    [Senate Hearing 113-465, Part 3]
    [From the U.S. Government Publishing Office]

                                                     S. Hrg. 113-465, Pt. 3

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2015 AND THE FUTURE YEARS DEFENSE PROGRAM

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 2410

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2015 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

                                   ----------

                      FEBRUARY 26; MARCH 26; APRIL 2, 2014

             Printed for the use of the Committee on Armed Services
    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
       2015 AND THE FUTURE YEARS DEFENSE PROGRAM--Part 3  READINESS AND
                               MANAGEMENT SUPPORT

                                                      S. Hrg. 113-465 Pt. 3

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2015 AND THE FUTURE YEARS DEFENSE PROGRAM

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 2410

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2015 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

                                   __________

                      FEBRUARY 26; MARCH 26; APRIL 2, 2014

                                   __________

             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, Chairwoman

    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

                                  ----------

                               february 26, 2014

                                                                       Page

    Department of Defense Information Technology Acquisition
      Processes, Business Transformation, and Management Practices...     1

    McFarland, Hon. Katrina G., Assistant Secretary of Defense for
      Acquisition, Department of Defense.............................     6
    Scheid, Kevin J., Acting Deputy Chief Management Officer,
      Department of Defense..........................................    11
    Takai, Teresa M., Chief Information Officer, Department of
      Defense........................................................    16
    Powner, David A., Director, Information Technology and Management
      Issues, Government Accountability Office.......................    22
    Questions for the Record.........................................    52

                                 march 26, 2014

    Current Readiness of U.S. Forces.................................    61

    Campbell, GEN John F., USA, Vice Chief of Staff, U.S. Army.......    64
    Paxton, Gen. John M., Jr., USMC, Assistant Commandant, U.S.
      Marine Corps...................................................    74
    Spencer, Gen. Larry O., USAF, Vice Chief of Staff, U.S. Air Force    83
    Cullom, VADM Philip H., USN, Deputy Chief of Naval Operations,
      Fleet Readiness and Logistics, U.S. Navy.......................    88
    Questions for the Record.........................................   119

                                 april 2, 2014

    Military Construction, Environmental, Energy, and Base Closure
      Programs.......................................................   145

    Burke, Hon. Sharon E., Assistant Secretary of Defense for
      Operational Energy Plans and Programs..........................   149
    Conger, John C., Acting Deputy Under Secretary of Defense for
      Installations and Environment..................................   160
    Hammack, Hon. Katherine G., Assistant Secretary of the Army for
      Installations, Energy, and Environment.........................   176
    McGinn, Hon. Dennis V., Assistant Secretary of the Navy for
      Energy, Installations, and Environment.........................   186
    Ferguson, Kathleen I., Acting Assistant Secretary of the Air
      Force for Installations, Environment, and Logistics............   193
    Questions for the Record.........................................   242

                                     (iii)

      DEPARTMENT OF DEFENSE AUTHORIZATION OF APPROPRIATIONS FOR
       FISCAL YEAR 2015 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                          WEDNESDAY, FEBRUARY 26, 2014

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

      DEPARTMENT OF DEFENSE INFORMATION TECHNOLOGY ACQUISITION PROCESSES,
               BUSINESS TRANSFORMATION, AND MANAGEMENT PRACTICES

        The subcommittee met, pursuant to notice, at 2:34 p.m. in
    room SR-232A, Russell Senate Office Building, Senator Jeanne
    Shaheen (chairwoman of the subcommittee) presiding.
        Committee members present: Senators Shaheen, McCaskill,
    Donnelly, and Ayotte.

        OPENING STATEMENT OF SENATOR JEANNE SHAHEEN, CHAIRWOMAN

        Senator Shaheen. Good afternoon. Sorry to keep you all
    waiting.
        At this time, I would like to call the subcommittee hearing
    to order.
        I want to begin by acknowledging my colleague from New
    Hampshire and ranking member, Senator Ayotte. It has been great
    to have a chance to work with her in this subcommittee, just as
    we do in New Hampshire. We are always pleased to be here
    representing New Hampshire on the subcommittee.
        During the hearing today, we are going to be receiving
    testimony regarding information technology (IT) acquisition,
    business transformation, and management practices. This is the
    first hearing of the Readiness and Management Support
    Subcommittee. I think we are beginning with an issue that is
    critical as we look at the many other issues we will be
    addressing in the Department of Defense (DOD) this year.
        The challenge of procuring IT systems in a timely and cost-
    effective manner is not something that is unique to DOD.
    Unfortunately, the stories of billions of dollars that are lost
    without any useful product as the result of that spending have
    appeared throughout the Federal Government, and while we
    recognize that this issue is not unique to DOD, it is clearly
    the biggest department within the Federal Government, and we
    have seen these issues appear, unfortunately, over a period of
    years.
        In fiscal year 2012, DOD IT acquisition investments totaled
    $32 billion, a sum which reflects DOD's growing need for
    sophisticated and reliable IT infrastructure. However, the $32
    billion is expended across DOD under the supervision of
    multiple officials with what is often too little involvement of
    the operational users and those who must defend IT systems
    against cyber threats.
        The Government Accountability Office (GAO) will soon
    release a report on acquisition of major IT systems in DOD, and
    though the report is still in draft form, the results that we
    have seen are disturbing. Of the 15 programs GAO reviewed, 7
    experienced growth in their cost estimates, ranging as high as
    2,233 percent, 12 programs experienced schedule slippage,
    ranging from a few months to 6 years, and only 3 programs met
    their system performance targets.
        Among the programs assessed were some that could have an
    impact on DOD's ability to meet the statutory goal of achieving
    an auditable statement of budgetary resources by the end of
    fiscal year 2014 and an auditable financial statement by the
    end of fiscal year 2017 which, as I am sure you all know, is a
    major priority for this subcommittee and for the Senate Armed
    Services Committee (SASC) as a whole.
        We must find ways to lower costs and improve inefficiency,
    while also improving our resiliency to cyber attack. A major
    piece of that challenge will be reforming our cumbersome
    acquisition process. Our current systems, which are better
    suited for weapons systems than IT, often produce systems
    already outdated once deployed. A new rapid approach with
    proper oversight which capitalizes on the knowledgeable IT
    workforce is necessary to correct these deficiencies.
        As you all know, this is not the first time the SASC has
    tackled this issue. Section 804 of the National Defense
    Authorization Act (NDAA) for Fiscal Year 2010 directed the
    Secretary of Defense to streamline and improve effectiveness of
    our current processes. The subcommittee remains interested in
    section 804 and we look forward to hearing from you all how DOD
    intends to move forward.
        Another area of interest to the subcommittee is DOD's
    ongoing data center and server consolidation on cloud
    migration. This initiative, called the Joint Information
    Environment (JIE), is extremely ambitious and complex, and yet
    it seems to lack formal management structures and processes. We
    look forward to hearing more about how the JIE is expected to
    unfold.
        With those opening remarks, and I have a longer statement
    that I will submit for the record. I would like to welcome our
    four witnesses this afternoon. Testifying today, we have the
    Assistant Secretary of Defense for Acquisition, Katrina G.
    McFarland; the Acting Deputy Chief Management Officer (DCMO),
    Kevin J. Scheid; the Chief Information Officer (CIO), Teresa M.
    Takai; and in addition to these representatives from DOD, we
    welcome the Director of Information Technology and Management
    Issues from GAO, David A. Powner. Thank you for being here.
        Now I would like to turn to Ranking Member Senator Ayotte
    for her statement. Thank you.
        [The prepared statement of Senator Shaheen follows:]
                  Prepared Statement by Senator Jeanne Shaheen
        Good afternoon. At this time, I would like to call the subcommittee
    hearing to order.
        I would like to begin by acknowledging what a pleasure it has been
    to work with my colleague from New Hampshire, Senator Ayotte and her
    staff. We continue to work in a time-honored bipartisan fashion on this
    subcommittee and I sincerely appreciate that we have been able to reach
    agreement on so many issues.
        I look forward to another productive year.
        During our hearing today, we will receive testimony regarding
    information technology (IT) acquisition, business transformation, and
    management practices. This is the first hearing the Readiness and
    Management Support Subcommittee has convened in this session, and we
    are beginning with an issue of immediate importance, which is why I am
    pleased to begin the subcommittee's work on the National Defense
    Authorization Act (NDAA) for Fiscal Year 2015 before delivery of the
    President's budget. This is a complicated topic requiring creative,
    outside-the-box thinking, as well as the experience and knowledge of
    professionals throughout the Department of Defense (DOD) in order to
    find the most efficient, cost-effective way forward.
        I would like to welcome our four witnesses this afternoon.
    Testifying, we have Assistant Secretary of Defense for Acquisition,
    Katrina McFarland; Acting Deputy Chief Management Officer, Kevin
    Scheid; and Chief Information Officer, Teresa Takai. In addition to
    these representatives from DOD, we welcome David Powner of the
    Government Accountability Office (GAO).
        IT acquisition investments totaled $32 billion in fiscal year 2012,
    a sum which reflects DOD's reliance on sound IT infrastructure.
    However, this $32 billion is expended across DOD under the supervision
    of multiple officials, with too little involvement of the operational
    users and those who must defend information systems against cyber
    threats.
        The Office of the Secretary of Defense organizational review
    conducted by former Secretary of the Air Force Mike Donley recommended
    major changes in the duties and responsibilities of the Deputy Chief
    Management Officer and the Chief Information Officer. The Senate Armed
    Services Committee also recommended major realignments affecting these
    officials in the Senate version of the NDAA. Neither set of
    recommendations were enacted into law. We hope to learn more about the
    rationale for the administration's proposals today.
        The Bipartisan Budget Act provided some temporary relief to DOD,
    but sequestration is still very much a real threat. We must find ways
    to lower costs and improve inefficiencies, such as eliminating sub-
    optimal data centers and networks, which lead to unnecessarily high
    costs. Cybersecurity vulnerabilities must be addressed before a major
    cyber attack causes catastrophic damage. The IT infrastructure must
    increase interoperability to improve information sharing. The slow,
    cumbersome acquisition process, better suited for weapon systems than
    IT, results in systems already outdated once deployed. A new, rapid
    approach with proper oversight and which capitalizes on the
    knowledgeable IT workforce is necessary to correct these deficiencies.
        This is not the first time the Senate Armed Services Committee has
    tackled this issue. Section 804 of the NDAA for Fiscal Year 2010
    directed the Secretary of Defense to ``develop and implement an
    alternative acquisition process for the rapid acquisition of IT
    systems.'' The legislation also required the new process to include
    ``early and continual involvement of the user; multiple, rapidly
    executed increments or releases of capability; early, successive
    prototyping to support an evolutionary approach; and a modular, open-
    systems approach.''
        This subcommittee remains interested in the section 804 reforms.
    DOD delivered a report to Congress on December 9, 2010, outlining its
    plan for implementation; however, DOD has fallen short of full
    implementation. We are interested in hearing from our witnesses why and
    in what ways this reform mandate has so far failed, where we have
    successfully improved the process of acquiring IT, and how DOD intends
    to proceed in the future.
        The committee has also passed legislation addressing the insider
    threat problem, supply chain risk management and software assurance
    against cyber threats, and the unique requirements for managing the
    rapid but disciplined acquisition of cyber tools and capabilities.
        We expect that future reform efforts will capture and build upon
    the work done in the NDAAs since 2010. We have read Mr. Powner's recent
    report titled ``Information Technology: Leveraging Best Practices to
    Help Ensure Successful Major Acquisitions.'' It appears that many of
    the best practices he identifies track with the requirements of section
    804.
        Another GAO report also merits attention: ``Major Automated
    Information Systems: Selected Defense Programs Need to Implement Key
    Acquisition Practices.'' This report is still in draft but its initial
    findings are significant. GAO's assessment of 15 programs found that 7
    experienced growth in their cost estimates, ranging as high as 2,233
    percent, 12 programs experienced schedule slippage, ranging from a few
    months to 6 years, and only 3 programs met their system performance
    targets.
        Among the programs assessed were some that could have an impact on
    DOD's ability to meet the statutory goal of achieving an auditable
    Statement of Budgetary Resources (SBR) by the end of fiscal year 2014,
    and an auditable financial statement by the end of fiscal year 2017. On
    the positive side, we note that the Marine Corps achieved an important
    initial milestone, an unqualified opinion on the current year of their
    budget statement. However, clearly so much more remains to be done.
        The most recent Financial Improvement and Audit Readiness Plan
    Status Report states that most but not all of DOD will meet the 2014
    goal. We would appreciate an update on which areas are most in danger
    of failing to achieve an auditable SBR and what has been done to ensure
    that as much of DOD succeeds as possible.
        Section 2866 of the NDAA for Fiscal Year 2012 imposed a moratorium
    within DOD on the acquisition or upgrade of data servers, server farms,
    and data centers. It required the implementation of a plan developed by
    the DOD Chief Information Officer to achieve reductions in the size of
    data centers and in the energy consumed to power and cool data centers
    along with increases in server virtualization and utilization rates.
    That plan also called for migrating from 700 data centers to fewer than
    100, while reducing the number of network operations centers from 65 to
    25. The NDAA for Fiscal Year 2013 required DOD to inventory all the
    applications it is running, eliminate redundancies, and rationalize its
    licenses. Progress here is critical to cost reduction.
        Section 2866 also directed DOD to transition to commercial cloud
    services wherever possible to take advantage of cost and efficiency
    advantages of commercial cloud providers, consistent with security
    constraints. The committee will closely monitor the progress of DOD's
    pilots and associated policy development regarding the use of
    commercial cloud capabilities.
        The ongoing data center and server consolidation, and cloud
    migration, are only elements of a far larger effort to transform DOD's
    entire telecommunications network. This initiative, called the Joint
    Information Environment (JIE) is an extremely ambitious and complex
    undertaking, and yet DOD has chosen to not make it a program with a
    program manager, requirements, milestones, schedules, and the like. It
    affects every command, every Service and DOD agency.
        The Defense Information Systems Agency advertises the JIE programs
    as delivering:

              `` . . . the largest restructuring of IT management in the
            history of the DOD. The end state is a secure, joint
            information environment comprised of shared IT infrastructure,
            enterprise services, and a single security architecture. JIE
            will enable DOD to achieve full-spectrum superiority, improve
            mission effectiveness, increase security, and realize IT
            efficiencies.''

        The apparent lack of formal management structures and processes for
    this enterprise-wide initiative is striking and demands attention. We
    look forward to our witnesses' explanations.
        Thank you to our witnesses, I look forward to hearing your
    testimony. I now invite the ranking member, Senator Ayotte, to make her
    statement.

                   STATEMENT OF SENATOR KELLY AYOTTE

        Senator Ayotte. Thank you, and I want to thank Chairwoman
    Shaheen. It is an honor to serve with you on the Readiness and
    Management Support Subcommittee and also to serve New Hampshire
    in the U.S. Senate with you. We have been able to work in a
    bipartisan fashion on issues that not only impact our State,
    but also issues that impact the country in this important
    subcommittee, and certainly today's topic is no exception to
    that.
        Within the existing problems associated with acquisition
    reform, one area of growing concern is how DOD acquires IT. I
    will also say that this is not a unique problem across the
    Government. I also serve on the Senate Homeland Security and
    Governmental Affairs Committee, and this is an issue that has
    been replete within that agency as well.
        But getting this right is not just important from an
    acquisition process point of view, but it is also critical
    because IT can be used as a vital tool to help DOD become more
    efficient to serve as a better steward of taxpayers' dollars
    overall.
        One of the most glaring examples of problems with IT
    acquisition was the termination of the Air Force's
    Expeditionary Combat Support System (ECSS). After 7 years and
    over $1 billion, this program was terminated in 2012 after it
    was determined that it would require another billion dollars to
    salvage, and even then, only a fraction of the program's
    requirements could be met.
        This is an example. We need to understand what went wrong
    and how we are going to prevent these types of situations going
    forward, particularly with the challenges we face with limited
    defense dollars.
        Equally disturbing as the cancellation of the ECSS, it
    places in doubt the Air Force's ability to conduct the
    Statement of Budgetary Resources by the end of this fiscal year
    which has been a concern with the SASC as a whole. This is an
    incredibly important issue that we do not plan to let go, and I
    hope that you do not either.
        However, I do appreciate that addressing problems related
    to IT acquisition appear to be on the minds of the authors of
    the recently reissued DOD Instruction (DODI) 5000.02, which
    articulates the defense acquisition process. It appears that
    many of the guiding principles set forth in the report mandated
    by section 804 of the NDAA for Fiscal Year 2010, which I know
    we are going to spend a substantial amount of time on today,
    were incorporated into the new DODI.
        Despite this, I remain concerned by the GAO reports
    indicating that a number of DOD's IT acquisition programs have
    not been correctly categorized on the Government's Web site
    called the IT Dashboard, which tracks the progress of such
    programs.
        Another important part of this hearing will be
    understanding whether DOD categorizes IT programs differently,
    how we can ensure that the Government's Web site employs a
    standardized metric for purposes of organization and
    transparency.
        As my colleagues know, I am also very interested in
    ensuring that DOD is ready to be audited because this will help
    ensure that we can better scrutinize spending to identify and
    eliminate waste and duplication before it happens. It is very
    important in the critical juncture we find ourselves at right
    now with DOD to be able to distinguish between necessary
    defense budget cuts and cuts that would harm our troops and
    damage our military's readiness, which is the foundation and
    purpose of this subcommittee.
        In that spirit, Assistant Secretary McFarland, based on
    your position as the Assistant Secretary of Defense for
    Acquisition, I also look forward to addressing some of the
    broader acquisition challenges that DOD faces beyond the IT
    issues, but I certainly think that they relate to the IT
    issues.
        For example, from 2007 to 2013, the Air Force wasted about
    $6.8 billion on 12 major acquisition programs; I have a list
    with me of those programs. There is no doubt that the Services,
    including the Air Force, are confronting difficult budget
    challenges. It is really hard when we see billions of dollars
    wasted on programs, and yet we see proposals where the Services
    are making proposals to cut very important programs to our men
    and women in uniform.
        One of those programs I have been quite outspoken about is
    the Air Force proposing the premature retirement of the A-10s
    in an effort to save $3.5 billion over the Future Years Defense
    Program, which Secretary Hagel publicly confirmed this week. I
    believe that this is a serious mistake and that we will lose
    the ability to have close air support (CAS). Chief of Staff of
    the Army General Odierno said it is the best CAS platform we
    have today. I believe that we risk our troops not having the
    re-attack times and capacity that the A-10 provides, well
    before we will have the F-35 variant that has purported to take
    up this mission in the future. We will have a gap that I
    believe is not good for our troops and could put them in
    danger.
        That is why I want to put this in perspective. When we look
    at $6.8 billion in wasted money and then we talk about having
    to cancel important air platforms like the A-10, that perform
    such an important function for our men and women in uniform and
    particularly those on the ground, that is why acquisition
    reform, I know to all of you matters, and why getting it right
    is critical in terms of making sure that our taxpayers' dollars
    are used wisely, but most importantly, that the men and women
    in uniform who serve us every day are able to have the support
    that they need, the equipment that they need, and the training
    that they deserve in serving our country.
        I appreciate your being here today and I look forward to
    this important discussion. I want to thank the chairwoman again
    for holding this hearing.
        Senator Shaheen. Thank you very much, Senator Ayotte.
        I would ask, Ms. McFarland, if you would go first, followed
    by Mr. Scheid, Ms. Takai, and Mr. Powner.

