F-35 Joint Strike
    Fighter, KC-46 tanker, and Long-Range Strike Bomber will help ensure
    the United States and our allies have an air superiority advantage, and
    will enable our combatant commanders to bring the full spectrum of
    capabilities of the joint force to the fight in these future threat
    environments.

        75. Senator Ayotte. General Spencer, how important is the KC-46A
    program to Air Force readiness?
        General Spencer. The KC-46A is an essential component of force
    readiness, particularly with the strategic shift to the Pacific Area of
    Operations coupled with concerns on the long-term sustainment on our
    aging KC-135R tanker fleet. To meet the Defense Strategic Guidance, air
    refueling capability remains the linchpin of our ability to project
    power across intercontinental distances to hold any target at risk. To
    this end, the KC-46A will ensure our Nation retains a ready and capable
    tanker force supporting joint and coalition aircraft in worldwide
    operations for decades to come.

        [Whereupon, at 4:21 p.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2014 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                           WEDNESDAY, APRIL 24, 2013

                               U.S. Senate,
                      Subcommittee on Readiness
                                and Management Support,
                                   Committee on Armed Services,
                                                        Washington, DC.

        MILITARY CONSTRUCTION, ENVIRONMENTAL, AND BASE CLOSURE PROGRAMS

        The subcommittee met, pursuant to notice, at 2:35 p.m. in
    room SR-232A, Russell Senate Office Building, Senator Jeanne
    Shaheen (chairman of the subcommittee) presiding.
        Committee members present: Senators Shaheen, Kaine, Ayotte,
    and Lee.
        Majority staff members present: Joseph M. Bryan,
    professional staff member; Jason W. Maroney, counsel; Michael
    J. Noblet, professional staff member; John H. Quirk V,
    professional staff member; and Russell L. Shaffer, counsel.
        Minority staff member present: Lucian L. Niemeyer,
    professional staff member.
        Staff assistant present: Daniel J. Harder.
        Committee members' assistants present: Chad Kreikemeier,
    assistant to Senator Shaheen; Marta McLellan Ross, assistant to
    Senator Donnelly; Karen Courington, assistant to Senator Kaine;
    Brad Bowman, assistant to Senator Ayotte; and Robert Moore,
    assistant to Senator Lee.

         OPENING STATEMENT OF SENATOR JEANNE SHAHEEN, CHAIRMAN

        Senator Shaheen. Good afternoon, everyone.
        At this time I would like to call this subcommittee hearing
    to order.
        Actually, given that we have two witnesses who are from New
    Hampshire, as well as Senator Ayotte and myself, I think next
    year we should do this in New Hampshire as opposed to down
    here. For the audience, you would really enjoy it very much to
    be up there. We will do it a little later in the year so it is
    a little warmer than it is right now.
        Senator Ayotte. More foliage.
        Senator Shaheen. Yes, that is right, when we have foliage.
        But seriously, I want to welcome everyone to the hearing
    this afternoon. Testifying, we have representatives from each
    of the Military Services and the Office of the Secretary of
    Defense (OSD) who are responsible for the Department of
    Defense's (DOD) military construction (MILCON) and
    environmental programs, and we very much look forward to your
    testimony.
        Overall, the President's budget request for military
    construction and family housing is $11.1 billion in fiscal year
    2014, approximately $200 million less than what was requested
    last year. The budget request broadly reflects the fiscal
    realities facing DOD, but especially in the absence of a
    resolution to sequestration, additional savings will need to be
    achieved. I look forward to hearing more from our witnesses on
    their top priorities for this year's request so that the
    subcommittee can move forward in a prudent and informed manner
    on the defense authorization bill.
        Last year's National Defense Authorization Act (NDAA)
    reduced or eliminated more than $660 million in programs in the
    military construction and environment accounts. We will be,
    again, looking to find savings in these areas, recognizing the
    current fiscal pressures, the subcommittee's responsibility to
    help DOD eliminate duplicative programs and projects, and
    increase management efficiencies and reduce waste.
        DOD has again requested a base realignment and closure
    (BRAC) round in 2015. I joined the majority of my colleagues in
    opposing this proposal last year, and I continue to believe
    that now is not the time to spend billions of dollars on
    another BRAC round, especially as DOD grounds combat aircraft
    and cancels ship deployments due to sequestration. The
    Government Accountability Office (GAO) has done a number of
    studies on the 2005 BRAC round which found, among other things,
    that BRAC implementation costs grew to about $35 billion,
    exceeding the initial 2005 estimate of $21 billion by 67
    percent. In this time of fiscal uncertainty, we clearly cannot
    afford another round like the last one.
        The GAO has made a number of recommendations for improving
    future BRAC rounds, including improving the process for
    accurately identifying and estimating all costs associated with
    BRAC decisions. I look forward to hearing more from our
    witnesses about why they believe that another BRAC round is
    necessary and what changes DOD has put in place to ensure
    similar cost growth will not occur in any future BRAC round.
        Now, setting BRAC aside, one of the more immediate ways our
    military installations can save money is through the adoption
    of more energy-efficient technologies. I am pleased to see DOD
    and each of the Services continue to strive for smarter ways to
    become energy efficient. That is perhaps why DOD was able to
    reduce its installation energy consumption by 2.4 percent and
    approximately $100 million in fiscal year 2012. The expanded
    use of metering to ensure an accurate baseline and smart grid
    technologies enable energy users to adapt to demand
    fluctuations and better informs our installation energy
    managers. Even simple fixes, like stopping water line leaks,
    ensures that in these times of fiscal uncertainty, DOD is doing
    its best at increasing efficiency.
        Last week, the full committee released a report of our
    year-long review of DOD spending overseas. The review focused
    on spending in Japan, South Korea, and Germany, three critical
    allies. In order to better sustain our presence in these
    countries, we need to understand and control our costs. The
    committee's bipartisan report describes inadequate oversight of
    MILCON projects built with in-kind payments. It also discusses
    in-kind payments earmarked for nonessential projects at a time
    when DOD is under severe budget constraints. Every dollar spent
    on unnecessary or unsustainable projects is a dollar
    unavailable to care for our troops and their families, to
    maintain and modernize equipment, and to pay for necessary
    investments in base infrastructure. The committee will be
    assessing what changes in law might be necessary to ensure
    closer scrutiny of our overseas investments and avoid future
    commitments that may be inefficient or unaffordable. I will be
    very interested in hearing what our panels think about this
    report and suggestions for future changes.
        The President's budget request also includes $3.8 billion
    for defense environmental programs, down from last year's
    request and representing the fourth consecutive year of
    decreases in funding for the program. As with past years, the
    largest piece of the environmental budget request is the
    environmental restoration program, the cleanup of contamination
    at bases, current and former, including the remediation of
    discarded military munitions. While the restoration budget has
    remained relatively steady over the past few years, it is
    important that DOD and Congress remain committed to the
    remediation of contamination, including the cleanup of military
    munitions at thousands of sites around the country.
        I would also like to take a moment to express my strong
    support for the Navy's inclusion of a project in its budget
    request to modernize and consolidate a number of facilities at
    Portsmouth Naval Shipyard that support our nuclear submarine
    fleet. I am sure it comes as no surprise that Senator Ayotte
    and I are particularly interested in what is happening at the
    shipyard. But Portsmouth is the only east coast maintenance
    depot for Virginia-class submarines, and this project will help
    to ensure that this capability is maintained for many years
    into the future. I understand that this project will not only
    improve productivity by consolidating several dispersed
    activities, but will also result in energy savings by reducing
    the overall footprint of the facilities and through the
    adoption of more energy efficient technologies. I believe these
    are exactly the kinds of projects DOD should be pursuing, and I
    applaud DOD and the Navy for making these investments.
        Now, before our witnesses deliver their opening remarks, I
    will ask Senator Ayotte if she has any statement.

                   STATEMENT OF SENATOR KELLY AYOTTE

        Senator Ayotte. I thank the chairman very much and very
    much appreciate being a part of the leadership of this
    subcommittee with you. I want to thank you for calling this
    very important hearing, particularly with the challenges we
    face right now with sequestration.
        As we all know, DOD has come in for a significant number of
    cuts with sequestration, and if you look at the percentages, it
    is actually disproportionate to what other areas of the
    Government have taken in terms of cuts. As Lieutenant General
    Milstead testified this morning before the Personnel
    Subcommittee, he said, ``Those who have given the most to the
    security of this Nation are asked to accept the bulk of the
    risk that sequestration poses to this Nation.'' So we need to
    understand fully from each of the witnesses what the impact is
    of sequestration in your areas because it is very important
    that we understand those implications.
        I share Senator Shaheen's desire to work to make sure that
    we are eliminating waste, duplication, misallocated funds,
    given the budget challenges we face. But with that said, we
    also need to fully understand the implications of the
    significant reductions that you are facing and what that means.
        In one of the areas, I also would certainly echo the praise
    that Senator Shaheen gave to the Navy for their commitment and
    recent projects at the Portsmouth Naval Shipyard. I think that
    is terrific and we really appreciate it, and also the
    importance of those projects in terms of helping the efficiency
    of the shipyard, as well as energy efficiency is terrific.
        But I have to say I note that the Department of Navy's
    recent report on the modernization of naval shipyards cites a
    $3.5 billion facility maintenance backlog, which is higher than
    the overall Navy's average. This backlog includes $1.2 billion
    of critical repairs for mission-essential facilities. So we
    have some significant challenges with the budget issues that
    you are facing.
        Naval shipyards play a critical role in maintaining the
    readiness of our fleet and are currently the sole provider of
    many depot-level maintenance capabilities. The readiness of our
    aircraft carriers and submarines is directly linked to
    sufficient funding for and efficient operation of the naval
    shipyards. These shipyards, including the Portsmouth Naval
    Shipyard, are highly dependent on the condition of shipyard
    infrastructure, including dry docks, piers, nuclear facilities,
    production shops, and other facilities.
        Yet, despite the importance of these facilities, based on
    current investment levels, as curtailed by the budget cuts that
    we are going to talk about today, the Navy will need 17 years
    to clear the current maintenance and infrastructure repair
    backlog, that is a significant number, and I think people need
    to understand that. While the Navy is looking at potential
    options to accelerate the rate of overall improvements in
    shipyard infrastructure, workplace efficiency, and operating
    conditions, the report concludes that a quicker upgrade plan
    ``is currently unaffordable.'' I know that the chairman and I
    will make this a primary focus to understand this for this
    hearing today and also throughout our work on this committee.
        I want to raise another issue, something that I have been
    very concerned about on the national security front. In section
    227 of the NDAA for Fiscal Year 2013, I would like to get an
    update regarding the environmental impact statements (EIS) that
    are being prepared for a potential third homeland missile
    defense interceptor site on the east coast of the country. The
    purpose of an east coast missile defense site would be to
    ensure that we have shoot-look-shoot capability against a
    potential Iranian intercontinental ballistic missile (ICBM)
    fired at the east coast of the United States. I know very well
    that the witnesses that are before us are familiar with the
    fact that if we were to receive an incoming missile from North
    Korea on the west coast of the country, we have that shoot-
    look-shoot capability, but we do not have the same capability
    on the east coast of the country.
        Director of National Intelligence James Clapper testified
    this month that this Iranian ICBM threat could emerge as early
    as 2015. Yet, in order to properly site and build an east coast
    missile defense site, and I want to commend the administration
    for now looking very seriously at this issue, it could take up
    to 5 or 6 years to build an east coast missile defense site. So
    this is, obviously, I think something we need to look at with a
    sense of urgency, and I certainly look forward to hearing from
    you as to where that process stands right now.
        I also join the chairman in opposing DOD's request for the
    authorization to conduct a round of BRAC in 2015. Now is not
    the time to spend billions of dollars on another BRAC round,
    especially as DOD grounds combat aircraft, cancels ship
    deployments, and furloughs workers due to sequestration.
        As the chairman mentioned earlier, we have not fully
    understood or realized the cost from the last BRAC round, and
    there were significant costs to undertaking a BRAC round. In
    fact, if you look at what happened in 2005, the BRAC Commission
    estimated that the total cost of the BRAC decisions would be
    $21 billion. According to GAO, the 2005 BRAC round actually
    cost taxpayers $35 billion, $14 billion more than projected, a
    massive increase, in terms of the estimate, of 67 percent.
    Given the budget environment we are in, we simply cannot afford
    this type of endeavor right now or this kind of cost growth.
        I have heard from DOD certain assurances that the new round
    will be better than the last round. However, I am not sure how
    I understand DOD can make those assurances, given that this is
    designed to act as an independent entity, free from the
    influence of DOD. It is not clear to me how we can be confident
    that there are any real cost savings to be gained from another
    BRAC round, and that is among the reasons that I certainly
    oppose a BRAC round.
        I want to thank the chairman for this hearing, and I look
    forward to the testimony of the witnesses. I want to thank each
    of you for your service to our country during very challenging
    times. Thank you for being here today.
        Senator Shaheen. Thank you, Senator Ayotte.
        Let me welcome all of you who will be testifying. First, we
    have John Conger, who is the Acting Deputy Under Secretary of
    Defense for Installations and Environment. Welcome. Katherine
    Hammack, Assistant Secretary of the Army for Installations,
    Energy, and Environment. Thank you for being here. Roger
    Natsuhara, Principal Deputy Assistant Secretary of the Navy for
    Energy, Installations, and Environment; and Kathleen Ferguson,
    who is the Acting Assistant Secretary of the Air Force for
    Installations, Environment, and Logistics. Again, thank you all
    for being here this afternoon. We look forward to your
    testimony. I will ask you if you will go ahead and present in
    that order. Mr. Conger?

     STATEMENT OF JOHN C. CONGER, ACTING DEPUTY UNDER SECRETARY OF
                 DEFENSE, INSTALLATIONS AND ENVIRONMENT

        Mr. Conger. Thank you very much. Chairman Shaheen, Ranking
    Member Ayotte, distinguished members of the subcommittee, I
    appreciate the opportunity to appear before you to discuss
    DOD's fiscal year 2014 budget request for installations and
    environment. As a side note, I am happy to be part of Team New
    Hampshire here, as the chairman alluded.
        The testimony I have submitted for the record describes the
    $11 billion we are requesting for MILCON; the $10.9 billion
    more we are investing in sustaining and restoring our
    facilities; and the $3.8 billion that we are seeking for
    environmental compliance and cleanup.
        You will note that these numbers are not significantly
    lower than those we requested in fiscal year 2013, and in fact,
    they represent a slight increase from what was appropriated
    this year. That is because the President's budget request
    replaces the across-the-board sequester cuts with a
    comprehensive deficit reduction plan. Within the request, that
    plan averts what would otherwise be another significant
    reduction in the defense budget and enables us to present to
    you a fiscal year 2014 budget request that allows us to
    continue prudent investment in our installations.
        However, sequestration has significantly impacted fiscal
    year 2013. While this hearing is focused on the 2014 request, I
    would like to address the 2013 issue briefly.
        Sequestration will affect our fiscal year 2013 execution in
    two ways. MILCON projects will be individually cut. Some of
    them will still be executable but others will not, and we are
    reviewing each project to assess the impact. It is possible
    that we will need to defer some lower priority fiscal year 2013
    projects to ensure there are funds available to reprogram so we
    can execute the higher priority ones, and we are still
    reviewing these impacts.
        More serious, though, is the impact to our facilities
    sustainment and restoration accounts. Because operation and
    maintenance (O&M) dollars are more discretionary and therefore
    more flexible, operational accounts were given more protection
    and facilities sustainment was cut more deeply to make up the
    difference. In fiscal year 2013, we are deferring all but the
    most critical repairs. We are deferring routine maintenance. We
    are holding off on major purchases and accepting risk by
    looking for building equipment to hold out longer. Frankly, we
    can probably accommodate this for a short period of time, but
    the system will break if we shortchange these accounts for
    multiple years.
        My colleagues will be able to speak about how each of them
    are managing this risk in their individual Services.
        Finally, let me say a word or two about BRAC. Obviously, it
    is an issue of concern, and as you mentioned, the
    administration is requesting a BRAC round in 2015.
        DOD is facing a serious problem created by the tension
    caused by constrained budgets, reductions in force structure,
    and limited flexibility to adapt to the first two. We need to
    find a way to strike the right balance so infrastructure does
    not drain too many resources from the warfighter. Without
    question, installations are critical components of our ability
    to fight and win wars. Whether that installation is a forward-
    operating location or a training center in the United States,
    our warfighters cannot do their job without bases from which to
    fight, on which to train, or on which to live when they are not
    deployed. However, we need to be cognizant that maintaining
    more infrastructure than we need taxes other resources that the
    warfighter needs as well, from depot maintenance, to training,
    to bullets and bombs.
        We are continually looking for ways to reduce the cost of
    doing business, looking for ways to reduce the cost of MILCON
    to investing in energy efficiency that pays us back in lower
    operating costs. BRAC is another very clear way for us to
    reduce the infrastructure costs to DOD. The previous five
    rounds of BRAC are providing us with recurring savings of $12
    billion or $13 billion every year, savings that do not result
    in decreased capability because it is derived from the
    elimination of excess.
        I am well aware of the skepticism that many in Congress
    have about the need for BRAC, and that seems based on the fact
    that we spent more than originally advertised during the 2005
    BRAC round. To be clear, BRAC 2015 will not look like BRAC
    2005. BRAC 2005 was conducted, one, while force structure was
    growing; two, while budgets were growing; and three, under
    leadership which directed the use of the authority to
    accomplish transformative change not just elimination of
    excess. Today, force structure is shrinking. The budget is
    shrinking, and we are firmly focused on reducing our future
    costs. That description characterizes the first four rounds of
    BRAC as well, and I can assert with confidence that a 2015
    round will have far more in common with them than it would with
    the 2005 round.
        Thanks for the opportunity to testify this morning. It is a
    pleasure to be here, and I look forward to your questions. In
    the questions and answers, we can address a couple of the other
    points you made in your opening statements.
        [The prepared statement of Mr. Conger follows:]

                     Prepared Statement by Mr. John Conger

                                  INTRODUCTION

        Chairman Shaheen, Ranking Member Ayotte, and distinguished members
    of the subcommittee: Thank you for the opportunity to present the
    President's fiscal year 2014 budget request for the Department of
    Defense (DOD) programs supporting installations, facilities energy, and
    the environment.
        It would be an understatement to say these are challenging times
    for the DOD budget. The impact of sequestration on our installations
    budgets in fiscal year 2013, combined with the uncertain budget context
    it poses for the next decade, requires us to change the way we think
    about our installations and the funds we will allocate to maintain
    them. We are still evaluating the impact the fiscal year 2013 cuts have
    had and will have on our various installations accounts, but we must
    consider every day how we can drive efficiencies and do more with less.
        While budgets are constrained and force structure shrinks, our
    infrastructure is being held constant. Our portfolio of approximately
    550,000 buildings and structures, 2.3 billion square feet, and a
    replacement value of $848 billion will be recapitalized and maintained
    in fiscal year 2014 through our request of $11 billion for military
    construction and family housing and $10.85 billion in operations and
    maintenance (O&M) for sustainment, restoration, and modernization.
        This budget request represents a prudent investment in
    recapitalizing and maintaining our facilities. Installations are
    critical components of our ability to fight and win wars. Whether that
    installation is a forward-operating location or a training center in
    the United States, 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, and we must ensure they continue to do so.
        Moreover, the environment in which our forces and their families
    live has an impact on their ability to do their job, and the
    Department's ability to retain those troops. Quality of life--to
    include not only the physical condition of the facilities in which our
    servicemen and servicewomen and their families live and work, but
    whether or not there is a safe, healthy environment around and within
    those facilities--is also critical to the readiness of the force. This
    request reflects that priority.
        Still, while we prioritize readiness and protect quality of life,
    we must be constantly seeking efficiencies in the budget. We are
    exploring ways to lower the cost of military construction as well as
    the cost of operating our facilities into the future. We are also
    cognizant that maintaining more infrastructure than we need taxes other
    resources that the warfighter needs--from depot maintenance to training
    to bullets and bombs. That is why the President's budget request for
    fiscal year 2014 also requests authority to conduct a round of Base
    Realignment and Closure (BRAC) in 2015.
        My testimony will outline the fiscal year 2014 budget request and
    highlight a handful of top priority issues--namely, the
    administration's request for BRAC authority, European consolidation
    efforts, status of the plan to move marines from Okinawa to Guam, an
    overview of our energy programs, and the request to renew or expand our
    land withdrawals at several critical installations.

       FISCAL YEAR 2014 BUDGET REQUEST--MILITARY CONSTRUCTION AND FAMILY
                                    HOUSING

        The President's fiscal year 2014 Military Construction (MILCON) and
    Family Housing Appropriation request totals $11.0 billion, a decrease
    of approximately $211.1 million from the fiscal year 2013 budget
    request. Our MILCON and Family Housing budget will allow the Department
    to respond rapidly to warfighter requirements, enhance mission
    readiness, and provide essential services for its personnel and their
    families, while better balancing available resources and our security
    needs.

                TABLE 1. MILCON AND FAMILY HOUSING BUDGET REQUEST, FISCAL YEAR 2013 VS. FISCAL YEAR 2014
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                            Change from Fiscal Year
                                                            Fiscal Year     Fiscal Year              2013
                                                           2013 Request    2014 Request  ---------------------------
                                                                                             Funding       Percent
    ----------------------------------------------------------------------------------------------------------------
    Military Construction...............................         8,540.7         8,505.3        (35.3)         (0.4)
    Base Realignment and Closure........................           476.0           451.4        (24.7)         (5.2)
    Family Housing......................................         1,650.8         1,542.7       (108.0)         (6.5)
    Chemical Demilitarization...........................           151.0           122.5        (28.5)        (18.9)
    Energy Conservation Investment Program..............           150.0           150.0          0.0           0.0
    NATO Security Investment Program....................           254.2           239.7        (14.5)         (5.7)
                                                         -----------------------------------------------------------
      Total.............................................        11,222.7        11,011.6       (211.7)         (1.9)
    ----------------------------------------------------------------------------------------------------------------
    Numbers may not add due to rounding

    Military Construction
        We are requesting $9.0 billion for military construction (Military
    Construction, Chemical Demilitarization, Energy Conservation Investment
    Program (ECIP), and the North Atlantic Treaty Organization (NATO)
    Security Investment Program). This request addresses routine needs for
    construction at enduring installations stateside and overseas, and for
    specific programs such as the NATO Security Investment Program and the
    ECIP. In addition, we are targeting MILCON investments in three key
    areas:
        First and foremost, our MILCON request supports the Department's
    operational missions. MILCON is key to initiatives such as the Nuclear
    Weapon Security Deviation Elimination Initiative and the Army
    Stationing Initiative, as well as the President's timeline for the
    European Phased Adaptive Approach (EPAA), and for projects that support
    enhanced homeland defense capabilities. Our fiscal year 2014 budget
    includes $3.26 billion to support operations and training requirements,
    including: range and training facilities for ground forces at several
    Army and Marine Corps installations; a third increment of the Naval
    Explosives Handling Wharf at Kitsap, WA; Air Force infrastructure to
    bed-down the initial delivery of the KC-46A tankers; communications
    facilities in California and Japan to support operations in the Pacific
    region; and training and support facilities for Special Operations
    Forces.
        Second, our fiscal year 2014 budget request includes $797.8 million
    to replace or modernize 17 DOD Education Activity (DODEA) schools that
    are in poor or failing physical condition. These projects, most of
    which are at enduring locations overseas, support the Department's plan
    to replace or recapitalize more than half of DODEA's 194 schools over
    the next several years. 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 2014 budget request includes $1.2 billion
    for 11 projects to upgrade our medical infrastructure, including $151.5
    million for the third increment of funding to replace the Landstuhl
    Regional Medical Center at the Rhine Ordnance Barracks in Germany, a
    critical facility supporting our wounded warriors. Our budget addresses
    medical infrastructure projects that directly impact patient care, and
    enhance our efforts to recruit and retain personnel. These projects are
    crucial for ensuring that we can deliver the quality healthcare our
    servicemembers and their families deserve, especially during overseas
    tours.

    Family Housing 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 $11.0 billion MILCON request includes $1.5 billion to fund
    construction, operation, and maintenance of government-owned family
    housing worldwide. Most government-owned family housing is on enduring
    bases in foreign countries, since the Department has privatized the
    vast majority of its family housing in the continental United States.
    The requested funding will ensure that we can continue to provide
    quality, affordable housing to U.S. military personnel and their
    families.
        The Department is committed to improving housing for our
    unaccompanied personnel as well. In recent years, we have invested
    heavily in unaccompanied personnel housing 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
    2014 MILCON budget request includes $423 million for 11 construction
    and renovation projects that will improve living conditions for more
    than 2,000 unaccompanied personnel.
        The Services rely largely on privatization to provide family
    housing on U.S. installations. As you've heard from my predecessors,
    privatization of family housing--where the Services partner with the
    private sector to generate housing built to market standards--is the
    single most effective reform my office has carried out. Prior to
    privatization, the Services' chronic underinvestment in their
    facilities had created a crisis, with almost 200,000 of the
    Department's family housing units rated ``inadequate.'' Privatization
    leverages the power of the commercial market to serve our needs. With
    an investment of approximately $3.6 billion, the Services have
    generated $29.7 billion in construction to build new and renovate
    existing family housing units. The Services also transferred
    responsibility for maintenance, operation, and recapitalization for 50
    years to private entities that have an incentive to maintain the
    housing so as to attract and retain military tenants.