    STATEMENT OF HON. KATRINA G. McFARLAND, ASSISTANT SECRETARY OF
             DEFENSE FOR ACQUISITION, DEPARTMENT OF DEFENSE

        Ms. McFarland. Thank you, Chairwoman Shaheen, Ranking
    Member Ayotte, and distinguished members of the subcommittee,
    for this opportunity to discuss IT acquisition.
        I would like to submit my full testimony for the record and
    will summarize it in the time I have.
        I am honored to represent DOD, along with my colleagues
    from CIO, DCMO, and GAO. My focus will be on IT acquisition
    policy, people, and the oversight of Major Defense Acquisition
    Programs and Major Automated Information Systems (MAIS).
        IT represents a considerable portion of all acquisition
    programs within DOD. DOD manages two fundamental types of
    software programs: national security systems and defense
    business systems.
        National security systems are generally information systems
    which involve intelligence activities, cryptological
    activities, command and control of military forces, and systems
    that are an integral part of weapons or weapons systems.
        Defense business systems are information systems which
    include financial systems, management information systems, and
    IT and cybersecurity infrastructure used to support our
    business activities.
        Section 804, as Senator Ayotte, the ranking member,
    mentioned of the NDAA for Fiscal Year 2010 directed that DOD
    develop and implement a new acquisition process for IT systems
    based on the 2009 Defense Science Board (DSB) report. The
    recommendations were to condense timelines by increasing
    collaboration and improve processes to deliver right
    capabilities to the warfighter in operationally relevant
    timelines.
        To do this, one must start with a defined requirement or
    capability. The Chairman of the Joint Chiefs of Staff has
    modified DOD's Joint Capability Integration and Development
    System, which develops our requirements, by introducing the IT
    Box concept to support more rapid acquisition timelines.
        On approval of a requirement formulated in an initial
    capabilities document or a capabilities development document,
    requirements management is delegated to an appropriate body in
    a sponsor's organization. The organization is not required to
    come back for requirements changes unless they exceed the
    parameters of the IT Box.
        In addition to the IT Box introduction, DOD has introduced
    the interim DOD directive operation of the defense acquisition
    system, also referenced by the ranking member, issued this
    fiscal year. It includes guidance to adopt a modular, open
    systems methodology with heavy emphasis on design for change in
    order to adapt to the changing circumstances consistent with
    the agile commercial methodologies. It describes acquisition
    models where across each model, the policy addresses the
    realization that IT capabilities may evolve, so desired
    capabilities can be traded off against cost and initial
    operational capability to deliver the best product to the field
    in a timely manner.
        In accordance with section 933 of the NDAA for Fiscal Year
    2011, DOD developed a strategy for the rapid acquisition of
    cyber tools, applications, and capabilities for the U.S. Cyber
    Command (CYBERCOM) and other military cyber operation
    components by chartering the Cyber Investment Management Board
    that unites IT policy and operational requirements with
    identifying gaps both in resources and in capabilities.
        Now, I would like to address DOD's most important asset,
    our people. Finding the expertise and skill sets required to
    develop and acquire capabilities for IT systems and cyber space
    operations is challenging. The talent pool is small. Industry
    and Government seek it, and it rarely meets the level of
    expertise across all areas. DOD is working on many fronts to
    address these challenges. For example, with the assistance of
    the Defense Acquisition Workforce Development Fund, DOD has
    established a functional area for IT acquisition to support
    training in the Defense Acquisition University.
        DOD is working to simplify the process of IT acquisition.
    There is an ongoing legislative review between DOD and
    Congress. There is an effort to develop a cybersecurity
    guidebook for the program manager that assists them in
    understanding what cybersecurity activities are necessary to
    conduct at each point of the acquisition lifecycle. The Program
    Assessment Root Cause Analysis Directorate contributes to our
    understanding of the root causes for the IT program failures in
    order to prevent them from reoccurring.
        Finally, there is an effort to help our program management
    by having our cybersecurity test and evaluation procedures
    include early development test and evaluation involvement for
    all of our test activities.
        I would like to conclude with the following key points.
        DOD will continue its efforts to operate as affordably,
    efficiently, and effectively as possible. We are evolving our
    approach to acquisition for IT and recognize the distinct
    challenges that come with it. We are taking a disciplined and
    proactive step to improve our IT processes and compensate for
    them.
        Thank you for your ongoing support of our men and women in
    uniform. I know you share my desire to ensure that they have
    the resources necessary to meet and accomplish their mission.
        [The prepared statement of Ms. McFarland follows:]
                  Prepared Statement by Hon. Katrina McFarland
        Thank you for the opportunity to address the Subcommittee on
    Readiness and Management Support of the Senate Armed Services
    Committee. I am honored to represent the Department of Defense (DOD)
    along with my colleagues. The DOD partnership among my office, the
    Office of the Deputy Chief Management Officer (DCMO), and Chief
    Information Officer (CIO), manages the DOD IT Enterprise in the areas
    of acquisition, policy, and the Defense Business Systems (DBS). I will
    focus my discussion on Information Technology (IT) acquisition policy,
    people, and oversight of the Acquisition of Major Defense Acquisition
    Programs and Major Automated Information Systems (MAIS) over which the
    Under Secretary of Defense (USD) for Acquisition, Technology, and
    Logistics (AT&L), as Defense Acquisition Executive, has Milestone
    Decision Authority. Ms. Takai will discuss her responsibility for
    overall IT Policy and as the Enterprise IT sponsor. Mr. Scheid will
    discuss his responsibility for the Defense Business Architecture and
    Defense Business Council/Investment Review Board oversight. At the
    Office of the Secretary of Defense (OSD) level, we oversee the planning
    and execution of the Services' acquisition programs and establish
    acquisition, logistics, maintenance, and sustainment support policies.
                                   background
        Section 804 of the National Defense Authorization Act (NDAA) for
    Fiscal Year 2010 directed the DOD to develop and implement a new
    acquisition process for IT systems based on the recommendations of
    Chapter 6 of the March 2009 Defense Science Board Report. IT represents
    a considerable portion of all acquisition programs within DOD. To help
    manage IT, DOD manages two fundamental types of software programs,
    National Security Systems (NSS) and DBS. NSS as defined in 44 U.S.C.
    3541, are telecommunications or information systems operated by or on
    behalf of the Federal Government, the function, operation, or use of
    which involves intelligence activities, cryptologic activities related
    to national security, command and control of military forces, equipment
    that is an integral part of a weapon or weapons system, or, is critical
    to the direct fulfillment of military or intelligence missions. NSS
    includes a category of software programs called embedded software--
    software that operates and controls our weapon system platforms.
        DBS, as defined in 10 U.S.C. 2222, are information systems, other
    than a NSS, operated by, for, or on behalf of the DOD, including
    financial systems, management information systems, financial data
    feeder systems, and the IT and cybersecurity infrastructure used to
    support business activities, such as contracting, pay and personnel
    management systems, some logistics systems, financial planning and
    budgeting, installations management, and human resource management.
    Because NSS tend to be broader in scope with significant
    interoperability needs and requirements, we use different policies and
    procedures to acquire these two product categories.
                     it requirement process implementation
        To acquire IT, one must start with defined requirements (or
    capabilities). DOD has worked to condense timelines, increase
    collaboration between communities, and improve processes to deliver the
    right capabilities to the warfighter in operationally relevant
    timelines. The Chairman of the Joint Chiefs has modified DOD's Joint
    Capability Integration and Development System by instituting a major
    change for Information System (IS) requirements development which
    introduces the ``Information Technology (IT) Box,'' enabling the
    delegation of authorities to specifically support the more rapid
    timelines necessary for IT capabilities through the Defense Acquisition
    System processes. The four sides of the ``IT Box'' include the
    organization that will provide oversight and management of the product;
    the capabilities required; the cost for application and system
    development; and the costs for sustainment and operations. Under this
    construct, upon approval of an IS-Initial Capabilities Document (ICD)
    or IS-Capabilities Development Document (CDD) by the Joint Requirements
    Oversight Council (JROC), requirements management is delegated by the
    JROC to an appropriate body in the sponsor's organization. The
    delegation of authorities and defined parameters enable faster
    timelines for IT programs, because the organization is not required to
    return to the JROC for requirements approval unless the IT Box
    parameters are exceeded by prescribed thresholds. The organization that
    requirements approval is delegated to for an IS-ICD or IS-CDD must
    return to the JROC to provide periodic updates.
        An example of DOD's recent use of the ``IT Box'' was through
    tailoring an IT acquisition that supports the Combatant Commanders with
    mission planning tools through an automated and enterprise capability
    called the `Integrated Strategic Planning and Analysis Network (ISPAN)
    Increment 2' program. The Vice Chairman Joint Chiefs of Staff delegated
    JROC responsibility for ISPAN non-key performance parameters to a
    Combatant Command (United States Strategic Command). In concert, on
    March 10, 2010, the USD(AT&L) approved ISPAN acquisition tailoring that
    included shorter development periods with multiple capability releases,
    early and continual user involvement, and a modular open-systems
    approach using successive prototyping efforts, consistent with section
    804 of the NDAA for Fiscal Year 2010.
        In January 2013, the Air Force completed a report after the ISPAN
    program had successfully delivered its increment 2 of capabilities and
    highlighted significant improvement in acquisition cycle-time as well
    as speed in decisionmaking compared to an earlier increment. For
    example:

             Time between Milestone B and Initial Operational
            Capability: ISPAN Inc. 2-15 months; ISPAN Block 1-60+ months.

        This demonstrates the value of close coordination between the
    requirements and acquisition process for the delivery of IT
    capabilities.
                defense acquisition system implementation of it
        On November 26, 2013, the Deputy Secretary of Defense issued an
    interim Department of Defense Instruction 5000.02 to implement a number
    of statutes and regulations that have come into existence since the
    last version was published in 2008. This new acquisition policy
    includes guidance to address the challenges associated with the
    different types of IT acquisition programs, such as guidance to address
    the fundamental challenge with DBSs where a suite of integrated
    applications referred to as Enterprise Resource Planning (ERP) business
    management software is acquired. For ERPs, positive outcomes are
    dependent upon understanding the needed process changes prior to
    starting implementation. Consistent with section 804 of the NDAA for
    Fiscal Year 2010, it includes guidance to adopt a modular, open-systems
    methodology with heavy emphasis on ``design for change'' in order to
    adapt to changing circumstances consistent with commercial agile
    methodologies. Finally, the new acquisition policy addresses hybrid
    models where significant software development is the predominant
    activity for a major weapon system, or in situations that combine
    hardware development as the basic structure with a software intensive
    development occurring simultaneously. Across each model, the policy
    addresses the realization that information technology capabilities may
    evolve so ``desired capabilities'' can be traded-off against cost and
    initial operational capability to deliver the best product to the field
    in a timely manner.
                           section 933 implementation
        Following section 804 was section 933 in the NDAA for Fiscal Year
    2011 which required DOD to develop a strategy for the rapid acquisition
    of cyber tools, applications, and capabilities for U.S. Cyber Command
    (CYBERCOM) and other cyber operations components of the military. It
    specifically requested an orderly process for determining and approving
    operational requirements; a well-defined, repeatable, transparent, and
    disciplined process for developing capabilities in accordance with the
    acquisition guidance and policy; allocation of facilities and other
    resources to thoroughly test capabilities in development, before
    deployment; and operational use to validate performance and take into
    account collateral damage, and to promote interoperability, share
    innovation, and avoid unproductive duplication in cyber operational
    capabilities. In response to section 933, DOD chartered the Cyber
    Investment Management Board (CIMB). The goal of the CIMB is to unite IT
    policy and operational requirements and identify gaps and resources to
    enable the rapid acquisition and development of cyber capabilities. The
    CIMB is aligning existing processes and implementing new processes to:

             enable rapid cyber acquisition and balance investments
            based on operational need;
             align and synchronize requirements, testing and
            evaluation;
             facilitate oversight and improve insight of DOD cyber
            activities and investments; and
             enable integration and transparency among key process
            owners.

        The CIMB is tri-chaired by the USD(AT&L), the Vice Chairman of the
    Joint Chiefs of Staff, and the Under Secretary of Defense for Policy.
    The CIMB membership includes the OSD Principal Staff Assistants to
    include the DOD CIO, the Services, the Defense Information Systems
    Agency, National Security Agency, U.S. Strategic Command, and CYBERCOM.
    Since March 2012, the CIMB addressed topics ranging from exploring the
    cyber portfolios within the science and technology base, National
    Security Agency, and CYBERCOM; as well as offensive and defensive
    cyberspace operations, defend the nation, cyber situational awareness
    and a holistic assessment of the cyber investment portfolio. DOD has
    achieved an understanding of cyber investment and mission alignment
    enabling future effective strategic management of total cost of
    ownership and return on investment.
        Another DOD initiative stemming from section 933 is the Cyber
    Acquisition Process Pilot Plan. The plan was approved by the USD(AT&L)
    on July 29, 2013 and was designed to test and refine the proposed
    requirements, acquisition, test and evaluation processes. The goal is
    to select two to five capabilities and facilitate, observe and analyze
    as they progress through the acquisition process in order to understand
    where existing and dependent processes need better alignment or
    changes. The intended output is to refine and validate the rapid
    acquisition processes prior to implementation across the DOD. As you
    are aware, one of the tenants in DOD's Better Buying Power initiative
    is continual process improvement. We find ourselves sustaining changes
    through this process by starting with a subset of programs measuring
    the success of the initiatives as we execute, and introducing these
    changes to a larger set as they demonstrate success or reassessing the
    changes if they don't.
                                   it people
        IT has many challenges, of which cyber capabilities add complexity.
    Finding the expertise and skill sets required to develop and acquire
    capabilities for IT systems for cyberspace operations is challenging.
    For example, one challenge found in the cyber acquisition domain is
    that many cyber capabilities are not acquired or developed under a
    traditional acquisition program of record structure because of the
    funding level of the cyber development efforts. In many cases, a
    program manager does not exist. The talents we require span information
    assurance, information technology, operations, and in the case of DBSs,
    enterprise management. The talent pool is small and rarely meets the
    level of expertise across the necessary areas; those who possess the
    required skills are in extremely high demand. Industry faces similar
    challenges; DOD, other Federal organizations, and industry are all
    seeking the same skillsets increasing the challenge to recruit talent
    and retain talent.
        We are working to address these IT workforce issues. With the
    assistance of the Defense Acquisition Workforce Development Fund, we
    have established a functional area for IT acquisition that is working
    the appropriate IT acquisition training into the Defense Acquisition
    University training curriculum, as an example. The USD(AT&L) chairs the
    Acquisition Workforce Senior Steering Board that is attended by the
    Service acquisition executives, the Service defense acquisition career
    managers, the Defense Acquisition University, and the functional career
    area leads. It focuses on the immediate workforce needs, challenges,
    and staffing levels.
        We are working to simplify the process of acquisition through a
    legislative review in coordination with Representative Thornberry, Vice
    Chairman of the House Armed Services Committee. Additionally, there is
    also a joint effort for AT&L and the DOD CIO to develop a cybersecurity
    guidebook for program managers. This guidebook is being developed to
    provide program managers clear and concise guidance on what
    cybersecurity activities should be conducted at each point in the
    acquisition lifecycle, while emphasizing early integration of
    cybersecurity requirements. The purpose is to help program managers
    ensure cybersecurity is considered in the design of a new capability
    instead of later on in the process when it may be too costly or take
    too long to implement it correctly. The Program Assessment Root Cause
    Analysis directorate works in my organization, which contributes to our
    understanding of the root cause of IT program failures in order to
    prevent them from re-occurring. Again, with the help of the Defense
    Acquisition Workforce Development Fund funding, we will bring back
    lessons learned to the Defense Acquisition University to ensure we
    train our people on effective program management, engineering,
    logistics, contracting, et cetera.
        Another effort to help program managers is adjusting our
    cybersecurity test and evaluation (T&E) procedures to include early
    developmental T&E involvement in test planning and execution. The goal
    is to improve the resiliency of military capabilities before beginning
    production and deployment. Early discovery of system vulnerabilities
    can facilitate remediation to reduce the impact on cost, schedule, and
    performance.
        One example of this is regression testing, which is a term for
    tests to ensure that software changes in one part of a system do not
    break or alter working functionality in another. Every software system
    requires regression testing. The Director for Operational Testing and
    Evaluation (DOT&E) is now examining regression test procedures as part
    of its suitability evaluations. DOT&E has also begun helping some
    programs convert to automated (vice manual) regression testing so as to
    gauge the extent of the problem DOD faces. In the last 2 years they
    have been able to help the Defense Logistics Agency implement automated
    regression testing for the Enterprise Business System.
                                   conclusion
        I would like to conclude with the following key points. The DOD is
    evolving its approach to IT acquisition. We are off to a good start
    with the interim DODI 5000.02 which provides program structures and
    procedures tailored to the dominant characteristics of the product
    being acquired and to unique program circumstances, including
    operational urgency and risk factors. We will continue to work with the
    DOD CIO to implement IT Policy, and the DCMO to execute to the Business
    Enterprise Architecture. DOD recognizes the distinct challenges
    associated with acquiring IT capabilities and we are taking disciplined
    and proactive steps to improve our processes to compensate for them.

        Senator Shaheen. Mr. Scheid.