                      TABLE 2. FAMILY HOUSING BUDGET REQUEST, FISCAL YEAR 2013 VS. FISCAL YEAR 2014
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                            Change from Fiscal Year
                                                            Fiscal Year     Fiscal Year              2013
                                                           2013 Request    2014 Request  ---------------------------
                                                                                             Funding       Percent
    ----------------------------------------------------------------------------------------------------------------
    Family Housing Construction/Improvements............           190.6           193.8          3.1           1.6
    Family Housing Operations & Maintenance.............         1,458.3         1,347.2       (111.2)         (7.6)
    Family Housing Improvement Fund.....................             1.8             1.8            0          (0.3)
                                                         -----------------------------------------------------------
      Total.............................................         1,650.8         1,542.7       (108.1)        (6.5)
    ----------------------------------------------------------------------------------------------------------------
    Numbers may not add due to rounding

    Facilities Sustainment, Restoration, and Modernization
        In addition to investing in new construction, we must maintain,
    repair, and recapitalize our existing facilities. The Department's
    Sustainment and Recapitalization programs strive to keep our inventory
    of facilities mission capable and in good working order. Facility
    recapitalization is the funding that is used to improve a facility's
    condition through repair (restoration and modernization) or replacement
    MILCON. Sustainment represents the Department's single most important
    investment in the health 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 and
    optimize the owner's investment. Sustainment prevents deterioration,
    maintains safety, and preserves performance over the life of a
    facility, and helps improve the productivity and quality of life of our
    personnel.
        For fiscal year 2014, the Department's O&M request for Facility
    Sustainment, Restoration, and Modernization (FSRM) includes $8.0
    billion for sustainment, $2.7 billion for restoration and modernization
    (recapitalization), and $145 million for demolition. The total FSRM O&M
    funding ($10.85 billion) reflects a 0.3 percent increase from the
    fiscal year 2013 President's budget (PB) request ($10.81 billion).
    While the Department's goal is to fund sustainment at 90 percent of
    modeled requirements, due to budget challenges, the Departments of the
    Army, Navy, and Air Force have taken risk in maintaining and
    recapitalizing existing facilities. These Services continue to budget
    to fund sustainment at between 80 percent and 85 percent of the modeled
    requirement, whereas the Marine Corps and most Defense Agencies achieve
    or exceed the 90 percent goal. Continued deferred sustainment of
    existing facilities will present the Department with larger bills in
    the outyears to replace facilities that deteriorate prematurely due to
    underfunding.

     TABLE 3. FACILITY SUSTAINMENT, RESTORATION, AND MODERNIZATION BUDGET REQUEST, FISCAL YEAR 2013 VS. FISCAL YEAR
                                                          2014
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                            Change from Fiscal Year
                                                            Fiscal Year     Fiscal Year              2013
                                                           2013 Request    2014 Request  ---------------------------
                                                                                             Funding       Percent
    ----------------------------------------------------------------------------------------------------------------
    Sustainment.........................................         7,895.0         8,040.0        145.0           1.8
    Restoration and Modernization.......................         2,794.0         2,666.0       (128.0)         (4.6)
    Demolition..........................................           125.0           145.0         20.0          16.0
                                                         -----------------------------------------------------------
      Total FSRM........................................        10,814.0        10,851.0         37.0           0.3
    ----------------------------------------------------------------------------------------------------------------

        Our fiscal year 2014 budget also includes $2.7 billion in O&M funds
    for recapitalization, reflecting a decrease of 4.6 percent from the
    fiscal year 2013 President's budget request. This decrease largely
    results from the Services' decision to defer renovations at locations
    that may be impacted by changes in force structure. This constrained
    funding follows significant reductions in energy conservation
    investments from sequestration reductions in fiscal year 2013, which
    will make achievement of DOD's statutory energy intensity goals
    impossible to attain for the foreseeable future.
        A final category of investment is demolition, which allows the
    Services to eliminate facilities that are excess to need or no longer
    cost effective to operate. Our fiscal year 2014 budget request includes
    $145 million in operations and maintenance funding, a net increase of
    $20 million (16 percent) over the fiscal year 2013 request. This
    funding will allow us to demolish approximately 5 million square feet
    of facilities. Demolition is also accomplished as part of many of our
    MILCON projects, and with both sources of funding, we anticipate
    eliminating over 62 million square feet of space between fiscal year
    2008 and fiscal year 2014. Demolition is an important task in
    completing an asset's life cycle. In most of cases, it removes eyesores
    and hazards from our installations and opens land for other uses.
    Ongoing Initiatives to Reduce Costs and Improve Value
        Finally, I would like to mention several ongoing initiatives
    designed to improve the Department's management of our infrastructure.
        Clarifying Anti-Terrorism/Force Protection (AT) Standards:
        On December 7, 2012, the Deputy Secretary issued policy for DOD to
    begin using the antiterrorism standards developed by the Federal
    Interagency Security Committee (ISC) for DOD leased space in buildings,
    in lieu of continuing the use of DOD-developed standards. The revised
    policy will put DOD in line with other Federal agencies when
    determining security requirements for leased facilities, thereby
    promoting efficiencies with leasing arrangements through General
    Services Administration, particularly in buildings with multiple
    Federal tenants, as commonly found in urban areas. Additionally,
    because the ISC standards will allow DOD to better align organization
    missions to threats and risk mitigation, the Department can realize
    cost savings through decreased relocation, rent, and retrofit costs. We
    will also be reviewing our on-base processes for applying antiterrorism
    standards to determine if the ISC or similar processes and standards
    are more appropriate given the vast spectrum of missions that occur on
    military installations.
        Improving Facility Assessments:
        In order to understand the effect of investments on our
    infrastructure, we need a reliable process for measuring the condition
    of those assets. Accurate and consistent Facility Condition Index (FCI)
    data, 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, are essential for leadership to make informed
    decisions that target scarce resources to those facilities in most need
    of recapitalization, or to identify those assets that should be
    demolished. The Department is developing policy to reinvigorate and
    standardize our inspection and reporting processes, to include
    qualified professionals conducting the inspections. To make the results
    of these inspections relevant, we intend on using the FCIs as a
    centerpiece for a new recapitalization program that better considers
    facility conditions when prioritizing asset investments.
        Improving Asset Investments Planning and Programming:
        Budgets associated with sustaining, renovating, and modernizing DOD
    facilities are dropping at a disproportional rate compared to the size
    of our existing inventory. The facility investments made over the last
    decade, as a result of Grow the Forces, BRAC 2005, and Army Modularity
    initiatives, can easily be undermined with sharp reductions in future
    maintenance budgets. The Department is nearing completion on
    establishing a facility recapitalization program that focuses on the
    use of FCIs, which makes having an accurate and consistent facility
    inspection program essential. The recapitalization program will contain
    elements that look broadly across DOD's facility inventory as well as
    target specific facilities that fall below a minimum FCI. The former
    element provides the DOD components with flexibility in prioritizing
    which assets best support their operational priorities and maintaining
    appropriate levels for quality of life. For assets that fall below an
    acceptable FCI, the DOD components will be charged with determining
    whether that asset should be repaired, replaced, or demolished. The
    concept is to only retain and sustain those facilities that contribute
    to our military readiness and are in a condition that will not
    jeopardize life, health, and safety of DOD personnel, weapon systems,
    or equipment.
        Reducing the Federal Premium:
        My office continues to interact with industry and academia to
    explore innovation and efficiency in MILCON projects, as part of our
    focus on Better Buying Power initiatives. We are completing a study on
    MILCON unit costs compared with commercial unit costs for similar
    facilities. We are evaluating medical facilities, unaccompanied
    housing, administrative buildings, child care centers, and schools for
    differences in constructed features and costs, as well as other
    process-based differences and their impacts on costs. The insight
    gained from this study should allow us to identify potential cost-
    saving measures in DOD-based processes or requirements, as well as
    cost-saving opportunities in statutory requirements that we will work
    with Congress to address.
        Reducing Life Cycle Costs While Minimizing Impacts to First Costs:
        In March, the Department published its new construction standard
    (Unified Facilities Criteria), governing the construction of all new
    buildings and major renovations. The new standard incorporates the most
    cost-effective elements of consensus-based green building standards
    like those managed by the American Society of Heating Refrigeration and
    Air-Conditioning Engineers (ASHRAE) to help accelerate DOD's move
    toward more efficient, sustainable facilities that cost less to own and
    operate. This new standard is consistent with recommendations made by
    the National Research Council following their evaluation of the cost
    effectiveness of commercial green building standards and rating
    systems.

            FISCAL YEAR 2014 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 2014 budget, we are
    requesting $3.83 billion to continue the legacy of excellence in our
    environmental programs. While this is below the fiscal year 2013
    request, the reduction reflects improved technologies and processes
    rather than any decline in effort.
        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
    Initiative (REPI).

                  TABLE 4: ENVIRONMENTAL PROGRAM BUDGET REQUEST, FISCAL YEAR 2014 VS. FISCAL YEAR 2013
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                            Change from Fiscal Year
                                                            Fiscal Year     Fiscal Year              2013
                                                           2013 Request    2014 Request  ---------------------------
                                                                                             Funding       Percent
    ----------------------------------------------------------------------------------------------------------------
    Environmental Restoration...........................          $1,424          $1,303         ^$121          ^8.5
    Environmental Compliance............................          $1,449          $1,460          +$11          +0.8
    Environmental Conservation..........................            $378            $363          ^$15          ^4.0
    Pollution Prevention................................            $111            $106           ^$5          ^4.5
    Environmental Technology............................            $220            $214           ^$6          ^2.7
    Legacy BRAC Environmental...........................            $318           *$379          ^$12          ^3.1
    BRAC 2005 Environmental.............................             $73
                                                         -----------------------------------------------------------
      Total.............................................          $3,974          $3,826         ^$148         ^3.7
    ----------------------------------------------------------------------------------------------------------------
    * BRAC accounts were combined in the National Defense Authorization Act (NDAA) for Fiscal Year 2013

    Environmental Restoration
        We are requesting $1.7 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 $1.3 billion
    for ``Environmental Restoration,'' which encompasses active
    installations and Formerly Used Defense Sites (FUDS) locations and $379
    million for ``BRAC Environmental.'' DOD is making steady progress,
    moving sites through the cleanup process towards achieving program
    goals. While the fiscal year 2014 request for environmental restoration
    is down 8.5 percent, that reduction is because DOD has nearly finished
    investigating our sites and is bounding the problem.

                                         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
    ----------------------------------------------------------------------------------------------------------------
                                                                               Projected Status    Projected Status
                                                           Status as of the      at the end of       at the end of
                                                          end of fiscal year   fiscal year 2018    fiscal year 2021
                                                            2012  (Percent)        (Percent)           (Percent)
    ----------------------------------------------------------------------------------------------------------------
    Army................................................                 88                  97                  98
    Navy................................................                 72                  89                  95
    Air Force...........................................                 68                  89                  94
    DLA.................................................                 88                  91                  91
    FUDS................................................                 75                  90                  94
                                                         -----------------------------------------------------------
      Total.............................................                 77                  92                  96
    ----------------------------------------------------------------------------------------------------------------

        By the end of 2012, the Department, in cooperation with State
    agencies and the Environmental Protection Agency (EPA), completed
    cleanup activities at 77 percent of Active and BRAC IRP and MMRP sites,
    and FUDS IRP sites, and is now monitoring the results. During fiscal
    year 2012 alone, the Department completed cleanup at over 900 sites. Of
    the more than 38,000 restoration sites, over 29,000 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; developing 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 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.

    Environmental Technology
        A key part of DOD's approach to meeting its environmental
    management 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 2014 budget request for Environmental
    Technology overall is $214.0 million, our core efforts are conducted
    and coordinated through two key programs--the Strategic Environmental
    Research and Development Program (SERDP-STCP--which validates more
    mature technologies to transition them to widespread use). The fiscal
    year 2014 budget request includes $72.3 million for SERDP and $39.5
    million for the Environmental Security Technology Certification Program
    (ESTCP) for environmental technology demonstrations. (The budget
    request for ESTCP includes an additional $32.0 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 most
    recently, developing technology that allows us to discriminate between
    hazardous unexpoloded ordnance and harmless scrap metal without digging
    up an object. This last development promises to reduce the liability of
    the MMRP program by billions of dollars and accelerate the current
    cleanup timelines for sites within the program--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. 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.

    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 endemic to military lands--that is, they are found nowhere else in
    the world--including more than 10 listed species and at least 75
    species-at-risk.
        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, REPI, for
    which we are requesting $50.6 million in fiscal year 2014.
        REPI is a key tool for combating the encroachment that can limit or
    restrict military test and training. 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
    this buffer around our installations for half-price.
        In 10 years of the program, REPI partnerships have protected more
    than 270,000 acres of land around 64 installations in 24 States. This
    land protection has resulted in tangible benefits to test and training,
    and also significant contribution to biodiversity and endangered
    species recovery actions. For example, the U.S. Fish and Wildlife
    Service recently found it was not warranted to list a butterfly species
    as endangered in Washington State, 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. In California, the U.S. Fish and Wildlife Service exempted
    Marine Corps Base Camp Pendleton populations of Riverside fair shrimp
    from critical habitat designation because of ongoing base management
    activities and off-post buffer protection. Both of these actions allow
    significant maneuver areas to remain available and unconstrained for
    active and intense military use at both locations.

                               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) BRAC, (2) European Basing Consolidation, (3) Rebasing
    of marines from Okinawa to Guam, (4) DOD Facilities Energy Programs,
    and (5) Request for Legislative Land Withdrawals.

        1.  BRAC

        The administration is requesting authority from Congress to conduct
    a BRAC round in 2015.
        The Department is facing a serious problem created by the tension
    caused by 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. Without question, installations are
    critical components of our ability to fight and win wars. Whether that
    installation is a forward operating location or a training center in
    the United States, our warfighters can't do their job without bases
    from which to fight, on which to train, or in which to live when they
    are not deployed. However, we need to be cognizant that maintaining
    more infrastructure than we need taxes other resources that the
    warfighter needs--from depot maintenance to training to bullets and
    bombs.
        While the primary function of BRAC is to match infrastructure to
    missions, it is also about trimming excess so that resources otherwise
    wasted on unnecessary facilities can be reapplied to higher priorities.
    Savings from BRAC are substantial. The first four rounds of BRAC (1988,
    1991, 1993, and 1995) are producing a total of about $8 billion in
    annual, recurring savings, 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.
        An additional savings benefit of BRAC is that it enables the
    Department to execute the civilian workforce efficiencies plan required
    by the NDAA for Fiscal Year 2013. BRAC 2005 eliminated 13,000 civilian
    positions associated with closed installations and reorganized common
    business-oriented support functions. The BRAC 1993/95 rounds averaged
    36,000 eliminations per round. Congress has already demanded these
    civilian personnel cuts, and if they are not made through BRAC, they
    will need to be made elsewhere.
        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 490,000), Marine Corps personnel
            (from 202,000 to 182,000), and Air Force force structure
            (reduced by 500 aircraft)--subsequent to that analysis point to
            additional excess.

        The fundamental rationale for using the BRAC process to achieve
    these efficiencies is to enable DOD, an independent commission, the
    public, and Congress to engage in a comprehensive and transparent
    process to facilitate the proper alignment of our infrastructure with
    our mission. As we witnessed last year, piecemeal attempts to improve
    the alignment of installations to mission are generally met with
    skepticism and resistance from Congress and State and local officials
    who question DOD's rationale to the extent that the proposed changes
    are effectively stopped. Indeed, recent statutory changes have further
    restricted the Department's ability to realign its installations.
    Absent BRAC, the Department is effectively locked into a status quo
    configuration. BRAC, therefore, should be an essential part of any
    overall reshaping strategy.
        BRAC provides us with a sound analytical process that is proven. It
    has at its foundation a 20-year force structure plan developed by the
    Joint Staff; a comprehensive installation inventory to ensure a
    thorough capacity analysis; and defined selection criteria that place
    priority on military value (with the flexibility to express that in
    both a quantitative and qualitative way).
        The BRAC process is comprehensive and thorough. Examining all
    installations and conducting thorough capacity and military value
    analyses using certified data enables 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 between 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
    Department is mindful of the significant toll BRAC has on our host
    locations. Our Office of Economic Adjustment (OEA) provides technical
    and financial support to help these communities through closure,
    disposal, and redevelopment with a program tailored to their specific
    planning and implementation requirements. The former installation is
    often the single greatest asset for impacted communities to redevelop
    and restore a lessened tax base and the lost jobs from closure. One of
    the most important disposal authorities available to help impacted
    communities with job creation is the Economic Development Conveyance
    (EDC). The Department is using the full breadth of this authority to
    structure conveyances into win-win agreements wherein communities can
    create jobs and bolster their local tax base, and the Department sees
    increased savings through reduced property maintenance costs and
    participation in the cash flows from successful local redevelopment
    efforts.
        The Department anticipates approximately 13,000 jobs will be
    generated by 8 EDCs for real and related personal property at the
    following BRAC 2005 locations: Kansas Army Ammunition Plant, KS; Lone
    Star/Red River Army Depot, TX; Naval Air Station (NAS) Brunswick, ME;
    Newport Chemical Depot, IN; Buckley Annex, CO; Fort Monmouth, NJ;
    Pascagoula Naval Station, MS; and Ingleside Naval Station, TX. The
    Department anticipates approving additional EDCs in fiscal years 2013
    and 2014.

        2. European Basing Consolidation

        In response to last year's request for BRAC authority, many in
    Congress asserted that we should look first at our overseas
    infrastructure for reductions. Even though we have already made
    substantial reductions over the last several years in our European-
    based personnel and infrastructure, upcoming force structure changes
    and a focus on greater joint utilization of assets should produce
    additional opportunities for reducing infrastructure while preserving
    required capabilities.
        To that end, on January 25, then Secretary Panetta directed the
    Department to initiate a review of our European footprint, stating:
    ``Consolidation of our footprint in Europe will take into account the
    shift in strategic focus to the Pacific; the planned inactivation of
    two Brigade Combat Teams and associated support forces; reductions in
    Air Force units; and decreasing requirements for support to the ongoing
    conflict in Afghanistan.''
        In response, we have initiated a comprehensive infrastructure
    analysis effort that will identify potential closure/consolidation
    scenarios. We are developing business case analyses for this task,
    taking operational impacts, return on investment, and military value
    into consideration. By the end of this year we plan to conclude with a
    fully vetted list of options from which the Secretary can make
    strategic investment decisions.
        Through this process we seek to create long-term savings by
    eliminating excess infrastructure, recapitalizing astutely to create
    excess for elimination, and closing and/or consolidating sites. The
    results will ultimately validate our enduring European infrastructure
    requirements, providing an analytical basis to support sustainment
    funding and future recapitalization.

        3. Rebasing of Marines to Guam

        One important rebasing initiative that has received continued
    attention from Congress is our plan to realign several thousand marines
    from Okinawa to Guam. The Government of Japan has welcomed the U.S.
    strategy to rebalance defense priorities toward the Asia-Pacific region
    and U.S. efforts to advance its diplomatic engagement in the region. To
    achieve the goals of the shared partnership between the two countries,
    the U.S.-Japan Security Consultative Committee (SCC) decided to adjust
    the plans outlined in the original 2006 ``Realignment Roadmap''.
        On April 27, 2012, the SCC issued a joint statement detailing
    changes to the plans. Specifically, the United States and Japan
    separated the requirement of tangible progress on the construction of
    the Futenma Replacement Facility (FRF) before the movement of marines
    to Guam, from other marine restationing efforts on Okinawa to return
    lands to local communities. Also, while the overall number of marines
    planned to leave Okinawa remained essentially the same (approximately
    9,000), the new distributed laydown will result in fewer marines (and
    accompanying family members) being restationed to Guam (approximately
    5,000) with the remainder of the forces moving to Hawaii and the
    continental United States.
        The revised laydown, commonly referred to as the ``distributed
    laydown'' establishes fully capable Marine Air Ground Task Forces
    (MAGTF) (maritime, air, ground, logistics, and associated lift) in
    Okinawa, Guam (5,000), Australia (2,500 through a rotational
    deployment) and Hawaii (2,700) and ensures that individual MAGTFs can
    respond rapidly to low-end contingencies (e.g., humanitarian
    assistance/disaster relief, counter-piracy, etc.) while also ensuring
    that the force can aggregate quickly to respond to high-end
    contingencies. Additionally, the revised laydown increases our ability
    over time to train and exercise with allies and partners throughout the
    region.
        The President's fiscal year 2014 budget request includes $85
    million for construction of an aircraft hangar at the north ramp of
    Andersen Air Force Base (AFB). In addition to supporting the Marine
    Corps Aviation Combat Element relocation to Guam, this facility can
    also be utilized to meet current operational requirements of Marine
    units in the Pacific. Our request includes another $273.3 million for
    non-military assistance to address Guam water and wastewater
    improvements. As a result of the fragile state of Guam's water and
    wastewater infrastructure, remedies and new infrastructure are required
    to support existing military missions, as well as potential growth
    associated with the Department's rebalance to the Asia-Pacific region.
    Numerous Federal agencies, including the EPA, worked with the
    Department and validated these water and wastewater requirements,
    concluding significant capital improvements were necessary.
        Finally, as a result of the adjustments to the laydown of marines
    on Guam, the Department must conduct a Supplemental Environmental
    Impact Study (SEIS). This SEIS supersedes and expands on the previously
    initiated Live Fire Training Range Complex (LFTRC) SEIS by
    incorporating the requirement for a new Marine Corps cantonment area on
    Guam. With the reduction in the size of future Marine forces in Guam,
    the National Environmental Policy Act requirements are being combined
    in order to determine the optimal locations for the range complex,
    cantonment and housing relative to each other and the Record of
    Decision is anticipated in February 2015.

        4. DOD Facilities Energy Programs

        The Department has focused on facilities energy for three key
    reasons: to reduce costs; improve the energy security of our fixed
    installations; and achieve DOD's statutory energy goals. Energy bills
    are the largest single cost in our facilities operations accounts, and
    any effort to reduce the cost of installations must include efforts to
    reduce them. Moreover, given the reach of our installations to provide
    direct support to operational forces, we must reduce the vulnerability
    of our installations to possible outages of the electric grid. DOD has
    statutory energy goals for energy intensity and renewable energy among
    other statutory goals.
        Our approach to achieving these goals has four elements: reduce the
    demand for traditional energy through conservation and improved energy
    efficiency; expand the supply of renewable and other distributed (on-
    site) generation sources; enhance the energy security of our
    installations directly (as well as indirectly, through the first two
    elements); and leverage advanced technology.

    Reduce Demand
        From DOD's new energy budget data system within the Department's
    fiscal year 2014 budget request, there are approximately $1 billion in
    energy conservation investments, mostly for investments in repair and
    upgrading systems in existing buildings. The preponderance of these
    investments are within the FSRM accounts along with other necessary
    investments in maintaining our existing real property. As mentioned in
    that section above, this constrained funding follows significant
    reductions in energy conservation investments from sequestration
    reductions in fiscal year 2013, which will make achievement of DOD's
    statutory energy intensity goals impossible to attain for the
    foreseeable future. One account that is singled out is the ECIP, a
    MILCON appropriation for which we are requesting $150 million. DOD also
    is investing more than $2 billion in energy conservation projects for
    Operational Energy, including aviation and other transportation fuels
    that are used on DOD bases.
        The Services also use third-party financing tools, such as Energy
    Savings Performance Contracts and Utility Energy Service Contracts, to
    improve the energy efficiency of their existing buildings. While such
    performance-based contracts have long been part of the Department's
    energy strategy, in fiscal year 2012 the DOD committed to award nearly
    $1.2 billion in performance-based contracts by the end of 2013, or soon
    thereafter, in response to the President's Dec. 2, 2011 commitment ($2
    billion in such contracts Federal Government-wide). To date, the
    Department has awarded 39 contracts worth $362 million with another
    approximately $930 million in contracts under development.
        In addition to retrofitting existing buildings, we are taking
    advantage of new construction to incorporate more energy-efficient
    designs, material and equipment into our inventory. This past March, I
    issued a new construction standard for high-performance, sustainable
    buildings, 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. My office continues to lead the development of an
    Enterprise Energy Information Management system (EEIM) that will
    collect facility energy data in a systematic way. The EEIM will also
    provide advanced analytical tools that allow energy professionals at
    all levels of the Department both to improve existing operations and to
    identify cost-effective investments. In order to make EEIM a reality,
    the Department must vastly increase the deployment of advanced energy
    meters, capable of automatically collecting energy use information.

    Expand Supply of Onsite Energy
        DOD is increasing the supply of renewable and other distributed
    (onsite) sources of energy on our installations. Onsite energy is
    critical to making our bases more energy secure. The Military
    Departments have each established a goal to develop 1 gigawatt (GW) of
    renewable energy (RE) by 2025. Almost all projects will be third-party
    financed, using existing authorities (e.g., 10 U.S.C. Sec. 2922a and
    enhanced use leases).
        The Army issued a Multiple Award Task Order Contract Request for
    Proposal for $7 billion in total contract capacity for RE. Army
    projects currently underway include Fort Bliss, TX (1 MW Solar PV),
    White Sands Missile Range, NM (4.5 MW Solar PV), and Fort Carson, CO (2
    MW Solar PV). The Navy has a goal to produce at least 50 percent of the
    Navy's shore-based energy requirements from renewable sources by 2020.
    Projects currently underway include Marine Corps Air Station, Miramar,
    CA (3 MW Landfill Gas), Marine Corps Logistics Base, Barstow, CA (1.5MW
    Solar PV), Naval Air Weapons Station (NAWS) China Lake, CA (13.8 MW
    Solar PV) and Marine Corps Air Ground Combat Center (MCAGCC) Twentynine
    Palms, CA (1.2 MW Solar PV). The Air Force is using existing authority
    to lease non-excess land for the development of large-scale RE
    projects, the first of which is under negotiation at Edwards AFB, CA
    (200 MW Solar PV projected to come on line in 2016).
        Where renewable energy development is compatible with the military
    mission, certain public lands that have been withdrawn for military
    purposes offer a significant opportunity to improve our energy security
    while lowering the cost of energy. My office continues to work closely
    with the Department of Interior (DOI) to identify and overcome
    impediments to the execution of renewable energy projects on such
    lands.

    Enhance Security
        DOD is focusing on a diverse set of solutions to enhance facility
    energy security. These include prioritization agreements with
    utilities, addressing operations and maintenance of current back-up
    generators, microgrids, fuel supply and storage, and ensuring reliable
    access to fuel in the case of emergencies (e.g., Hurricane Sandy-
    Defense Logistics Agency-Energy and Federal Emergency Management Agency
    interagency partnership). Multiple demonstration projects are currently
    underway to assess the benefits and risks of alternative advanced
    microgrid and storage technologies.

    Leverage Advanced Technology
        DOD's Installation Energy Test Bed Program was established 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 is
    partnering with the Department of Energy (DOE) and reaching out
    directly to the private sector to identify those energy technologies
    that meet DOD's needs. The fiscal year 2014 budget request includes $32
    million for the Test Bed under the ESTCP.
        The Test Bed has more than 85 projects underway in five broad
    areas: advanced microgrid and storage technologies; advanced component
    technologies to improve building energy efficiency, such as advanced
    lighting controls, high performance cooling systems, and technologies
    for waste heat recovery; advanced building energy management and
    control technologies; tools and processes for design, assessment, and
    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.
        A Note on Renewable Energy Siting
        While the DOD has embraced renewable energy projects that improve
    energy security and reduce cost, and each service has established
    approximately 1 GW goals for the production of renewable energy on
    their installations, we are also responsible for evaluating the impact
    of these projects on our mission and objecting where there is
    unacceptable risk to national security. While most transmission and
    renewable energy projects are compatible, some can interfere with test,
    training, and operational activities. DOD created the Siting
    Clearinghouse to serve as the single point of contact for energy and
    transmission infrastructure issues at the DOD level. The goal of this
    body is to facilitate timely, consistent, and transparent energy siting
    decisions, while protecting test, training, and operational assets
    vital to the national defense.
        During 2012, the Clearinghouse oversaw the evaluation by technical
    experts of 1,769 proposed energy projects; 1,730 of these commercial
    projects, or 98 percent, were cleared (assessed to have little or no
    impact to DOD test, training, or operational missions). These 1,730
    projects represent 38 GWs of potential renewable energy generation. The
    39 projects that have not been cleared are undergoing further study,
    and the Clearinghouse is working with industry, State, tribal, and
    local governments, and Federal permitting and regulatory agencies to
    identify and implement mitigation measures wherever possible.
        In addition to reviewing projects, the Clearinghouse has conducted
    aggressive outreach to energy developers, environmental and
    conservation groups, State and local governments, and other Federal
    agencies. By encouraging developers to share project information, we
    hope to avert potential problems early in the process. We are being
    proactive as well by looking at regions where renewable projects could
    threaten valuable test and training ranges.\1\ The Clearinghouse is
    working with DOE, Department of Homeland Security, and the Federal
    Aviation Administration to model the impact of turbines on surveillance
    radars, evaluate alternative mitigation technologies, and expedite
    fielding of validated solutions.
    ---------------------------------------------------------------------------
        \1\ DOD is conducting a study to identify areas of likely adverse
    mission impact in the region that is home to China Lake and Edwards AFB
    in California, and Nellis AFB and the Nevada Test and Training Range in
    Nevada. These installations are the Department's premier sites for test
    and evaluation and require a pristine environment clear of
    interference. The results of the study can be used by developers as a
    risk-management tool.
    ---------------------------------------------------------------------------
        Finally, the Clearinghouse is taking advantage of section 358 of
    the NDAA for Fiscal Year 2011, which allows DOD to accept voluntary
    contributions from developers to pay for mitigation. For example, the
    Clearinghouse and the Navy have negotiated two agreements that provide
    for developer contributions for mitigation measures to protect the
    precision approach radar at the NAS Kingsville, TX, from wind turbine
    impacts. The agreements facilitate the continued growth of wind energy
    generation along the Texas Coastal Plain while providing for the safety
    of student pilots at NAS Kingsville and NAS Corpus Christi. We believe
    there will be other situations where developers will wish to contribute
    funds toward mitigation measures in order to realize a much larger
    return on a project; section 358 is an extremely useful, market-based
    tool that allows us to negotiate these win-win deals.

        5.  BLM Land Withdrawals

        The Department has a number of installations, training areas, and
    ranges that are located partially or wholly on public lands temporarily
    or permanently withdrawn from public use. Public lands are managed by
    DOI through the Bureau of Land Management (BLM). Withdrawals of public
    lands for military use require joint actions by DOD and DOI.
    Withdrawals exceeding 5,000 acres must be authorized by congressional
    legislation. Depending on the terms of the prior legislation, some
    withdrawals must be renewed by legislative action every 20-25 years.
        Presently, withdrawals for NAWS, China Lake, CA, and the Chocolate
    Mountain Aerial Gunnery Range (CMAGR), CA, expire on October 31, 2014.
    Additionally, the Army needs to convert its use of public lands at the
    Montana Army National Guard, Limestone Hills Training Area, from a BLM
    issued right-of-way to a legislative withdrawal. Finally, the Marine
    Corps seeks a new withdrawal of public lands at MCAGCC Twentynine
    Palms, CA, to expand its training areas to support increased
    requirements.
        NAWS China Lake
        NAWS China Lake consists of over 1.1 million acres of land of which
    92 percent are withdrawn public lands. The current legislative
    withdrawal, expiring in 2014, is for a 20-year term. Under a Memorandum
    of Understanding between the Department of the Navy and the DOI, the
    Commanding Officer of NAWS China Lake is responsible for managing the
    withdrawn land. The installation is home to approximately 4,300 DOD
    personnel and its primary tenant is the Naval Air Warfare Center
    Weapons Division.
        Chocolate Mountain Aerial Gunnery Range
        The Chocolate Mountain range was established in 1941. The range
    consists of about 459,000 acres of which approximately 227,000 acres
    are withdrawn public lands under the co-management of the Marine Corps
    and BLM. The current 20-year withdrawal is set to expire on October 31,
    2014. Its primary uses are aviation weapons training, including
    precision guided munitions, and Naval Special Warfare (SEAL) training
    ranges. It is the only Marine Corps aviation range that is capable of
    accommodating training with precision-guided munitions. Failure to
    renew the legislative withdrawal will have the practical effect of
    shutting the entire range down because it is an unusual checkerboard
    configuration of several hundred parcels of alternating fee-owned DOD
    land and withdrawn public lands.
        Limestone Hills Training Area
        The Limestone Hills Training Area consists of 18,644 acres of land
    in Broadwater County, MT, that has been used for military training
    since the 1950s. In 1984 the BLM issued the Army a right-of-way,
    formally permitting use of the training area for military purposes. The
    current right-of-way expires on March 26, 2014. The Montana Army
    National Guard is the primary DOD user of the training area but it is
    also used by Reserve and Active components from all branches of the
    Military Services for live fire, mounted and dismounted maneuver
    training, and aviation training. The legislative withdrawal of the
    Limestone Hills Training area is necessary because the BLM has
    determined that it no longer has the authority to permit the use of the
    property for military use under a right-of-way instrument. If the
    legislative withdrawal is not enacted, the use of the training area
    will be suspended and the Department will lose access to valuable
    training areas, operational readiness will be negatively impacted, and
    training costs will increase.
        Marine Corps Air Ground Combat Center Twentynine Palms
        At MCAGCC Twentynine Palms, the Department proposes to withdraw
    approximately 154,000 acres of public lands adjacent to the Combat
    Center. The added training lands would create a training area of
    sufficient size with characteristics suitable for the Marine Corps to
    conduct Marine Expeditionary Brigade (MEB) level training. MEB training
    requires sustained, combined-arms, live-fire, and maneuver training of
    three Marine battalions with all of their associated equipment moving
    simultaneously towards a single objective over a 72-hour period. The
    Department has no other training area within its inventory, including
    the National Training Center at Fort Irwin, CA, where it can conduct
    such training.
        The Department has worked since 2007 with the DOI, the BLM, and the
    Federal Aviation Administration in preparation for the withdrawal.
    During that period, the Department of the Navy has received numerous
    comments concerning the potential loss of use of the proposed
    withdrawal property to off-road recreational vehicle use. The
    Department's proposed withdrawal provides for continued access by off-
    road recreational vehicles to just under half of the Johnson Valley
    Off-Highway Vehicle (OHV) area. About 43,000 acres of the withdrawn
    lands will be open to year-round OHV use and an additional 43,000 acres
    of the withdrawn lands will be available to OHV use for 10 months out
    of the year provided there is no active military training. Without the
    legislative withdrawal of these lands, the Marine Corps will be unable
    to train its premier forcible entry force, MEBs, to deploy and perform
    the missions and operations that the Department requires of them.
        Because of the looming expiration dates of the current withdrawals
    for NAWS China Lake and CMAGR and the BLM issued right-of-way for the
    Limestone Hills Training Area, as well as the continuing Marine Corps
    training requirement shortfalls, DOD, with DOI's concurrence and
    cooperation, is leading the renewal process and proposes that the
    withdrawals be enacted with the NDAA for Fiscal Year 2014. This is
    somewhat different, in that in past withdrawals, the DOI typically
    introduced the withdrawal proposals to its congressional committees.
    However, the Department opted to combine these four withdrawals into a
    single legislative proposal. Unlike prior legislative withdrawals which
    were uncodified, stand-alone provisions of law, DOD is proposing that
    these withdrawals be made in a new chapter of title 10, U.S.C. This
    would allow commonality among the withdrawal provisions, place them in
    a location that is easy to find and refer to, and, if used for future
    withdrawals, reduce the need to reconsider and revise provisions on
    responsibilities, rights, and requirements with each proposal. An
    important objective of the consolidated approach is to make the
    withdrawal process substantially more efficient.
        The need to enact legislation and authorize these four withdrawals
    is urgent. The consequences of failing to enact withdrawal legislation
    could, in some of these instances, cause severe impacts on the
    Department if it is forced to stop training and operations. In all
    cases, the Department has a compelling need for the withdrawn land in
    order for it to successfully conduct its training, missions, and
    operations with the capabilities and competence that it must maintain.

        Senator Shaheen. Thank you very much.
        Secretary Hammack?

    STATEMENT OF HON. KATHERINE G. HAMMACK, ASSISTANT SECRETARY OF
            THE ARMY, INSTALLATIONS, ENERGY AND ENVIRONMENT

        Ms. Hammack. Thank you very much, Chairman Shaheen and
    Ranking Member Ayotte. I am delighted to be here with you this
    morning and other members of the subcommittee. I want to thank
    you for the opportunity to present the Army's fiscal year 2014
    MILCON budget.
        For fiscal year 2014, the Army requests $2.4 billion for
    MILCON, Army Family Housing, and the Army's share of the DOD
    BRAC account. This represents a 34 percent decrease from the
    fiscal year 2013 request.
        In addition to and in support of Army installations and
    facilities, the Army also requests $15.2 billion for
    installation, energy, and environmental programs, facilities
    sustainment, restoration, and modernization, and base operating
    support.
        With the fiscal challenges we are facing, the Army has
    closely reviewed the facility investments to determine the
    level of resources needed to support the force. Supporting the
    force requires appropriate facilities, training ranges,
    maintenance and operations, and that is where we have focused.
        But as you are well aware, the Army is reducing our end
    strength from a high of 570,000 in 2010 to 490,000 in 2017. In
    January of this year, we published a Programmatic Environmental
    Assessment (PEA) which was prepared in accordance with the
    National Environmental Policy Act, and a signed finding of no
    significant impact was published earlier this month.
        The resulting force structure reduction will create excess
    capacity at several installations. With a reduced end strength
    and force structure in the United States, now is the time to
    assess and right-size the supporting infrastructure. In line
    with force structure reductions in Europe, the Army is already
    downsizing our infrastructure in Europe.
        With a 45 percent reduction in force structure, the Army is
    implementing a 51 percent reduction in infrastructure, a 58
    percent reduction in civilian staffing, and a 57 percent
    reduction in base operating costs. A future round of BRAC in
    the United States is essential to identify excess Army
    infrastructure and prudently align civilian staffing with
    reduced uniformed force structure just like we are doing in
    Europe.
        We are also working closely with OSD to examine whether
    there are additional opportunities for consolidation in Europe
    through joint or multi-service consolidation.
        We do have property remaining from prior rounds of BRAC in
    the United States, and BRAC property conveyance remains an Army
    priority. Putting excess property back into productive reuse
    can facilitate job creation, help communities build the local
    tax base, and generate revenue. In total, the Army has conveyed
    almost 78 percent of the total prior BRAC acreage.
        In closing, I ask for the committee's continued support to
    our soldiers, families, and civilians in support of the Army's
    MILCON installations program. The Army's fiscal year 2014
    installation management budget request is a program that
    supports the Army's needs while recognizing the current fiscal
    conditions. The Army does request authority from Congress to
    conduct a BRAC round in 2015 because the Army's strength is our
    soldiers, families, and Army civilians who support them. They
    are, and will continue to be, the centerpiece for the Army.
        Thank you for your attention, and I look forward to your
    questions.
        [The prepared statement of Ms. Hammack follows:]

                Prepared Statement by Hon. Katherine G. Hammack

                                  INTRODUCTION

        Chairman Shaheen, Ranking Member Ayotte, and members of the
    committee, on behalf of the soldiers, families, and civilians of the
    U.S. Army, I want to thank you for the opportunity to present the
    Army's fiscal year 2014 Military Construction (MILCON) and Family
    Housing budget request.
        The Army's fiscal year 2014 MILCON budget request supports the
    Chief of Staff of the Army (CSA) priority of developing the force of
    the future, Army 2020 as part of the Joint Force 2020--a versatile mix
    of capabilities, formations, and equipment. Within the current fiscal
    climate, the Army Installation Management Community is focusing its
    resources to sustain, restore, and modernize facilities to support the
    CSA's Army Facility Strategy 2020 and Facility Investment Strategy
    priorities. The Installation Management Community is focused on
    providing the facilities necessary to enable the world's best trained
    and ready land force of the future.
        We ask for the committee's continued commitment to our soldiers,
    families, and civilians and support of the Army's MILCON and
    installations programs. The Army's strength is its soldiers and the
    families and Army civilians who support them. They are and will
    continue to be the centerpiece of our Army. America's Army is the
    strength of the Nation.

                                    OVERVIEW

        The Army's fiscal year 2014 President's budget requests $2.35
    billion for MILCON, Army Family Housing (AFH), and the Army's share of
    the Department of Defense (DOD) Base Closure Account (BCA). The request
    represents 1.8 percent of the total Army budget and a 34 percent
    reduction from the fiscal year 2013 request. The $2.35 billion request
    includes $1.12 billion for the active Army, $321 million for the Army
    National Guard, $174 million for the Army Reserve, $557 million for
    AFH, and $180 million for Base Realignment and Closure (BRAC) to
    address environmental and caretaker requirements at previously closed
    BRAC sites. In addition and in support of Army installations and
    facilities, the President's budget request includes $1.7 billion for
    installation energy, $789 million for environmental programs, $3.8
    billion for Facilities Sustainment/Restoration & Modernization (FSRM),
    and $8.9 billion for Base Operations Support (BOS).
        The budget request reflects a return to pre-fiscal year 2000
    spending levels for the MILCON accounts. From fiscal year 2001 through
    fiscal year 2011, the MILCON program grew rapidly to support the
    changes required of the Army at that time. The Army supported combat
    operations in two theaters, increasing end strength, the Global Defense
    Posture Realignment, the operationalization of the Reserve components,
    and transformation of the Army infrastructure through BRAC 2005. With
    the fiscal reality that we are facing as a Nation, in addition to the
    reductions of the Budget Control Act of 2011, the Army closely reviewed
    its facility investments necessary to support the force with versatile
    facility capabilities. This MILCON budget request reflects the
    necessary focused investments in training, maintenance, and operations
    to enable the future force of the All Volunteer Army of 2020 in a
    constrained fiscal environment.

                           ARMY 2020 FORCE STRUCTURE

        The Army is in the process of reducing its end strength and force
    structure. We are steadily consolidating and reducing our overseas
    force structure. In fiscal year 2013, the Army announced that two
    brigades in Europe would be deactivated, and that V Corps would not be
    returning to Europe upon the completion of its deployment to
    Afghanistan. In coordination with the Office of the Secretary of
    Defense (OSD), the Army is examining cost-effective opportunities to
    facilitate Joint and/or multi-service infrastructure consolidation at
    our overseas installations, with a specific focus in Europe.
        On January 19, 2013, the Army published a Programmatic
    Environmental Assessment (PEA), which was prepared in accordance with
    the National Environmental Policy Act). The PEA analyzes the
    environmental and socio-economic impacts associated with two
    alternative approaches to reducing our force structure. In the PEA, the
    Army set a ``stop loss'' threshold so that no multi-Brigade Combat Team
    (BCT) installation would lose more than 2 BCTs, or 8,000 total military
    and civilian employee personnel, under the worst-case scenario.
        The force structure reduction is likely to create excess capacity
    at several installations. If an installation's assigned military forces
    are reduced significantly, it logically follows that some number of
    civilian personnel functions may no longer be required to support our
    soldiers and families. The Army has not yet initiated any capacity
    analysis to determine the level of excess infrastructure.
        In line with the Budget Control Act of 2011 and the new defense
    strategy announced in January 2012, the fiscal year 2013 budget
    significantly reduced the Army's future funding projections. Along with
    the end of the wars in Iraq and Afghanistan, these changes have put the
    Army on a path to shrink its active duty end strength from its peak of
    570,000 in fiscal year 2010, to 490,000 by fiscal year 2017. This is a
    reduction of 80,000 soldiers, or approximately 14 percent, from the
    Active component. As former Defense Secretary Leon Panetta stated about
    force reductions, ``you can't have a huge infrastructure supporting a
    reduced force.'' These reductions will affect every installation in the
    Army. Further, these reductions are already programmed into the Army
    budget baseline.
        Additional cuts to the Army's budget, of the magnitude associated
    with sequestration, may drive our Active component end strength down
    below 490,000. If the Army is forced to take additional cuts due to the
    reduction in the outyear discretionary caps, we would need to reduce
    further the number of soldiers out of the Active component, National
    Guard, and U.S. Army Reserve. This would create even greater pressure
    to bring infrastructure and civilian staffing into proper alignment
    with force structure demands.

                          BASE REALIGNMENT AND CLOSURE

        If Army force structure declines, but the facility overhead and
    civilian support staff remain constant, then our investments in
    equipment, training, and maintenance will become distorted.
        The supporting infrastructure, as well as the civilian positions at
    our installations, should be reviewed to determine whether they are in
    line with reductions in end strength and force structure. The
    alternative is an installations budget that spends tens or even
    hundreds of millions of dollars to maintain unused facilities. This
    scenario would divert the Army's shrinking resources away from much
    needed investments in readiness, equipment, and training. Failure to
    properly resource programs supporting Army families and soldier
    readiness will lead to an all volunteer military that is hollowed out
    and weakened.
        At our installations, excess infrastructure, if unaddressed, will
    force the Army to spread its remaining resources so thinly that the
    ability of our installation services to support the force will suffer.
    We will have more buildings in our inventory that require maintenance
    than we have force structure to validate a requirement. Eventually,
    excess infrastructure and staff overhead will increase the risk of
    either spending a disproportionate share of scarce budget resources on
    sustainment, or not being able to perform the most basic services
    correctly. For instance, Army civilian and contractor staff that run
    our digitized training ranges could be spread so thinly that the
    scheduling and throughput of training events at home station could
    suffer. As these negative effects accumulate, the remaining soldiers
    and families will be more likely to vote with their feet and leave the
    Army in an unplanned manner.
        Four of the prior rounds of BRAC were implemented as the Cold War
    was winding down and the Army's force structure was rapidly declining.
    The combined 1988, 1991, 1993, and 1995 rounds (i.e., ``prior BRAC'')
    produced 21 major base closures, 27 significant realignments, $5
    billion in implementation costs, with over $3 billion in one-time
    savings, and almost $1 billion in annual reoccurring savings. Among
    them was the closure of Fort Ord, CA. Fort Ord was the first and only
    divisional post closed under BRAC, which reflected the Army's reduction
    of its Active component strength from 12 to 10 divisions.
        BRAC 2005 generated $4.8 billion in one-time savings and provides
    over $1 billion in net annual recurring savings for the Army. These
    savings were generated with an implementation period investment of
    about $18 billion. The Army accounted for BRAC savings when developing
    its fiscal year 2007 and subsequent budget requests. This downward
    budget adjustment was beneficial to the installation program overall;
    it resulted in real savings.
        We are requesting authority from Congress to conduct a BRAC round
    in 2015.

                          ARMY 2020 FACILITY STRATEGY

        As we shape the Army of 2020 through a series of strategic choices
    over the coming months and years, the Installation Management Community
    looks to implement its Army Facility Strategy 2020 (AFS 2020) to
    provide quality, energy efficient facilities in support of the force
    and the CSA priorities.
        AFS 2020 provides a strategic framework that synchronizes the Army
    Campaign Plan, the Total Army Analysis, 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. AFS 2020 is a cost effective and efficient
    approach to facility investments that reduces unneeded footprint, saves
    energy by preserving and encouraging more efficient facilities,
    consolidates functions for efficient space utilization, demolishes
    failing buildings, and uses appropriate excess facilities as lease
    alternatives in support of the Army of 2020.
        AFS 2020 incorporates a Facility Investment Strategy (FIS) that
    contains four components executed with MILCON and/or Operations and
    Maintenance (O&M) funding. FIS includes sustaining/maintaining required
    facilities; disposing of identified excess facilities by 2020;
    improving existing facility quality; and building out critical facility
    shortfalls to include combat aviation brigades, initial entry training
    barracks, maintenance facilities, ranges, and training facilities.
          fiscal year 2014 budget request--military construction, army
        The fiscal year 2014 Military Construction, Army (MCA) budget
    requests an authorization of $978 million and appropriations for $1,120
    million. The difference between the authorization and the
    appropriations requests is the $42 million to fund the second increment
    of the Cadet Barracks at the U.S. Military Academy and $99.6 million
    for planning and design (P&D), unspecified minor military construction
    (UMMC), and host nation support. The Cadet Barracks was fully
    authorized in the National Defense Authorization Act (NDAA) for Fiscal
    Year 2013. This MCA budget request supports the MILCON categories of
    Barracks, Modularity, Redeployment/Force Structure, Revitalization, and
    Ranges and Training Facilities.

    Barracks ($239 million/21 percent):
        The fiscal year 2014 budget request will provide for 1,800 new
    initial entry training barracks spaces at 3 installations replacing
    current housing in relocatable and temporary buildings. The locations
    of these replacement projects are: Fort Gordon, GA; Fort Leonard Wood,
    MO; and Joint Base Langley-Eustis, VA. The final project in this
    category is $42 million for the second increment of the Cadet Barracks
    at the U.S. Military Academy, which was fully authorized in fiscal year
    2013.

    Modularity ($322 million/29 percent):
        The Army will invest $247 million at Joint Base Lewis McChord, WA,
    and Fort Wainwright, AK, to construct facilities for the 16th Combat
    Aviation Brigade (CAB). These facilities provide critical Army aviation
    combat capability and Joint Force support and include aviation
    battalion complexes, an airfield operations complex, and an aircraft
    maintenance and aircraft storage hangars. The Army will construct a $75
    million command and control facility at Fort Shafter, HI, for U.S. Army
    Pacific.

    Redeployment/Force Structure ($337 million/30 percent):
        The Army will invest $242.2 million for seven facilities to support
    the 13th CAB at Fort Carson, CO. The facilities include two aircraft
    maintenance hangars, a runway, a headquarters building, simulator
    buildings, a fire station, and a central energy plant. Fort Bliss, TX,
    will receive $36 million to construct a complex to support the
    activation of a Gray Eagle Company (Unmanned Aerial System) in support
    of the 1st Armor Division headquarters. A $4.8 million battlefield
    weather facility will support the airfield operations of the CABs at
    Fort Campbell, KY. The Army will construct a company operations complex
    and an O&M facility for a total of $54 million at unspecified worldwide
    locations as directed by DOD.