     STATEMENT OF KEVIN J. SCHEID, ACTING DEPUTY CHIEF MANAGEMENT
                     OFFICER, DEPARTMENT OF DEFENSE

        Mr. Scheid. Good afternoon and thank you. Senator Shaheen,
    Senator Ayotte, and members of the subcommittee, my name is
    Kevin Scheid and I am the Acting DCMO of DOD. As the DCMO, I am
    the Secretary's and the Deputy Secretary's principal official
    for providing management oversight across DOD's military
    components, agencies, offices, and organizations. I report to
    the Deputy Secretary who is also the Chief Management Officer
    (CMO) of DOD.
        Thank you for the opportunity to provide this update on the
    management of DOD's business operations.
        As you are aware, DOD's basic mission is to hire, train,
    and equip soldiers, sailors, airmen, and marines, deploy them
    abroad to fight and win the Nation's wars, care for the wounded
    and their families, redeploy those troops home safely, and
    retrograde and refit the equipment capabilities to be ready and
    win the next fight.
        DOD performs this mission through various business areas or
    functional areas such as human resources, logistics,
    acquisition, financial management, installations, and security.
    These are the building blocks of the defense business
    enterprise.
        For DOD to be successful in performing these functions, my
    office works with DOD's senior leaders in defining the
    functional areas, establishing clear business goals and
    objectives, guiding DOD in establishing and aligning its
    processes, ensuring those processes are enabled by modern,
    interoperable business systems, and establishing meaningful
    outcome-oriented performance measures.
        I am relatively new in this position, having recently
    returned from an assignment at NATO as the Chief Operating
    Officer (COO) and the Deputy General Manager of a large NATO
    agency. On November 25, the Secretary designated me as the
    acting DCMO at the time of Ms. Beth McGrath's retirement.
        There have been significant changes made since Ms. McGrath
    last testified before the subcommittee. The most important of
    these changes was Secretary Hagel's December 4 decision to
    strengthen management in DOD by directing a series of
    consolidations and realignments within the Office of the
    Secretary of Defense (OSD). My office will be consolidating
    with the Office of the Director of Administration and
    Management, a relatively small office of about 36 employees,
    and the Office of the Assistant Secretary of Defense for
    Intelligence Oversight, an office of about 9 or 10 employees.
        In addition, the defense field activity of Washington
    Headquarter Services and the Pentagon Force Protection Agency
    will be realigned under the DCMO's office.
        Further, the Secretary directed the transfer of oversight
    responsibilities for the technical aspects of defense business
    systems from my office to the Office of the CIO. This change
    would realign responsibility and accountability for business
    systems in DOD while requiring my office to continue leading
    the development of requirements for those systems.
        These reforms may require changes to section 2222 of title
    10 and we are reviewing if that is necessary at this time.
        The Secretary's goal in strengthening the DCMO's office in
    this way through these consolidations is best captured, I
    think, in the following quote from Secretary Hagel: ``This
    consolidation enables the role of the Deputy CMO as the
    Principal Staff Assistant and Advisor to the Secretary and
    Deputy Secretary of Defense for full spectrum oversight on both
    the OSD and DOD levels of management administration,
    coordination, and collaboration across DOD components and
    business functions, performance improvement, and regulatory
    compliance.''
        DOD is in the midst of implementing the Secretary's
    direction, and all of DOD's witnesses here today are working
    closely together on a path forward.
        While the details are still being developed, I am confident
    that the focus on management and oversight will help advance
    DOD's progress in the business operations. As we execute these
    consolidations, DOD continues to make progress in the
    selection, acquisition, and control of IT systems.
        Building on the principles contained in DOD's response to
    section 804 of the NDAA for Fiscal Year 2010, important steps
    have been taken. Under Assistant Secretary McFarland's lead,
    lessons from the section 804 report have been incorporated in
    DOD's overarching acquisition policies. Under the CIO, Ms.
    Takai's lead, there have been lessons learned incorporated into
    the JIE. Under my predecessor's lead, Ms. McGrath, we have
    incorporated or embedded lessons learned in the business
    mission areas of what we call the Integrated Business Framework
    (IBF) for DOD.
        This framework, overseen by the Defense Business Council
    that I currently chair, has driven quantifiable improvements in
    DOD's business environment. Over the past 2 years, and we have
    only been through two cycles of this, we have improved the
    alignment of our strategies, enhanced data available for
    decisionmaking, and rationalized our business systems
    environment by reducing funds certifications by over $1 billion
    and retiring 60 legacy systems. We have only gone through two
    cycles, as I mentioned, and it is early, but this process is
    yielding some important results.
        Before I close, and in response to a topic that you
    specifically raised in your letter and mentioned in your
    opening comments, I would like to briefly discuss DOD's
    progress towards its audit readiness goals.
        Bringing this very large Department together, applying
    consistent business practices, and ensuring good internal
    controls is difficult, as I am sure you can appreciate. But our
    efforts are making progress, exhibited most recently by the
    Marine Corps' achievement of an unqualified favorable audit of
    its current year appropriation. Secretary Hagel is committed to
    audit readiness, as is DOD as a whole. My office continues to
    work with the Comptroller to implement the DOD plan to achieve
    audit readiness. DOD has resources, governance strategy, and
    senior leader commitment needed for success. While it is too
    soon to know for sure, we expect most budget statements to be
    audit ready by the goal of September 2014.
        In closing, I would like to reemphasize that the Secretary
    is strongly committed to strengthening DOD's management, and
    the steps he directed in December are taking shape and leading
    to his vision of stronger business processes, a simplified
    business environment, and greater oversight. Strengthening
    DOD's management is a high priority for the Secretary, as well
    as this subcommittee and the SASC. We appreciate the
    committee's support and guidance in meeting these priorities
    over the years. Together, our collective efforts are improving
    the support to our soldiers, sailors, airmen, and marines,
    while realizing greater efficiency and effectiveness for the
    American taxpayers. We are committed to continuing these
    efforts.
        Thank you for the opportunity to testify. I would be glad
    to take questions.
        [The prepared statement of Mr. Scheid follows:]
                   Prepared Statement by Mr. Kevin J. Scheid
                                  Introduction
        Senator Shaheen, Senator Ayotte, and members of the subcommittee, I
    appreciate the opportunity to testify before you to provide an update
    on our oversight of management in the Department of Defense (DOD). DOD
    has always taken its duty to be a good steward of taxpayer dollars very
    seriously and the efficient and effective management of DOD is key to
    accomplishing this. As the DOD's Acting Deputy Chief Management Officer
    (CMO), I am the Secretary and Deputy Secretary of Defense's primary
    agent for providing effective management across DOD's many
    organizations and establishing a simplified business environment that
    is fiscally responsible. The main focus of my office is to work with
    DOD's senior leaders across the enterprise to define clear business
    goals, create meaningful performance measures, align activities via
    repeatable processes, ensure that these processes are supported by
    modern, interoperable defense business systems, and support the
    Secretary of Defense's direction to implement institutional reforms, as
    well as simplify DOD's business environment and lower its cost.
        While I have only been part of the Office of the Deputy CMO for
    about 6 months and in the Acting Deputy CMO position since November 25,
    2013, much progress has been made since my predecessor, the Honorable
    Elizabeth McGrath, last testified before you. I look forward to being
    able to share some of this progress with you today.
                       secretary's organizational review
        The responsibilities of the Office of the Deputy CMO were recently
    enhanced when, on December 4, 2013, Secretary Hagel announced a series
    of organizational realignments within the Office of the Secretary of
    Defense (OSD). While the Secretary's announcement included numerous
    elements, one of his primary goals was to strengthen and elevate the
    role of the Office of the Deputy CMO to provide, both within OSD and
    across DOD, full spectrum oversight of management, administration,
    coordination across DOD Components and business functions, performance
    improvement, and regulatory compliance. This will be accomplished
    through the consolidation of the Office of the Director of
    Administration and Management, Washington Headquarters Service, the
    Pentagon Force Protection Agency, and a few additional organizations
    into the Office of the Deputy CMO structure.
        Another of the Secretary's primary goals was to strengthen the
    Office of the DOD Chief Information Officer (CIO) to address the
    growing information technology (IT) and cyber challenges, improve
    oversight of IT resources, and further enable successful implementation
    of the Joint Information Environment. This will be accomplished through
    the transfer of oversight responsibility for the technical aspects of
    defense business systems from the Office of the Deputy CMO to the
    Office of the CIO.
        DOD is in the midst of implementing the Secretary's direction and
    the Offices of the Deputy CMO, DOD CIO, and the Under Secretary of
    Defense (Acquisition, Technology, and Logistics) (USD(AT&L)) are
    working closely together to ensure the optimal alignment of
    responsibility and accountability for business processes and business
    systems approval and acquisition. While certain details continue to be
    finalized, I am confident that the renewed focus on management and
    oversight will help advance DOD's progress in its business operations
    and IT functions. I look forward to being able to share additional
    details about these organizational realignments, including any possible
    legislative changes, with the committee if and when the Secretary
    approves such changes.
                         integrated business framework
        In 2012, aided by changes to DOD's investment management process
    for defense business systems contained in section 901 of the National
    Defense Authorization Act (NDAA) for Fiscal Year 2012, the Deputy CMO
    established a new governance body, the Defense Business Council, to
    consolidate previously dispersed responsibilities and implement a new
    overarching management approach, the Integrated Business Framework.
    This framework is intended to align all levels of our management
    strategies and processes and use multiple statutory and policy levers,
    including investment management responsibilities, to drive positive
    outcomes in DOD's business operations. The framework is also aligned
    with the guiding principles established in the DOD's Strategic
    Management Plan and enables DOD business leaders to instill a cost
    culture, institutionalize end-to-end business processes, align business
    operations, and modernize and rationalize business systems.
        The Integrated Business Framework is progressing. Over the past 2
    years we have:

             Aligned the Strategic Management Plan and DOD's Annual
            Performance Plan with the National Security Strategy and
            Quadrennial Defense Review;
             Established, for the first time, functional strategies
            for each of our lines of business (financial management, human
            resources, etc.) that are aligned with the Strategic Management
            Plan and lay out the strategic vision, goals, priorities,
            outcomes, measures, and any mandatory enterprise initiatives
            for a given functional area;
             Established, for the first time, a portfolio based
            approach for reviewing all defense business system spending.
            The mechanism for achieving this, Organizational Execution
            Plans developed by the DOD components (the military
            departments, defense agencies, et cetera), include details on
            the component's proposed business system investments, their
            alignment with DOD's functional strategies and their adherence
            to Business Process Reengineering and Business Enterprise
            Architecture requirements;
             Aligned and improved budget and systems data, which
            has improved the visibility of our defense business systems
            inventory and enabled DOD business leaders to make more
            informed investment decisions;
             Established the Defense Business Council as the
            requirements validation body for defense business systems,
            thereby aligning strategy with investments;
             Created and implemented criteria for evaluating
            defense business systems spending, which resulted in not
            certifying obligation requests totaling $617 million, or 9
            percent of the total requested amount for fiscal year 2014.
            During the two investment certification cycles since the NDAA
            for Fiscal Year 2012 was enacted, the Defense Business Council
            has not certified over $1 billion in requests; and
             Retired more than 60 defense business systems as
            legacy systems and taken steps to eliminate them from future
            budgets.

               defense business systems and it acquisition reform
        Over the years, DOD has had many challenges with the development,
    deployment, and oversight of defense business systems. The Office of
    the Deputy CMO and its predecessor organizations have played a variety
    of roles in trying to address this problem from both an acquisition and
    an investment management perspective.
        Through its hiring of recognized industry experts on large-scale IT
    projects and its implementation of enterprise IT solutions, the
    business mission area has learned many lessons about DOD's ability to
    agilely acquire defense business system capabilities. A primary lesson
    was that defense business systems required a unique approach that in
    many cases is different from the traditional DOD model for weapons
    system acquisition. Consequently, DOD began development of a tailored
    acquisition process for defense business systems known as the Business
    Capability Lifecycle.
        Shortly after the Deputy CMO was established, the then-Deputy
    Secretary of Defense asked this new office to lead DOD's response to
    section 804 of the NDAA for Fiscal Year 2010, which directed DOD to
    develop and implement a new acquisition process for IT systems based,
    to the extent determined by the Secretary, on the recommendations of a
    2009 Defense Science Board Report on IT Acquisition Reform. The intent
    was to initially focus on defense business systems and leverage
    progress made and lessons learned to address the full set of
    recommendations from the Defense Science Board Report. The broad themes
    contained in the 804 Report were developed in collaboration across DOD
    and with industry. They were sweeping in their scope and, if fully
    implemented, would likely require legislative changes to fully
    implement. In conjunction with the publication of the 804 Report, a
    task force was established, chaired by the Deputy Secretary and run by
    the Deputy CMO. Working groups established under the task force
    developed more detailed recommendations for implementation of the 804
    Report's themes. Eventually, responsibility for the way ahead on policy
    implementation shifted to USD(AT&L), and they have taken important
    steps forward, such as incorporating aspects of the Business Capability
    Lifecycle into the latest release of DOD's acquisition guidance, DODI
    5000.02.
        Since publication of the 804 Report, the Office of the Deputy CMO
    has focused on further implementing the principles of the report in two
    primary ways for defense business systems. First, until December 2013,
    when USD(AT&L) rescinded its delegation of Milestone Decision Authority
    to the Deputy CMO for certain large defense business system
    acquisitions, the Deputy CMO used this delegated authority to conduct
    frequent oversight of these programs and cap spending authority in line
    with the recommendations of the report. Second, the Deputy CMO has
    embedded, where practicable, the principles of the 804 Report, into the
    execution of the Integrated Business Framework and revised investment
    management process as described above. The use of these principles,
    which include using portfolios to help govern defense business systems,
    use of the Defense Business Council to review problem statements of new
    business system investments prior to approving initiation, and review
    of the business process reengineering conducted on the processes
    systems support, is beginning to pay dividends.
                                   conclusion
        DOD is committed to improving the management and acquisition of IT
    systems, as well as our overarching business operations. These issues
    receive significant management attention and are a key part of our
    broader strategy to build better business processes that will create
    lasting results for our men and women in uniform, as well as the
    American taxpayer. I appreciate the opportunity to discuss the
    Secretary's plans to strengthen management in DOD and I look forward to
    continuing our work with this committee in the months and years ahead.
        I would be glad to take your questions.

        Senator Shaheen. Thank you.
        Ms. Takai.

       STATEMENT OF TERESA M. TAKAI, CHIEF INFORMATION OFFICER,
                         DEPARTMENT OF DEFENSE

        Ms. Takai. Thank you, Madam Chairwoman. Thank you so much
    for inviting us this afternoon. I appreciate this opportunity
    to testify before the subcommittee on topics that are of great
    importance to all of us, and certainly in my world.
        I provided a written statement that covers the scope of
    everything that the CIO does, and rather than trying to go into
    all of that, because I know we are very focused in a particular
    area, I would like to mainly focus my remarks on the JIE, if I
    could.
        We wanted to be able to describe to you this key initiative
    to ensure that DOD has access to information on secure
    information networks--and I will come back to that because that
    really is pivotal in what we are doing--and also the tools
    necessary to execute our warfighting and business support
    missions.
        I want to say right away that the efforts we are taking
    regarding the IT infrastructure is in direct support of the IT
    acquisition process and also in support of the business
    transformation efforts. It is really about being able to
    provide the technology that is necessary for the business
    systems to accomplish what they need, but also standardization
    to assist with the IT acquisition process in that important
    area.
        I think our mission success depends upon the ability of our
    military leaders and civilians to act decisively based on the
    most timely and accurate information. Recognizing that
    information is a strategic asset pushes us to undertake a very
    ambitious effort to realign and restructure how our networks,
    hardware, and software housed in data centers is constructed,
    operated, acquired, and defended. This is done in order to
    provide better information access to our users, improve our
    ability to defend not only the networks and the data, but also
    make it responsive to our changing technological and
    operational factors.
        This effort, called JIE, is intended to enable and empower
    our military's decisionmaking and our most important asset, our
    people, by providing warfighters and our mission partners a
    shared IT infrastructure that consists of federated networks
    with common configurations, management, and a common set of
    enterprise services with a single security architecture. I know
    that is a mouthful but it does describe what we are intending.
        The ultimate benefit of the JIE is to the commander in the
    field. It allows for more innovative integration of ITs,
    operations, and cybersecurity; its related tempo is more
    appropriate to our fast-paced operational conditions.
        Some of the other benefits are, as I mentioned, a single
    security architecture that enables our cyber operators at every
    level to see the status of the networks for operations and
    security, and provide standard resilience and cyber maneuver
    options for cyber forces. The complexity of our networks today
    makes it very difficult for our cyber operators to see who is
    on our network and be able to defend our networks as we would
    like them to.
        As you mentioned, the consolidation of our data centers,
    which also includes our operation centers and our help desks,
    will enable users and systems to have timely and secure access
    to the data and services needed to accomplish their assigned
    missions regardless of their location.
        Finally, a consistent DOD-wide IT architecture that defines
    our enterprise standards and supports fielding of DOD
    capabilities in support of information sharing, as well as the
    sustainment and integration of legacy systems, will be an
    important part of the way that we not only acquire systems, but
    the way we operate and sustain.
        DOD plans on utilizing the Services' existing programs'
    initiatives and mainly our technical refresh dollars to deploy
    and migrate to JIE standards utilizing specific implementation
    guidance. Simply stated, JIE will help improve our ability to
    field capability faster and more efficiently, and allow us to
    be better stewards of taxpayers' resources.
        Now, in line with this, it is also important that we take
    actions necessary to increase visibility into our IT budgets
    and spending patterns, and strengthen our analysis of IT
    investments as part of our overall governance and oversight
    processes. I am working very closely with my colleagues here to
    identify ways to leverage DOD's three core processes: our
    requirements, budgeting, and acquisition, to address the
    systemic conditions resulting in our current stovepiped IT
    infrastructure. This is critical if we are to achieve the
    agility and responsiveness from IT that our warfighters demand.
    Working closely not only with my colleagues here but the
    Comptroller and the Cost Assessment and Program Evaluation
    Office, we will deliver the flexible, agile acquisition
    processes that Ms. McFarland spoke of that really meet our
    requirements and budgeting processes to institutionalize the
    agility and flexibility necessary for this domain.
        Finally, maintaining information dominance for our
    warfighters is critical to our national security. The efforts
    outlined above will ensure that DOD's information capabilities
    provide better mission effectiveness and security, and are
    delivered in a manner that makes the most efficient use of our
    financial resources.
        I very much appreciate your interest and your staff's
    interest in our efforts. I look forward to your questions.
        [The prepared statement of Ms. Takai follows:]
                   Prepared Statement by Ms. Teresa M. Takai
                                  introduction
        Good afternoon Madam Chairwoman and distinguished members of the
    subcommittee. Thank you for this opportunity to testify before the
    subcommittee today on information technology (IT) acquisition
    processes, business transformation, and the Department of Defense (DOD)
    management practices. I am Teri Takai, DOD's Chief Information Officer
    (CIO). My office is responsible for ensuring DOD has access to the
    information, the communication networks, and the decision support tools
    needed to successfully execute our warfighting and business support
    missions. Our mission is to ensure that these capabilities can be
    depended upon in the face of threats by a capable adversary in all
    conditions from peace to war, and particularly in the face of ever-
    increasing cyber threats. My focus in accomplishing these
    responsibilities is to ensure the effectiveness, reliability, security,
    and efficiency of DOD's IT capabilities for the warfighter, and ensure
    we are able to take advantage of future technology innovations to
    support DOD's missions.
        I would like to give you a broad overview of DOD's IT landscape;
    summarize recent directions from the Secretary of Defense to strengthen
    the DOD CIO; and describe the Joint Information Environment (JIE),
    DOD's multiyear effort to restructure much of the underlying network,
    computing, and cyber security of DOD so as to make us more agile in
    deploying new decision support capabilities, make us better able to
    mount cyber defense of our core DOD missions, and make us more
    efficient and better stewards of taxpayer resources. I will also
    briefly describe some of the activities underway in my office related
    to my responsibilities for overseeing Positioning, Navigation, and
    Timing (PNT) and spectrum.
                    overview of dod's information technology
        DOD's fiscal year 2014 IT budget request was $39.6 billion and
    included funding for a broad variety of IT, ranging from command and
    control systems, commercial satellite communications, and tactical
    radios to desktop computers, server computing, enterprise services like
    collaboration and electronic mail, and DOD business systems. These
    investments support mission critical operations that must be delivered
    both on the battlefield and in an office environment. They also provide
    capabilities that enable the Commander in Chief to communicate with and
    direct the military, and that support command and control,
    intelligence, logistics, medical and other warfighting and business
    support functions throughout DOD. Included in the overall IT budget are
    DOD's cybersecurity activities and efforts. These are designed to
    ensure that essential DOD missions work well in the face of cyber
    attacks. These cybersecurity efforts continue to receive the highest-
    level attention and support of DOD.
                   secretary of defense organizational review
        Recently Secretary of Defense Hagel issued direction to strengthen
    the role of the DOD CIO. Specifically he affirmed the importance of my
    office as an Office of the Secretary of Defense Principal Staff
    Assistant with the responsibilities listed above. As well, he directed
    actions to add functions, expand authorities, and restore stature to
    the DOD CIO, with a priority focus on advancing the JIE as a special
    interest item for the Secretary. The Secretary also directed my office
    to improve visibility, oversight, and governance of IT resources. He
    reaffirmed the critical importance of addressing the challenges posed
    by cybersecurity.
        My office has completed the development of a plan of action and
    milestones to implement the Secretary's direction. We are taking
    actions necessary to increase visibility into IT budgets and spending
    patterns, and are strengthening our analysis of IT investments and
    evolving our processes for IT governance and oversight. We are working
    closely with the DOD's Deputy Chief Management Officer (DCMO) and with
    the DOD Under Secretary of Defense (Acquisition, Technology, and
    Logistics) (USD(AT&L)) to strengthen the oversight and management of IT
    Business Systems.
                       information technology acquisition
        Consistent with the Secretary's direction, my office is working
    closely with others in DOD to identify ways to adapt our existing
    processes to ensure adaptability to technological advances and ability
    to defend the network against emerging cybersecurity threats. In
    particular, we are examining how best to leverage DOD's three core
    processes--requirements, budgeting, and acquisition--to address the
    systemic conditions resulting in DOD's stove-piped IT infrastructure.
    This is critical if we are to achieve the agility and responsiveness
    from IT systems that warfighters both demand and deserve, and improve
    our ability to defend against cyber attacks. My office is working
    closely with the offices of the DCMO, USD(AT&L), the Comptroller, the
    Director of Cost Assessment and Program Evaluation and others to
    develop a flexible, agile acquisition process that also addresses the
    DOD's requirements and budgeting processes to institutionalize the
    agility and flexibility necessary in cyberspace, while ensuring
    compliance with enterprise standards.
                         joint information environment
        Mission success depends upon the ability of our military commanders
    and civilian leaders to act decisively based on the most timely and
    accurate data and information. Recognizing that information is a
    strategic asset, DOD is undertaking an ambitious effort to re-align and
    restructure how our many IT networks are constructed, operated and
    defended in order to provide better information access to the user,
    improve our ability to not only defend the networks and the data, but
    make it responsive to constantly changing technological and operational
    factors. The challenge is amplified because capable adversaries are
    extremely active in seeking to penetrate DOD systems, compromise
    command and control, to steal or destroy sensitive and strategic
    information, and to gain an upper hand on U.S. forces and warfighting
    capability. Consequently, DOD is pursuing the alignment of existing
    vast IT networks into JIE. First and foremost, JIE will improve mission
    effectiveness. It is intended to enable and empower our military's
    decisive edge--our people--by providing warfighters and our mission
    partners a shared IT infrastructure consisting of federated networks
    with common configurations and management, and a common set of
    enterprise services, within a single security architecture.
        The JIE will change the way we assemble, configure, and use new and
    legacy information technologies. It will consist of enterprise level
    network operations centers that will reduce the complexity and
    ambiguity of seeing and controlling the numerous networks within DOD; a
    set of core data centers--significantly reducing the current number of
    DOD data centers while ensuring the information is secured and
    available where needed; and standard, single security architecture that
    will reduce the number of organizationally owned firewalls, unique
    routing algorithms, and inefficient routing of information that
    currently exists today. Together with the single, authoritative
    identity management and access control, emerging cloud capability,
    mobile computing devices and data-focused applications, and common IT
    enterprise services, JIE will provide the information environment to
    flexibly create, store, disseminate, and access data, applications, and
    other computing services when and where needed. It will better protect
    the integrity of information from unauthorized access while increasing
    the ability to respond to security breaches across the system as a
    whole.
        The ultimate beneficiary of JIE is the commander in the field,
    allowing for more innovative integration of information technologies,
    operations, and cyber security at a tempo more appropriate to today's
    fast-paced operational conditions. Specific benefits include:

             A standardized information and security architecture
            across software, servers, the network, mobile and fixed user
            computing, and identity and access control systems. Users and
            systems will be able to trust their connection from end to end
            with the assurance that the information and systems involved in
            a mission are correct and working even during a cyber attack.
            The JIE architecture will enable cyber operators at every level
            to see the status of the networks for operations and security
            and will provide standard resilience and cyber maneuver options
            for all cyber forces. This will minimize complexity for a
            synchronized cyber response, maximize operational efficiencies,
            and reduce risk. Most importantly, unlike the one size fits all
            networks DOD has now, the JIE will provide mission commanders
            more freedom to take operational risk with the networks since
            the risks can be contained to the decision support and systems
            specifically needed for that mission.
             Consolidation of data centers, operations centers, and
            help desks will enable users and systems to have timely and
            secure access to the data and services needed to accomplish
            their assigned missions, regardless of their location.
             A consistent DOD-wide IT architecture that defines
            enterprise standards and supports effective fielding of DOD
            capabilities in support of information sharing, as well as
            sustainment and integration of legacy systems.