    Revitalization: ($86.8 million/8 percent):
        As part of the facility investment strategy of AFS 2020, the Army
    will invest in five projects to correct significant facility
    deficiencies or facility shortfalls to meet the requirements of the
    units and/or organization mission requirements. Projects included are
    the $63 million pier replacement and modernization at Kwajalein Atoll,
    a $2.5 million entry control building and a $4.6 million hazardous
    material storage facility for the National Interagency Bio-defense
    Campus at Fort Detrick, MD, a $5.9 million command and control
    operations facility at Fort Bragg, NC, and a $10.8 million air traffic
    control tower at Biggs Army Airfield, Fort Bliss, TX.

    Ranges and Training Facilities ($35.5 million/3 percent):
        The fiscal year 2014 budget request includes $35.5 million to
    construct ranges and simulation training facilities to maintain
    readiness of units and soldiers. The program will provide for a $17
    million regional simulation center at Fort Leavenworth, KS, and a $4.7
    million weapons simulation center in support of enlisted Initial Entry
    Training, and Officer and Noncommissioned Officer career courses at
    Fort Leonard Wood, MO. The Army will construct a $4.7 million automated
    sniper field fire range for Special Operations Forces training at Eglin
    Air Force Base, FL, and a $9.1 million multi-purpose machine gun range
    at Yakima Firing Center, WA, in support of Active and Reserve component
    unit training in the area.

    Other Support Programs ($99.6 million/9 percent):
        The fiscal year 2014 budget request includes $41.6 million for
    planning and design of MCA projects and $33 million for the oversight
    of design and construction of projects funded by host nations. As
    executive agent, the Army provides oversight of host nation funded
    construction in Japan, Korea, and Europe for all Services. The fiscal
    year 2014 budget also requests $25 million for unspecified minor
    construction.

                   MILITARY CONSTRUCTION, ARMY NATIONAL GUARD

        The fiscal year 2014 Military Construction, National Guard (MCNG)
    budget requests an authorization of and an appropriation for
    $320,815,000. The MCNG program is focused on the MILCON categories of
    Modularity, Revitalization, and Ranges and Training Facilities.

    Modularity ($121 million/37 percent):
        The fiscal year 2014 budget request is comprised of seven projects,
    which include five readiness centers/Armed Forces Reserve centers in
    Illinois, Minnesota, Mississippi, New York, and South Carolina. This
    request also includes one vehicle maintenance shop in South Carolina,
    and one Army aviation support facility in Illinois.

    Revitalization ($138 million/43 percent):
        The Army National Guard budget funds 12 projects to replace failing
    and inefficient facilities. There is a maneuver area training and
    equipment site in the Commonwealth of Puerto Rico, readiness centers in
    Alabama and Wyoming, an Armed Forces Reserve center in Texas, enlisted
    transient training barracks in Michigan and Massachusetts, a vehicle
    maintenance shop and aircraft maintenance hangar in Missouri, a Civil
    Support Team ready building in Florida, an aviation training/
    maintenance facility in Pennsylvania, and two water utilities projects
    in Mississippi and Ohio. These projects will provide modernized
    facilities and infrastructure to enhance the Guard's operational
    readiness.

    Ranges and Training Facilities ($21 million/7 percent):
        The fiscal year 2014 budget request includes a scout reconnaissance
    range gunnery complex in Fort Chaffee, AR.

    Other Support Programs ($41.2 million/13 percent):
        The fiscal year 2014 Army National Guard budget request includes
    $29 million for planning and design of future projects and $12.2
    million for unspecified minor MILCON.

                      MILITARY CONSTRUCTION, ARMY RESERVE

        The fiscal year 2014 Military Construction, Army Reserve (MCAR)
    budget requests an authorization of $158,100,000 and an appropriation
    for $174,060,000. The MCAR program is focused on the MILCON categories
    of Revitalization and Ranges and Training Facilities. The difference
    between the authorization and appropriation requests funds P&D and
    UMMC.

    Revitalization ($143.2 million/82 percent):
        The fiscal year 2014 Army Reserve budget request includes nine
    projects that build out critical facility shortages and consolidate
    multiple failing and inefficient facilities with new operations and
    energy efficient facilities. The Army Reserve will construct four new
    Reserve centers in California, Maryland, North Carolina, and New York
    that will provide modern training classrooms, simulations capabilities,
    and maintenance platforms that support the Army force generation cycle
    and the ability of the Army Reserve to provide trained and ready
    soldiers for Army missions when called. The request includes a new
    access control point/mail/freight center and noncommissioned officer
    Academy dining facility at Fort McCoy, WI. At Joint Base McGuire-Dix-
    Lakehurst, NJ, the Army Reserve will construct a consolidated dining
    facility and central issue facility and eliminate four failing, Korean
    War era buildings. Lastly, the request will provide a modern total Army
    school system training center at Fort Hunter-Liggett, CA, in support of
    all Army units and soldiers.

    Ranges and Training Facilities ($15 million/9 percent):
        The budget request includes two ranges that will build out a
    shortage of automated, multipurpose machinegun ranges and modified
    record fire ranges at Joint Base McGuire-Dix-Lakehurst, NJ. The ranges
    will enable Active and Reserve component soldiers in the northeastern
    part of the country to hone their combat skills.

    Other Support Programs ($16 million/9 percent):
        The fiscal year 2014 Army Reserve budget request includes $14.2
    million for planning and design of future year projects and $1.7
    million for unspecified minor MILCON.

                 FAMILY HOUSING OPERATION AND MAINTENANCE, ARMY

        The fiscal year 2014 budget request includes $512.8 million to
    support the Army's military family housing in the following areas:
    operations, utilities, maintenance, and repair; leased family housing;
    and oversight management of privatized housing. This request funds over
    16,000 Army-owned homes in the United States and overseas, almost 6,500
    leased residences worldwide, and government oversight of more than
    86,000 privatized homes.

    Operations ($101.7 million):
        The Operations account includes four subaccounts: management,
    services, furnishings, and a small miscellaneous account. All
    operations subaccounts are considered ``must pay accounts'' based on
    actual bills that must be paid to manage and operate the AFH owned
    inventory. Within the management subaccount, Installations Housing
    Service Offices provide referral services for off-post housing for 67
    percent of the Army families that reside in the local communities.

    Utilities ($96.9 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 ($107.6 million):
        The Maintenance and Repair account supports annual recurring
    projects to maintain and revitalize AFH real property assets. This
    funding ensures that we appropriately maintain the 16,000 Army-owned
    housing facilities so that we do not adversely impact soldier and
    family quality of life.

    Leasing ($180.9 million):
        The Army Leasing program is another way to provide soldiers and
    their families with adequate housing. The fiscal year 2014 budget
    request includes funding for 1,369 temporary domestic leases in the
    United States, and 5,064 leased units overseas. The overseas leases
    include support for NATO housing in Belgium and U.S. Special Operations
    Command housing in the Dominican Republic, Jamaica, Colombia, and
    Miami.

    Privatization ($25.7 million):
        The Privatization account provides operating funds for portfolio
    and asset management and strategic oversight of privatized military
    family housing and it pays for civilian pay at 44 locations; travel;
    contracts for environmental and real estate functions, training, and
    real estate development and financial consultant services. The need to
    provide oversight over the privatization program and projects is
    reinforced in the NDAA for Fiscal Year 2013 which requires more
    oversight to monitor compliance, reviews, and reporting 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. RCI has met its goal to eliminate those
    houses originally indentified as inadequate and built new homes where
    deficits existed. RCI family housing is at 44 locations and is
    projected to eventually represent 98 percent of the onpost 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 2018. After all IDPs are completed, the
    RCI program is projecting approximately $34 billion in development
    throughout the 44 locations for the next 40 to 50 years. From 1999
    through 2012, our partners have constructed 29,173 new homes, and
    renovated another 24,641 homes.

                       FAMILY HOUSING CONSTRUCTION, ARMY

        The Army's fiscal year 2014 Family Housing Construction request is
    for $39.6 million for new construction and $4.4 million for planning
    and design. The Army will construct 56 single family homes at Fort
    McCoy, WI, to support the senior officer and senior noncommissioned
    officer and families stationed there. Additionally, the Army will
    construct 29 townhouse style quarters in Grafenwoehr at Vilseck,
    Germany, as part of the consolidation and closure of the Bamberg and
    Schweinfurt garrisons.

                              BASE CLOSURE ACCOUNT

        BRAC property conveyance 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 NDAA for Fiscal Year 2013 consolidated BRAC Legacy and BRAC
    2005 accounts into a single DOD BCA. The Army's portion of the fiscal
    year 2014 budget request is for $180,401,000. The request includes
    $50.6 million for caretaker operations and program management of
    remaining properties, and $129.8 million for environmental restoration
    efforts. In fiscal year 2014, the Army will continue environmental
    cleanup and disposal of BRAC properties. The funds requested are needed
    to keep planned cleanup efforts on track, particularly at prior-BRAC
    installations including Fort Ord, CA; Fort McClellan, AL; Fort Wingate,
    NM; Fort Devens, MA; and Savanna Army Depot, IL. Additionally, funds
    requested support environmental restoration projects at several BRAC
    2005 installations such as Lone Star Army Ammunition Plant, TX; Kansas
    Army Ammunition Plant, KS; and Umatilla Chemical Depot, OR. Completing
    environmental remediation is critical to transferring property back
    into productive reuse and job creation.
        In total, the Army has conveyed almost 219,000 acres (78 percent of
    the total BRAC acreage disposal requirement of 279,000 acres), with
    approximately 61,000 acres remaining. The current goal is for all
    remaining excess property (22 percent) to be conveyed by 2021. Placing
    this property into productive reuse helps communities rebuild the local
    tax base, generate revenue, and replace lost jobs.

                                     ENERGY

        The Army is moving forward to address the challenge of Energy and
    Sustainability on our installations. In fiscal year 2014, the
    Installation Energy budget totals $1.719 billion and includes $43
    million from the DOD Defense-wide MILCON appropriation for the Energy
    Conservation Investment Program (ECIP), $344 million for Energy
    Program/Utilities Modernization program, $1,332 million for Utilities
    Services, and $5.0 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 ($43 million):
        The Army invests in energy efficiency, onsite 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. The
    Army received $43 million for 11 projects to include 6 energy
    conservation projects, 4 renewable energy projects, and 1 energy
    security project.

    Energy Program/Utilities Modernization ($344 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 development
    and construction of renewable energy projects through the Energy
    Initiatives Task Force, the Army's metering program, modernization of
    the Army's utilities, energy security projects, and planning and
    studies.

    Utilities Services ($1,332 million):
        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 entire Federal Government. The ESPC
    program has more than 170 Task Orders at over 70 installations
    representing $1.16 billion in private sector investments and over 350
    UESC Task Orders at 43 installations, representing $543 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. In fiscal year 2012, the Army
    executed more ESPCs and UESCs in one fiscal year than any other year in
    the entire history of program ($236 million).

    Installation Science and Technology Research and Development ($5.0
            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 the supporting installation operations.

                                  ENVIRONMENT

        The Army's fiscal year 2014 O&M budget provides $788,868,000 for
    its Environmental Program in support of current and future readiness.
    This budget ensures an adequate environmental resource base to support
    mission requirements, while maintaining a sound environmental
    compliance posture. Additionally, it allows the Army to execute
    environmental aspects of restationing while increasing programmatic
    efficiencies and addressing the Army's past environmental legacy.
        As a land-based force, our compliance and stewardship sustains the
    quality of our land and environment as an integral component of our
    capacity to train for combat effectively. We are committed to meeting
    our legal requirements to protect natural and cultural resources and
    maintain air and water quality during a time of unprecedented change.
    We are on target to meet DOD goals for cleaning up sites on our
    installations (90 percent of non-BRAC sites will be at response
    complete in fiscal year 2018 and 95 percent by fiscal year 2021), and
    we continue to fulfill environmental compliance requirements despite
    operating in a constrained resource environment.

                  SUSTAINMENT, RESTORATION, AND MODERNIZATION

        This year's FSRM funding is $3,760,996,000. This request includes
    $3,082 million for Sustainment (80 percent of the OSD FSM requirement,
    for all Army components), $36 million for demolition, and $643 million
    for Restoration & Modernization. The Army views 80 percent sustainment
    funding as a necessary adjustment due to the economic impacts and the
    requirements of the fiscal year 2011 Budget Control Act. FSRM funding
    is an integral part of the Facility Investment Strategy (FIS) proponent
    of AFS 2020. The Army is taking a slight risk in the sustainment of our
    facility inventory valued at $312 billion. In keeping with the FIS, the
    Army has increased its investment in facility restoration through the
    O&M-R&M account. This will fully restore trainee barracks, enable
    progress toward energy objectives, and provide commanders with the
    means of restoring other critical 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 2014 BOS request is $8,867,014,000, which is
    a slight decrease from the fiscal year 2013 request. The Army's fiscal
    year 2014 BOS strategy continues to prioritize funding for life,
    health, and safety programs and Army Force Generation requirements
    ensuring soldiers are trained and equipped to meet demands of our
    Nation at war. The Army remains committed to its investment in Army
    Family Programs and continues to evaluate its services portfolio in
    order to maintain relevance and effectiveness. The Army will meet the
    challenge of day-to-day requirements by developing efficient service
    delivery or adjusting service levels while managing customer
    expectations. These efforts will encourage program proponents to
    evaluate policies, seek alternatives, and find innovative solutions to
    meet these challenges. The Army is committed to developing a cost
    culture for increasing the capabilities of BOS programs through an
    enterprise approach. Additionally, the Army will continue to review
    service delivery of its soldier, family, and civilian programs to
    ensure the most efficient and effective means of delivery are realized.

                                   CONCLUSION

        The Army's fiscal year 2014 installations management budget request
    is a program that assists the Army as it transitions from combat. It
    provides for our soldiers, families, and civilians, while recognizing
    the current fiscal conditions. The Army requests the support of the
    committee and Congress in its effort to implement the Army Facility
    Strategy 2020 and facilities investment strategy. These combined
    efforts will set the foundation for the sustainment, restoration, and
    modernization of the facilities necessary to enable the future Army of
    2020, a joint force with a versatile mix of capabilities.
        The planned reduction of 14 percent of the Active Army's end
    strength to 490,000 by the end of fiscal year 2017 will create excess
    U.S.-based installation infrastructure. Since 2005, as we reduced
    installations overseas, many units relocated back to the United States.
    For example, Forts Benning, Bliss, Bragg, Carson, Knox, and Riley
    received approximately 7 million square feet of additional
    infrastructure to host and support these units returning home from
    overseas. The additional capacity here at home was important because it
    helped the Army transform from a division-based force into modular
    Brigade Combat Teams.
        With sequestration triggered, we face additional and significant
    reductions in the annual funding caps limiting defense budgets for the
    next 9 years; these reductions would cause reductions in military and
    civilian endstrength. A future round of BRAC is essential to identify
    excess Army infrastructure and prudently align civilian staffing and
    infrastructure with reduced force structure and reduced industrial base
    demand. BRAC allows for a systematic review of existing DOD
    installations to ensure effective Joint and multi-service component
    utilization. If we do not make the tough decisions necessary to
    identify efficiencies and eliminate unused facilities, we will divert
    scarce resources away from training, readiness, and family programs and
    the quality of our installation services will suffer. We are requesting
    authority from Congress to conduct a BRAC round in 2015.
        In closing, I would like to thank you again for the opportunity to
    appear before you today and request your commitment to the Army's
    program and the future of our soldiers, families, and civilians.

        Senator Shaheen. Thank you.
        Mr. Natsuhara?

      STATEMENT OF ROGER M. NATSUHARA, PRINCIPAL DEPUTY ASSISTANT
     SECRETARY OF THE NAVY, ENERGY, INSTALLATIONS, AND ENVIRONMENT

        Mr. Natsuhara. Chairman Shaheen, Ranking Member Ayotte, and
    members of the subcommittee, I am pleased to appear before you
    today to provide the overview of the Department of the Navy's
    investment in its shore infrastructure.
        For fiscal year 2014, the Department of the Navy is
    requesting over $12 billion in various appropriation accounts
    to operate, maintain, and recapitalize our shore
    infrastructure. This level of funding represents continued
    investment to enhance combatant commanders' capabilities,
    improve servicemembers' quality of life, and recapitalize aging
    infrastructure.
        The fiscal year 2014 budget also demonstrates the
    Department of the Navy's commitment to energy security by
    funding cost-effective projects that will improve our energy
    infrastructure and reduce our energy consumption.
        Additionally, the budget request provides $185 million for
    MILCON and O&M projects to address critical requirements at our
    shipyards.
        Our request includes $1.7 billion in MILCON projects
    supporting several key objectives of the Defense Strategic
    Guidance of 2012. For instance, the Navy and Marine Corps have
    programmed approximately $657 million to enhance warfighting
    capabilities in the Asia-Pacific region such as the new hangar,
    apron, and infrastructure at Marine Corps Base Hawaii and the
    Navy's wharf improvement at Naval Base Guam.
        We have $200 million in projects such as the broad area of
    maritime surveillance hangars in California and Guam and the
    EA-18G Growler and P-8 Poseidon projects in Washington State
    that will ensure the United States remains capable of
    projecting power in anti-access and area denial environments.
    The Navy's investments in a barracks and armory at Camp
    Lemonnier, Djibouti provides supporting infrastructure enabling
    U.S. Special Operations Forces to carry the fight forward,
    conducting stability and counterinsurgency operations for U.S.
    Central and U.S. Africa Commands.
        The strength of our Navy and Marine Corps team lies not
    only in advanced weaponry and faster, stealthier ships and
    aircraft. Our naval forces also derive their strength from the
    sailors and marines who fire the weapons, operate and maintain
    the machinery, or fly the planes, and from the families and
    civilians supporting them. Towards this end, the Navy and
    Marine Corps have programmed over $224 million of MILCON funds
    for operational and tactical training, professional
    development, and academic facilities, nearly $100 million for
    unaccompanied housing, and $463 million to support family
    housing construction and operations.
        Guam remains an essential part of the United States' larger
    Asia-Pacific strategy which includes developing the island as a
    strategic hub and establishing an operational Marine Corps
    presence. The Department of the Navy recognizes congressional
    concerns regarding execution of the Guam military realignment
    and is taking steps necessary to resolve critical issues that
    will allow the construction program to move forward.
        Furthermore, the United States and Japan are continuously
    looking for more efficient and effective ways to achieve the
    goals of the realignment road map. Both countries remain
    committed to maintaining and enhancing a robust security
    alliance and the United States remains committed to enhancing
    the U.S.-Japan alliance and strengthening operational
    capabilities.
        Our Nation's Navy and Marine Corps team operates globally,
    having the ability to project power, effect deterrence, and
    provide humanitarian aid whenever and wherever needed to
    protect the interests of the United States. The Department of
    the Navy's fiscal year 2014 request supports critical elements
    of the Defense Strategic Guidance by making needed investments
    in our infrastructure and people and preserving access to
    training ranges, afloat and ashore.
        I look forward to working with you to sustain the
    warfighting readiness and quality of life for the most
    formidable expeditionary fighting force in the world.
        Thank you for the opportunity to testify before you today,
    and I welcome your questions.
        [The prepared statement of Mr. Natsuhara follows:]

                  Prepared Statement by Mr. Roger M. Natsuhara

        Chairman Sheehan, Ranking Member Ayotte, and members of the
    subcommittee, I am pleased to appear before you today to provide an
    overview of the Department of the Navy's investment in its shore
    infrastructure.

                  MEETING THE CHALLENGE OF FISCAL UNCERTAINTY

        The American public expects its military to spend wisely the
    resources entrusted to us. The fiscal uncertainty we now face as a
    nation only heightens the need to make prudent investments that ensure
    our Navy and Marine Corps team remains ready to respond to crises
    wherever and whenever they may occur. We appreciate the support of
    Congress in passing the Defense and the Military Construction, Veterans
    Affairs, and Related Agencies Appropriations Acts for Fiscal Year 2013.
    They provide us with the critical funding necessary to repair,
    maintain, and modernize our infrastructure and support new platforms as
    they arrive on station. Yet, since balanced deficit reduction was not
    enacted, the sequestration reductions must be taken from these funds
    and applied in a manner that provides no flexibility.
        The Department of the Navy continues to consider options that could
    mitigate the impact of sequestration to the extent possible. With
    respect to military construction (MILCON), the Department of the Navy's
    objective is to preserve project scope and limit any project deferrals
    to the greatest extent possible. The Department intends to achieve this
    by reprogramming existing bid savings and any that may accrue in the
    future. The Department of the Navy is still in the process of
    evaluating the precise impact of the sequester and will have more
    definitive information when our analysis is complete.
        The effects of the fiscal year 2013 sequester will persist beyond
    the current year and profoundly affect the Navy and Marine Corps'
    ability to carry out their missions in today's threat environment using
    the protocols and force structure that currently exist. Moreover, the
    President's fiscal year 2014 budget request assumes Congress will reach
    a compromise on deficit reduction; otherwise, the programs and projects
    we present today will be subject to reductions as well.

                        INVESTING IN OUR INFRASTRUCTURE

    Overview
        Our installations provide the backbone of support for our maritime
    forces, enabling their forward presence. The Department of the Navy is
    requesting over $12 billion in various appropriations accounts, a
    decrease of $619 million from the President's fiscal year 2013 request,
    to operate, maintain and recapitalize our shore infrastructure. Figure
    1 provides a comparison between the fiscal year 2013 and fiscal year
    2014 budget request by appropriation.

        Although smaller, the fiscal year 2014 request supports the Defense
    Strategic Guidance of 2012 and represents continued investment in
    enhancing combatant commanders' capabilities, improving servicemember
    quality of life, and recapitalizing aging infrastructure. The fiscal
    year 2014 budget also demonstrates the Department of the Navy's
    commitment to energy security by funding cost effective projects
    efforts that will improve our energy infrastructure and reduce our
    consumption.

    Military Construction
        Our fiscal year 2014 President's budget request of $1.7 billion
    keeps pace with last year's request and supports several key objectives
    of the Defense Strategic Guidance of 2012. For instance, the Navy and
    Marine Corps are investing approximately $657 million to enhance
    warfighting capabilities in the Asia-Pacific region such as the new
    hangar, apron, and infrastructure ($132.2 million) at Marine Corps Base
    (MCB), HI, that will support the second squadron of MV-22 Osprey
    aircraft arriving in 2016; and Navy's wharf improvements ($53.4
    million) at Naval Base Guam.
        Additionally, the Navy is investing over $200 million in projects
    such as the Broad Area Maritime Surveillance hangars in California
    ($17.5 million) and Guam ($61.7 million) and the EA-18G Growler ($32.5
    million) and P-8 Poseidon ($85.2 million) projects in Washington State
    that will ensure the United States remains capable of projecting power
    in anti-access and area denial environments. The third increment of the
    Explosive Handling Wharf ($24.9 million) at Naval Submarine Base
    Bangor, WA, supports the objective of maintaining a safe, secure, and
    effective nuclear deterrent. The Marine Corps is investing $84 million
    in a new cyber operations and headquarters facility at Fort Meade, MD,
    that will leverage proximity to U.S. Cyber Command and the National
    Security Agency to operate effectively in the cyberspace domain.
    Finally, the Navy's investments in a barracks and armory ($29 million)
    at Camp Lemonnier, Djibouti provides supporting infrastructure enabling
    Special Operations Forces to carry the fight forward, conducting
    stability and counterinsurgency operations for U.S. Central and U.S.
    Africa Commands.
        The Department of the Navy continues efforts to reduce our energy
    costs. The fiscal year 2014 request includes nearly $70 million to
    decentralize steam plants at MCB Camp Lejeune and Marine Corps Recruit
    Depot San Diego, installing new gas-fired energy efficient space and
    domestic water-heating systems. Additionally, the Department will
    benefit from nearly $61 million in energy and water conservation
    projects funded through the Defense-Wide Energy Conservation Investment
    Program. These funds will enhance energy security at Camp Smith, HI ($8
    million) and Marine Corps Air Station (MCAS) Miramar, CA ($18 million);
    increase sources of cost effective renewable energy ($1.7 million);
    improve water conservation efforts ($2.4 million); and increase energy
    efficiency in many other locations ($30.7 million). However, the almost
    $600 million fiscal year 2014 reduction in Sustainment, Restoration,
    and Modernization/Operation and Maintenance (O&M) and Base Operating
    Support (Figure 1 above), in addition to the sequester reductions in
    fiscal year 2013, will make the statutory energy intensity goals more
    difficult to achieve. Moreover, a reduced investment in energy projects
    now will result in lost opportunity for savings in the future, higher
    utility costs and, ultimately, reduced readiness as funds are diverted
    to pay these bills.

    Facilities Sustainment, Restoration, and Modernization
        The Department of Defense (DOD) uses a Facilities Sustainment Model
    to calculate life cycle facility maintenance and repair costs. Using
    industry-wide standard costs for various types of buildings and
    geographic areas, the model is updated annually. Sustainment funds in
    the O&M accounts are used to maintain facilities in their current
    condition. The funds also pay for preventative maintenance, emergency
    response to minor repairs, and major repairs or replacement of facility
    components (e.g. roofs, heating and cooling systems).
        The Navy budgeted $1.5 billion (80 percent of the model) in fiscal
    year 2014 and continues to take risk in its shore infrastructure to
    increase investment in afloat readiness and capabilities. It manages
    this risk by prioritizing work to address mission critical facilities
    in poor condition and resolve life-safety issues. Projects not meeting
    these criteria are deferred. There are, however, exceptions to the ``80
    percent'' rule. Maintenance dredging, flagship educational
    institutions, Camp David, and the Naval Observatory receive 100 percent
    of the funding recommended by the model. Furthermore, the Navy
    programmed $425.1 million to meet the 6 percent capital investment in
    depots required by title 10, U.S.C., section 2476.
        The Marine Corps will continue to fund sustainment funding at 90
    percent of the model ($691 million) in fiscal year 2014. Even this
    strong commitment will result in some facilities degradation. The
    Marine Corps will continue to prioritize and target facilities that
    directly affect mission operations for full sustainment.
        Restoration and Modernization provides major upgrades of our
    facilities. In fiscal year 2014, the Department of the Navy is
    investing $570 million of MILCON, and $618 million of O&M funding into
    restoring and modernizing existing infrastructure.