        DOD plans on utilizing the Services' existing programs,
    initiatives, and technical refresh to deploy or migrate to JIE
    standards utilizing specific implementation guidance.
    Data Center Consolidation
        An important aspect within JIE is the active consolidation of DOD's
    numerous data centers. These efforts are consistent with and support
    the Federal Data Center Consolidation Initiative being led by the
    Federal CIO. DOD has established four classes of data centers to assist
    in the development and execution of our data center consolidation
    strategy. These four types of data centers are:

             Core Data Center (CDC)--delivers enterprise services
            and provides primary migration point for systems and
            applications; these are our most important data centers,
            strategically located to provide speed of access to global
            information requirements;
             Installation Processing Node--provides local services
            to DOD installations and hosting systems not suited for CDCs,
            these will be located at the installation level, and will
            consolidate the duplicative data centers at the installations;
             Special Purpose Processing Node--provides compute and
            storage for fixed infrastructure or facilities, such as test
            ranges, labs, medical diagnostic equipment, and machine shops;
            and
             Tactical/Mobile Processing Node--provides support to
            the deployed warfighter at the tactical edge; these unique
            ``data centers'' directly support the warfighter in a
            disadvantaged or tactical environment, but connect back into
            the Generating Force information sources and core data centers.

        DOD's data center consolidation efforts have been aided by section
    2867 of P.L. 112-81, which was originally sponsored by the Senate Armed
    Services Committee. We have made significant progress in our data
    center consolidation, and have closed 277 data centers as of the first
    quarter pf fiscal year 2014.
    Cloud Computing
        Cloud Computing is becoming a critical component of the JIE and
    DOD's IT modernization efforts and will enable users the access to data
    anywhere, anytime on any approved device. One key objective is to drive
    the delivery and adoption of a secure, dependable, resilient multi-
    provider enterprise cloud computing environment that will enhance
    mission effectiveness and improve IT efficiencies. Cloud services will
    enhance warfighter mobility by providing secure access to mission data
    and enterprise services regardless of where the user is located and
    what device he or she uses.
        My office continues to investigate new ways to leverage commercial
    cloud computing innovations and efficiencies to improve DOD. The nature
    of DOD's mission, and the risk to national security if DOD information
    were to be compromised, requires the careful evaluation of commercial
    cloud services, especially in areas of cybersecurity, continuity of
    operations, and resilience. To improve our cybersecurity posture with
    regards to commercial cloud computing, we are participating in the
    Federal Risk Authorization and Management Program and updating our own
    cybersecurity policies.
        There are two key components of DOD's cloud strategy. The first
    component is the establishment of a private enterprise cloud
    infrastructure that supports the full range of DOD activities in
    unclassified and classified environments. The second is DOD's adoption
    of commercial cloud services that can meet DOD's cybersecurity needs
    while providing capabilities that are at least as effective and
    efficient as those provided internally.
    Enterprise Services
        As previously noted, enterprise services are those global
    applications that can be used by many, if not all users within DOD.
    They are a key element of achieving more effective operations and
    improved security across DOD. An example of this is Defense Enterprise
    Email, which is an enterprise messaging tool, built by consolidating
    existing disparate email servers into a global capable server and
    operated by the Defense Information Systems Agency (DISA) on a fee-for-
    service basis. The result is a common DOD enterprise email and contact
    address list and consolidated email service.
        The enterprise directory service is being incorporated by many
    organizations in order to provide baseline authoritative enterprise
    identity data that is shareable across the enterprise via an automated
    synchronization service. Defense Enterprise Email is currently used by
    DISA, the U.S. Army, the Joint Staff, the Office of the Secretary of
    Defense, Defense Manpower Data Center, Office of Naval Research, Navy
    Recruiting Command, HQ Air Force, Air Force District Washington, U.S.
    European Command, U.S. Southern Command, U.S. Transportation Command,
    U.S. Africa Command, and U.S. Forces Japan. As of February 2014, there
    are 1.6 million enterprise email users on DOD's unclassified network
    and 150,000 users on the DOD Secret network, and continued adoption and
    consolidation to this capability is expected in the future.
                                 cybersecurity
        Cybersecurity is one of the highest priorities of the
    administration and DOD. The primary cybersecurity goal of my office is
    ensuring that essential DOD missions are dependable and resilient in
    the face of cyber exploits and attacks by a capable adversary. This is
    also a primary concern driving the other improvement efforts,
    particularly JIE. This focus on mission assurance, rather than on
    computer or system security, is one of the primary changes in DOD's
    cybersecurity approach. This approach enables us to move from an
    approach of bolting on cyber security solutions to one where resilient,
    mission assurance, and cyber security characteristics will be built
    into the total information environment.
        JIE gives certain operational commanders more freedom to take
    operational cyber security risks. We accomplish this by using ``risk
    zones'' in the design of the JIE computing and networks; these zones
    help keep the risks assumed by a particular mission from spilling over
    into other missions. This is also a significant change from today's DOD
    networks which impose more operational constraints on commanders. Other
    primary cybersecurity goals include improved safe sharing with whatever
    partners a mission requires, and a continued need to keep a secret.
    Through refinement of the JIE concept, including the JIE single
    security architecture, we have concluded that all of these cyber
    security goals can be achieved, and DOD will have better joint
    warfighting decision support, better operational and acquisition
    agility, and better efficiency.
        Like other IT efforts, cybersecurity is a team sport within DOD,
    and these efforts span many organizations. In particular, I work
    closely with others in the Office of the Secretary of Defense, U.S.
    Cyber Command, the Military Departments, and Defense Agencies to ensure
    cybersecurity issues are being addressed.
    Single Security Architecture
        A key priority in the last year has been the development of a
    unifying, joint cybersecurity approach for the design of the JIE. This
    is the JIE Single Security Architecture (SSA). Although many of the
    DOD's cyber security initiatives are common across all DOD
    organizations, each Military Service has had the ability to make
    important decisions about how to design computing and networks and
    about how to structure cyber defenses. This has led to several
    challenges, such as diversity in the cybersecurity protections of the
    DOD that does not provide a common level of protection for joint
    missions (because the IT for these missions is designed and operated by
    many organizations), and sometimes interferes with the collaborative
    attack detection, diagnosis, and reaction so necessary in a complex
    organization like DOD. Finally, the challenge caused by this diversity
    can interfere with a joint commander's ability to share information
    with external mission partners.
        To solve these problems, the SSA provides for a common approach to
    the structure and defense of computing and the networks across all DOD
    organizations. This engineering of the cyber security approach ``end-
    to-end'' will significantly improve DOD's ability to resist cyber-
    attacks; to dampen the spread of successful attacks; and to detect,
    diagnose, and react to attacks in ways that are optimized for joint
    missions. Owing to the standardization and cyber data sharing of JIE,
    cyber defenders will have broad visibility into the computing and
    networks, and via secure remote management and automation, they will be
    able to much more quickly construct and execute defensive actions. In
    addition, the risk containment zones the SSA defines in the server
    computing and the network will enable joint commanders to better
    contain cyber risk to mission while sharing as broadly with external
    partners as a mission requires. It will also make development of new
    decision support capabilities simpler and easier since many program
    offices will not need to worry about most cybersecurity protections,
    but will instead be able to build software applications on top of the
    standard protections and situational awareness capabilities provided by
    JIE.
        The DOD CIO published a new Strategy for Defending Networks,
    Systems, and Data in October 2013. The strategy identifies strategic
    imperatives to ensure the protection, integrity, and assurance of DOD
    cyber assets. It is focused in four key areas: establishing a Resilient
    Cyber Defense Posture; Transform Cyber Defense Operations; Enhance
    Cyber Situational Awareness; and Assure Survivability against Highly
    Sophisticated Cyber Attacks. In the near term, we will be finalizing
    the Implementation Plan for the strategy. To ensure success going
    forward, we will collaborate closely with others in DOD.
             information technology and cyber workforce development
        A critical component of readiness is a workforce that is trained
    and equipped. DOD is in the process of implementing a comprehensive
    strategy to transform its legacy IT and information assurance
    personnel, as well as critical personnel in non-traditional IT
    occupations, into a cohesive cyberspace workforce which includes a
    strong cybersecurity workforce component. The DOD Cyberspace Workforce
    Strategy is focused on recruiting, training, and retaining the
    necessary workforce to build and operate our networks as well as defend
    U.S. national interests in cyberspace. The workforce must be properly
    sized and properly trained, and there must be career progression that
    encourages growth and development of broad ranging skillsets, such as
    building a defensible architecture, acquiring secure technologies,
    securely operating systems and networks, analyzing cyber threats, and
    planning cyberspace operations. We are working across DOD to realize
    competitive hiring and retention initiatives, and institute robust
    training and education programs, to achieve a world class, mission
    ready cyberspace workforce.
        Space-based PNT provides crucial capability to military, civil, and
    commercial users worldwide. We are working to better integrate the
    services of the Global Positioning Systemas the primary means of
    delivering PNT which provides our Nation and allies the ability to
    precisely navigate anywhere in the world. Our PNT architecture provides
    our Nation and allies precise target location, the ability to strike
    with a minimum of collateral damage, navigation capabilities that
    support logistics, command and control, friendly force tracking, and
    precise timing. This latter feature is critical to encryption,
    synchronization, and integration of data networks within the
    communications and cyber enterprises. With this understanding, we are
    working, as a high priority, several infrastructure upgrades to protect
    this critical piece of cyber terrain.
        Spectrum has become increasingly important not only to DOD's
    missions, but to consumers and the economy of the Nation as a whole.
    The use of the electromagnetic spectrum continues to be a critical
    enabler of our warfighting capabilities and DOD's cyber operations.
    Defense leadership is cognizant and sensitive to the unprecedented
    spectrum demands resulting from DOD's increasing reliance on spectrum-
    dependent technologies and the rapid modernization of commercial mobile
    devices. Fully recognizing the linkages between national security and
    economic prosperity, the DOD is fully committed to the President's 500
    MHz initiative to make spectrum available for commercial broadband use,
    the implementation of more effective and efficient use of this finite
    radio-frequency spectrum and the development of solutions to meet these
    goals while ensuring national security and other Federal capabilities
    are preserved.
        To that end, DOD has developed a plan that will make 25MHz of
    spectrum available to commercial industry on a shared basis, thus
    achieving a balance between expanding wireless and broadband
    capabilities for the Nation and the need for access to support
    warfighting capabilities in support of our national security.
                                   conclusion
        Maintaining information dominance for the warfighter is critical to
    our national security. The efforts outlined above will ensure that
    DOD's information capabilities provide better mission effectiveness and
    security, and are delivered in a manner that makes the most efficient
    use of financial resources. I ask that you strongly support, authorize,
    and fund DOD's key cybersecurity and information technology
    modernization programs. I want to thank you for your interest.

        Senator Shaheen. Thank you very much.
        Mr. Powner.

    STATEMENT OF DAVID A. POWNER, DIRECTOR, INFORMATION TECHNOLOGY
        AND MANAGEMENT ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE

        Mr. Powner. Chairwoman Shaheen, Ranking Member Ayotte, and
    members of the subcommittee, I appreciate the opportunity to
    testify this afternoon on improving IT acquisition at DOD.
        Of the $82 billion the Federal Government spends on IT
    annually, DOD spends almost half of this, $40 billion. Of that,
    about $25 billion is spent on legacy systems. Therefore, it is
    important that DOD not only acquires new systems, on time and
    within budget, but that it also efficiently manages existing
    systems.
        Regarding systems acquisitions, too often we hear of failed
    projects like ECSS. These complex projects, though, can be
    delivered successfully when there is appropriate transparency,
    accountability, oversight, and program management.
        Starting with transparency, the IT Dashboard was put in
    place to highlight the status and CIO assessments of
    approximately 700 major IT investments across 27 departments.
    This public dissemination of each project's status is to allow
    the Office of Management and Budget (OMB) and Congress to hold
    agencies accountable for results and performance. Many agencies
    have accurate information on the Dashboard, and that
    information is used to tackle troubled projects. DOD does not.
    DOD reports 93 IT investments on the Dashboard--81 are in green
    status, meaning low risk, 12 are in yellow status, meaning
    medium risk, and there are no projects rated as high risk, or
    red.
        Chairwoman Shaheen, there are many problems here. First,
    some of these projects should be red, based on the review that
    you currently mentioned in your opening statement. Second, the
    data is not always current since CIO ratings have not been
    updated since September 2012. Third, there are major
    investments that are not even listed on the Dashboard.
        Given the amount DOD spends annually on IT and its not-so-
    stellar track record, Congress absolutely needs a clear picture
    of what these investments are and how they are performing.
    Therefore, DOD needs to ensure that all projects are on the
    Dashboard and accurately updated.
        Once this transparency is improved, key IT executives need
    to be accountable, along with the appropriate business leaders
    responsible for these projects.
        We have seen successful oversight performed by using a
    tiered portfolio-based governance structure, meaning that not
    all DOD major investments need to be overseen exactly the same
    way. Some of the 93 investments can be delegated below the CIO
    level. Most should be overseen by the CIO, and some of DOD's
    major priorities likely demand oversight above the CIO level.
        Turning to program management, we recently issued a report
    that showcases successful IT acquisitions. One of those
    projects was the Defense Information Systems Agency's (DISA)
    global combat support system. Several best practices increased
    the likelihood that IT acquisitions will be delivered on time
    and within budget. This starts with getting the requirements
    right by involving the right users and prioritizing those
    requirements. A big takeaway from these successful stories was
    that each of these successful investments was an increment of a
    larger project. Tackling projects in increments is a best
    practice.
        We have ongoing work that is currently looking at agencies,
    including DOD, and how they are tackling these large
    investments in more manageable pieces. That report will be
    issued in the spring and will show that DOD is not acquiring
    systems in small enough increments.
        Turning now to operational systems, OMB started a data
    center consolidation effort in 2010 to address the Government's
    low server utilization rates estimated on average at 10 to 15
    percent, far below the industry standard of 60 percent. This
    effort was to result in $3 billion in savings across all
    departments. DOD has done a really good job when it comes to
    data centers, Chairwoman Shaheen. They have identified 2,000
    centers, to date. They have closed over 250 centers, and they
    have reported $875 million in savings. They have also reported
    to us in the current review that their savings alone could
    match OMB's government-wide goal of $3 billion by the end of
    2015.
        OMB recently expanded the data center consolidation effort
    into a larger initiative to eliminate additional duplicative
    spending in administrative and business systems. As part of
    this, DOD identified 26 opportunities where duplication existed
    in areas like enterprise software, security infrastructure, and
    network operations. DOD estimates that these 26 opportunities,
    which include their data center consolidation efforts, could
    result in savings that exceed $5 billion. Given the magnitude
    of DOD's potential savings associated with duplicative systems
    and data center consolidation, it is essential that they have
    support for and track these savings, and not use poor systems
    or processes as an excuse for not realizing billions in
    savings.
        In summary, by tackling duplicative IT systems and
    consolidating data centers, DOD can save over $5 billion
    through 2015 alone. Systems acquisition performance can be
    greatly improved by reporting accurately and timely on the IT
    Dashboard, improving governance, acquiring incrementally, and
    following program management best practices.
        This concludes my statement. I would be pleased to respond
    to questions.
        [The prepared statement of Mr. Powner follows:]
                   Prepared Statement by Mr. David A. Powner
        Chairwoman Shaheen, Ranking Member Ayotte, and members of the
    subcommittee: I am pleased to be here today to discuss how best
    practices and major information technology (IT) reform initiatives can
    help the Department of Defense (DOD) better acquire and manage IT
    investments. As reported to the Office of Management and Budget (OMB),
    Federal agencies plan to spend at least $82 billion on IT in fiscal
    year 2014. Of this amount, DOD plans to spend about $39.6 billion, or
    48 percent of the government's total IT spending. Given the size of the
    department's investments and the criticality of many of these systems
    to the security and defense of the Nation, it is important that DOD
    successfully acquire them--that is, ensure that they are acquired on
    time and within budget, and that they deliver expected benefits and
    results.
        However, as we have previously reported and testified, Federal IT
    projects too frequently fail and incur cost overruns and schedule
    slippages while contributing little to mission-related outcomes.\1\
    During the past several years, we have issued multiple reports and
    testimonies on best practices for major acquisitions and Federal
    initiatives to acquire and improve the management of IT investments.\2\
    In those reports, we made numerous recommendations to Federal agencies
    and OMB to further enhance the management and oversight of IT programs.
    Further, we highlighted several examples of DOD investments that failed
    to, or only partially delivered results within planned cost and
    schedule estimates.
    ---------------------------------------------------------------------------
        \1\ See, for example, Government Accountability Office (GAO),
    Information Technology: OMB and Agencies Need to More Effectively
    Implement Major Initiatives to Save Billions of Dollars, GAO-13-796T
    (Washington, DC: July 25, 2013); Secure Border Initiative: DHS Needs to
    Reconsider Its Proposed Investment in Key Technology Program, GAO-10-
    340 (Washington, DC: May 5, 2010); and Polar-Orbiting Environmental
    Satellites: With Costs Increasing and Data Continuity at Risk,
    Improvements Needed in Tri-agency Decisionmaking, GAO-09-564
    (Washington, DC: June 17, 2009).
        \2\ See, for example, GAO, Information Technology: Leveraging Best
    Practices to Help Ensure Successful Major Acquisitions, GAO-14-183T
    (Washington, DC: Nov. 13, 2013); Information Technology: Additional
    Executive Review Sessions Needed to Address Troubled Projects, GAO-13-
    524 (Washington, DC: June 13, 2013); Data Center Consolidation:
    Strengthened Oversight Needed to Achieve Billions of Dollars in
    Savings, GAO-13-627T (Washington, DC: May 14, 2013); Data Center
    Consolidation: Strengthened Oversight Needed to Achieve Cost Savings
    Goal, GAO-13-378 (Washington, DC: Apr. 23, 2013); Information
    Technology Dashboard: Opportunities Exist to Improve Transparency and
    Oversight of Investment Risk at Select Agencies, GAO-13-98 (Washington,
    DC: Oct. 16, 2012); Data Center Consolidation: Agencies Making Progress
    on Efforts, but Inventories and Plans Need to Be Completed, GAO-12-742
    (Washington, DC: July 19, 2012); Information Technology: Critical
    Factors Underlying Successful Major Acquisitions, GAO-12-7 (Washington,
    DC: Oct. 21, 2011); Information Technology: Continued Attention Needed
    to Accurately Report Federal Spending and Improve Management, GAO-11-
    831T (Washington, DC: July 14, 2011); and Information Technology:
    Investment Oversight and Management Have Improved but Continued
    Attention Is Needed, GAO-11-454T (Washington, DC: Mar. 17, 2011).
    ---------------------------------------------------------------------------
        As discussed with subcommittee staff, I am testifying today on how
    best practices and major IT reform initiatives can help DOD better
    acquire and manage IT investments. Accordingly, my testimony
    specifically focuses on the critical success factors of major IT
    acquisitions and their importance to improving IT investment oversight
    and management. I will also address several initiatives put into place
    by OMB to address the transparency of IT investments and to review
    troubled and duplicative existing projects. All work on which this
    testimony is based was performed in accordance with generally accepted
    government auditing standards or all sections of GAO's Quality
    Assurance Framework that were relevant to our objectives. Those
    standards and the framework require that we plan and perform our audits
    and engagements to obtain sufficient, appropriate evidence to provide a
    reasonable basis for our findings and conclusions based on our audit
    objectives; the framework also requires that we discuss any limitations
    in our work. We believe that the information, data, and evidence
    obtained and the analysis conducted provide a reasonable basis for our
    findings and conclusions based on our objectives. A more detailed
    discussion of the objectives, scope, and methodology of this work is
    included in each of the reports on which this testimony is based.\3\
    ---------------------------------------------------------------------------
        \3\ GAO-13-524; GAO, Information Technology Reform: Progress Made;
    More Needs to Be Done to Complete Actions and Measure Results, GAO-12-
    461 (Washington, DC: Apr. 26, 2012); IT Dashboard: Accuracy Has
    Improved, and Additional Efforts Are Under Way to Better Inform
    Decision Making, GAO-12-210 (Washington, DC: Nov. 7, 2011); GAO-12-7;
    Information Technology: OMB Has Made Improvements to Its Dashboard, but
    Further Work Is Needed by Agencies and OMB to Ensure Data Accuracy,
    GAO-11-262 (Washington, DC: Mar. 15, 2011); and Information Technology:
    OMB's Dashboard has Increased Transparency and Oversight, but
    Improvements Needed, GAO-10-701 (Washington, DC: July 16, 2010).
    ---------------------------------------------------------------------------
                                   background
        IT should enable government to better serve the American people.
    However, despite spending hundreds of billions on IT since 2000, the
    Federal Government has experienced failed IT projects and has achieved
    little of the productivity improvements that private industry has
    realized from IT. Too often, Federal IT projects run over budget,
    behind schedule, or fail to deliver results. In combating this problem,
    proper oversight is critical.
        Both OMB and Federal agencies have key roles and responsibilities
    for overseeing IT investment management and OMB is responsible for
    working with agencies to ensure investments are appropriately planned
    and justified. However, as we have described in numerous reports,\4\
    although a variety of best practices exist to guide their successful
    acquisition, Federal IT projects too frequently incur cost overruns and
    schedule slippages while contributing little to mission-related
    outcomes.
    ---------------------------------------------------------------------------
        \4\ See, for example, GAO, FEMA: Action Needed to Improve
    Administration of the National Flood Insurance Program, GAO-11-297
    (Washington, DC: June 9, 2011); GAO-10-340; Secure Border Initiative:
    DHS Needs to Address Testing and Performance Limitations That Place Key
    Technology Program at Risk, GAO-10-158 (Washington, DC: Jan. 29, 2010);
    and GAO-09-564.
    ---------------------------------------------------------------------------
        Agencies have reported that poor-performing projects have often
    used a ``big-bang'' approach--that is, projects that are broadly scoped
    and aim to deliver capability several years after initiation. For
    example, in 2009 the Defense Science Board reported that DOD's
    acquisition process for IT systems was too long, ineffective, and did
    not accommodate the rapid evolution of IT.\5\ The board reported that
    the average time to deliver an initial program capability for a major
    IT system acquisition at DOD was over 7 years.
    ---------------------------------------------------------------------------
        \5\ Defense Science Board, Report of the Defense Science Board Task
    Force on Department of Defense Policies and Procedures for the
    Acquisition of Information Technology (Washington, DC: March 2009).
    ---------------------------------------------------------------------------
        As previously mentioned, and as seen in figure 1, Defense accounts
    for 48 percent of the fiscal year 2014 Federal Government's IT budget.

        Of the department's $39.6 billion IT budget, approximately 14
    percent is to be spent on classified systems. Of the remaining $34
    billion, about one-quarter is to be spent on acquiring new investments,
    and the rest is to be spent operating and maintaining existing or
    legacy systems. This is illustrated in figure 2.

        Further, over the past several years, we have reported that overlap
    and fragmentation among government programs or activities could be
    harbingers of unnecessary duplication.\6\ Thus, the reduction or
    elimination of duplication, overlap, or fragmentation could potentially
    save billions of tax dollars annually and help agencies provide more
    efficient and effective services.
    ---------------------------------------------------------------------------
        \6\ GAO, 2013 Annual Report: Actions Needed to Reduce
    Fragmentation, Overlap, and Duplication and Achieve Other Financial
    Benefits, GAO-13-279SP (Washington, DC: Apr. 9, 2013), Annual Report:
    Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve
    Savings, and Enhance Revenue, GAO-12-342SP (Washington, DC: Feb. 28,
    2012), and Opportunities to Reduce Potential Duplication in Government
    Programs, Save Tax Dollars, and Enhance Revenue, GAO-11-318SP
    (Washington, DC: Mar. 1, 2011).
    ---------------------------------------------------------------------------
    OMB Has Launched Major Initiatives for Overseeing Investments
        OMB has implemented a series of initiatives to improve the
    oversight of underperforming investments, more effectively manage IT,
    and address duplicative investments. These efforts include the
    following:

             IT Dashboard. Given the importance of transparency,
            oversight, and management of the government's IT investments,
            in June 2009 OMB established a public website, referred to as
            the IT Dashboard, that provides detailed information on
            approximately 700 major IT investments at 27 Federal agencies,
            including ratings of their performance against cost and
            schedule targets. The public dissemination of this information
            is intended to allow OMB, other oversight bodies including
            Congress, and the general public to hold agencies accountable
            for results and performance. Among other things, agencies are
            to submit Chief Information Officer (CIO) ratings, which,
            according to OMB's instructions, should reflect the level of
            risk facing an investment on a scale from 1 (high risk) to 5
            (low risk) relative to that investment's ability to accomplish
            its goals. Ultimately, CIO ratings are assigned colors for
            presentation on the Dashboard, according to the five-point
            rating scale, as illustrated in table 1.

             TechStat reviews. In January 2010, the Federal CIO
            began leading TechStat sessions--face-to-face meetings to
            terminate or turnaround IT investments that are failing or are
            not producing results. These meetings involve OMB and agency
            leadership and are intended to increase accountability and
            transparency and improve performance. Subsequently, OMB
            empowered agency CIOs to hold their own TechStat sessions
            within their respective agencies. According to the former
            Federal CIO, the efforts of OMB and Federal agencies to improve
            management and oversight of IT investments have resulted in
            almost $4 billion in savings.
             Federal Data Center Consolidation Initiative.
            Concerned about the growing number of Federal data centers, in
            February 2010 the Federal CIO established the Federal Data
            Center Consolidation Initiative. This initiative's four high-
            level goals are to promote the use of ``green IT'' \7\ by
            reducing the overall energy and real estate footprint of
            government data centers; reduce the cost of data center
            hardware, software, and operations; increase the overall IT
            security posture of the government; and shift IT investments to
            more efficient computing platforms and technologies. OMB
            believes that this initiative has the potential to provide
            about $3 billion in savings by the end of 2015.
    ---------------------------------------------------------------------------
        \7\ ``Green IT'' refers to environmentally sound computing
    practices that can include a variety of efforts, such as using energy
    efficient data centers, purchasing computers that meet certain
    environmental standards, and recycling obsolete electronics.
    ---------------------------------------------------------------------------
             PortfolioStat. In order to eliminate duplication, move
            to shared services, and improve portfolio management processes,
            in March 2012 OMB launched the PortfolioStat initiative.
            Specifically, PortfolioStat requires agencies to conduct an
            annual agencywide IT portfolio review to, among other things,
            reduce commodity IT \8\ spending and demonstrate how their IT
            investments align with the agency's mission and business
            functions.\9\ PortfolioStat is designed to assist agencies in
            assessing the current maturity of their IT investment
            management process, making decisions on eliminating duplicative
            investments, and moving to shared solutions in order to
            maximize the return on IT investments across the portfolio. OMB
            believes that the PortfolioStat effort has the potential to
            save the government $2.5 billion over the next 3 years by, for
            example, consolidating duplicative systems.
    ---------------------------------------------------------------------------
        \8\ According to OMB, commodity IT includes services such as IT
    infrastructure (data centers, networks, desktop computers and mobile
    devices); enterprise IT systems (e-mail, collaboration tools, identity
    and access management, security, and web infrastructure); and business
    systems (finance, human resources, and other administrative functions).
        \9\ OMB, Implementing PortfolioStat, Memorandum, M-12-10
    (Washington DC: Mar. 30, 2012).
    ---------------------------------------------------------------------------
    opportunities exist to improve defense's acquisition and management of
                              major it investments
        Given the magnitude of DOD's annual IT budget, which was $39.6
    billion in fiscal year 2014, it is important that the department
    leverage all available opportunities to ensure that its IT investments
    are acquired in the most effective manner possible. To do so, the
    department can rely on IT acquisition best practices, and initiatives
    such as OMB's IT Dashboard, and OMB-mandated TechStat sessions.
    Best Practices Are Intended to Help Ensure Successful Major
            Acquisitions
        In 2011, we identified seven successful investment acquisitions and
    nine common factors critical to their success, and noted that the
    factors support OMB's objective of improving the management of (1)
    large-scale IT acquisitions across the Federal Government, and (2) wide
    dissemination of these factors could complement OMB's efforts.\10\
    Specifically, we reported that Federal agency officials identified
    seven successful investment acquisitions, in that they best achieved
    their respective cost, schedule, scope, and performance goals.\11\
    Notably, all of these were smaller increments, phases, or releases of
    larger projects. For example, the DOD investment in our sample, Defense
    Global Combat Support System-Joint (Increment 7), was a smaller portion
    of an ongoing investment. The common factors critical to the success of
    three or more of the seven investments are generally consistent with
    those developed by private industry and are identified in table 2.
    ---------------------------------------------------------------------------
        \10\ GAO-12-7.
        \11\ The seven investments were: (1) Commerce's Decennial Response
    Integration System; (2) Defense's Defense Global Combat Support System-
    Joint (Increment 7); (3) Department of Energy's Manufacturing
    Operations Management Project; (4) DHS's Western Hemisphere Travel
    Initiative; (5) Department of Transportation's Integrated Terminal
    Weather System; (6) Internal Revenue Service's Customer Account Data
    Engine 2; and (7) Veterans Affairs Occupational Health Recordkeeping
    System.
    ---------------------------------------------------------------------------

        Regarding DOD's Global Combat Support System-Joint (Increment 7),
    officials cited six factors that were critical to this investment's
    success. Among others, officials noted that senior department
    executives supported the program, end users and stakeholders were
    involved in the development of requirements which were then
    prioritized, and government and contractor staff were consistent and
    stable.
    IT Dashboard Can Improve the Transparency Into and Oversight of Defense
            IT Investments
        The IT Dashboard serves an important role in allowing OMB and other
    oversight bodies to hold agencies accountable for results and
    performance. However, we reported in October 2012 that opportunities
    existed to improve transparency and oversight of investment risk at
    selected agencies, including DOD.\12\ Specifically, we found that among
    the agencies we reviewed, DOD was unique in that its CIO ratings on the
    Dashboard reflected additional considerations beyond OMB's
    instructions. For example, briefing slides prepared for DOD's 2011 CIO
    rating exercise identified the need to ``balance'' CIO ratings, and
    advised that yellow or red ratings could lead to an OMB review. That
    report further noted that DOD did not rate any of its investments as
    either high or moderately high risk and that in selected cases, these
    ratings did not appropriately reflect significant cost, schedule, and
    performance issues reported by GAO and others.
    ---------------------------------------------------------------------------
        \12\ GAO-13-98.
    ---------------------------------------------------------------------------
        We also highlighted three DOD investments that experienced
    significant performance problems and were part of a GAO high-risk area
    (business systems modernization); however, they were all rated low risk
    or moderately low risk by the DOD CIO. For example, in early 2012, we
    reported that Air Force's Defense Enterprise Accounting and Management
    System faced a 2-year deployment delay and an estimated cost increase
    of about $500 million from an original life-cycle cost estimate of $1.1
    billion (an increase of approximately 45 percent), and that assessments
    by DOD users had identified operational problems with the system, such
    as data accuracy issues, an inability to generate auditable financial
    reports, and the need for manual workarounds.\13\ In July 2012, the DOD
    Inspector General reported that the system's schedule delays were
    likely to diminish the cost savings it was to provide, and would
    jeopardize the department's goals for attaining an auditable financial
    statement. DOD's CIO rated the Dense Enterprise Accounting and
    Management System low risk or moderately low risk from July 2009
    through March 2012.
    ---------------------------------------------------------------------------
        \13\ GAO, DOD Financial Management: Reported Status of Department
    of Defense's Enterprise Resource Planning Systems, GAO-12-565R
    (Washington, DC: Mar. 30, 2012) and DOD Financial Management:
    Implementation Weaknesses in Army and Air Force Business Systems Could
    Jeopardize DOD's Auditability Goals, GAO-12-134 (Washington, DC: Feb.
    28, 2012).
    ---------------------------------------------------------------------------
        Moreover, DOD did not apply its own risk management guidance to the
    ratings, which reduces their value for investment management and
    oversight. Therefore, we recommended that DOD ensure that its CIO
    ratings reflect available investment performance assessments and its
    risk management guidance. DOD concurred with our recommendation.
    Nonetheless, the Dashboard currently shows that for DOD's 93 major
    investments, 81 are low or moderately low risk (green), 12 are medium
    risk (yellow), and none are moderately high or high risk (red).
    TechStat Reviews Can Help Highlight and Evaluate Poorly Performing
            Investments
        TechStat reviews were initiated by OMB to enable the Federal
    Government to intervene to turnaround, halt, or terminate IT projects
    that are failing or are not producing results. In 2013, we reported
    that OMB and selected agencies had held multiple TechStats, but that
    additional OMB oversight was needed to ensure that these meetings were
    having the appropriate impact on underperforming projects and that
    resulting cost savings were valid.\14\ We noted that OMB and selected
    agencies had tracked and reported positive results from TechStats, with
    most resulting in improved governance. Agencies also reported projects
    with accelerated delivery, reduced scope, or termination. We also found
    that OMB reported in 2011 that Federal agencies achieved almost $4
    billion in life-cycle cost savings as a result of TechStat sessions.
    However, we were unable to validate OMB's reported results because OMB
    did not provide artifacts showing that it ensured the results were
    valid. Among other things, we recommended that OMB require agencies to
    report on how they validated the outcomes. OMB generally agreed with
    this recommendation.
    ---------------------------------------------------------------------------
        \14\ GAO-13-524.
    ---------------------------------------------------------------------------
        We also found that as of April 2013, OMB reported conducting 79
    TechStats on 55 investments at 23 Federal agencies, including DOD. The
    four DOD investments that were reviewed included the Expeditionary
    Combat Support System, which received three TechStats. We recently
    testified that in December 2012, DOD canceled the Expeditionary Combat
    Support System after having spent about a billion dollars and missing
    multiple milestones, including failure to achieve deployment within 5
    years of obligating funds.\15\ The system was to provide the Air Force
    with a single, integrated logistics system that was to control and
    account for about $36 billion of inventory. We issued several reports
    on this system and found that, among other things, the program was not
    fully following best practices for developing reliable schedules and
    cost estimates.\16\ Among other things, we had recommended that DOD
    ensure that any future system deficiencies identified through
    independent assessments be resolved or mitigated prior to further
    deployment of the Expeditionary Combat Support System.
    ---------------------------------------------------------------------------
        \15\ GAO-13-796T.
        \16\ GAO, DOD Business Transformation: Improved Management
    Oversight of Business System Modernization Efforts Needed, GAO-11-53
    (Washington, DC: Oct. 7, 2010) and DOD Financial Management:
    Implementation Weaknesses in Army and Air Force Business Systems Could
    Jeopardize DOD's Auditability Goals, GAO-12-134 (Washington, DC: Feb.
    28, 2012).
    ---------------------------------------------------------------------------
        In addition to efficiently acquiring IT investments, it is also
    important for DOD to efficiently manage its existing IT systems,
    especially since the agency plans to spend about $25 billion in fiscal
    year 2014 on these systems. To do so, DOD can rely on Federal
    initiatives designed to reduce inefficiencies, redundancy, and
    duplication in IT investments, as discussed in the following section.
    DOD Could Consolidate Hundreds of Data Centers, Leading to Billions in
            Savings
        In an effort to consolidate the growing number of Federal data
    centers, in 2010, OMB launched a data center consolidation initiative.
    As part of this initiative, agencies developed plans to consolidate
    data centers; however, these plans were incomplete and did not include
    best practices. In addition, although we reported that agencies had
    made progress on their data center closures, OMB had not determined
    initiative-wide cost savings, and oversight of the initiative was not
    being performed in all key areas.\17\ Among other things, we
    recommended that agencies complete inventories and plans, with which
    most agencies agreed. Finally, as part of ongoing follow-up work, we
    determined that agencies closed additional data centers, but that the
    number of Federal data centers was significantly higher than previously
    estimated by OMB. Specifically, we testified in 2013 that OMB reported
    approximately 3,133 data centers in December 2011.\18\ However, as of
    July 2013, 22 of the 24 agencies had collectively reported 6,836 data
    centers in their inventories, an increase of approximately 3,700. Of
    these, DOD reported 1,922 facilities. Since DOD's original goal was to
    consolidate from 936 data centers to 392 and to save an estimated $2.2
    billion, this increase in inventory opens the possibility of
    consolidating even more centers and realizing billions in cost savings.
    ---------------------------------------------------------------------------
        \17\ GAO, Data Center Consolidation: Agencies Need to Complete
    Inventories and Plans to Achieve Expected Savings, GAO-11-565
    (Washington, DC: Jul. 26, 2011) and Data Center Consolidation: Agencies
    Making Progress on Efforts, but Inventories and Plans Need to Be
    Completed, GAO-12-742 (Washington, DC: Jul. 19, 2012).
        \18\ GAO-13-796T.
    ---------------------------------------------------------------------------
    PortfolioStat Can Be Used to Address Duplicative DOD Investments and
            Realize Cost Savings
        OMB's PortfolioStat initiative is designed to assist agencies in
    assessing the current maturity of their IT portfolio management process
    and making decisions on eliminating duplication--which we reported on
    in February 2012. Specifically, we found 31 potentially duplicative
    investments totaling approximately $1.2 billion at DOD, but that the
    department had begun taking actions to address this duplication.\19\
    For example, according to Defense officials, four of the Navy
    acquisition management investments--two for Naval Sea Systems Command
    and two for Space and Naval Warfare Systems Command--would be reviewed
    to determine whether these multiple support systems are necessary. In
    addition, DOD reported that the Air Force was in the process of
    developing a single contract writing system to replace the five
    potentially duplicative investments we had identified. Additionally, in
    September 2013, we found additional potential duplication within DOD's
    health care and dental management investments, totaling over $30
    million.\20\ Again, department officials described plans to address
    this. The existence of this potential duplication reinforces the need
    for the department to continue to take firm actions to address IT
    duplication and inefficiencies.
    ---------------------------------------------------------------------------
        \19\ GAO, Information Technology: Departments of Defense and Energy
    Need to Address Potentially Duplicative Investments, GAO-12-241
    (Washington, DC: Feb 17, 2012).
        \20\ GAO, Information Technology: Key Federal Agencies Need to
    Address Potentially Duplicative Investments, GAO-13-718 (Washington,
    DC: Sep. 12, 2013).
    ---------------------------------------------------------------------------
        We recently reported \21\ and testified \22\ on PortfolioStat,
    including DOD's efforts to address duplication through the initiative.
    Specifically, we noted that, although OMB had previously stated that
    PortfolioStat was expected to result in savings of approximately $2.5
    billion through fiscal year 2015, the 26 DOD PortfolioStat initiatives
    alone, including data center consolidation, were expected by the
    department's CIO to save between $3.2 billion and $5.2 billion through
    fiscal year 2015, and to result in efficiencies between $1.3 billion
    and $2.2 billion per year beginning in fiscal year 2016. However, DOD
    was unable to show support for how all of these savings were
    calculated, citing a variety of reasons such as dependence on accurate
    reporting by departmental components and the lack of granular
    information from accounting systems. While recognizing the challenges
    the department faces in obtaining the support for consolidation
    opportunities identified by its components, we also noted that
    obtaining this information is critical to ensuring that planned savings
    and cost avoidance are realized.
    ---------------------------------------------------------------------------
        \21\ GAO, Information Technology: Additional OMB and Agency Actions
    Are Needed to Achieve Portfolio Savings, GAO-14-65 (Washington, DC:
    Nov. 6, 2013); and GAO-13-378.
        \22\ GAO-13-685T and GAO-13-627T.
    ---------------------------------------------------------------------------
        Accordingly, we recommended that DOD take steps to improve its
    PortfolioStat implementation. The department concurred with our
    recommendation to obtain support for estimated savings, but disagreed
    with our recommendation to fully describe the consolidation of
    commodity IT spending under the CIO in future OMB reporting. The
    department stated that it did not intend to follow OMB's guidance to
    consolidate commodity IT spending under the CIO. However, by not
    following OMB's guidance, DOD is missing an opportunity to achieve
    additional cost savings across the department.
        To manage its annual investment of over $39 billion in IT, DOD
    needs to leverage best practices, improve transparency of its major
    investments, and review troubled projects through TechStat reviews. To
    do so, DOD can use the common factors critical to the successful
    management of large-scale IT acquisitions, which should result in the
    more effective delivery of mission-critical systems. Further, DOD needs
    to continue to improve the accuracy of its information on the Dashboard
    in order to provide greater transparency and even more attention to the
    billions of dollars invested in troubled projects. In addition, more
    departmental TechStat reviews are needed to focus management attention
    on additional troubled projects and establish clear action items to
    turn the projects around or terminate them.
        With the possibility of over $5.3 billion in savings from the data
    center consolidation and PortfolioStat initiatives, DOD should continue
    to identify consolidation opportunities in both data centers and
    commodity IT. In addition, better support for the estimates of cost
    savings associated with the opportunities identified would increase the
    likelihood that these savings will be achieved.
        Chairwoman Shaheen, Ranking Member Ayotte, and members of the
    subcommittee, this completes my prepared statement. I would be pleased
    to respond to any questions that you may have at this time.
                     gao contact and staff acknowledgments
        If you or your staffs have any questions about this testimony,
    please contact me at (202) 512-9286 or at pownerd@gao.gov. Individuals
    who made key contributions to this testimony are Dave Hinchman
    (Assistant Director), Rebecca Eyler, and Kevin Walsh. (311404)