                            INVESTING IN OUR PEOPLE

    Overview
        The strength of our Navy-Marine Corps team lies not in advanced
    weaponry or faster, stealthier ships and aircraft. Our naval forces
    derive their strength from the sailors and marines who fire the weapon,
    operate and maintain the machinery, or fly the plane, and from the
    families and civilians supporting them. We continue to provide the best
    education, training, and training environments available so our forces
    can develop professionally and hone their martial skills. Providing
    quality of life is a determining factor to recruiting and retaining a
    highly professional force. To this end, we strive to give our people
    access to high-quality housing, whether government-owned, privatized,
    or in the civilian community, that is suitable, affordable, and located
    in a safe environment. Protecting our sailors, marines, civilian
    employees, and their families remains one of our highest priorities as
    we continue to reduce mishaps across the Department of the Navy.

    Training and Education
        Of the $1.7 billion request for MILCON, the Navy and Marine Corps
    together have programmed over $224 million in operational and technical
    training, professional development, and academic facilities. For
    example, the Navy, in order to accommodate an increased student load at
    Nuclear Power Training Unit in South Carolina, will expand pierside
    berthing for an additional moored training ship that will provide
    ``hands on'' propulsion plant training in a realistic environment
    ($73.9 million). The Marine Corps will consolidate its Command and
    Control Training and Education Center of Excellence, Civil Military
    Operations School, and Marine Air Ground Task Force Staff Training
    Program into one 69,000 square foot facility ($25.7 million). This
    project will allow the Marine Corps to carry out its Marine Corps
    University recapitalization program.

    Unaccompanied Housing
        In addition to expeditionary housing the Navy will build in
    Djibouti, the fiscal year 2014 request includes 2 projects that will
    provide accommodations for 1,220 transient and permanent party
    personnel. The first project replaces outdated and deteriorating
    housing for initial skills training (``A'' School) students at Naval
    Station Great Lakes ($35.9 million). The second project, at Naval Base
    Ventura County, acquires and converts 300 existing leased ``Section
    801'' family housing units and 2 supporting facilities to address
    pressing billeting needs ($33.6 million).
        The Marine Corps is benefitting from prior investments in
    unaccompanied housing made in support of the Commandant's Barracks
    Initiative and the Grow the Force effort that increased end strength
    from 175,000 to 202,000 marines. Despite the projected decline in end
    strength, the Marine Corps is well positioned to accommodate its
    projected steady-state troop strength of 182,000 without excess
    inventory, having only programmed an amount to support 90 percent of
    its unaccompanied housing requirement. The results of the ongoing force
    structure analysis will determine whether some locations might require
    additional resources.

    Family Housing
        The Department of the Navy continues to rely on the private sector
    as the primary source of housing for sailors, marines, and their
    families. When suitable, affordable, private housing is not available
    in the local community, the Department of the Navy relies on
    government-owned, privatized, or leased housing. The fiscal year 2014
    budget request of $463.3 million supports Navy and Marine Corps family
    housing operation, maintenance, and renovation requirements.
        Both the Navy and Marine Corps have requested fiscal year 2014
    funding for post-acquisition construction projects necessary to improve
    existing government-owned family housing in overseas locations. These
    include projects in Japan that will revitalize 68 homes at Commander
    Fleet Activities Sasebo ($21.6 million), another 50 homes at MCAS
    Iwakuni while metering 736 units ($24.2 million), and 59 homes at Naval
    Base Guam ($23.1 million).
        Through the Military Housing Privatization Initiative, the
    Department of the Navy has virtually eliminated its entire inventory of
    inadequate housing. While the Navy does not privatize any additional
    housing in fiscal year 2014, the Marine Corps has awarded Phase 6 of
    its Camp Lejeune project this year, but is continuing to review the
    need for other previously approved projects as part of an assessment of
    Marine Corps-wide requirements.
        Additionally, the Navy and Marine Corps estimate spending almost
    $75 million to lease over 2,500 housing units domestically (781) and
    abroad (1,763). Over the past several years, the Navy has reduced its
    number of foreign ``high-cost'' leases (based on thresholds contained
    in U.S.C. title 10, section 2828). This past year, the Department of
    the Navy instituted a policy to limit the leasing of high cost homes
    overseas (based on 10 U.S.C. 2828 thresholds). We will only consider
    such leases for designated high risk billets/high risk personnel where
    there are no less costly options to provide secure housing or where it
    can be demonstrated that such a lease is in the best interest of the
    Government.
        Finally, the Department of the Navy programmed $287.3 million that
    will provide for the daily operation, maintenance, and utilities
    expenses necessary to manage its military family housing inventory. The
    budget request also includes another $27.6 million to provide oversight
    and portfolio management for over 63,000 privatized homes to ensure the
    Government's interests remain protected and quality housing continues
    to be provided to military families.

    Safety
        The fiscal uncertainty we live with today not only affects
    operational readiness; the impact may also manifest itself in safety
    performance. More than ever, we must emphasize safety and risk
    management, both on- and off-duty, as operational tempo increases and
    our sailors and marines are asked to do more with resources that are
    being stretched. Efforts to ensure the safest and most secure force in
    the Department of the Navy's history include more targeted oversight of
    our high risk evolutions and training, based on hazard- and leading-
    indicators rather than just mishap reporting. To do so requires a
    robust analytical capability that pulls safety and safety-related data
    from a variety of sources and rapidly disseminates actionable lessons
    learned to the Fleet and shore establishments. In fiscal year 2012, the
    Department of the Navy committed to developing this needed capability
    by establishing a secure funding stream for the Risk Management
    Information System. But targeted data alone is not enough. We are
    employing System Safety Engineers in the hazard and mishap
    investigation process and incorporating safety considerations in every
    stage of design and production, from the blueprint to rollout.

                             MANAGING OUR FOOTPRINT

    Overview
        It is a basic tenet that DOD should own or remove from public
    domain only the minimum amount of land necessary to meet national
    security objectives. Coupled with the fiscal imperative to conserve
    resources, especially in this era of deficit reduction, the Department
    of the Navy has more than enough incentive to reduce its footprint both
    at home and abroad.

    European Consolidation
        To meet these twin objectives, the Department of the Navy is ready
    to conduct a capacity analysis that will provide the basis for
    consolidating military infrastructure in Europe. It should be noted the
    Navy has a limited footprint in the European theater, relocating its
    European headquarters from London to Naples in 2005, closing Naval Air
    Station (NAS) Keflavik in 2007, and closing Naval Support Activities
    Gaeta and La Maddalena in 2006 and 2008, respectively. We are
    undertaking preliminary capacity assessments of our remaining bases at
    Naval Station Rota, NAS Sigonella, and the Naval Support Activities in
    Naples and Souda Bay that will inform a Defense-wide path forward. Our
    assessment will also include, in partnership with NATO and Norway, a
    review of the Marine Corps' prepositioning site in central Norway.

    Base Closure and Realignment
        With respect to consolidating our domestic infrastructure, the Base
    Realignment and Closure (BRAC) process offers the best opportunity to
    assess and evaluate opportunities to properly align our domestic
    infrastructure with our evolving force structure and laydown. Since the
    first round of BRAC in 1988, the Department of the Navy has closed 186
    domestic installations and activities, including 52 major
    installations. Figure 2 demonstrates the evolution of the Department of
    the Navy's force structure since 2005:

        The Department of the Navy has programmed $145 million to continue
    environmental cleanup, caretaker operations, and meet the property
    disposal plan. By the end of fiscal year 2012, we disposed 91 percent
    of our excess property through a variety of conveyance mechanisms with
    less than 17,000 acres remaining. Here are several examples of what we
    were able to achieve in the past year.
        Since the former NAS Brunswick in Maine closed in 2011, the Navy
    has disposed of 79 percent of the surplus property. The community is
    experiencing success in creating short-term and long-term jobs as it
    continues to implement its redevelopment plan for the property.
        In fiscal year 2012, the Navy completed the last disposal action at
    the former Naval Station Ingleside, TX, with the public sale of 155
    acres on October 7, 2011 to Kiewitt Offshore Services, LTD for
    approximately $2 million.
        Finally, at the end of 2012, the Navy and South Shore Tri-Town
    Development Council reached agreement on an economic development
    conveyance amendment that resulted in the disposal of 556 acres of the
    former NAS South Weymouth in Massachusetts. This agreement brought the
    total percentage disposed at South Weymouth to 93 percent, with less
    than 150 acres pending disposal upon completion of environmental
    remediation actions.
        Overall, the Navy continues to reduce its inventory of properties
    closed under BRAC. Of the original 131 installations with excess
    property, the Navy only has 23 installations remaining with property to
    dispose. We anticipate reducing this number by six installations this
    year, with the remainder to be disposed as we complete our
    environmental remediation efforts.
        Under the previous BRAC efforts, the Navy has been able to realize
    approximately $4.4 billion in annual recurring savings. BRAC 2005 alone
    resulted in approximately $863 million in annual recurring savings.
    Although there remain cleanup and disposal challenges from prior BRAC
    rounds, we continue to work with regulators and communities to tackle
    complex environmental issues, such as low-level radiological
    contamination, and provide creative solutions to support redevelopment
    priorities, such as Economic Development Conveyances with revenue
    sharing.

    Compatible Land Use
        The Department of the Navy has an aggressive program to promote
    compatible use of land adjacent to our installations and ranges, with
    particular focus on limiting incompatible activities that affect the
    Navy and Marine Corps' ability to operate and train, and protecting
    important natural habitats and species. A key element of the program is
    Encroachment Partnering (EP), which involves cost-sharing partnerships
    with States, local governments, and conservation organizations to
    acquire interests in real property adjacent and proximate to our
    installations and ranges.
        DOD provides funds through the Readiness and Environmental
    Protection Initiative that are used in conjunction with Navy and Marine
    Corps O&M funds to leverage acquisitions in partnership with States,
    local governments, and nongovernmental organizations. Figure 3
    represents the activity and funding for restrictive easements the
    Department of the Navy acquired in fiscal year 2012:

        Vital to the readiness of our naval forces is unencumbered access
    to critical land, water, and air space adjacent to our facilities and
    ranges. The Department of the Navy understands that energy exploration,
    on land and off-shore, plays a crucial role in our Nation's security
    and are activities not necessarily mutually exclusive with military
    training. However, we must ensure that obstructions to freedom of
    maneuver or restrictions to tactical action in critical range space do
    not degrade the ability of naval forces to achieve the highest value
    from training and testing. As an active participant in the DOD
    Clearinghouse, the Department of the Navy assisted in the evaluation of
    1,769 proposed energy projects submitted through the formal Federal
    Aviation Administration's Obstacle Evaluation process during calendar
    year 2012. Ninety-eight percent (1,730) of the projects were assessed
    to have little or no impact on military operations.
        The 1,730 projects cleared by the Clearinghouse represent
    potentially 38 gigawatts (GW) of renewable energy projects. The wind-
    turbine developers, in particular, were responsible for a large
    increase in U.S. green energy during 2012--over 13 GW of nameplate
    wind-turbine capacity were completed in 2012.

    Land Withdrawals
        A number of Department of Navy installations are located wholly or
    partially on public lands that have been withdrawn from the public
    domain. Withdrawals exceeding 5,000 acres must be authorized in
    statute. As part of the National Defense Authorization Act (NDAA) for
    Fiscal Year 2014, the administration requests to renew the withdrawals
    for Naval Air Weapons Station, China Lake, CA, and the Chocolate
    Mountains Air Gunnery Range, CA, managed by the U.S. Marine Corps. The
    Marine Corps also seeks to withdraw an additional 154,000 acres at its
    Air Ground Combat Center, Twentynine Palms, CA, to support increased
    training requirements. These three withdrawal actions have been
    combined into a single legislative proposal with the Army's request to
    convert its use of public lands at the Limestone Hills Training Area,
    MT. Each of these withdrawal actions would extend for a period of 25
    years.

                           PROTECTING OUR ENVIRONMENT

    Overview
        The Department of the Navy is committed to environmental
    compliance, stewardship, and responsible fiscal management that support
    mission readiness and sustainability, investing over $1 billion across
    all appropriations to achieve our statutory and stewardship goals. This
    level of funding remains relatively stable over the past few years,
    even while other investments have been reduced. Figure 4 provides a
    comparison between the fiscal year 2013 and fiscal year 2014 budget
    request by appropriation.

        The Department of the Navy continues to be a Federal leader in
    environmental management by focusing our resources on achieving
    specific environmental goals and proactively managing emerging
    environmental issues, integrating sound environmental policies and
    lifecycle cost considerations into weapon systems acquisition to
    achieve cleaner, safer, more energy-efficient and affordable
    warfighting capabilities.

    Conservation
        I want to highlight an achievement demonstrating the Department of
    the Navy's ability to manage our training lands simultaneously for the
    benefit of endangered species and military operations. Our conservation
    efforts have led to the proposed delisting of the Island Night Lizard
    by the U.S. Fish & Wildlife Service from the Federal list of threatened
    and endangered species. The Island Night Lizard is found only on three
    of the California Channel Islands, which include the Navy's San Nicolas
    Island and San Clemente Island. The Navy's recovery efforts and
    environmental stewardship of San Nicolas and San Clemente Island over
    the past 3 decades made this national achievement possible. This
    delisting also reduces the regulatory encumbrances the Navy experiences
    at San Clemente Island--the Navy's premier land, air, and sea
    combination live fire range. Developing and implementing conservation
    programs such as this enables the Department of the Navy to maintain
    combat readiness by ensuring continued access to the land, sea, and
    airspace necessary to test, train, and live on with as few
    environmental constraints as possible.

                           RELOCATING MARINES TO GUAM

    Overview
        Guam remains an essential part of the United States' larger Asia-
    Pacific strategy, which includes developing the island as a strategic
    hub and establishing an operational Marine Corps presence. DOD
    recognizes Congress' concerns regarding execution of the Guam military
    realignment as outlined in the NDAA for Fiscal Years 2012 and 2013 and
    is taking steps necessary to resolve critical issues that will allow
    the construction program to move forward.

    Moving Forward
        In April 2012, the U.S.-Japan Security Consultative Committee (SCC)
    announced an adjustment to reduce the number of marines relocating from
    Okinawa to Guam from approximately 8,600 to approximately 5,000. In
    October 2012, the Department of the Navy issued a new Notice of Intent
    expanding the scope of the Supplemental Environmental Impact Statement
    (SEIS) for the Live Fire Training Complex to also evaluate alternatives
    for the Main Cantonment, Family Housing, and impacts on Guam's civilian
    infrastructure, scaled according to this reduction in relocating
    marines.
        The first MILCON contracts funded by both the U.S. and Government
    of Japan at Apra Harbor, Andersen Air Force Base (AFB) and along Marine
    Corps Drive (Defense Access Roads) were awarded following the Record of
    Decision in September 2010 and are now proceeding. These projects are
    not impacted by the SEIS.
        The fiscal year 2013 budget request included $26 million to
    construct facilities in support of the Marine Aviation Combat Element
    at the Andersen AFB North Ramp on Guam. We appreciate the support of
    Congress in authorizing and appropriating funds that enables the second
    increment of a project providing an aircraft parking apron, taxiways,
    lighting, wash racks, and supporting utilities to proceed.
        The fiscal year 2014 budget request includes $85.7 million for
    construction of a Type II Hangar at the Anderson AFB North Ramp. To
    match the U.S. effort in fiscal year 2013, the Government of Japan has
    agreed to reallocate $10.8 million to fund planning and design for the
    second increment of North Ramp utilities and site improvement using
    their Japan fiscal year 2009 funds already transferred to the United
    States and for fiscal year 2014, transferring $114.3 million of Japan
    fiscal year 2011 funds for the construction of this project. None of
    these projects are impacted by the SEIS.
        Finally, the United States and Japan are continuously looking for
    more efficient and effective ways to achieve the goals of the
    Realignment Roadmap. Both countries remain committed to maintaining and
    enhancing a robust security alliance, and the United States remains
    committed to enhancing the U.S.-Japan Alliance and strengthening
    operational capabilities.

                                   CONCLUSION

        Our Nation's Navy-Marine Corps team operates globally, having the
    ability to project power, effect deterrence, and provide humanitarian
    aid whenever and wherever needed to protect the interests of the United
    States. The Department of the Navy's fiscal year 2014 request supports
    critical elements of the Defense Strategic Guidance 2012 by making
    needed investments in our infrastructure and people, reducing our
    worldwide footprint, and preserving access to training ranges, afloat
    and ashore.
        Yet, unless Congress acts to enact a comprehensive and measured
    approach to deficit reduction, our programs will be subject to
    reductions in planned spending even larger than the ones we are
    grappling with today. I look forward to working with you to sustain the
    warfighting readiness and quality of life for the most formidable
    expeditionary fighting force in the world.
        Thank you for the opportunity to testify before you today and I
    welcome your questions.

        Senator Shaheen. Thank you.
        Ms. Ferguson.

     STATEMENT OF KATHLEEN I. FERGUSON, ACTING ASSISTANT SECRETARY
      OF THE AIR FORCE, INSTALLATIONS, ENVIRONMENT, AND LOGISTICS

        Ms. Ferguson. Chairman Shaheen, Ranking Member Ayotte, and
    distinguished members of the subcommittee, thank you for the
    opportunity to speak to you today about the Air Force's
    installations, MILCON, and environmental programs. I am also
    proud to be part of Team New Hampshire, having graduated both
    from Nashua High School and the University of New Hampshire.
        On behalf of the Secretary and the Chief of Staff of the
    Air Force, I would like to thank the committee for your
    unwavering support for our airmen in the Air Force.
        Our fiscal year 2014 budget request contains $1.3 billion
    for MILCON, $2.2 billion for facilities sustainment, $813
    million for restoration and modernization, and $465 million for
    military family housing.
        In fiscal year 2013, we took a deliberate pause in MILCON
    to ensure we were making the right capital investment decisions
    as force structure adjustments were being made in line with the
    emerging defense strategy.
        Our fiscal year 2014 MILCON request is approximately $900
    million above our fiscal year 2013 request and returns us to
    near historical funding levels, supports DOD's strategic
    priorities, our top weapons systems modernization programs, and
    distributes MILCON funding equitably between Active, Guard, and
    Reserve components.
        This budget request reflects our ongoing modernization
    effort. This includes critical infrastructure for the F-35 and
    KC-46A, recapitalization of the U.S. Strategic Command
    headquarters, and construction of the new Cyber Command Joint
    Operations Center.
        Included in this budget request is $265 million at
    unspecified locations to support the KC-46 bed-down. We will
    submit site-specific MILCON project document forms in May 2013
    after preferred and reasonable alternative bases are announced
    and will request the committee's support of the substitution.
        The Air Force strongly supports DOD's request for another
    round of BRAC in 2015. While we have no current capacity
    analysis from which to draw, our capacity analysis from 2004
    suggested that 24 percent of our basing infrastructure was
    excess to needs. BRAC 2005 did not result in major reductions
    to the Air Force, and since that time, we have reduced our
    force structure by more than 500 aircraft and nearly 8 percent
    of active duty military end strength. We continue to spend
    money maintaining excess infrastructure that would be better
    spent on recapitalization and sustainment. Divestiture of
    excess property on a grander scale is a must.
        We are also working hard to identify innovative ways to
    reduce costs. Installation community partnerships are one
    approach to reducing operating and service costs while
    enhancing and retaining quality.
        The Air Force is currently prototyping a variety of
    projects in States including Texas, Florida, Georgia,
    California, and North Carolina. In total we have 15 locations
    where installation and community leaders have fully embraced
    the Air Force community partnership concept and are coming
    together to collectively reduce costs.
        During this period of fiscal uncertainty, the Air Force is
    ready to make the tough decisions required to avoid mission-
    impacting reductions and installation support that contribute
    to a hollow force. Our fiscal year 2014 budget request
    addresses our most pressing needs, seeks authorization to
    eliminate unnecessary infrastructure, and stays true to the
    fundamental priorities of our Air Force.
        Thank you and I look forward to your questions.
        [The prepared statement of Ms. Ferguson follows:]

                 Prepared Statement by Ms. Kathleen I. Ferguson

                                  INTRODUCTION

        As you are aware, the U.S. Air Force takes great care to project
    the distinctive capabilities of airpower. From air and space
    superiority--enabling joint and coalition forces to operate unhindered
    in the air domain while denying our adversaries the same--to global
    strike--holding any target on the planet at risk with either
    conventional or nuclear forces--to rapid global mobility, global
    intelligence, surveillance, and reconnaissance, and the command and
    control architecture to integrate full-spectrum joint military
    operations, the Nation expects our Air Force to provide and employ
    these enduring contributions from a position of continuing advantage
    over potential adversaries.
        Those contributions are enabled and reinforced by our global
    network of Air Force installations, and managing those installations
    involves understanding and balancing mission requirements, risk, market
    dynamics, budgets, and the condition of our assets. Within the
    portfolio of installations, environment, and energy, we continually
    evaluate how to reduce costs while improving the way we manage our real
    estate, housing, and energy demand. We focus our investments on
    critical facilities; reduce our footprint by demolishing old, energy
    inefficient buildings; upgrade heating and cooling systems and other
    energy-intense building systems; leverage third-party financing through
    public-public and public-private partnerships and the lease of under-
    utilized portions of the portfolio, where those opportunities exist;
    and continue to build on our excellence in environment, safety, and
    occupational health programs.
        However, today's fiscal climate challenges our ability to maintain
    our current suite of capabilities and jeopardizes our ability to
    fulfill our role in executing the Nation's Defense Strategic Guidance.
    With this fiscal year 2014 budget request, we took great care to align
    our limited resources with our overall objectives to maintain a high
    quality and ready force by investing in readiness, modernization, and
    airmen and their families. Proud of our success but realizing the
    fiscal challenges that lie ahead, we will continue to work hard to
    identify opportunities and initiatives with high rates of return that
    will maximize the impact of every dollar. We are committed to charting
    a path through these challenging times that fulfills the promises made
    to the American people, our Nation's leaders, and our innovative airmen
    and their families. I appreciate the opportunity to provide additional
    details in this testimony.

                                 INSTALLATIONS

        Ready installations are an integral part of ensuring a ready Air
    Force. We consider our installations ``power projection platforms''
    from which we employ our enduring airpower contributions, increase
    responsiveness, and ensure global access across the full spectrum of
    military operations. As such, the health of our installations directly
    contributes to overall Air Force readiness. Our Air Force installation
    investment strategy for fiscal year 2014 focuses on the Air Force's
    enduring contributions and on building sustainable installations to
    enable the Defense Strategy. We will employ a Centralized Asset
    Management approach to apply our limited installation dollars to our
    most critical needs. Using a ``mission-critical, worst-first''
    methodology, we will minimize risk to mission and risk to airmen, and
    continue to optimize our processes to increase efficiency.
    Additionally, we must address the excess capacity we have identified
    previously to ``right-size'' our installations footprint to a smaller,
    but more flexible and agile, Air Force of the future. Continuing to
    live with more capacity than we need and have resources to sustain is
    akin to a ``hollow force,'' or in this case, ``hollow installations.''
        Given our strategic intent to build sustainable installations, we
    established a coherent link between our major installation programs
    during this year's budget formulation. After researching existing
    academic studies and analyzing private sector data, we determined we
    should resource maintenance and repair of our infrastructure programs
    at 2 percent of our Plant Replacement Value. As a result, we are
    funding Facilities Sustainment to 80 percent of the Department of
    Defense's (DOD) Facilities Sustainment Model, increasing Restoration
    and Modernization investments, and increasing military construction
    (MILCON) funding to near historic levels after our fiscal year 2013
    deliberate pause. In addition, we adjusted the utilities portion of our
    Facilities Operations account to meet 3-year historical obligation
    levels and fully resourced Fire and Emergency Services to meet DOD
    standards. Taken together, these investments avoid hollowing out our
    installations--our power projection platforms--in the near term.
        In total, our fiscal year 2014 President's budget request contains
    $4.31 billion for MILCON, facility sustainment, restoration, and
    modernization (FSRM), as well as another $465 million for military
    family housing. For sustainment, we request $2.2 billion; for
    restoration and modernization, $813 million; and for MILCON, we request
    $1.3 \1\ billion, which is approximately $900 million more than our
    fiscal year 2013 President's budget request. As previously stated, this
    MILCON increase comes just 1 year after our deliberate pause. This is
    intended to bring our MILCON funding closer to historical levels,
    supporting DOD's strategic priorities, as well as the Service's top
    weapons system modernization programs, and distributes MILCON funding
    equitably between Active, Guard, and Reserve components.
    ---------------------------------------------------------------------------
        \1\ $1.3 billion is total force funding request including Active,
    Guard, and Reserve
    ---------------------------------------------------------------------------
    Readiness
        Our fiscal year 2014 President's budget request includes vital
    facility and infrastructure requirements in support of Air Force
    readiness and mission preparedness. Examples of this include
    investments in projects which strengthen our nuclear deterrence posture
    at Minot Air Force Base (AFB), ND; and Kirtland AFB, NM. Our budget
    request also supports Total Force cyberspace and intelligence,
    surveillance, and reconnaissance projects at a host of locations,
    including Martin State and Fort Meade, MD; Terre Haute, IN; Birmingham,
    AL; and the Air Force Weapons School at Nellis AFB, NV.
        Consistent with National Military Strategy, another key focus area
    for the Air Force is the Asia-Pacific theater, where we will make key
    investments to ensure our ability to project power in areas in which
    our access and freedom to operate are challenged, and continue efforts
    to enhance resiliency. Guam remains our most vital and diplomatically
    accessible location in the western Pacific. For the past 8 years, Joint
    Region Marianas-Andersen AFB has accommodated a continual presence of
    our Nation's premier air assets, and will continue to serve as the
    strategic and operational nucleus for military operations, originating
    from, or transiting through, in support of a potential spectrum of
    crises.
        To fully support Pacific Command's strategy, the Air Force is
    committed to hardening critical infrastructure, including select
    hangars, as part of Pacific Airpower Resiliency, a comprehensive
    initiative that also includes dispersal and rapid recovery capabilities
    after attack. Guam's location also provides ideal environments for
    training and exercises. In 2014, we plan to continue the development of
    the Pacific Regional Training Center by constructing a Silver Flag Fire
    Rescue and Emergency Management training facility and a Rapid Engineer
    Deployable Heavy Operational Repair Squadron Engineers (Red Horse)
    Airfield Operations facility. These facilities will enable mandatory
    contingency training and enhance the operational capability to build,
    maintain, operate, and recover a `bare base' at forward-deployed
    locations, and foster opportunities for partnership building in this
    vitally important area of the world.