        Senator Shaheen. Thank you all very much both for being
    here and for your testimony, and for what I know will be a good
    discussion.
        I know that Senator Ayotte is going to address some of the
    questions that Mr. Powner raised in his testimony. When Mr.
    Powner says that none of the projects that are on the
    Dashboard--none of those are listed as high risk, is that
    because there is a genuine belief that none of them are high
    risk? I assume that means at risk of not coming to successful
    conclusion. Are you suggesting, Mr. Powner, that those projects
    are not working in the way they should when you describe high
    risk?
        Mr. Powner. I think in order to manage problem projects,
    you need to acknowledge you have a problem. So if you look at
    our review of the MAIS programs, there are 40 MAIS programs, I
    can identify several of those MAIS programs that clearly, I
    believe, should be red and should be managed aggressively as
    red projects so you get them back on track. They are
    overrunning. The schedules are being pushed out. I think if you
    acknowledge they are red, you govern those projects differently
    if you acknowledge that you have a problem. So that is what we
    would like to see. We would like to see more of those projects
    as red.
        There are 93 major investments. There are a lot of complex
    projects there. It is not that they are doing a bad job that
    they are red. There are red projects across programs. There are
    red projects in the private sector. But you cannot fix the
    problems unless you acknowledge you have a problem.
        Senator Shaheen. So can I ask if you would respond to that?
        Ms. Takai. Let me respond as it relates to the reporting on
    the Dashboard, and then Ms. McFarland can speak to some of the
    acquisition processes.
        First of all, I think I want to make sure that we
    acknowledge that there is a challenge for us in actually
    getting a clear rating in terms of a red, yellow, and green. I
    certainly do not want to walk away from the fact that it is a
    very difficult situation for us in terms of being sure that we
    have the right categorization and we are communicating that
    categorization correctly. So I want to make sure I make that
    statement.
        Second of all, I think to answer your question, certainly
    because of the categorization issues, I would not necessarily
    depict our current ratings that are out on the Dashboard as
    being 100 percent correct. That is right. We are now working on
    trying to do two things: number one, to get a better alignment
    of the way that we have been doing the ratings with the way the
    ratings have been defined in the OMB Dashboard. That is
    something, again because some of the complexities, we have not
    done. Ms. McFarland's organization and mine have been working
    on a new directive that will better define exactly what the
    status is.
        The second challenge and a part of doing----
        Senator Shaheen. Can I interrupt just a minute?
        Ms. Takai. Sure.
        Senator Shaheen. Are you in agreement with Mr. Powner that
    accurately reflecting the level of risk involved in a project
    is helpful in managing it properly?
        Ms. Takai. Yes, ma'am. Certainly it is important that we
    understand what the challenges are. However, I would add
    though, as Mr. Powner said, we do often recognize that our
    programs need attention. That is actually one of the big
    benefits of our current DOD 5000 process. It really does
    highlight where we have issues and where we need to take
    action. I think we need to make sure that the actions that we
    are taking are accurately reflected in our ratings, so that we
    have visibility of the actions we are taking going forward.
        Senator Shaheen. Is there something with respect to the way
    the ratings are done that make it particularly challenging for
    DOD, or will the 5000 process help identify that? What do you
    see as changing in order to more effectively be able to rate
    the risk involved with those projects?
        Ms. Takai. One of the challenges that I will comment on, I
    know Ms. McFarland will have a comment as well, is the way we
    rate programs and the judgments that we make on programs today
    are really driven by the 5000 process. They do not necessarily
    fit well with the quarterly reporting process that is part of
    what OMB and the OMB Dashboard have. Consequently, it tends to
    result in us having the same rating for a longer period of
    time. One of the things Ms. McFarland and I are working on is
    how to make sure that we have a rating structure that does not
    appear to be different from what is being reported in our
    milestone decision process in the DOD 5000. That has been one
    of our challenges to this point, and I think it is the effort
    that her organization and my organization are working together
    or to make sure we have better clarity.
        Ms. McFarland. Yes. Frankly, what Teri was talking about is
    what we are trying to change. When we just changed the 5000
    over the last couple of months, released the interim, some of
    the things that you have been highlighting, along with the
    ranking member, in terms of how to do IT acquisition, is
    changing our culture internally on how we look at risk.
        The challenge we have right now is that we have a system
    called the Defense Acquisition Management Information Research
    (DAMIR). It reports based on a very distinct approach from
    weapons systems. For us, we focus on cost, schedule, and
    performance. Risk is embedded in each, and we have multiple
    players who come in, the program manager, the OSD functional
    staff, and we all rate on a program. Those two from the
    standpoint of IT have to be aligned. Right now there is a
    difference in lexicon and how we think. We drafted a first
    effort to try to look at how we take and make those risk
    factors look the same so we do not report on two metrics and
    confuse people even more.
        Senator Shaheen. Do you work with the GAO as you are trying
    to make some of these alignments to best assess what is going
    on?
        Ms. Takai. Yes, ma'am. One of the things that we have been
    discussing is the way that we are looking at some of the
    ratings to make sure that they are aligned with the way the GAO
    is looking. Also, OMB is actually looking at those ratings
    because it is really a GAO reporting of what is in the OMB
    Dashboard. It is very important that we are consistent because
    otherwise the other concern I have is that if we are different,
    then if you go and look at another agency and you see a rating.
    You certainly do not want to hear DOD's ratings are a little
    different, which I am sure you hear a lot from us on other
    things.
        Senator Shaheen. No, we never hear that. [Laughter.]
        Ms. Takai. That is an important thing not only from the
    standpoint of us being aligned with OMB, but also so there is
    consistency of reporting so that when you look at the
    reporting, you are getting an accurate picture.
        Senator Shaheen. Thank you.
        Mr. Powner, did you want to add something to that?
        Mr. Powner. I would just add that the interim 5000
    guidance, I think, where you could tailor it to different types
    of acquisition software, intensive hardware, using an
    incremental approach, and the Dashboard were put in place to
    change culture and Government. Monthly ratings by a CIO is
    something that is a challenge for not only DOD but for others,
    but it is a good challenge. If you cannot do it in a month,
    strive to do it in a quarter, strive to do in 6 months. That is
    better than what we have gotten historically. It was a push,
    but I think it is the appropriate push.
        I would add that DOD has large acquisition in IT. There are
    a lot of IT acquisitions that are large and complex that need
    to follow the rigor of a 5000. Other IT can be acquired more
    incrementally. You still want rigor, but you do not necessarily
    have to have the exact rigor that you have with all the details
    in the 5000. Having that flexibility in the current interim
    guidance is very good. You hear about agile development or
    going incrementally.
        We have a report that I know Senator Ayotte is very
    involved with for the Senate Homeland Security and Governmental
    Affairs Committee, where we are looking at incremental
    development across the Federal Government. We took 37
    investments at DOD. OMB has some guidance that said everyone
    has to do everything in 6 months. One out of 37 at DOD is going
    to deliver in 6 months. DOD said that is unrealistic. I agree,
    but they said we will strive for 12 to 18 months. We said let
    us bump it up to 12 months. Of those 37 investments, only 10,
    so about a quarter of the investments, are going to deliver
    something in a year. So you still have a lot of projects that
    do not deliver anything for years, and that is the mode we need
    to get out of in the Government.
        Senator Shaheen. Thank you.
        Senator Ayotte, we have been talking about the IT
    Dashboard.
        Senator Ayotte. Thank you. I apologize, I had to leave for
    a minute.
        On the Dashboard issue, as I read the GAO report, I see
    that essentially we can save a pretty substantial amount of
    money. Then when I look at it, we are spending $39 billion on
    IT systems for DOD in fiscal year 2014. That is a huge amount
    of money. I see in your report, I am really fascinated, page 5
    where you basically say we have overlap, fragmentation, and we
    have unnecessary duplication so that there could be much more
    taxpayers' dollars saved if we could get that one issue right.
    You have probably already addressed this to some extent, but
    what do you think is the number one priority to get at at that
    issue, which is an issue rampant across Government? But here,
    we are talking about $39 billion just in 1 fiscal year, and
    that is a substantial amount of money that can go to other
    things.
        Mr. Powner. There is that initiative. It is called the
    Portfolio Stat that came out of OMB, and I believe DOD is
    probably one of the model agencies. They identified 26
    initiatives in all these categories that they claim can save
    between $3.2 billion and $5.2 billion by 2015. That is right
    around the corner, and that is a lot of money.
        The number one initiative out of those 26, Ranking Member
    Ayotte, is data center consolidation. To date, they have closed
    over 250 centers. Now, some of these are small closets and
    things like that, but there are some large centers that are
    closed. I can give you examples of those. They claim they have
    saved $875 million to date. By the end of fiscal year 2015,
    $3.1 billion. By the end of 2017, it approaches about $7
    billion. It is the model data center consolidation effort, if,
    in fact, they carry it through.
        I made a comment in my statement about how they need to
    track savings. There are always these comments that come up
    that we do not have the appropriate accounting systems, ways to
    calculate savings, and that kind of stuff. Use a cuff system.
    These numbers are so large. That cannot be an excuse for not
    tracking those savings. There are over $5 billion that we can
    save by the end of 2015. That is a lot of money that you can
    reinvest in other systems that are important or something else
    that is a priority for DOD.
        Senator Ayotte. Secretary McFarland, where are we in terms
    of tracking these savings? Or maybe Ms. Takai. Sorry if I am
    asking the wrong person.
        Ms. Takai. Yes, Senator. We are actually tracking the
    savings. We are tracking the data center closures, and we are
    tracking the savings on an ongoing basis.
        I will just give you an example of an area where NDAA
    language that we received actually is helping us. We are
    reviewing all data center expenditures, and they have to be
    approved by my office. It is not just a question of saving by
    closing down a data center, but we are actually eliminating
    some of the redundant spending that you just talked about. I
    will give you an example.
        In the first quarter of this year, Navy achieved a cost
    avoidance of $3.4 million by disapproving three requests. They
    would not have even known that those dollars were going to be
    spent if we did not have a very tight approval process right
    now. As you can see, if you just take three requests versus the
    number, quite frankly, that come across my desk on a daily
    basis, we are going to be achieving the savings.
        But I think the other thing I want to mention here is that
    in some cases these are cost avoidance, number one. They are
    not necessarily savings off the top line. Effectively, we were
    stopping spending.
        The second thing I would note is that some of these
    savings, as we are looking at them, are being included in the
    efficiencies numbers that you are already seeing as the
    Services are coming in to report on their budget. Perhaps they
    are not calling them out directly because they are not thinking
    of IT as being a big part of their expenditure. We are tracking
    it in a number of different ways.
        I will close by saying it is a challenge to track the
    savings because the expenditure at DOD is very decentralized
    and it is actually done at the point that the equipment is
    being purchased or the data center is being equipped. So one of
    our challenges is to be able to collect those dollars. But
    having said that, the fact that it is a challenge does not mean
    that I do not agree that we should be tracking it and that we
    should be racking it up.
        Senator Ayotte. It seems to me a priority, given the
    setting we find ourselves in, because the tracking of it is the
    motivation so that we have more accountability. Then we know
    that those dollars can be used for other, more viable purposes.
        So, Mr. Scheid, I wanted to ask you. When you testified,
    you talked about the situation of the audit readiness of DOD. I
    think you said that most will be audit ready by 2014. So is the
    Air Force still the problem child? Are they the worst offender?
    Can you break it down by Services?
        Mr. Scheid. I would not characterize it as a problem child
    or worst offender. I can go through the Services. In the
    testimony, I said while it is too soon to know for sure, we
    expect the budget statements to be auditable by September 2014.
        The Marine Corps is the pacesetter. They are out in front.
    They have already achieved a clean audit of their financial
    statements. The Department of the Navy follows right behind.
    They are best positioned or at low risk and have a mature
    system in place. The Army has installed probably the most
    comprehensive and modern automation through its Enterprise
    Resource Planning (ERP), and they are trying to leverage the
    investments to support the audit. The Air Force is, as you
    indicated, still struggling, and attempting to assert audit
    readiness with largely legacy systems. They are working through
    those legacy systems.
        Where we see a great deal of risk or more risk is in what
    we call the fourth estate, the fourth estate being the defense
    agencies and activities that are not particularly in a Military
    Service or attached to a Military Service. There we have, I
    think, 44 different entities, and half of them have already had
    a clean audit at one point or another. That would be like the
    Defense Finance and Accounting Services (DFAS), for example.
    But the others are all struggling with legacy systems and
    trying to just achieve the readiness.
        We work with the Comptroller very closely on this. I co-
    chair the Financial Improvements Audit Readiness (FIAR)
    Council. As I indicated, I am new to this area, but we are
    working with them to ensure that in particular, and this is my
    predecessor's work, the systems that support audit readiness
    are on track. We have had these authorities to monitor, track,
    and work on those systems for a few years and have done work
    with the Services to improve that.
        On the audit readiness, may I add one comment to the
    previous discussion? You indicated $39 billion of investments
    across DOD, which is a huge responsibility. About $7 billion of
    that are business systems that we have identified. They break
    down into about 1,200 individual systems.
        My predecessor and the office I am in now have instituted
    what we call the IBF to help bring some discipline to this
    business space. We align it or arrange it through functional
    strategies, which each have functional owners, functions as in
    human resources, acquisition, and so forth. Then we organize
    these systems into portfolios. The portfolios are reviewed
    annually in an investment review board.
        This process has helped the team reduce redundancies,
    identify where there are redundancies, reduce them, and
    identify where we should not be obligating funds. I indicated
    in my testimony, I think, we had cost avoidance of about $1
    billion through these two cycles, and we have stopped funding
    60 legacy systems. Of that $39 billion, the business systems
    has had increased scrutiny through this IBF that we have
    established and is getting some results. It is early days still
    and there is a lot of work ahead, but we are working in that
    direction.
        I hope, Senator, that answers your question also on the
    FIAR.
        Senator Ayotte. Yes, thank you. My time is up and I know we
    will have a chance for follow-up questions. Thank you.
        Senator Shaheen. Thank you.
        I would like to point out, relative to the consolidation of
    data center discussions, that in addition to the cost savings,
    part of that cost savings is significant energy savings, and so
    that is another benefit for doing the consolidation.
        Senator Donnelly?
        Senator Donnelly. Thank you, Madam Chairwoman.
        Mr. Powner, we talked about 93 projects on Dashboard.
    Secretary McFarland, are there goals and metrics for each of
    those 93 projects month-by-month where we are, how we are
    doing, and are we on target? Could I pull up a booklet and see
    exactly where we are in that project?
        Ms. McFarland. I will share this with Teresa.
        Of those 93, there is a certain number of them which we
    call MAIS, and for them, there are metrics. For the balance, I
    will turn it over to Teresa.
        Ms. Takai. Yes, sir, there are metrics for all of the
    projects that are on Dashboard. We do not necessarily track
    month-by-month. We track major milestones for each one of those
    projects, and the frequency of the milestones is dependent upon
    the size of the project and when they will have met particular
    deliverables.
        Senator Donnelly. Mr. Powner, do you think we have
    sufficient metrics in place on these projects to make sure that
    we are on target and on time?
        Mr. Powner. I believe DOD has internal metrics. I do not
    think where we are at on those metrics is transparent
    necessarily on Dashboard because the data is not updated.
        The other thing I would add, Senator Donnelly, is that
    there are some MAIS projects, nine of them that we are aware
    of, that are not on Dashboard. So, for instance, there is Navy
    Common Ground System. I do not see that on Dashboard. There is
    an Army Tactical Mission Command program. We did a scrub
    because we are doing the MAIS work for this committee right
    now, and it will be out at the end of the month. So I think
    there is a fundamental question. Have we captured all the
    investments and then do we actually have the right status of
    how they are performing? I think the answer to both those
    questions is no.
        Senator Donnelly. Let me ask this: in terms of best
    practices, I was just sitting here jotting down some names. I
    know DOD has concerns about security and stuff. Do folks from
    Amazon, Google, GE, Apple, or Microsoft come in and say, ``here
    are our best practices''?
        Ms. McFarland. Yes, we do. In fact, much of what we have
    been doing over the last couple of years to understand best
    practices has been through the industry consortiums, to
    understand what goes on and how to perform inside of
    acquisition better.
        Mr. Scheid. The DSB has been helpful in the past. They
    worked on the 804 report. Also, the Defense Business Board is
    composed of CEOs, COOs, and others that have insights into
    these programs. They do projects, studies, and analyses, and we
    benefit from that.
        Senator Donnelly. This may sound like a little bit of an
    offbeat question, but that is okay. Is there a need for all of
    this to be focused or located at DOD? Would it be
    disadvantageous if it were spread throughout the country or
    that we had some computer operations, for instance, in
    California, New Hampshire, Indiana, Pennsylvania, or other
    places?
        Ms. Takai. Actually, a very small, minute part of what we
    do is actually focused at DOD. Our data centers are spread
    throughout the country, which is actually part of the challenge
    of getting them consolidated, quite frankly, sir. Because they
    are at each base, post, camp, and station, and that is a bit of
    our challenge. The development processes, Ms. McFarland can
    speak to this, in fact, are not at DOD. They are most often
    near where the major focal point is as it relates to the
    business operation that is going to be benefiting from that
    system.
        Senator Donnelly. Okay.
        As we look at the systems going forward, one of the
    concerning things is counterfeit electronic parts, electronic
    chips, et cetera, and I was wondering what is being done in
    that area.
        Ms. McFarland. If you are not aware, sir, we actually have
    a Federal Acquisition Regulation----
        Senator Donnelly. I am.
        Ms. McFarland. Okay. We are doing quite a bit of work in
    that area. I came originally from the Missile Defense Agency
    which really brought to bear a lot of attention on that issue.
    For contractor accountability, we are holding them accountable
    for providing spare parts or any part that is counterfeit.
        Senator Donnelly. Okay. So there is identification on all
    of the parts that are going into the process.
        Ms. McFarland. That is the requirement.
        Senator Donnelly. Thank you, Madam Chairwoman.
        Senator Shaheen. Thank you, Senator Donnelly.
        Assistant Secretary McFarland, I want to go back to section
    804 that Senator Ayotte and I talked about, and you all have
    referenced. I am interested in the extent the efforts that are
    being undertaken now, with respect to trying to improve our
    acquisition programs, to build on what was done with section
    804. Can you, or Ms. Takai, talk about the extent to which your
    belief, that the reforms requested under section 804 have
    actually been implemented and how the current process builds on
    that? What was done? What was not done, maybe?
        Ms. McFarland. Yes, ma'am. I would say about 75 to 80
    percent of what the report to Congress discussed has been
    initiated and implemented. ``Implemented'' is not complete. As
    you are aware, the system has a slow progress, and many of the
    items within section 804 regard the early onset or the
    initiation of the program. So we have programs that did not
    benefit from those specific initiatives that are very important
    to make the products what we want them to be. We will be
    continuing to do cleanup in a lot of those areas.
        The programs that are coming forward I mentioned in my
    written testimony are programs that have shown success. We have
    demonstrated that we can reduce by 45 months the timelines for
    requirements by using IT Box compared to an earlier increment.
    A lot of the programs are now coming forward for our review
    that have demonstrated that they are taking a very close and
    precise look at what size of an increment they can build and
    field.
        One of the biggest hurdles that we had over the last few
    years was that people did not understand the full complexity of
    what they had to build, particularly in business systems where
    all of the interfaces and the exchange are very large. The
    enterprise exceeds the boundaries of just DOD. We interoperate
    with a lot of different agencies and activities. When we look
    through the lens of what section 804 put into place, I am
    seeing, and I am very cautiously optimistic, that those
    implementations will continue forward. They are strengthened in
    the new DOD 5000 directive, and we are seeing products and
    programs coming forward where we can actually review and
    institute them.
        On the second note, the Services are also very interested
    in this. You have probably paid attention to the news. There is
    a lot of activity within the Services that recognize the
    challenges in IT and they are putting their own personal focus
    on looking through what they have for those investments, where
    they are putting their people, and how they construct the
    programs. The Air Force just stood up a new board specifically
    to do that. We are putting emphasis on it. Can I say we are
    complete? No. We have a long way to go. The enterprise is huge.
        Senator Shaheen. To make it more concrete for my
    understanding, can you describe a particular project that you
    think, as a result of the section 804 changes, has
    characteristics that you are translating now as you are looking
    at the 5000 process and adopting some of those characteristics
    or guidelines?
        Ms. McFarland. Yes, I can. The integrated pay and personnel
    system for the Army came forward originally with a very
    complex, big bang theory on how it was going to deliver
    capability. After we went through the process with them, they
    reduced that sizing of increments to be discrete elements that
    show a manageable and deliverable product within each of these
    releases. They are short form. They have very distinct
    parameters that they can measure and identify and have been
    able to control costs that way.
        We have many different metrics that we are now putting in
    place related to this. One of the questions during program
    review I ask is: how many interfaces do you understand and what
    is it that your people will have to do to address the change?
    Much of what we do, particularly in defense business systems,
    is related to the people operating those pieces of gear. It is
    like using my kitchen sink for umpteen years and I am very
    familiar with it and you just put something in front of me that
    I do not understand, it still does everything according to the
    written requirement, but it is not familiar. I used to reach
    here and now I have to reach there. That is one of the biggest
    pieces for the success and failure of these systems.
        Another one, just from memory here. We have also rolled in
    on top of the section 804, the Better Buying Power initiatives.
    Are you familiar with those?
        Senator Shaheen. No.
        Ms. McFarland. One of the things that we have asked them to
    take a look inside of when they execute a program is once you
    have established what you think is the appropriate cost for
    delivering that, we build that into the independent cost
    estimate. We also ask the program managers and their teams to
    come in with what efforts they can do to take costs out of the
    program. As we look at their execution, they have to show
    discrete efforts that demonstrate some actual activity to look
    at reducing costs. It can be anything as simple as using a
    different contract type because it is more effective when I
    incentivize this contractor to deliver that methodology. We
    have a huge effort working with our people to change the
    culture to make it cost-effective.
        Another aspect is simply affordability. We have a lot of
    challenges explaining to people what affordability is.
    Affordability is not making it cost avoidance or savings.
    Affordability is understanding how much you have to spend on
    something, staying within that, and understanding the total
    ownership cost of something when you deliver it. Even though
    you may wish to deliver a capability inside of IT within a
    certain period of time, if you cannot afford it, look to find
    what you can afford that is meaningful that you can deliver.
        Senator Shaheen. What kind of educational development
    efforts go along with the kind of program implementation that
    you are talking about?
        Ms. McFarland. Prior to this position, I was the Defense
    Acquisition University's president, and one of the things that
    I did, because I had just come off of the team for Mr. Kendall
    and Dr. Carter, was trying to change the curriculum in the
    university to focus on how to build in cost consciousness.
    Oddly enough, this is a trip to the past. When I entered
    government service in the 1980s, we had much of what is
    considered today the new look at acquisition that is ongoing.
    It was post-Cold War thinking; how do I get money out of the
    system? We were working on things that I have an excellent book
    on called ``Design to Cost,'' for example. Myself and others
    were also focused on cost avoidance, and how you look at how to
    construct a cost-effective system. We are building that back
    into our training curriculum. It is not just for those students
    that come through because of the mandatory certification they
    have to take. We actually have mission assistance teams and
    rapid training teams that reach out to the major systems and
    commands to educate them.
        In addition, Dr. Carter, when he was the Under Secretary of
    Defense for Acquisition, Technology, and Logistics, Mr.
    Kendall, myself, and Alan Esteves actually go out to centers of
    excellence and centers of mass when it comes to acquisition.
    For example, last week I was down at Naval Air Station Patuxent
    River talking on a hot topic forum for about 2 hours with about
    350 acquisition professionals going through what they have to
    think about because it is truly critical thinking. The attitude
    of cost has to be thought of when you are doing a very complex
    system. In addition to all the demand signals we put on them
    for how to do acquisition, they have to also put that
    additional equation together.
        Senator Shaheen. I am over my time, but since it is just
    Senator Ayotte and I, maybe she will not mind if I ask a
    follow-up question.
        So given all that, the training that people are undergoing,
    and the focus, how is it that we can have a contract like the
    Air Force had that is $1 billion in and no deliverables?
        Ms. McFarland. This is an incredible human endeavor. That
    program was started around 2002 and it was done during a period
    of time when we were waking up to the huge investment in IT. At
    that time, it was the tail end of when we were thinking of
    acquisition through the large systems integrator, where we had
    decided that it was more useful to put essentially the business
    of doing acquisition in industry's hands. In other words, we
    had decided that industry could do it better.
        Unfortunately, that did not work. There was also a great
    deal of perverse incentives in that program. If you had an
    opportunity to read the root cause assessment that was
    submitted to Senator McCain, it talks about this. If you were
    to take the Weapons Systems Acquisition Reform Act, it talks
    about six parameters and a seventh called ``other,'' and
    effectively it is what could go wrong on a program, and every
    one of them was met. Very negative.
        There was a lot of accountability across the entire
    spectrum of their program. It did not do business process
    reengineering. It gave the contractor the responsibility to
    develop the requirements and then build to them. In terms of
    how you manage constructively and contain constructively
    requirements, it was completely set wrong.
        Have we learned from that? Oh, yes. There is nothing more
    humbling than to see something like that happen and have it go
    on as long as it did. Have we rolled it into our business
    process engineering lessons? Yes. Have we rolled it into the
    school? Yes. Have we a long way to go? Yes.
        Senator Shaheen. Thank you.
        Senator Ayotte.
        Senator Ayotte. Thank you.
        In following up to that, we are talking about the ECSS
    system, and I wanted to get your impression, Mr. Powner, having
    just finished this draft GAO report, the impression of having
    heard about this one system. But we know that is not the only
    example. I want to just restate this is not an issue that is
    unique to DOD in terms of these systems, particularly with
    regard to IT systems. I wanted to get any thoughts you had on
    this.
        Mr. Powner. I think it is great that we are building into
    the curriculum, we are looking at lessons learned, and all
    those things. But this is where governance plays a factor. You
    have an investment board and you have executives who are in
    charge of these programs; Mr. Scheid mentioned the IBF. The IBF
    is darned good. It is a portfolio-based approach and if you
    followed it, less programs would fail.
        But someone at some high level on these boards needs to ask
    questions. Is the Government defining the requirements and not
    the contractor? Are we going with an incremental approach? Are
    we validating those requirements? Is the business on board?
    Because the business was not on board for ECSS. These are
    basic, fundamental questions that do not really have a whole
    lot to do with IT. It is more management stuff, and that is
    what governance is all about. We see, not only at DOD but
    across the Federal Government, poor governance in an executive
    level and program offices start doing things at this detailed
    level without the appropriate executive oversight. This is an
    executive issue. That is why we fully endorse putting the CIO
    picture next to each investment on the Dashboard, and if the
    CIO is not the appropriate person, put the appropriate person
    who is the right executive of that department or agency.
        Senator Ayotte. As I understand it, in 2011, the Institute
    for Defense Analyses wrote a report titled: ``Assessment of DOD
    ERP Business Systems.'' One of the primary findings spoke to
    this issue of leadership, that acquisition programs require
    that a single accountable leader has the span of control to
    define, implement, and execute the end-to-end business process
    the IT investment is intended to support.
        I think I have asked this in the larger hearing as well.
    For a system like ECSS, was there one accountable leader? Was
    anyone held accountable for the failures? Because it seems to
    me that you have these major systems and how often are saying
    you are responsible and then holding people accountable? Can
    you speak to that, Secretary McFarland, and how that culture
    obviously helps get better results for the taxpayers?
        Ms. McFarland. In terms of who and what was held
    accountable, obviously the contractor was one of the principal
    people held accountable. In terms of us, yes. We reconstructed
    that organization. When the program was terminated, the Air
    Force took it very seriously, and they are now trying to
    reorganize to determine how to execute a follow-on system
    because the ECSS's capability is still required.
        In terms of how you are setting yourselves up for the
    future, it was an integral part of why we made the changes. In
    terms of how we are looking at changes since the 2010
    implementation of section 804, a lot of those obviously
    problematic areas were incorporated into what we are doing in
    terms of business process reengineering in terms of governance.
        Senator Ayotte. I wanted to follow up, Mr. Scheid, as well
    on the audit issue. Certainly on this issue, when you listed
    the Services and where they were with regard to the audit
    situation, as well as the 44 entities that are outside the
    Services, you had the Air Force fourth in terms of the
    Services. So how are we going to get the Air Force up to speed
    to be audit ready.
        Next, I think it would be helpful for this subcommittee to
    understand the 44. I know you know them. I do not know them. I
    would like to have a list of the 44 that are not in an update.
    You said half of them have actually been able to meet an audit
    in the past. Which ones do you feel are most at risk?
    Understanding that each Service Chief is going to have
    responsibility for the Services, certainly the Secretary as a
    whole and DOD is responsible for these other entities. I can
    understand why they would be even more vulnerable. I think a
    report to us on that would be helpful for us to understand, as
    we look at this audit issue.
        Senator Shaheen. I agree. Perhaps you could provide that to
    the subcommittee.
        Mr. Scheid. Yes. I will provide the list. Now that I am
    thinking about it, some of those 44 may be captured in the
    Washington Headquarters Services (WHS). That is that one entity
    that works for many offices.
        Senator Ayotte. In DOD?
        Mr. Scheid. In DOD, yes. They are outside the OSD.
        Let me provide that list. They are agencies and activities,
    and some of these activities are small and for audit purposes
    they are rolled up into other entities like WHS.
        But an agency like DFAS is not in a Service. It is outside
    and it is in this fourth estate that we call it. They have been
    audited. I believe the number of years is 14 years. They are
    largely personnel. It is salaries. In terms of meeting the
    audit requirements, it is relatively simple as compared to a
    large organization with different activities.
        [The information referred to follows:]

        We maintain a list of 46 Department of Defense entities that fall
    outside the Military Services. We informally refer to this grouping as
    the ``fourth estate.''
    Office of the Secretary of Defense:

         1.  Office of the Under Secretary of Defense (Acquisition,
    Technology, and Logistics) (OUSD(AT&L))
         2.  Office of the Under Secretary of Defense (Comptroller)
    (OUSD(C))
         3.  Office of the Under Secretary of Defense (Intelligence)
    (OUSD(I))
         4.  Office of the Under Secretary of Defense (Personnel and
    Readiness) (OUSD(P&R))
         5.  Office of the Under Secretary of Defense (Policy) (OUSD(P))
         6.  Office of the Deputy Chief Management Officer (DCMO)
         7.  Office of the General Counsel of the Department of Defense
    (OGC)
         8.  Office of the Inspector General of the Department of Defense
    (OIG)
         9.  Director of Cost Assessment and Program Evaluation (D,CAPE)
        10.  Director of Operational Test and Evaluation (DOT&E)
        11.  Assistant to the Secretary of Defense for Intelligence
    Oversight (ATSD(IO))
        12.  Assistant Secretary of Defense for Legislative Affairs (ASD
    (LA))
        13.  Assistant to the Secretary of Defense for Public Affairs (ASD
    (PA))
        14.  Department of Defense Chief Information Officer (DoD CIO)
        15.  Director of Administration and Management (DA&M)
        16.  Office of the Director of Net Assessment (ONA)
    Defense Agencies:
        17.  Defense Advanced Research Projects Agency (DARPA)
        18.  Defense Commissary Agency (DeCA)
        19.  Defense Contract Audit Agency (DCAA)
        20.  Defense Contract Management Agency (DCMA)
        21.  Defense Finance and Accounting Service (DFAS)
        22.  Defense Health Agency (DHA)
        23.  Defense Information Systems Agency (DISA)
        24.  Defense Intelligence Agency (DIA)
        25.  Defense Legal Services Agency (DLSA)
        26.  Defense Logistics Agency (DLA)
        27.  Defense Security Cooperation Agency (DSCA)
        28.  Defense Security Service (DSS)
        29.  Defense Threat Reduction Agency (DTRA)
        30.  Missile Defense Agency (MDA)
        31.  National Geospatial-Intelligence Agency (NGA)
        32.  National Reconnaissance Office (NRO)
        33.  National Security Agency/Central Security Service (NSA/CSS)
        34.  Pentagon Force Protection Agency (PFPA)
    Department of Defense Field Agencies:
        35.  Defense Acquisition University (DAU)
        36.  Defense Human Resource Activity (DHRA)
        37.  Defense Media Activity (DMA)
        38.  Defense Prisoner of War/Missing Personnel Office (DPMO)
        39.  Defense Technical Information Center (DTIC)
        40.  Defense Technology Security Administration (DTSA)
        41.  Department of Defense Consolidated Adjudications Facility (DoD
    CAF)
        42.  Department of Defense Education Activity (DoDEA)
        43.  Office of Economic Adjustment (OEA)
        44.  Task Force for Business and Stability Operations (TFBSO)
        45.  Test Resource Management Center (TRMC)
        46.  Washington Headquarters Service (WHS)

        The Defense Commissary Agency, Defense Contract Audit Agency,
    Defense Finance and Accounting Service, and National Reconnaissance
    Office received favorable audit opinions for fiscal year 2013. In
    addition, the Military Retirement Fund, Medicare-Eligible Retiree
    Health Care Fund, and the Defense Health Agency-Contract Resource
    Management also received favorable audit opinions. In fiscal year 2012,
    the Defense Information Systems Agency and the Office of the Inspector
    General received favorable financial audit opinions.

        Mr. Scheid. On the status of the Air Force, I would prefer
    to take that for the record, if I may.
        Senator Ayotte. Sure.
        [The information referred to follows:]

        The Air Force is working hard to become audit ready. As Comptroller
    Hale relayed in his November 2013 Financial Improvement and Audit
    Readiness (FIAR) Plan Status Report, we do expect most of the
    Department's budget statements to be asserted as audit ready or be
    under audit by September 30, 2014. Significant challenges to audit
    readiness remain across the Department, while the Air Force is
    particularly impacted by the challenge of having to work largely in a
    legacy environment. The long-term plan to mitigate legacy system
    challenges is the full deployment of Defense Enterprise Accounting
    Management System (DEAMS). DEAMS will be fully deployed by 2017.
    Further exacerbating the Air Force challenges is the fact that its FIAR
    consulting contract was under protest for nearly 8 months, so the 2014
    goal for Air Force is particularly challenging.
        Although the Air Force is arguably the Service with the most risk,
    it is also sprinting to put itself in position. Air Force senior
    leaders have committed to doing everything possible to be audit ready
    by the end of fiscal year 2014. In order to minimize delays resulting
    from the FIAR support contract protest, the Air Force implemented a
    rigorous and systematic process for testing key financial controls
    throughout the year. Each month, it is testing various controls within
    its various business areas. In fiscal year 2013, the Air Force tested
    over 10,000 transactions, applying over 57,100 test attributes. It saw
    its success rates improve from 40 percent to 90 percent or better on
    many of the samples. These overall test results demonstrate the Air
    Force is developing controls to sustain audit readiness beyond 2014.
        The Air Force has also refined its FIAR execution strategy to focus
    on tracing a financial transaction from origination through reporting
    for each assessable unit--a ``walkthrough'' of the financial
    transaction process. The walkthroughs entail visits to the originating
    bases through the major commands and the Defense Finance and Accounting
    Service. This allows the Air Force to leverage existing process
    documentation and control testing prepared by these command echelons,
    saving time and resources. The teams are able to identify and implement
    corrective actions and test mitigating or compensating controls early
    in the process.