    Modernization
        The fiscal year 2014 budget request includes key infrastructure
    investments to support bed-down of the F-35A and KC-46. Our ability to
    remain on schedule with modernizing our aging fighter and tanker
    aircraft depend on meeting construction timelines for critical enabling
    infrastructure--facilities such as aircraft maintenance hangars,
    training and operations facilities, and apron and fuels infrastructure.
    This year's President's budget request includes a $265 million at three
    locations to support the KC-46A bed-down. This consists of $193 million
    at an unspecified location for Main Operating Base (MOB) #1, $63
    million at an unspecified location for the Flight Training Unit (FTU),
    and $9 million for land acquisition at Tinker AFB, OK, for the KC-46A
    depot. Potential facility types at MOB #1 and FTU include a flight
    simulator facility, 2-bay maintenance hangar, fuel cell and corrosion
    control hangar, parking apron and hydrant fuel system, flight training
    center, fuselage trainer, squadron operations and aircraft maintenance
    unit facilities. Specific site fiscal year 2014 Military Construction
    Project Data forms (DD Forms 1391) will be submitted to replace the
    unspecified MOB #1 and FTU projects in May 2013 after Preferred &
    Reasonable Alternative bases are announced. Our fiscal year 2014
    program also supports vital combatant commander priorities, such as
    continuation of the multi-year effort to recapitalize the U.S.
    Strategic Command headquarters facility at Offutt AFB, NE, and
    construction of the new Cyber Command Joint Operations Center at Fort
    Meade, MD.

    People
        Airmen are the Air Force's greatest asset. Recruitment, quality-of-
    life, and retention rank among our highest priorities. Our devotion to
    taking care of our people continues with future plans to provide
    adequate housing for our airmen, and their families by budgeting to
    sustain and modernize overseas housing, privatize all housing in the
    United States by the end of 2013, and continue investments and
    improvements in our dormitories. We are proud to say that our
    persistent focus and investments in our dormitories has allowed the Air
    Force to surpass the DOD goal that 90 percent of permanent party dorm
    rooms for unaccompanied airmen are adequate by 2017. We request
    continued support from Congress to ensure we can continue to invest in
    these areas in order to provide thriving housing and dormitory
    communities, and more importantly, take care of our valued people.

    Closures and Realignments
        We do all of this while recognizing that we are carrying
    infrastructure that is excess to our needs. While we have no recent
    excess infrastructure capacity analysis from which to draw, our
    capacity analysis from 2004 suggested that 24 percent of Air Force
    basing infrastructure capacity was excess to our mission needs. While
    Base Realignment and Closure (BRAC) 2005 did not make major reductions
    to the Air Force, since that time we have reduced our force structure
    by more than 500 aircraft and reduced our active duty military end
    strength by nearly 8 percent. So, intuitively we know that we still
    have excess infrastructure, while we spend considerable time optimizing
    the use of our facilities and carefully and frugally managing those
    facilities we know to be excess.
        Physical infrastructure is expensive. As discussed, the Air Force
    spends billions of dollars each year operating, sustaining,
    recapitalizing, and modernizing our physical plant. When we account for
    the additional costs of running our installations, that number nearly
    doubles. Since the last BRAC round, we have strived to identify new
    opportunities and initiatives that enable us to maximize the impact of
    every dollar we spend. Our efforts to demolish excess infrastructure,
    recapitalize our family housing through privatization, unlock the
    fiscal potential value of under-utilized resources through leasing, and
    reduce our energy costs have paid considerable dividends.
        Since 2006, we have demolished 38.5 million square feet of aging
    building space that was excess to our needs. We estimate the resultant
    savings to be more than $300 million. To be more specific, we have
    demolished antiquated administrative facilities, ill-suited for today's
    technological age and excess to our needs. We have eliminated aircraft
    operational and maintenance facilities that we no longer need based on
    reductions to the size of our aircraft fleet. We have demolished old
    and energy-inefficient warehouse facilities no longer needed due to
    rapidly evolving supply chains that reduce the need for localized
    storage.
        Like our sister Services, the Air Force is committed to providing
    quality housing for airmen and their families. Through housing
    privatization, the Air Force has invested $500 million and, in turn,
    leveraged $7.5 billion in private-sector funding to provide quality
    homes for airmen much more quickly than we could have done with
    traditional MILCON processes. In a similar vein, we have continually
    sought to improve the stewardship of our real property by leveraging
    appropriated dollars for private-sector investment. With the
    authorities provided to execute enhanced-use leases, we are pursuing
    innovative ways to leverage our underutilized real estate to return
    value to our installations. As a result of our energy conservation
    efforts, we have cumulatively avoided more than $1 billion in facility
    energy costs since 2003, the funds for which have been redirected to
    better enable warfighters to complete their missions. We will continue
    to invest in all of these strategies.
        Despite our best efforts and the innovative programs we've just
    mentioned, we continue to spend money maintaining excess infrastructure
    that would be better spent recapitalizing and sustaining our weapons
    systems, training for readiness, and investing in the quality of life
    needs of airmen. Divestiture of excess property on a grander scale is a
    must.

    European Infrastructure Consolidation
        Since 1990, the Air Force has reduced both aircraft and forces
    stationed in Europe by 75 percent. We operate from six main operating
    bases that remain critical to our NATO commitments and provide
    throughput and global access for three unified combatant commands. We
    recognize that in light of recent evolutions in the national security
    strategy, there may be further opportunities for consolidation. The
    Secretary of Defense has directed a capacity analysis to explore
    additional opportunities for reducing long-term expenses through
    footprint consolidation in Europe, and the Air Force fully supports
    this effort. We already plan to draw down 18 Primary Aerospace Vehicle
    Authorized (PAA) A-10s in Europe in fiscal year 2013 and to reduce
    operations at Lajes Field, Azores, to better match infrastructure
    requirements to mission demand. Through the Office of Secretary of
    Defense-led study, we will look for additional opportunities for
    operations and support cost savings through consolidation and closure.

    Air Force Encroachment Management Program
        The Air Force needs access to airspace and ranges from its air
    bases to ensure its ability to conduct test and evaluation and
    operational and training missions. In some cases communities are
    unaware that economic or land-use initiatives they are pursuing--such
    as development right up to the base boundary or under airspace safety
    zones--have the potential to limit our options for current and future
    mission needs.
        As a result, we have instituted an Air Force Encroachment
    Management framework to identify and address potential encroachment
    issues early on. We attempt to identify, address, and actively work
    with community planners and conservation groups to develop compatible
    uses through joint land use and airspace studies that preserve Air
    Force options and those of the surrounding communities.
        To date the Air Force has worked with 32 community stakeholders in
    creating Installation Complex Encroachment Management Action Plans
    (ICEMAPS) as a means to identify current or potential encroachment
    issues and the actions necessary to resolve these issues to our mutual
    benefit. These action plans have proved so successful that the Office
    of Economic Adjustment indicated they would prefer to accomplish a
    Joint Land Use Study after an ICEMAP has been completed because it
    identifies stakeholders and an installation's mission footprint (land
    area beyond the base boundary like military training routes, special
    use airspace, or drop zones) that has proven key to identifying
    compatible development strategies. This may include adoption of land
    use controls in accident potential zones or clear zones, acquisition of
    easements or key parcels of land affecting access to our airspace and
    ranges--this includes leveraging the DOD-directed Readiness
    Environmental Protection Initiative; addressing line of sight
    obstructions to critical microwave wireless communication and potential
    mitigations; working comprehensive solutions with community
    stakeholders like the Gulf Regional Airspace Strategic Initiative
    initiative with communities around Eglin AFB or addressing better use
    of water resources in areas facing shortages now or in the future.
        We are also working with DOD on analyzing the effects of siting the
    varying types of renewable energy projects and how best to work with
    developers and communities to minimize or mitigate potential impacts to
    our Air Force training and test and evaluation missions. Together, with
    the DOD Siting Clearinghouse and other Services and Agencies, we have
    cleared more than 1,500 projects for further development. We now have
    several initiatives underway that should help developers and local
    communities understand those areas near DOD installations with a high
    risk of adverse impact and those more suitable for the development of
    renewable energy or other economic initiatives.

    Air Force Community Partnership Initiative
        The Air Force is enthusiastically exploring the potential of
    installation-community partnerships as a means to reduce operating and
    service costs in support of the Air Force mission while retaining or
    enhancing quality. This concept is embodied in the National Defense
    Authorization Act for Fiscal Year 2013 language 10 U.S.C. section 2336,
    and this legislation has the potential to increase DOD and the Service
    Departments' latitude in pursuing creative public-public and public-
    private, or ``P4'', partnership initiatives.
        Currently, the Air Force is testing a prototype process through
    which installation and community leaders are motivated to develop
    creative ways to leverage their capabilities and resources and in the
    process, reduce mutual operating costs. Through this innovative start-
    up program, we have agreed to provide support to 13 locations where
    installation and community leaders have fully embraced the Air Force
    Community Partnership concept. We are using these prototype initiatives
    to drive the development of policy, identification of an oversight
    framework/governance structure and training requirements, types of
    potential opportunities and requisite resource requirements and
    priorities.

                                 ENVIRONMENTAL

        Our environmental programs are designed to provide the mission-
    ready people, infrastructure, and natural resources necessary to meet
    mission requirements, today and tomorrow. The Air Force is committed to
    conducting our operations in an environmentally responsible way;
    meeting all environmental standards and legal obligations applicable to
    these operations; planning future activities to consider environmental
    and community impacts, and minimize them where practicable; eliminating
    pollution from activities wherever and whenever we can; cleaning up
    environmental damage resulting from past activities; and responsibly
    managing our irreplaceable natural and cultural resources in a
    sustainable manner. To address these commitments, the Air Force's
    fiscal year 2014 President's budget request seeks a total of $1 billion
    for environmental programs.

    Environmental Restoration
        Our fiscal year 2014 President's budget request seeks $560 million
    for cleanup of active installations and BRAC installations. We
    established our cleanup program in 1984 to clean-up former hazardous
    waste disposal sites on active and BRAC installations. Our past focus
    was on completing investigations and getting remedial actions in
    place--many of which were designed to operate for decades. In early
    2011, we put into place a new policy and new metrics--a policy that
    shifts the goal from remedy-in-place to closing sites, from one that
    tolerated decades to complete the clean-up to one that rewards
    innovative technologies; from one that was cost-plus to one that is
    fixed price and performance based and incentivizes contractors to
    develop innovative ways to get to site closure; and to one that
    considers the total life cycle cost informed by a solid business case
    analysis.
        Our new goals are to achieve accelerated completion of 90 percent
    of Air Force BRAC cleanup sites and 75 percent of non-BRAC sites by
    2015, in order to place the emphasis on bringing the program to
    closure. Through the use of improved performance-based contracting,
    coupled with this new policy, after 2-plus years of focused effort we
    have put in-place almost 80 new performance-based contracts, and we are
    cleaning up sites three times faster, with life-cycle cost savings at
    these sites as much as 33 percent over original government estimates--
    and it is our expectation this will go even higher as we continue to
    mature this contracting approach. By using this approach, we are not
    only closing sites faster, we are also reducing land access
    restrictions where possible, while still being fully protective of
    human health and environment.
        We continue to work with State and Federal regulators on
    socializing this new approach. We continue to receive positive feedback
    from many of the regulators on the overarching goal to finish clean-up
    more expediently and more efficiently.

    Environmental Quality
        Our fiscal year 2014 President's budget request seeks $487 million
    in Environmental Quality funding for compliance, environmental
    conservation, pollution prevention, and environmental technology
    investment. As in our clean-up program, we have refocused our efforts
    to streamline and more effectively manage our environmental quality
    program activities. One example we introduced to you last year is how
    we are continuing to improve our approach for our National
    Environmental Policy Act (NEPA) program. Every decision we make is
    backed by environmental analyses, with major efforts and costs going
    into the development of Environmental Impact Statements (EIS) and
    Environmental Assessments (EA).
        As we looked at how to become more efficient in all our functional
    areas, we found that over time our NEPA process had become stagnant and
    bureaucratic. We had migrated away from the Council on Environmental
    Quality guidance that emphasizes clear, concise, and analytical
    analyses rather than encyclopedic documents. On average, EISs were
    taking 3\1/2\ years to complete and EAs half that time. Our
    decisionmaking process was being crippled by such tasks as elaborate
    internal reviews and steps that added very little value to the quality
    of the analysis.
        Last year, we informed you we had issued policy to refocus our NEPA
    process. The policy emphasizes use of performance-based contracts to
    incentivize contractors to provide quality environmental analyses that
    are fully-compliant with NEPA, that are aimed at better decisionmaking.
    Likewise, to refocus our internal reviews, the policy set goals for
    completion of EISs in 12 months and EAs in 6 months. To execute the new
    policy the Air Force established a NEPA center of excellence to
    standardize the Air Force approach to NEPA management and contracting
    and to provide reach back to major commands and installation NEPA
    professionals. Currently, we have approximately 400 EAs and EISs
    underway, with some being performed in-house, and most being supported
    by contract. Our focus this year is to streamline our execution
    processes for all NEPA actions to align them with our new standardized
    processes and performance-based contracts, to ensure we get timely
    decisions in a cost-effective manner. Results from these changes
    continue to be very promising; our contract actions have been reducing
    NEPA analysis time requirements and costs, and we're doing this without
    sacrificing quality.
        We continue to look at ways to improve how the Air Force manages
    waste. Pollution prevention and waste minimization provide great
    potential to realize efficiencies while at the same time sustaining the
    Air Force mission, maintaining a safe and healthy workplace for our
    people, and improving the environment in which we live. Last April, we
    established stronger pollution prevention and waste minimization goals
    that apply Air Force wide. Our new pollution prevention goals seek to
    reduce our hazardous waste disposal by 20 percent, reduce our toxic
    releases by 35 percent, and divert 65 percent of our non-hazardous
    solid waste by reduction, recycling, reuse or composting, rather than
    landfilling; all by 2020. We will use our environmental management
    system to achieve these goals; and we fully expect to see our
    operations become more efficient, more protective of the workforce,
    while realizing cost savings. We are also striving to change how our
    culture considers waste and the environment. The Air Force believes
    that `green' is a smart way to do business. Simply put: green is money;
    green is innovation; green is safety; and green is good stewardship.
        We will continue to improve our environmental programs while
    complying with legal requirements, reducing unacceptable risk to
    operations from energy-related considerations and environmental
    impacts, by continuously improving energy and environmental management
    practices to be more effective and efficient, and to ensure sustainable
    management of the resources we need to adequately fly, fight, and win
    into the future. There is no question that responsible and prudent
    stewardship of the natural and other resources with which we are
    entrusted is of great importance to national and economic security.
        Working together with regulatory agencies, other Federal partners,
    and industry experts, the Air Force is continuously innovating and
    adopting best practices to lessen the environmental impact of its
    operations while helping the Air Force maintain its mission-ready
    posture and capabilities.

                                   CONCLUSION

        During this period of fiscal uncertainty, the Air Force is ready to
    make the tough decisions required to avoid mission-impacting reductions
    in installation support that contribute to a hollow force. We recognize
    it will take strong leadership to ensure a fully trained and ready
    force, along with the facilities and support to maintain the range of
    capabilities required to engage a full range of contingencies and
    threats, at home and abroad.
        Our fiscal year 2014 budget request addresses our most pressing
    needs, and it stays true to the five fundamental priorities of our Air
    Force. We continue to mature our use of centralized asset management
    principles to mitigate the risk that we accept by deferring
    recapitalization of current mission facilities. We remain committed to
    caring for our airmen and their families as we strive to eliminate
    inadequate housing by 2018, and to complete our privatized housing
    initiative in the United States by 2013.
        While we strive toward remaining ready, capable, and viable for the
    numerous security challenges ahead, we must be clear--the Air Force's
    fiscal year 2014 budget request represents continued risk in our
    installations programs. We have made hard strategic choices during
    formulation of this budget request. We needed to slow the erosion in
    full-spectrum readiness as a result of over 20 years of combat in the
    Middle East. We needed to sustain our legacy fleet to remain capable of
    delivering the combat effects our combatant commanders require in the
    near-term fight. We needed to continue modernizing our aging fleet of
    fighters, bombers, and refuelers that allow us to remain viable over
    the long term, particularly in the high-end anti-access/area denial
    environment we expect to fight in the far term. That required us to
    take continued risk in areas we would choose not to take risk in, such
    as our installations. We believe this risk is prudent and manageable in
    the short-term, but we must continue the dialogue on right-sizing our
    installations footprint for a smaller, but more capable force that sets
    the proper course for enabling the Defense Strategy while addressing
    our most pressing national security issue--our fiscal environment.
        Finally, we continue to carefully scrutinize every dollar that we
    spend. Our commitment to continued efficiencies, a properly sized force
    structure, and right-sized installations will enable us to ensure
    maximum returns on the Nation's investment in her airmen, who provide
    our trademark, highly valued airpower capabilities for the joint team.

        Senator Shaheen. Thank you all very much for your
    testimony.
        I want to start with BRAC, which probably does not surprise
    any of you, but I want to talk about it in the context of what
    is happening overseas. I addressed in my opening remarks, as
    did Senator Ayotte, our concerns about the costs of the last
    round, and I think last year DOD heard very clearly from the
    Armed Services Committee the concerns that we had about a
    future round and about looking at our excess capacity overseas
    and seeing what savings could be accomplished there.
        So I understand that last May DOD announced the U.S.
    presence in Europe will be reduced by approximately 15 percent
    over the next 10 years, and I understand that the Secretary of
    Defense has initiated a study looking at consolidating
    infrastructure in Europe.
        So, Mr. Conger, what is the current status of the closure
    and consolidation of U.S. facilities in Europe?
        Mr. Conger. There are two parts to that answer.
        First, we have been reducing our force structure in Europe
    for quite some time and we have been reducing our facilities in
    Europe for that same amount of time. There is a lot that has
    been done already.
        That said, we listened very closely to what Congress said
    last year when they said close bases overseas first before you
    start talking about BRAC rounds. In response, we have kicked
    off--the Secretary kicked off in January a BRAC-like process
    for looking at bases in Europe. Given the reduced force
    presence that we are going to have there, we had plans in place
    to reduce the number of bases we have there. But what we are
    looking at here is not just sort of a one-for type of thing
    where, here is a brigade leaving, therefore, this base is
    closing. We are doing a thorough scrub and we are doing it
    using joint principles. We are going to look for ways to
    leverage the various Services together in order to maximize the
    amount of consolidation. Frankly, while military value always
    takes precedence, we are looking to save money and we are
    looking to get rid of this excess.
        So we have started that process. We have had several
    meetings at a variety of levels, a couple meetings in the
    executive groups, but lots and lots of meetings of various
    subgroups, starting to pull together the capacity analysis.
    Then once that is completely done, we are going to do the
    military value analysis and we are going to run various
    scenarios and score them against each other. This is just like
    the BRAC process except we are looking at bases in Europe.
        We are hopeful that we will have products at the end of
    this year. I recognize the fact that in order to influence this
    budget process, we have to report to you at least the interim
    results, but frankly, if it takes a little bit longer, we are
    going to do a thorough job. We are not just going to stop once
    any interim data is provided to this committee or the House
    side either.
        Senator Shaheen. But the goal is to have that report ready
    to present to the congressional committees by the end of the
    year?
        Mr. Conger. The schedule that we have laid out at the
    initiation of the process had us finishing up in December, but
    I will say that earlier this week Mr. Kendall, my boss, and the
    chairman of the senior steering group that is running this
    study said he wants results earlier than that. Now, if that
    means that we have two batches of results, so be it. But we are
    going to do what Mr. Kendall says.
        Senator Shaheen. Do I understand you to say that it is also
    looking at the opportunities for joint consolidation so that we
    could put Air Force and Army personnel in a single facility if
    that was the determination of what was most efficient and
    effective?
        Mr. Conger. Absolutely. In fact, I would say this: as each
    Service looks at their own individual footprint, you get a
    certain set of answers. But if you look at things holistically,
    sometimes you get more opportunities for consolidation. There
    might be a case where we can consolidate at a particular
    location that would put the bill on one Service's back, but a
    lot of savings to another Service. Under the traditional rules,
    that would not happen, right? But as we look at things from a
    joint perspective, that would be exactly the kind of thing that
    we might recommend.
        Senator Shaheen. So I was struck by the fact--and we had
    this conversation yesterday--that there is money recommended in
    this budget proposal to support a new round of base closures. I
    am curious about why money was not also put in to look at
    overseas base closures as well.
        Mr. Conger. I think it is an issue of scale. One of the
    things that we heard from Congress last year was that we did
    not have a wedge built in for a BRAC round to pay for it. That
    reduced the credibility of our BRAC request, and it was a fair
    criticism. This year, we wanted to address that criticism, and
    we used earlier BRAC rounds as a model to come up with a
    projection and say, here is what the net requirement would be
    across an entire BRAC round; we laid in a wedge that we would
    be able to leverage against that.
        A BRAC round is bigger than European rebasing round, and so
    we have not specifically laid in that wedge. Moreover, I would
    say because we can just go off and do the European review
    without congressional authority at this point in time, because
    you need congressional authorization to do a BRAC round, we can
    just start running with the European review. We just went ahead
    and did that.
        Senator Shaheen. But you are assuming you have money that
    you could shift in the budget in order to accommodate those
    closures.
        Mr. Conger. I am assuming that if an investment is required
    in order to accommodate the recommendations of a European
    basing round, that that will be provided to Congress in a
    budget request.
        Senator Shaheen. Thank you.
        Ms. Ferguson, I noticed that the Air Force budget request
    includes $34 million in new operational facilities in the
    United Kingdom. Why would we authorize new facilities until we
    have the results of the study that Mr. Conger referred to?
        Ms. Ferguson. The fiscal year 2014 MILCON was put together
    recognizing that we may have a European infrastructure
    consolidation, but we made a determination that these would be
    required. However, if at some future point that would change,
    we would not execute those dollars, but right now we would
    anticipate needing those.
        Senator Shaheen. Why are they so urgent?
        Ms. Ferguson. They support U.S. Special Operations Command
    at Mildenhall. I can get you a more detailed response.
        [The information referred to follows:]

        The Military Construction (MILCON) projects requested in fiscal
    year 2014 in the United Kingdom include a $22 million Guardian Angel
    (GA) Operations Facility at Royal Air Force (RAF) Lakenheath and a $12
    million Main Gate Complex at RAF Croughton.
        U.S. European Command (EUCOM)/U.S. Africa Command (AFRICOM)
    requires an increase of U.S. Air Forces in Europe GA personnel recovery
    assets to fully respond to and support simultaneous contingency plans
    and operations. The GA Operations Facility project at RAF Lakenheath
    constructs a 6,045 square mile facility for GA Squadron operations,
    administration, warehouse, equipment storage, and aquatic training,
    which provides the minimum facility requirements necessary to meet a
    EUCOM and AFRICOM requirement. The proposed project enables full
    operational capability for three GA Unit Type Codes (UTCs deployable
    asset) and one Support UTC planned for fiscal years 2014-2016. Without
    this facility, there is no adequate permanent facility to accommodate
    additional personnel and equipment. Critical equipment/assets will have
    to be stored outside and exposed to elements, thereby inhibiting
    mission readiness and expediting degradation. There are no aquatic
    training facilities currently available at RAF Lakenheath to ensure
    water-based training currency for GA personnel. Currently, they use an
    off-base pool (only allows fin swimming 1 day per week, and does not
    meet dive training requirement). It involves a 4-hour round trip and
    $750 per day rental fee. If the project is slipped, personnel will need
    to be housed in temporary accommodations.
        The Main Gate Complex project at RAF Croughton constructs a 1,074
    square mile Main Gate Complex including the main gate, visitor control
    center, privately-owned vehicle inspection area with canopy, large
    vehicle inspection station and overwatch building. The project also
    includes a road network providing controlled flow and separation of
    vehicles for inspection, plus capacity for peak flow traffic during
    heightened security. The current entrance fails to comply with security
    directives, increasing risk to airmen, critical satellite
    communications missions, and Department of State regional
    communications hub. The requirement is driven by Joint Staff Integrated
    Vulnerability Assessment write-up, DOD 2000.16, UFC 4-022-01, and
    Operations Order 08-01. There are no acceptable workarounds and the
    current gate is noncompliant due to lack of acceptable queue space,
    serpentine, etc.

        Senator Shaheen. Okay, thank you.
        Senator Ayotte?
        Senator Ayotte. I want to thank the chairman.
        I wanted to follow up, Mr. Conger, on the questions that
    you were asked by Senator Shaheen. Just so we understand it, is
    it the intention of DOD, once this review is completed
    obviously, you do not necessarily need the same type of legal
    authority that you would with a domestic BRAC round--to come to
    the Senate Armed Service Committee to report your
    recommendations for the European base closing?
        Mr. Conger. Absolutely. Obviously, we are doing this from a
    good government perspective, but Congress was very loud and
    very clear, and to do something and then not take credit for it
    would seem to be a little bit unproductive.
        Senator Ayotte. That is important and I think that one of
    the issues that I did not raise in my opening statement but,
    obviously, Senator Shaheen has just hit upon, is that I think
    it is very difficult for this body to even consider undertaking
    a domestic BRAC round without a full consideration of what
    bases could be consolidated and/or closed overseas, given that
    the interest is always to have domestic capacity foremost.
        One of the things that I think will be important for the
    overall committee to hear--and I am assuming that it would be
    important on the House side too--is to be able to evaluate the
    European plan. What savings do you think you can realize from
    that and then, obviously, see what the costs are, because I
    assume there are some costs in going through the European
    closings, either of relocating and/or in some instances you
    have environmental issues, et cetera, that you would have even
    with a domestic round. We would then evaluate whether there is
    merit to bringing the domestic BRAC round.
        So I think that is why this is so important; that we have a
    full understanding before we would go forward, and also given
    the history on the 2005 BRAC round. I understand what you are
    saying about that this would be very different. But again, a
    lot of this is out of the control of DOD, correct? You do not
    control the BRAC.
        Mr. Conger. To a degree. We make our recommendations and
    then the commission reviews them and makes changes.
    Traditionally, the majority of DOD's recommendations are upheld
    by the commission.
        Senator Ayotte. There have also been changes too.
        Mr. Conger. There have been changes.
        Senator Ayotte. It is independent.
        So this is an important issue and I appreciate the
    chairman's questions on this issue because we look forward to
    seeing your plan and understanding what it is really going to
    take and what savings, and then we can discuss whether it makes
    sense to have a domestic BRAC round. I still have a lot of
    concerns about it.
        I wanted to follow up. I know that I raised in my opening
    statement the idea of the east coast missile defense site and
    the EISs that were asked for based on the last defense
    authorization. So I am not sure, Mr. Conger, if this is the
    right question for you, but can you give us a status update on
    where things are with that?
        Mr. Conger. I can. Fortunately, I was signaled that you
    might ask that question. I checked with the Military Defense
    Agency (MDA), who owns the ball on this. So MDA has started the
    study and is in the process of narrowing the potential sites
    down to five or six within the next 30 days. MDA is on schedule
    for completing the study by December 31st, as required, and the
    EIS is projected to start subsequently in 2014 and will take 18
    to 24 months to complete. So that is the status of the study.
        Senator Ayotte. Just so we understand, if the EIS starts in
    2014 and takes 18 to 24 months to complete, we are in or beyond
    2015.
        Mr. Conger. I think that is right.
        Senator Ayotte. Director Clapper just told me that there
    are many that believe that Iran will have ICBM capability by
    then.
        Mr. Conger. I am going to have to defer to the MDA folks to
    be able to answer your more detailed questions on this. I did
    want to make sure that we had this status for you.
        Senator Ayotte. I will follow up with the appropriate folks
    on this issue because it seems to me that there is more of an
    urgency than the administration, given some of the threats we
    are all concerned about with Iran. Obviously, I appreciate the
    administration's enhancement recently in Alaska of the ground-
    based interceptors. I will bring this to the appropriate
    individuals at DOD. But it seems to me there needs to be a
    greater sense of urgency so we can truly make the decision and
    put this information in the hands of the President sooner
    rather than later, given the threat we face from Iran.
        Secretary Ferguson, I know that you played a very critical
    role. You already discussed that you will get back to the
    committee once you make the basing decision for the KC-46A and
    appreciate certainly the work that you are doing on that. Can
    you give us an update on how that process is going forward?
        Obviously, this is something that the chairman and I have a
    deep interest in. We are very proud of the work done by the
    157th Air Refueling Wing, and particularly the objective
    criteria, the strategic location, close to the operational
    refueling tracks, and most of all, the performance of the
    pilots there, given that they have supported every major
    contingency operation. If you can give us an update on where
    things are with that? Are they on track and what we can expect
    when the decision will be made?
        Ms. Ferguson. Of course. Thank you.
        Pease was selected as one of the candidate locations a few
    months ago, and right after the first of the year each one of
    the candidate bases was site-surveyed by a joint team from Air
    Mobility Command in the Air National Guard. Those site surveys
    are now all complete. Air Mobility Command has brought the
    results of those site surveys into the Pentagon, and the
    gentleman sitting behind me now chairs the Strategic Basing
    Executive Steering Group. So the baton has been passed.
        Senator Ayotte. Welcome. [Laughter.]
        Senator Shaheen. We hope you plan to stay for a while.
        Senator Ayotte. We are glad and also we would love to have
    you come to New Hampshire. [Laughter.]
        Ms. Ferguson. So he is running that through the process
    right now over the next few weeks. There are a series of
    briefings. These are decisions that the Chief and Secretary do
    not take lightly, and so we do not go and just run time, give
    them the briefing, and walk out. We do not make recommendations
    to them. So there will be at least three events where the Chief
    and Secretary get briefed on the results of the site surveys.
    In the room, they have their senior advisors, the Commander of
    Air Mobility Command and the Director of the Air National
    Guard. Once they make the decision, then Mr. Bridges will be
    over. There will be telephone calls certainly made to folks as
    well, but then there will be a rollout here. About the middle
    of May is what we are anticipating.
        Senator Ayotte. Great. Thank you for the update.
        Senator Shaheen. Welcome, Senator Kaine. Even if you are
    not from New Hampshire, we are delighted you are here.
    [Laughter.]
        Senator Kaine. Yes. Sorry to break up the gang here, but it
    is great to be here. Thank you and thank you all for your
    service and especially at a challenging time. You are doing
    important work at a challenging time.
        So I want to stick with BRAC too. It is an observation and
    a question, and I want candor and even argument with my
    observation. For my colleagues, I am saying the same thing
    because it may be something that my colleagues have different
    feelings about.
        I was on the BRAC commission, the State-appointed BRAC
    Commission in Virginia, pre-2005 as the Lieutenant Governor at
    the appointment of Senator Warner, Governor at the time. My
    observation about it--and I credit your points that 2005 might
    have been different than earlier rounds--was that once the BRAC
    round begins, every last community and every last base or
    installation and its surroundings was on high alert. Whether
    they have a need to be or not, they are and they hire the
    phalanx of accountants, PR people, lawyers, and lobbyists, and
    they spend a lot of time and a lot of drama preparing and
    lobbying. We certainly did that, and then there is an
    announcement and then there is some process following the
    announcement.
        But I have been underwhelmed at the amount of savings that
    results from all the drama. So if there have been five BRAC
    rounds and there are $12.5 billion of annual savings, it is
    about $2.5 billion per round in a $3.6 trillion budget. Yet,
    there is a lot of additional expense on the communities and a
    lot of expense that might have an effect in the local economy
    too. There is anxiety, that expense probably does not get
    captured. So it seems to me that the process is big,
    complicated, and costly, and creates a lot of anxiety, but the
    savings at the end of the day, frankly, are not all that great.
        One of my assessments for why the savings may not be that
    great: if you start with a process where your job is to look at
    installations, it is not really overall a cost savings
    exercise. Let us look at cost savings generally, but if it is
    just installation-specific, it is not really an integrated
    review. It is just pulling installations out.
        There is a second example in Virginia that I thought was an
    interesting one that was not a BRAC. Certain projects are
    subject to BRAC because of the size and certain are not. After
    I was Governor, Secretary Gates asked if the Joint Forces
    Command (JFCOM) in Hampton Roads, which I think had been
    initiated under Secretary Rumsfeld as part of the
    transformation, the jointness approach: do we really need a
    separate JFCOM when the Joint Chiefs of Staff have offices next
    to each other on the same floor of the Pentagon? Do we need a
    separate command for this? It was not subject to BRAC because
    it was not of a certain size, and it was a suggestion of a
    closure of a mission, not a huge public process, not a lot of
    sturm and drang. Secretary Gates announced that he did not
    think we needed this.
        The Virginia congressional delegation got together and did
    not like this. This is important to the Hampton Roads economy,
    but they also said Secretary Gates laid out some rationale and
    was not 100 percent wrong. There was a good faith behind the
    rationale.
        The congressional delegation went to the Pentagon and said
    they understood the rationale about the entire command, but
    there are some missions being performed that are valuable that
    would be performed under any scenario. They hoped that the DOD
    would keep these and keep it in Hampton Roads.
        Without a BRAC round and all the process surrounding it,
    that discussion took place. The decision was made to stand down
    JFCOM, but some functions should remain and many of the
    functions did remain in Hampton Roads. There were savings, but
    it was a different kind of a process.
        Analyzing those two, I know we need to save money, and I
    think we probably need to save money including in
    installations. But the way Secretary Gates made the JFCOM
    announcement, it was not part of an installation-specific
    review. It was mission-driven rather than installation-driven.
    He said this mission is not one in a resource-constrained
    environment that is at the top right now in terms of funding.
        To me, that had some real virtues to it. It did not create
    the sturm and drang for everybody. There was a mission-driven
    announcement. There was opportunity for Members of Congress to
    come in and say we think you got it wrong, and we have an
    alternative. We hope you will consider it. There was a
    discussion. There was a consideration. It saved money.
        I am wrestling with going forward; we do need to find
    savings, and I think we may well need to find savings on
    installations and I think certainly installations overseas. But
    I am open to the notion that some of the savings that we may
    need to find in installations would be here. I gather that is
    why, when you say we support BRAC, you are all saying we may
    have excess capacity in installations. We need to deal with it.
        But what I am wondering about is whether the process of a
    BRAC seems big, expensive, creates a lot of drama, and not
    likely to lead to a lot of savings. There is a different way to
    come at it, which is basically a strong executive makes a
    recommendation as we are looking at ways to save, here are
    ideas. Some of the ideas have impact on installations, maybe
    even some closures. We are making those recommendations to
    Congress, and Congress, now we want you to wrestle with them.
        I am the only Governor in Virginia that left office with a
    smaller budget than when I started because I had to. I get no
    virtue points, I was required to balance the budget during a
    recession. I had to make a lot of painful recommendations to my
    legislature, including closing installations, not military
    installations, but we had schools for the deaf and blind and
    training facilities and all kinds of things. I would make
    recommendations, including closing installations.
        Invariably--and you know this, Governor Shaheen--my
    legislature would say I was a heartless dope and I had not
    thought about it enough. Then after about 3 or 4 months of
    looking at the budget, they would basically approve about 75
    percent of what I proposed. They would not take back the
    heartless dope comment, but they would eventually come to see
    that I had thought about it and maybe I was making some good
    recommendations.
        A second way to come at this installation issue is not the
    massive BRAC process that gets everybody all worked up, but is
    just for the Chairman of the Joint Chiefs, after discussion
    with the branches, to make a series of recommendations on cost
    savings. It would not be limited to installations. It would not
    be installation-specific but it would be mission-driven and
    because they are mission-driven would probably include some
    installation recommendations. Then it would be on Congress and
    we would have to make hard decisions.
        I think BRAC was set up as almost an anti-accountability
    mechanism. It enables us to make decisions without anybody's
    fingerprints being completely on them. But the more of those
    things we do, the more of these anti-accountability strategies
    we come up with, and the more we try either as an executive or
    a legislature to keep our fingerprints off things, it does not
    seem like we are going the right way in making the fiscally
    responsible choices. It seems like the more things we come up
    with, we go the wrong way.
        So I am just saying this for my colleagues, and I said it
    briefly at the full hearing the other day, and I would say it
    to you as well. If we have excess capacity, is the big BRAC
    round the right way to deal with the questions of excess
    capacity? That is, I guess, the question that I would pose to
    everybody.
        I would love to hear your thoughts.
        Mr. Conger. I will take that. A couple of things.
        First of all, I am sympathetic to the heartless comments.
    As you might imagine, being the person who has to come up to
    the Hill and talk about BRAC, I am not winning a whole lot of
    popularity points myself.
        As far as $2.5 billion being a relatively small amount of
    money, as you might remember, there is the old quote that says,
    ``A billion here, a billion there, and sooner or later you are
    talking about real money.'' I think that that is reflected in
    the fact that these savings recur. If you are talking about $12
    billion out of a big budget, that is one thing, but if you are
    talking about $12 billion that happens every single year, that
    is like getting a new aircraft carrier every year or six
    submarines. $2.5 billion might not seem like a lot of money in
    the budget, but if the alternative to doing a BRAC round was
    cutting a submarine, there might be some other folks who might
    have an issue with that. I am using naval examples because they
    are big, but it is reflected across all of our things.
        With regard to JFCOM, the dynamics are different with the
    JFCOM facility because it was within the scope of the BRAC law.
    There is a specific law that says we cannot just go off and
    close bases in the same way, and because JFCOM was part of a
    larger base, it did not have the same legal triggers. You are
    familiar with all of this and that is why that was a different
    scenario.
        We are looking for ways where we do not need authority
    specifically from Congress to go ahead and go save money. We
    are not sitting idly waiting for BRAC. That is why we kicked
    off the European round already because we do not need authority
    to go off and do that. So we went off and started working it.
    There are other examples where we are driving towards
    efficiencies throughout DOD, and we have to do that.
    Installations are just one piece of the puzzle. But as we cut
    down in force structure, it would be irresponsible of us to not
    try and propose ways to cut the tail as we cut the tooth. So we
    have to look for a way to find this money.
        I respect the drama that goes on in communities as they
    prepare for BRAC. It is a difficult process, but it is a fair
    process. One of the dynamics that led to BRAC in the first
    place was that when base closures were proposed, there was
    politics. It depended on who the chairman was, on what got
    closed and what did not get closed. This was a way to take
    politics out of the process and put it into a ``you cannot edit
    this list'' type of dynamic. So you did not have the base
    closures depending on who was the most senior person at the
    table. So it is about fairness in that regard. There is a whole
    other dynamic in the BRAC law, but I think that is the one that
    is pertinent to this part of the discussion.
        Senator Shaheen. Does anybody else want to respond to that
    question?
        Ms. Hammack. Yes, I just want to make a comment that in
    Europe, where we are reducing our force structure by 45
    percent, we are systematically closing bases and we are
    consolidating. Navy and Air Force are also looking at their
    infrastructure. OSD is taking a look at what is already in
    process underway to see if there are additional opportunities.
        Now, anytime Army, Navy, or Air Force has property that is
    excess, the first thing is to go to the other Federal agencies
    and essentially say, ``hey, does anybody need this?'' At that
    point in time, the Army is moving into an Air Force facility
    that was excessed, and we do some of that already.
        OSD is looking to see if there is anything else that could
    be done if all options have been evaluated. So when we talk
    about BRAC in the United States, we are reducing our force
    structure size, and with the PEA, we announced that there are
    21 locations that might have force structure reductions. That
    is going to create excess space. Each brigade combat team takes
    up a little over 1 million square feet. So we are going to have
    holes. We are going to have empty buildings, and we are going
    to have places that we could move other units or other options
    into. In order to consolidate our infrastructure, we need the
    authority. Congress has told us we cannot close any of these
    facilities without authority.
        Senator Kaine. Congress has not said you cannot recommend
    to us things that should be closed. I agree, you cannot close
    without our approval, but there is no prohibition to the DOD
    making recommendations about how to take those gaps,
    consolidate, and then leave them subject to our approval. So I
    get that you cannot do it unilaterally, but you can still
    propose.
        Mr. Conger. That is why BRAC was designed to take politics
    out of the process.
        Senator Shaheen. Senator Lee?
        Senator Lee. Thank you, Madam Chairman.
        Thanks to each of you for joining us today.
        Mr. Conger, Under Secretary of Defense Robert Hale stated
    multiple times during the DOD posture hearing last week that
    the 2015 BRAC proposed by the President in his budget would be
    significantly different from the last BRAC that we had in 2005.
    Can you elaborate on what Under Secretary Hale might have had
    in mind when he made that statement?
        Mr. Conger. Sure. As I noted at the beginning of the
    hearing, I think he was right. The BRAC 2015 will not look like
    BRAC 2005. BRAC 2005 was conducted while force structure was
    growing, while budgets were growing, and under leadership that
    directed the use of the authority to accomplish transformative
    change, not just elimination of excess. Today force structure
    is shrinking, the budget is shrinking, and we are firmly
    focused on reducing our future costs. That is the dynamic that
    we are dealing with here.
        You get to a point under the BRAC law and constrained by
    the BRAC law where even if we were in an environment without
    excess, we would not be able to shift things around because
    BRAC says you cannot move functions around. One of the things
    that happened, in addition to eliminating excess during the
    2005 round, was that Secretary Rumsfeld wanted to optimize
    where we are all located. So not everything was driven by
    savings. Should it have been that way? That I leave open to the
    committee to judge. But that was part of what drove the
    recommendations that we got in 2005. It is different from the
    recommendations that were in the 1990s.
        I would offer that Mr. Hale's comments drive to that point
    that we are focused on saving money and eliminating excess
    because of the dire budget situation that we are in. We are
    looking to save money and this is going to be a round much
    closer to the ones from the 1990s.
        Senator Lee. Okay.
        Ms. Hammack. If I may make a comment.
        Senator Lee. Yes.
        Ms. Hammack. Another thing that is not well understood is
    the Army moved units back to the United States from overseas.
    So in Korea and in Europe, we had facilities that were
    optimized for those units. When we moved them back to the
    United States, we had to build new infrastructure to house
    them. From an Army standpoint, we did not really reduce our
    overall square footage. For us it was a realignment more than
    it was a closure. Although there were some facilities that were
    closed, it was realigning a lot of our units and realigning our
    forces. So it was a very different BRAC from all of the other
    BRAC rounds.
        Mr. Conger. To add on that point, the closures overseas are
    not calculated as part of the savings as GAO audits them. The
    savings that we calculate are domestic savings.
        Senator Lee. Okay. Given that factor and the set of
    circumstances you identified, economically we are in a
    different position now.
        Ms. Ferguson, I want to talk about the F-35 for a minute.
    Last week there was an announcement that the EIS for the F-35
    basing decision was delayed until I think this fall. That,
    following the incorporation of new census data into the EIS and
    the determination, additional public commentary was necessary
    in a lot of that data.
        Do you think this will have any impact on the arrival of
    the first operational units of the F-35 that are scheduled for
    2015?
        Ms. Ferguson. No. Based on our analysis, the delay of the
    EIS to the fall of this year will have no impact. Now, there
    could be other impacts to delivery beyond the EIS, but directly
    related to the delay of the EIS, no.
        Senator Lee. On this one alone, you do not see it having
    that impact.
        Ms. Ferguson. No, it should not impact.
        Senator Lee. Are you concerned that even if there is not an
    impact, that this could at least create less of a margin for
    delays, for any other delays that might come up? We are slicing
    it thinner and thinner. I assume you would agree with that.
        Ms. Ferguson. Certainly as we get closer to the delivery of
    the first aircraft and we have construction still to do at the
    first operational location, then we need to make sure that
    construction is done to the maximum extent practicable before
    that first aircraft arrives. But we have taken a look at that,
    and we are not concerned at this point.
        Senator Lee. Okay. The reason I raise the concern, as you
    can imagine, is that we have had a number of delays in
    connection with the F-35, but it sounds like at this point you
    are not anticipating any additional delays.
        Ms. Ferguson. We are not.
        Senator Lee. Can you tell me why originally census data
    from over a decade ago was being used in the EIS process?
        Ms. Ferguson. When they started working on the EIS, that
    was the only data that was available. The 2010 Census data had
    not yet been published. They got through the end of the
    process, published the document, and then by that point in
    time, the 2010 data was published. For one of the locations,
    that data was significantly different. So we went back and
    modified the EIS to incorporate that new data.
        Senator Lee. Right. Can you help me understand why it is
    that the incorporation of the new census data necessarily
    required new hearings to be conducted for new input on the EIS?
        Ms. Ferguson. We are not going to do new hearings. We are
    going to put the EIS out on the street for a public comment
    period, but we will not accomplish additional hearings, but it
    will provide the public the opportunity to comment on the
    updated information that will be contained in the EIS.
        Senator Lee. Now, we know that sequestration is likely to
    slow the input, will slow down the induction of some aircraft
    into depot. What impact do you think the slowdown will have on
    the working capital fund and depot labor rates?
        Ms. Ferguson. On depot labor rates, I do not have that
    specifically, but we do know with the combination of the
    reduction in weapons systems sustainment, we are reducing
    weapons systems sustainment by about 18 percent. We have
    civilian furloughs; the 35,000 civilians at the depot will be
    out. We are anticipating 60 fewer aircraft will be inducted and
    about 35 fewer engines will be inducted. Through a combination
    of those factors, it will take us a period of time to build out
    of that bow wave. It could take us a year or more to come out
    of that after we realize the effects of sequestration from
    2013.
        Senator Lee. How can DOD work to address, anticipate, and
    mitigate against the so-called bow wave that will be caused by
    the slowdown in depot inductions that we are seeing?
        Ms. Ferguson. The Air Force Materiel Command staff, the
    staffs at each one of the depots, headquarters Air Force, my
    staff--they are working very closely with everyone at our
    lifecycle management center to try to mitigate that. But right
    now, with an 18-percent reduction in weapons systems
    sustainment, the furlough, reduction also in flying hours
    contributes to that as well. There will be a readiness impact
    associated with that.
        Senator Lee. Okay. All right, thank you.
        Thank you, Madam Chairman.
        Senator Shaheen. Thank you.
        Mr. Conger, I want to go back to the European
    infrastructure question because there was one piece of it that
    I did not get to, and that is the NDAA for Fiscal Year 2013
    required DOD to evaluate the feasibility and cost savings that
    could be realized by closing and consolidating operations of
    the 16 major defense agencies of DOD that are also maintaining
    facilities and personnel overseas.
        So are these facilities going to be part of the Secretary
    of Defense's review of the infrastructure in Europe?
        Mr. Conger. We are doing a comprehensive look. It is going
    to include the defense agencies, yes.
        Senator Shaheen. Do you believe that they also maintain
    excess or under-utilized facilities overseas?
        Mr. Conger. I think it is fair to say that defense
    agencies, in particular those that support the force structure,
    are proportional to the force structure. Therefore, if we find
    efficiencies and optimization in basing of our forces, people
    consolidate in a particular location, you may need fewer
    schools, fewer medical facilities, et cetera. Those are the
    supporting requirements of having a force in a particular
    location.
        Senator Shaheen. Thank you. I look forward to seeing that
    report when it is completed. I certainly hope that the urgency
    about expediting it will be conveyed to DOD.
        I want to go now to some issues that were raised in a
    report by this committee's review of overseas basings that
    looked at some of the projects that are built with in-kind
    payments from foreign governments. For example, the committee's
    review found that the Army does not approve construction
    projects that are built with in-kind payments in Korea.
        Secretary Hammack, can you let us know why the Army does
    not review and approve these projects? Is this something that
    should be approved and reviewed by the Army? How can we make
    sure that they are subject to that same review as other
    projects?
        Ms. Hammack. They are reviewed by the Army, but they are
    also subject to the requirements of the U.S. Forces Korea
    commander, which is a combatant command that works through the
    OSD. So I would defer to Mr. Conger.
        Mr. Conger. In general, the requirements are--they
    originate from one of the Service subcommands inside a theater,
    come up through the combatant command, come over to the Joint
    Staff, and they are being reviewed at each step in this process
    for approval inside OSD. So there are a variety of looks at
    each of these.
        Senator Shaheen. As we discussed yesterday, some of the
    projects that have been discussed raise questions about whether
    there is urgency to those projects, given all the other demands
    that currently exist. So I wonder if you are looking at
    legislative or procedural changes that could help ensure that
    the projects that are being funded and undertaken are those
    that are real priorities and not something that is less than a
    priority for the various Services.
        Mr. Conger. I understand that point. As we discussed the
    other day, the report led to the Washington Post article.
    Several of the examples were highlighted in there.
        One thing I did want to make sure that everybody was aware
    of is that when a project list is approved at DOD, the Deputy
    Secretary of Defense sends a letter over to Congress saying
    this is the list of items that we are looking to pursue. In
    particular, I am talking about the payment in-kind projects in
    Germany because those were the ones highlighted in the article
    the other day. That oversight process is responsive to
    Congress.
        In particular, I would point out that one of the projects
    sent over in July of 2011 was a warehousing project that this
    committee sent a letter to the Pentagon on and said we have
    concerns about. We, as a consequence, even though it was 2
    years later, put a hold on that. We are looking at it, and in
    fact, the facts on the ground do change. The warehousing
    project in particular that, once again, we notified the Hill
    about 2 years ago, because of the reduction in forces at
    Grafenwoehr, while the requirement has not changed, there is
    more space available, and so we did not necessarily need to
    build the project.
        The oversight of this committee helped us to save some
    money and so that is valuable. We send these reports over to
    Congress not because we think you are going to file them in a
    drawer, but because we value your feedback.
        Senator Shaheen. Sure, and I appreciate that, although the
    report suggested that there were some projects that had gone
    forward without sufficient notification to the appropriate
    committees in Congress. Do you disagree with that?
        Mr. Conger. We can look through those in particular, and I
    think we need to have an ongoing conversation about that. Some
    of the ones that were highlighted have not actually been
    submitted for approval yet. I mean, they are in the preliminary
    stages. We have not even gotten them in OSD. But the
    investigators from this committee went out to Europe and they
    looked at the lists of projects that they were looking at, and
    some of those made it into the report even though they were
    pre-approval. They were just under consideration.
        Senator Shaheen. Again, I guess I am not sure I quite
    understand what recommendations you might have to improve the
    current process so we do not have things like sunroom additions
    to senior officer housing in Germany done at a time when there
    are other priorities that supersede that.
        Mr. Conger. Yes. The sunroom one was sent over in 2010. It
    was $200,000 total for changes to three housing units in order
    to bring them up to the standards for the individuals that they
    were hoping to station in them. Those projects in retrospect--
    were they ideal? Well, it brings the housing up to standard. So
    we do not want to be subject to the churning of the sound bite
    in that it does not sound particularly like a high priority to
    add sunrooms to housing. There is a certain amount of space
    that is associated with a certain rank of officer, and they
    were trying to make sure that the housing was up to standards
    for the people that they wanted to station in the housing.
        Senator Shaheen. I appreciate that. I guess my concern--and
    I am still not clear on how or whether you think it is
    appropriate to address it--is the oversight of the projects
    that are undertaken and to what extent there is appropriate
    oversight. How you prioritize how those in-kind contributions
    are done? It is still not clear to me exactly how that works.
        Mr. Conger. I think that securing construction from foreign
    governments is valuable to DOD and to the country. I think it
    is important to be able to receive those payments in kind, to
    receive MILCON from other nations.
        Senator Shaheen. I am not taking issue with that.
        Mr. Conger. Is there enough oversight? I think we can have
    a conversation. There certainly is oversight. Is there enough
    oversight? That is something that we should engage in. In all
    honesty, given the degree to which we are looking to reduce
    force structure in Europe and given the degree to which we
    expect probably an increase in those payments in-kind coming up
    in the future as we go through our reductions, as we hand bases
    back after brigades are removed, after we go through our
    European base review, there is going to be a lot more of this.
    So as a consequence, we are going to want to do more oversight,
    and we should do that with this committee.
        I do not question for a second that this committee, OSD, or
    the Services should be doing oversight over these projects.
    What was a relatively small list in the past may become a
    bigger list, and we need to make sure that we are all on the
    same page.
        Senator Shaheen. Certainly I think this subcommittee would
    appreciate the recommendations that you will be looking at for
    how to improve the oversight process.
        Mr. Conger. Yes, ma'am.
        Senator Ayotte. I thank the chairman, and I would share in
    her request that we do greater oversight for these in-kind
    contributions. I understand that we are grateful that these
    nations are willing to give in-kind contributions, but given
    that they are on our bases, the oversight is still very, very
    important. So I would share her request that we be more engaged
    in that oversight and more vigorous oversight.
        I wanted to ask Mr. Natsuhara about the plan that I
    referenced in the opening that we recently received that was
    required pursuant to the 2012 NDAA, the modernization of naval
    shipyards.
        As I referenced in the opening, we certainly have some
    facilities that are aging with our shipyards. Looking at the
    facilities, some are approximately 60 years old. The average
    dry dock age is 79 years old. So the overall condition of
    infrastructure is certainly a big challenge. As I mentioned in
    the opening, the Navy will need, according to the report, about
    17 years at the current funding rates to clear the current
    maintenance backlog.
        So I appreciate that you are trying to look at ways to
    quickly address the maintenance backlog. So can you help us
    understand what additional annual funding you will need to
    achieve this goal? I would also like to understand what the
    impact is on sequestration, thinking about especially 2013 and
    2014. I know you have submitted a budget request with us
    assuming that sequestration gets resolved, but I think we need
    to understand what the implications are if this thing stays in
    place.
        I would also open up that question beyond this issue with
    the backlog on the maintenance and ask all of the witnesses to
    talk about the long-term implications if it is not resolved.
        Mr. Natsuhara. Thank you.
        Based on our plan, we believe that our projected budgets
    out through the 17 years, that we will be able to meet that 17-
    year plan. It was all based on very detailed analysis and study
    with our Chief of Naval Operations staff, our Naval Sea Systems
    staff, and Naval Facilities Engineering staff to really balance
    the risks to determine what is that right risk to recapitalize,
    clear the backlog of the shipyards to maintain their mission,
    but also balance the rest of the Navy's priorities in
    facilities to make sure that we do not fix one part of the Navy
    at the expense of the other. So it was a very balanced approach
    we took trying to balance the risks of the shipyards and the
    rest of the facilities. So we believe our budget will be able
    to match the 17 years.
        As far as 2013, we will be able to meet for the shipyards,
    the 6 percent requirement. We have already funded that. We will
    be able to meet--but for the rest of the depots, the Fleet
    Readiness Centers, we are not there yet because of
    sequestration, but for the shipyards for 2013, we are going to
    meet the 6 percent.
        For 2014, we do not know yet. Our plan is in our budget,
    but we do not know what the sequestration is going to be. So we
    will do that analysis if that happens.
        Senator Ayotte. So you have not done the analysis yet if
    sequestration goes into place, how this thing impacts the
    maintenance going forward?
        Mr. Natsuhara. We have not done the analysis yet.
        Senator Ayotte. I would ask for follow-up information on
    that. It is just important for us to all understand here
    because the more information I think Members of Congress
    receive on the implications of this long term to the overall
    readiness of our forces, I think it, hopefully, will help get
    people off the sidelines here to try to resolve this in a
    sensible way.
        So I would also ask the other witnesses to be able to
    comment on what we look at going forward in terms of each of
    the areas that you are responsible for.
        Mr. Conger. Before we get into the specifics of each
    individual service impact, let me speak a little bit broadly
    about sequestration and how 2014 is different than 2013.
        In fiscal year 2013, sequestration is an appropriations/
    authorization issue. It is all about individual accounts, how
    much money is available in individual accounts and the specific
    cuts that were taken that we are trying deal with halfway
    through a year. They are severe. They are rigid. Without
    question, as I mentioned earlier in my opening statement, they
    have consequences.
        That said, in fiscal year 2014, the President's budget
    request and the administration position is that we are not
    taking sequestration cuts in the defense budget but rather the
    administration's deficit reduction plan accommodates those cuts
    elsewhere. That means this becomes a budget resolution issue as
    opposed to an individual appropriation type of issue. The
    question is--and frankly, it is up to Congress to decide how
    that is dealt with, whether the particular offsets that the
    administration proposed are rejected or if----
        Senator Ayotte. Let me just interject for a minute.
        Mr. Conger. Yes.
        Senator Ayotte. We are where we are. So the Senate did a
    budget resolution. The House did a budget resolution. Who knows
    if they will get reconciled. The President's is hanging out
    there, a post-budget thing. I think we are where we are right
    now.
        Can you just let us know, assuming the status quo going
    forward and the President's plan does not get passed, which I
    think at this point is unlikely that it would, where are we?
        Mr. Conger. If the question is: what is the impact to DOD
    if, in fact, there is another broadbased 8 percent across-the-
    board cut----
        Senator Ayotte. Yes, because the law stays in place as it
    is. The only thing you have differently is the Appropriations
    Committee can work with you versus the across-the-board
    approach, which they have already done. We did in the
    Continuing Resolution. But going forward, the numbers are where
    they are unless we make a change around here, as I understand
    it.
        Mr. Conger. I think for that broadbased answer, I defer to
    my colleagues to say if they took that specific cut in each of
    their areas, what it would be. But I think from a broader
    perspective, I think that rather than this panel answering the
    question in a narrow sense, I think it has to be a wider DOD
    answer for you, and we would have to get back to you.
        Senator Ayotte. I want you to know I have been asking this.
    All of us have been asking this in every hearing we have had
    with the Service Chiefs, with everyone. So to the extent you
    cannot answer us, I think it is important because there needs
    to be a full understanding around this place about what the
    real implications are.
        Thank you.
        Ms. Hammack. For the Army, the fiscal year 2013 budget is a
    63 percent reduction in our sustainment, restoration, and
    modernization. It is a risk and it does create what has been
    called a bow wave of a backlog of what needs to be done. An
    analogy that I heard, it is like not maintaining your car,
    there is a risk. When we are focusing only on the most critical
    life, health, and safety, we are taking a risk by not
    maintaining our existing infrastructure.
        Senator Ayotte. So after a while, if you do not change the
    oil, you have an issue.
        Ms. Hammack. You have an issue, and that cost of not
    changing the oil is much higher than if you had maintained the
    oil regularly. That holds true for maintaining our heating,
    ventilation, and air conditioning (HVAC) equipment. It holds
    true for maintaining our infrastructure, replacing roofs when
    they are at end of life versus waiting for failure. It is a
    higher cost if you wait for failure.
        In our 2014 budget, we took a reduction and we are taking a
    risk. It is 10 percent lower than what we thought was ideal,
    but it is taking a risk and that is how we are responding to
    the effects of a reduced fiscal environment. If we have to go
    further, if we have to go as deep as we did in 2013, it is
    going to be even much more of a bow wave. It is critical and it
    is something that we are going to have to respond to and fund
    at some time. Buildings need to be maintained. That is a fact.
        Senator Shaheen. Senator Kaine?
        Senator Kaine. I just want to come in on Senator Ayotte's
    point. We had an interesting interchange in the same way at the
    full committee hearing last week with Secretary Hagel and
    General Dempsey. I thought it was interesting because I think
    the questions from the Senate side--they might have seemed like
    hostile questions, but I think they were actually helpful
    questions.
        I fully support the budget. The way it was constructed said
    sequester is a bad idea, here is the better way. I completely
    agree, sequester is a bad idea. There is a better way and that
    is to significantly moderate the effects of sequester by
    reducing the size of the cuts, by making them targeted and not
    strategic, by not spreading them evenly across the 10-year
    budget, but back-loading these kinds of concepts. I am glad you
    prepared it that way.
        But the challenge we have is with our colleagues to really
    demonstrate why the administration's version is much better
    than the sequester version. Part of that is if you had to live
    with the sequester as is, if there is no alternative, instead
    of the budget that you have put on the table, which is not
    really your optimal budget--you are dealing with the cut
    already, as you described. You have presented it and you have
    had to sharpen the pencil and multiple drafts.
        But if you, the DOD, could show in large scope and if we do
    not get that and we have to live with the sequester, here is
    what this looks like down the road, I think we will create more
    momentum within our colleagues. This is what a lot of us are
    trying to do, create momentum within our colleagues to say we
    like the administration's version better than the status quo.
    So that was a request that was made DOD-wide, but it was a
    helpful request. I think this is going to help us add allies to
    try to come up with a budget that is better suited to what you
    are trying to do to keep our country safe.
        Senator Shaheen. Thank you, Senator Kaine.
        I want to go back to the in-kind burden-sharing issue for a
    minute, Mr. Conger, because one of the areas addressed by the
    Armed Services Committee report was South Korea, and one of the
    items in the budget that got my attention was a request for $52
    million to replace a school at Camp Walker in South Korea. I
    wondered if, before requesting those funds, DOD had considered
    trying to use South Korean in-kind contributions for that, and
    if not, why not. Is this not exactly the kind of project that
    we might be able to use in-kind burden-sharing funds to
    support?
        Mr. Conger. I will tell you what, I do not have a specific
    answer to that question right now. I will get you one for the
    record because I think you deserve a thoughtful, deliberative
    one rather than me just trying to answer off the cuff.
        Senator Shaheen. Okay. I appreciate that.
        [The information referred to follows:]

        The school at Camp Walker would normally be considered for burden-
    sharing funds, but this particular project is part of a larger
    Department of Defense (DOD)-wide initiative undertaken in 2009 to
    improve the overall condition of Department of Defense Education
    Activity schools, and eliminate those in poor or failing condition.
    Burden-sharing funds were not used to meet this requirement because
    U.S. Forces Korea priorities for the funds over their 5-year plan were
    focused on implementing the Land Partnership Plan, which relocates U.S.
    military operations north of the Han River mainly to Camp Humphreys.
    Given that the requirement for a replacement school at Camp Walker was
    not directly related to LPP, DOD chose to fund this project from DOD
    resources.

        Senator Shaheen. I think we will have some follow-up
    questions for the record about some of the differences that we
    see in what the report found than I understood your answers to
    be.
        Mr. Conger. That is fair enough.
        Senator Shaheen. I appreciate that.
        I want to go now to one of the issues that I have been very
    concerned about and very appreciative of the lead that the DOD,
    and particularly all of our branches of the military have
    taken, around energy use. I think some of you have heard me
    talk about my appreciation for the work that has gone on around
    energy and energy efficiency, in particular, which is one of
    the things that I am particularly concerned about. I know in
    our conversations, Mr. Conger, you talked about the bill that
    DOD has for energy use on an annual basis, which is
    significant. So I wondered if each of you might talk about some
    of the areas where you think you are making real progress
    around energy use and then, if you could, indicate whether
    sequestration is having an effect on those areas and how you
    see the long-term implications of any impacts from
    sequestration on those energy efforts.
        Mr. Conger. Let me take the second part of your question
    and defer the first one to my colleagues.
        Under sequestration, the O&M accounts have been hit
    particularly hard and, in particular, the facilities
    sustainment accounts which have been limited to the life,
    safety, health types of repairs. Those accounts are where many
    of the energy efficiency upgrades occur. That is not to say
    that we are making a lot of changes to buildings just to
    increase the energy efficiency, although that is certainly the
    case. But when you replace the HVAC system, when you add
    insulation, when you replace the roof, you are making energy
    efficiency upgrades, and you are lowering your future bill by
    doing things the right way.
        Those proactive, bill-lowering efforts that are normally
    part of our sustainment budget were deferred because of
    sequestration in fiscal year 2013, and we have limited the
    investments that we are making in repair of our buildings. So
    is there an impact? Absolutely, there is an impact on the
    energy investments that we are making.
        Ms. Hammack. From the Army's standpoint, we have focused on
    leveraging the public/private partnerships, and those are the
    Energy Saving Performance Contracts. So in fiscal year 2012, we
    tripled the number of Energy Saving Performance Contracts that
    we executed and we are on a path to have about the same, if not
    a higher amount this year. So by leveraging private sector
    investments, we are able to continue with our energy
    efficiency.
        That being said, as Mr. Conger mentioned, there were some
    programs that are being delayed and those were the direct-
    funded programs.
        Sequestration also affects us because those in the
    acquisition community will face furloughs, and that slows down
    the acquisition process. So that means our processing of the
    contracts and the task orders is going too slow. So while we
    are currently on target, we are unsure how it is going to
    affect us at the year end because there may be some slippage
    due to the effects of sequestration on our acquisition
    community.
        Senator Shaheen. Do you have data that quantifies what the
    savings are from those performance contracts that you have put
    in place already?
        Ms. Hammack. Absolutely, and we can get you that
    information.
        Senator Shaheen. I would really be interested in getting
    that.
        Ms. Hammack. Certainly.
        [The information referred to follows:]

        Since 1996, the Army has executed over 170 Energy Savings
    Performance Contract Task Orders at 72 installations resulting in over
    $1.17 billion in third party investments. Since 1992, the Army has
    executed over 350 Utilities Energy Service Contract Task Orders at 43
    installations resulting in over $543 million in energy investments.
    These investments have resulted in annual energy savings of 10.4
    trillion British Thermal Units per year and an annual cost avoidance of
    more than $157 million.

        Senator Shaheen. Thank you.
        Mr. Natsuhara?
        Mr. Natsuhara. At the Department of Navy, we have been very
    aggressive in our goals. We too are going to be leveraging the
    third party financing for a lot of our larger projects.
        We are very concerned with the sequestration. The Marine
    Corps cut about 50 percent of what they planned to do on their
    energy efficiency for fiscal year 2013. That will cause
    problems in the out-years because the investment that we
    planned to take this year--we have already taken the savings on
    the energy. So we are working hard to try to get those
    investments back because we are just going to create another
    bill in the out-years. So we are very concerned about that.
        On the Navy side, they are taking risk in other areas and
    trying to recover most of their efficiency projects. They are
    not there yet. But we also have the same concerns there. The
    main thing is not only getting the energy savings today, it is
    if we do not do them today, we are going to have another
    problem in the out-years. So we are very concerned about that
    on the shore side.
        On the operational energy side or forces side, we have been
    working hard with our systems commands to try to keep all those
    energy efficiencies. There it is about the combat
    effectiveness, making sure the warfighter gets the extra energy
    savings not just to save energy or money, but to increase their
    effectiveness for the warriors out there.
        Senator Shaheen. Will the impact of sequestration be enough
    to prevent you from getting to the 50 percent savings goal by
    2020?
        Mr. Natsuhara. Right now, we think we are going to be okay.
    We are still doing some analysis because we just got the
    numbers, but if you like, we can get you a brief on that.
        [The information referred to follows:]

        The Department of the Navy places a high priority on energy
    efficiency investments, so at this point in executing the fiscal year
    2013 ``post-sequester program'', the reductions do not immediately
    jeopardize our ability to meet our energy savings goals (50 percent
    Navy; 37.5 percent Marine Corps) by 2020. I must caveat this response,
    however, by saying the outcome is dependent upon enacting a stable
    investment profile in fiscal year 2014 and beyond that remains
    unencumbered by future sequester scenarios. Future investment
    reductions would imperil the Department of the Navy's ability to meet
    targeted consumption reductions and any other energy goals, including
    compliance with Federal legislation and mandates.

        Senator Shaheen. That would be helpful.
        I also understood that the Navy had been reluctant to
    engage in performance contracting. Is that the case, or is this
    a change that you are undertaking? Are you beginning to do that
    now?
        Mr. Natsuhara. We are beginning to look at those. We have
    programmed some money to do some analysis, upfront studies, and
    they take a little bit of time, but we are looking at those and
    we anticipate having some of those in the near future.
        Senator Shaheen. Secretary Hammack, perhaps you could share
    your experience with the Navy.
        Ms. Hammack. Absolutely. They can leverage the same
    contracting mechanisms that we have been using.
        Senator Shaheen. Ms. Ferguson?
        Ms. Ferguson. In 2012, the Air Force avoided $1.5 billion
    in energy costs due to initiatives that we have put in place,
    which I think is a really good news story. Part of that was
    from reducing aviation fuel consumption. We exceeded our goal
    early. We reduced our aviation fuel consumption by 12.4 percent
    since 2006. We have gone now and we have updated that goal, and
    we are going to look at improving our aviation energy
    efficiency by 10 percent by 2020, and really looking at how we
    operate the airplanes, including in a deployed environment.
        Some of the things we have done to reduce the fuel costs is
    we have done KC-135 engine upgrades, which has both an
    operational efficiency and an energy efficiency. We have C-5
    engining. That showed a 3 percent improvement in burn rate. So
    we are getting benefits from that. We have reduced our facility
    energy consumption by 22 percent, and we are on track to meet
    the 2020 goal, and we have done that since 2003. In 2012, we
    avoided $300 million in facility energy costs because of the
    initiatives we have put in place.
        The impact of sequestration: we are delaying about 220
    energy-related facility projects. The cost for those projects
    was right around $150 million, but the annual savings for those
    would be about $25 million. So it would pay back in about 5 to
    6 years. So we are deferring that, but we are continuing to
    look for opportunities. I envision that there could be similar
    issues that come up on the operational side, but we are going
    to continue to look at that. Energy, of course, is a high
    priority for DOD, and we will continue to focus where we can.
        Senator Shaheen. So when you talk about the aviation
    savings, is most of that accomplished through changing out the
    engines for more efficient engines, or are you also looking at
    biofuels as a way to save long term on energy use?
        Ms. Ferguson. We have looked at biofuels and all of our
    aircraft have been certified both on hydrotreated renewable jet
    and Fischer-Tropsch fuels, those are there. We are not going
    out and actively purchasing those, but those are there if it
    makes sense to buy them.
        Where we are really seeing savings is by changing the way
    we fly, how we load C-17s and C-5s and doing them more
    efficiently, and seeing how we can operate in a more efficient
    manner. So it is really changing the culture of how we fly, how
    we operate. I think when General Spencer was in front of the
    committee recently, he gave an example of when he was on a C-17
    and he was in the cockpit, and the crew talked about how to
    save fuel as they were going on their mission. So it is really
    about changing also the culture of our pilots.
        Senator Shaheen. I know that the Navy has done a lot of
    work around biofuels. Do you share those technologies with the
    Air Force and the Army as you look at developing new biofuels?
        Mr. Natsuhara. Yes, all the Services now have a Deputy
    Assistant Secretary of Energy. So collaboratively I think they
    have all been working very closely together sharing
    information, including the biofuels initiative.
        Senator Shaheen. Thank you.
        No further questions, Senator Kaine? At this point, I do
    not have any other than the questions that we will submit for
    the record.
        So thank you all very much for your testimony this
    afternoon and for your service to the country.
        This hearing is adjourned.
        [Questions for the record with answers supplied follow:]

                    Question Submitted by Senator Tim Kaine

                            FORT MONROE-HAMPTON, VA

        1. Senator Kaine. Secretary Hammack, I would like to raise an issue
    that is important in my State, and that is the matter of Fort Monroe,
    in Hampton, VA. I know you are well-versed on this issue. I am also
    aware there is no hard deadline or decision point that will lead to a
    resolution to allow all parties to move forward. I would hope all
    stakeholders could sit down and agree on a reasonable way forward. Will
    you pledge to work with the Commonwealth of Virginia and the City of
    Hampton to find measures that can be undertaken to bring this process
    to a close in a timely way?
        Ms. Hammack. Yes, I will continue to work with the Commonwealth of
    Virginia and the City of Hampton regarding Fort Monroe. I am pleased to
    report that on June 14, 2013 the Governor recorded a Quitclaim Deed
    transferring 312.75 acres of reversionary property (approximately 55
    percent of the closed installation) to the Commonwealth. The Army looks
    forward to an appropriate ceremony to celebrate this historic
    milestone. The return of this property will support job creation,
    facilitate tourism opportunities, and provide economic benefits to the
    community.
                                     ______

                 Question Submitted by Senator Saxby Chambliss

                 LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN

        2. Senator Chambliss. Secretary Conger, as you are aware, the
    Unified Facilities Criteria (UFC) released by the Department of Defense
    (DOD) on March 1, 2013, states that DOD components will design and
    build all new construction and major renovations projects with third-
    party certification to the U.S. Green Building Council Leadership in
    Energy and Environmental Design (LEED)-Silver Level (or approved
    equivalent rating). Singling out LEED specifically over other systems
    and not defining ``equivalent'' is, by default, a LEED preference
    policy. I am concerned that the LEED rating system discourages the use
    of domestically grown and processed wood products that are vital to
    rural communities all across the United States. In addition, as a
    recent National Research Council study found, there is no empirical
    evidence demonstrating the superiority of LEED-Silver over any of the
    other prevalent green building rating or certification systems in use.
    Given that, DOD should not arbitrarily select winners and losers by
    naming one green building standard to the exclusion of all others in
    its green building policy. As you develop revisions to this policy due
    out this summer, are you going to ensure that the new policy does not
    arbitrarily favor a private green building standard that hurts the
    domestic wood products industry?
        Mr. Conger. The UFC for High Performance Buildings published on
    March 1, 2013, sets standards for all new construction and major
    renovation that are independent of any certification system. While
    Chapter 5 of the UFC does reference the existing DOD policy as a tool
    for demonstrating compliance with some aspects of the UFC, the
    standard, as a whole, must not be read to construe endorsement of any
    particular certification system. The standards are based heavily on the
    American Society of Heating and Air-Conditioning Engineers
    sustainability standard 189.1, which is agnostic regarding
    certification systems and expresses no preference with regard to wood
    and most other building products. The revised sustainable buildings
    policy, currently under development, will allow DOD components to
    develop their own processes for demonstrating compliance with the
    minimum UFC standards. Those processes can include any of the third-
    party certification systems approved for Federal Agency use under the
    Department of Energy's EISA section 436 authority.

        [Whereupon, at 4:14 p.m., the subcommittee adjourned.]