        Mr. Scheid. One, because of my lack of experience just
    being in the seat for a few months, and two, to make sure you
    are not misled in any way by something.
        Senator Ayotte. I appreciate it.
        I have a specific question about audits. As I understand
    it, the NDAA for Fiscal Year 2010 charges the CMO of DOD, in
    consultation with the Comptroller, with revising a FIAR plan
    which describes that specific actions must be taken to ensure
    that the financial statements of DOD are validated and ready
    for audit by no later than September 30, 2017.
        As I understand it, there is an argument going on right now
    in DOD as to whether to include valuations of property as part
    of the audit which is required to be completed by 2018. Though
    establishing the value of a company's property certainly is
    very critical in the private sector, as I understand the
    argument within DOD right now, some are arguing that it may be
    less necessary to ascertain the value of property owned by DOD.
        I am not taking a side. I just want to get your opinion of
    what you think. What is your view on this debate? How
    significant of an additional undertaking is it to establish the
    values of property? How many additional auditors does it take?
    Does that take us down every M-16, every rucksack, if this
    requirement were lifted? I am not taking a position one way or
    the other. I want us to get the best information we can to make
    decisions on behalf of the taxpayers. Is this something that
    would help you meet your audit deadlines? I just want to hear
    the opinions of the group on this, particularly Mr. Scheid, and
    obviously if Mr. Powner has any opinion, I would be happy to
    have him weigh in as well. Is this a debate that you are aware
    of?
        Mr. Scheid. No, I am not aware of it. I would be glad to
    get more information on it.
        Senator Ayotte. Okay.
        [The information referred to follows:]

        I am not aware of a debate or argument going on within the
    Department of Defense (DOD) related to valuations of defense property.
        In order to achieve a clean opinion, DOD must adhere to federal
    financial accounting standards, which require that capital property be
    fairly valued. These current standards mandate that federal agencies
    report property and equipment assets at full acquisition cost. DOD
    recently published equipment valuation guidance, which provides options
    for valuing our assets and costs associated with this effort. The
    Comptroller will meet with each of DOD's components to determine which
    options work best within their standard business processes.
        DOD is committed to meeting its audit goals to include existence
    and completeness of all equipment assets. This will provide assurance
    of physical stewardship, control of assets, and information that is
    most meaningful to the management and our stakeholders. DOD is studying
    the cost of making and auditing property and equipment values; however,
    those costs are not yet known. We remain committed to becoming audit
    ready in a way that is cost effective.

        Mr. Scheid. I am aware that in the audit readiness timeline
    that I believe has been briefed to the subcommittee and others
    by Secretary Hale, that the mission critical asset's existence
    and the completeness audit readiness, the critical asset
    existence is part of this taking account of the physical
    properties, facilities, trucks, everything from aircraft to
    fire trucks and so forth.
        Senator Ayotte. Sorry to interrupt. I have had some people
    ask me if that means we have to get down to every screw. At
    least as I understand this debate, there is some consternation
    there.
        Mr. Scheid. I am not auditor. I am not an accountant. But
    there must be a limitation to that, particularly in such a
    large organization trying to get to an audit.
        Senator Ayotte. We are not trying to ask you to do
    something that would be unreasonable. What we want is things
    that would be helpful to the taxpayers.
        Mr. Scheid. Yes. This is part of the plan. I believe it is
    reasonable to expect us to deliver that account.
        If there is a debate in DOD, I do not want to speculate on
    it or contribute one way or the other to it. I would rather get
    you the facts on it.
        Senator Ayotte. Okay. I appreciate the follow-up on that.
    Thank you.
        Mr. Powner. I am not aware of the issue, but I have a
    colleague on our financial management team. If I could take
    that for the record, we can get back to you on that.
        Senator Ayotte. That would be great. Thank you.
        [The information referred to follows:]

        See answers to Questions for the Record 11-16.

        Senator Shaheen. Can I just ask Secretary McFarland or Ms.
    Takai, are either of you aware of this issue?
        Ms. McFarland. No, but it is fascinating.
        Senator Shaheen. Yes, it is.
        Ms. Takai. No, I am not aware either.
        Senator Shaheen. I want to go back to the issue that you
    raised, Ms. Takai, about the JIE because I am not sure that I
    quite understand either what this idea is, or what it is
    designed to do and how it should work. I wonder if you could
    talk a little bit more about that. Is this viewed as an agency-
    wide or a DOD-wide effort? Who is in charge of it, and how is
    it supposed to work?
        Ms. Takai. Perhaps I can start out with just a description,
    perhaps in a little bit more detail in terms of what it is.
        The effort is really around being able to take the money
    that we spend today, because I think as Mr. Scheid said, out of
    our $40 billion a year, a fairly large proportion of that is
    spent on just maintaining and upgrading our networks, our data
    centers, our servers that sit within those centers, as well as
    buying a fair amount of services from other companies. Then, of
    course, we have software purchases, which is software that
    basically runs the computers all the way up to the way we do
    email. The line, which gets a little bit fuzzy, is it falls
    short of, for instance, an ECSS or an equivalent system or
    financial system. What is it that is underneath it that, first,
    makes it run and, second, means that you can connect it? That
    connection means not only from a computer terminal but also how
    do you connect it from a mobile device and some of the newer
    technologies coming in? So, I think it is important to set that
    context.
        The next thing is that our infrastructure is, obviously,
    from a multiplicative standpoint, bigger than any industry. I
    was talking to some folks from AT&T the other night, and we
    concluded that AT&T and their worldwide network was probably
    maybe close to the equivalent of the Navy if you think about
    the size. So when we talked about the number of data centers, I
    think we also have to recognize that we have a U.S. number but
    we also have a deployed force and that exacerbates the issue.
        The challenge that we have with that is multiple. Today, we
    have what I would call fairly loose standards. In other words,
    my office puts out standards, but the way that the technologies
    are implemented can vary significantly not only from Service to
    Service, but because of our size, we are very decentralized.
    Each location will actually set up their own computers. They
    will set up their own firewalls and so on. All of that, I
    think, back to Senator Ayotte's point, is a part of what can
    certainly lead to redundancy. It can lead to competing
    technologies, and certainly that has multiple ramifications.
        Let me just say what the ramifications are. First of all,
    it means that when we try to defend our networks, that means
    that we have to see when there is an adversary on our network,
    and we have to be able to trace back and see where that
    adversary has gone. The way we are set up right now, you have
    to understand all of our networks to be able to actually do
    that, which of course is an impossible task. I think you have
    heard General Alexander say, given the way we are operating
    today, that is just impossible.
        The second thing is, we have different ways of operating
    our networks. We have some big operation centers, some small
    operation centers, and the same is true of help desks and so
    on, which again is redundancy and it also makes it very
    difficult to run.
        So the effort around JIE, as you mentioned, is not what we
    would call a program of record because, again, we are not
    suggesting that we need new money for this. We are suggesting
    that we need to take the money that we spend today and use that
    money to drive towards this standardization, this
    communization, this ability to eliminate the redundancy and to
    operate in a single way.
        The overall responsibility for that program is mine. The
    Secretary has designated that I am responsible for working with
    not only the Services but all of the component organizations in
    order for them to implement the JIE. As you could well imagine,
    that is a daunting and challenging task. We are part-way
    through that. The data center consolidation is one of our
    efforts in doing that. Our defense enterprise email that you
    may have heard is another area that we are focused on. But we
    have a suite of things in terms of the way we are doing some of
    our fairly detailed network configurations and so on that we
    are in the process of specifying and rolling out.
        The Services have just delivered to me, in fact, at the end
    of February their implementation plan because the challenge is
    just like all of the issues we have been talking about here. I
    can lay out ground rules, but clearly each of the Services has
    to have a plan for how they are going to implement because each
    of them are in different places in terms of how much they have
    standardized. Those plans have come back in and we are
    currently in the process of bringing those together.
        We also are expecting from all of our components plans to
    be completed at the end of March. We are going to actually look
    at how we are going to operate that.
        Let me give you a couple of concrete examples. We started
    with a concept of operations in Europe because Europe, between
    our U.S. European Command and U.S. Africa Command, as well as
    Navy support, had actually started down a path of doing
    consolidation. Through that, we have been able to bring up one
    single enterprise operation center, and they are in the process
    of shutting down. I do not have the exact number, some number
    of centers. This, of course, helps CYBERCOM because they will
    be able to work through that operation center, as well as we
    have a plan for which of the data centers in Europe will be
    closing as part of our data centers and then how it will be
    consolidating.
        Our second geographic area is U.S. Pacific Command (PACOM).
    Admiral Locklear has asked to be the second area. We have a set
    of workshops that are scheduled for the end of March/early
    April that will take advantage of the work that they have
    already started but make sure that the work in PACOM is aligned
    with the work that is happening in Europe.
        The complexity is that in PACOM we have every Service, and
    each Service has their own way of doing networks and data
    centers, and so they are going to come together in PACOM to
    actually come together on how they will do a joint
    implementation.
        The real complexity that we have here is that the funding
    sources come in from the Services. They each have a specific
    way of doing things. But the real benefit, in many ways, of
    JIE, which is why it is called ``joint,'' is actually in the
    combatant commanders who have to deal with the technologies
    coming in from each of the Services, and through the
    standardization, the concept is to ensure that we are operating
    in a much more uniform way than we are today.
        It is a huge effort. I do not want to minimize it at all.
    Many major corporations have done this. I can certainly cite
    many in Silicon Valley. Hewlett Packard has a major effort in
    this area. Oracle has internally. IBM, in fact several years
    ago, just went through the same kind of consolidation and
    bringing together. My background is State government, and State
    government is challenged as well, within their internal
    operations with every agency having their own.
        Senator Shaheen. Yes, we have experienced that.
        Ms. Takai. So if you think about what the challenges were
    at the State government level, which I know very well from my
    Michigan and California days, then you blow that up. My IT
    spend in California was about $5 million, and I had about 110
    CIOs that I was trying to bring together. Multiply that by our
    numbers here. I think you can see the size. But I think to
    Senator Ayotte's point, you can also see the opportunity if we
    can continue to move this forward.
        I really would come back to the comments that were made by
    GAO. This is not going to be a perfect process. It is not going
    to be a march that looks really exact and pretty, but it is, to
    some extent, to his point we are putting pressure on the
    organization to get better.
        I will make one last point. If we cannot get to some level
    of operating in a much more standardized fashion, it makes it
    so much harder, if not impossible, for us to move to new
    technologies like the cloud technology. I have often said that
    if I replace all of my disparate data centers with disparate
    clouds, I am actually not any farther ahead. I am actually in
    some ways increasing my complexity because now data centers
    that I own and run today, I will either be using a commercial
    cloud capability or a different cloud capability. It is really
    important that we get the standardization to happen so that
    then, to the point, I think, that Mr. Scheid made, we can move
    our business systems into cloud technologies. We can get the
    efficiencies, but we can also ensure that we have security in
    those solutions so that we do not have to be concerned about,
    not only the fact that we are getting more efficient, but we do
    not want to do that at the sacrifice of security.
        Senator Shaheen. That is helpful. Let me see if I can
    restate what I understand you to have said about the JIE now.
        It is an effort to standardize IT systems throughout DOD so
    that they are more efficient and better coordinated. Is that
    essentially what it is?
        Ms. Takai. That is correct.
        Senator Shaheen. It is under your portfolio.
        Ms. Takai. That is correct.
        Senator Shaheen. You talked about the consolidation. Is
    there a list of initiatives as part of that that you hope to
    accomplish and a timetable to do that?
        Ms. Takai. Yes, ma'am.
        Senator Shaheen. Different people are in charge of that.
    You said the budget for all of this will come through the
    various Services.
        Ms. Takai. That is correct.
        Senator Shaheen. So I assume that they have bought into
    this effort either directly or indirectly.
        Ms. Takai. We are working on that now, ma'am.
        Senator Shaheen. As you look in the short-term, say, over
    the next 2 years, 5 years, and 10 years, what are you hoping to
    accomplish within the next 2 years and where do you hope to be
    5 years from now?
        Ms. Takai. In the next 2 years, we are intending to
    implement two or three areas in the network, and certainly we
    can provide more detail. I do not want to get too technical in
    this discussion, but it is really to standardize the networks
    and certain areas of the networks. That is one of the things in
    the 2-year period.
        We will have a plan to finish on defense enterprise email.
        Senator Shaheen. Thank you very much.
        Senator Ayotte.
        Senator Ayotte. Thank you for working so hard on these
    issues. Thank you.
        Ms. Takai. Thank you.
        So those are a couple things in the 2-year period.
        In the 5-year period, I think as we mentioned, we are
    projected to close over 800 additional data centers by 2021.
    Actually, the rest of the figures that you have asked for are
    what I am expecting to get out of these implementation plans
    because I have asked each Service to come in. I have to take
    each Service's plan and then lay it out by geographic area so
    that I do not have conflicts between that. I think once I have
    all the implementation plans, I will have a better ability to
    tell you when, but I certainly can share with your staff today
    what our target numbers are for the categories that we are
    looking at. We have that and we are very happy to share that
    with you.
        Senator Shaheen. How is this effort integrated with the IT
    Dashboard and the work that OMB and GAO are tracking?
        Mr. Powner. Clearly this effort is integrated with the data
    center consolidation effort. I think that is one of the big
    parts of JIE. Again, just to reiterate, I think DOD has gotten
    off to a great start looking at data center consolidation, but
    again, it is just really important that we track those savings
    because they have already had significant savings to date. In
    some of the centers that I looked at that have been closed,
    there is some good stuff going on where you have centers that
    had 450 servers and you shut down 440 of them, all but 10.
    There are several stories like that. That is where we had
    unused capacity.
        When we do ask DOD, what is your average server
    utilization, they can answer the question. Many agencies
    cannot. Frankly, their average server utilization is higher
    than most, and they got the most savings. I know they are big,
    but there is a good news story here on data center
    consolidation. That is the one area on legacy spending I think
    needs the most focus and continued focus.
        Senator Shaheen. Good. That is encouraging, and it is a
    message that we should probably do a better job of trying to
    get out.
        I think one of the things that has been hard, certainly for
    me and I think it is true of some other Members of the Senate
    and Congress to understand, is why we have duplicate systems
    being built within the Air Force and the Army. I appreciate
    that some of that is history and tradition, but I think given
    the resource challenges that we are facing in the future, the
    effort to be more efficient with those systems is very
    important. I very much appreciate what you all are doing to
    accomplish that and hope that we can continue to help track
    those efforts so that we are better informed, and also so that
    we can look at how we can be helpful in that effort.
        I think given that we are hoping to be out by 4:30 p.m.,
    the one area that I would like to ask about has to do with the
    House of Representatives passing the Federal Information
    Technology Acquisition Reform Act (FITARA) because it is
    legislation that is designed to address some of the IT
    challenges that we are facing in the Federal Government. I
    wonder if you all could speak to what is in the FITARA
    legislation. It is my understanding that DOD already performs
    many of the requirements that are in that legislation. We
    already have a single Department CIO within DOD and whether
    this is legislation that would be helpful in the efforts to
    address the IT challenges that you are facing at DOD or whether
    you see it as redundant to what is already going on.
        Ms. Takai. Yes, ma'am, if I could speak to that. First of
    all, we certainly applaud the legislation from the standpoint
    of intent. I think again to the comments that Mr. Powner made,
    it is important to have transparency. It is important to have
    visibility even for us as CIOs in order to be able to better
    manage the overall expenditures. Again, we want to make sure
    that the intent of the bill, we think, is very good.
        Unfortunately, I think a couple of things. It looks to try
    to manage that by virtue of additional oversight. I think what
    you heard from my colleagues and I today is that we very
    strongly feel that it is in the processes that are implemented
    and it is in the measurements of how we are actually managing
    the process as opposed to an additional oversight. Many of the
    areas of oversight that were suggested in the bill are actually
    things that we report to OMB on today, and so additional
    reporting, I think, is a concern.
        Many of the items that were in that bill are actually the
    things that the Secretary has tasked us to do already in his
    direction that Mr. Scheid spoke of in his reorganization
    effort. Obviously, our concern is that if, in fact, those
    reporting requirements do not fit, then we could be in a very
    difficult situation of an oversight from the OMB Office of CIO,
    oversight as a result of this bill, and then oversight as it
    relates to the way we are fitting into what the Secretary has
    asked us to do.
        We are, again, more concerned about the implementation than
    the intent. We mentioned to your staff there are some areas
    where we believe that we could move forward with the intent,
    but do it in a little different way than the level of oversight
    that is suggested in the bill.
        Senator Shaheen. Mr. Powner, do you share that view of how
    the House-passed legislation might affect DOD?
        Mr. Powner. Yes. I think you need to be careful on the
    reporting. I agree with that because we want to get into good,
    solid management and not just reports. There are aspects of the
    bill that are very solid-like data center consolidation. There
    are separate bills on data center consolidation. The Dashboard
    is in there in a small way such as encouraging the movement to
    cloud. I think the CIO authority thing is a big issue because
    CIOs do not have the appropriate authority across the Federal
    Government. There is a fundamental question if you grant them
    authority by giving them budget authority, or do you make the
    CIOs earn it through having certain responsibilities associated
    with Dashboard and the like. That was the intent of Dashboard.
    If we get CIOs more engaged on all these major investments,
    they will be even more of a player at the table on the
    management team.
        Again, I think there are aspects of that bill that are very
    solid, and I think the question on oversight is basically to
    cut right to the chase, what happened. A lot of things that are
    in that bill are exactly what Ms. Takai is saying you are
    already doing because OMB put in place policies to do that.
    There is a fundamental question of whether OMB is doing the
    appropriate oversight of those policies. We have some issues
    with that. So I think Congress is saying if OMB is not going to
    oversee it, then we are going to oversee it.
        Bottom line on all this, let us make sure that we better
    manage IT acquisitions and have the right transparency and
    oversight, whether it is Dashboard or a similar mechanism, and
    let us manage the inefficiencies out of the legacy bucket
    because DOD spends $25 billion on legacy systems out of an $80
    billion spend. That is huge. You can see here that there are a
    lot of inefficiencies that we can tackle through duplicate
    systems and data center consolidation. That intent of the bill
    is spot-on to try to tackle those issues. How do you go about
    doing it? There are many ways of doing it. But let us not lose
    sight of the big things there.
        Senator Shaheen. I appreciate the comments that everybody
    has made. Is the reason to pass something like FITARA to
    address administrative changes that are going happen when we
    have a new Secretary of Defense, when we have a new CIO, when
    we have new leadership at DOD, GAO, and OMB? Is there a concern
    that the efforts that are underway now will change direction,
    will not go to completion? Is that something we should be
    concerned about as we are thinking about how to fully implement
    some of these efforts?
        Ms. Takai. I will speak for DOD, and certainly the other
    agencies are in a different situation. But it is really not a
    concern at DOD because the functions that the Secretary has
    tasked me for are actually incorporated in my ongoing charter
    and the charter for my organization. So the next person who
    comes into the position will start with a set of
    responsibilities. I think that there is a continuity from
    there.
        I will, though, make the comment, and I do want to follow
    up on an item that Mr. Powner spoke of and I think you spoke of
    as well, that the strategic relationship between the CIO and
    the head of the agency. Mr. Powner spoke about the importance
    of not only the CIO ownership but also of the ownership of
    senior executives in the organization. I think that is
    something that is important to reinforce in anything that we
    are looking at because I think we have seen with Clinger-Cohen
    that giving the CIO responsibility is great, but it needs to
    have that relationship.
        Certainly, I can speak for myself that Secretary Hagel has
    fully endorsed the JIE. He has issued that as part of his
    tasking to us in terms of what we are supposed to do. That kind
    of involvement, back to your question about getting everyone
    signed up, quite frankly without that, it would be potentially
    close to impossible, but having his endorsement and his
    involvement in it, as well as our Deputy Assistant Secretary
    and our former Deputy Secretary, has been really pivotal for
    us. So I think that that is an important part, and I think Mr.
    Powner spoke about that. But I would not want to lose that in
    this overall dialogue. It is really very critical.
        Senator Shaheen. Thank you all very much. I very much
    appreciate your testimony and look forward to continuing to
    work with you as you make these changes. Thank you very much,
    Mr. Powner, for your insights.
        We will keep the record of this hearing open until close of
    business on Friday for any other questions.
        The hearing is adjourned.
        [Whereupon, at 4:21 p.m., the subcommittee adjourned.]

        [Questions for the record with answers supplied follow:]
                    Question Submitted by Senator Tim Kaine
                    information technology workforce efforts
        1. Senator Kaine. Secretary McFarland and Ms. Takai, my first bill,
    the Troop Talent Act of 2013, provides avenues for Active Duty
    servicemembers to receive certifications for the skills they acquire
    through their military training as they transition to civilian life. As
    you both highlighted in your testimony, the Department of Defense (DOD)
    faces significant challenges finding and retaining personnel with
    sufficient training and expertise in information technology (IT). What
    specific efforts are being taken by DOD to ensure a mission-ready IT
    workforce?
        Ms. McFarland. Under Secretary of Defense (Acquisition, Technology,
    and Logistics) (USD(AT&L) Frank Kendall and DOD Chief Information
    Officer (CIO), Teresa Takai, jointly signed the IT Acquisition
    Workforce Strategic Plan in April 2012. The partnership aligns the IT
    acquisition workforce improvements to the larger and ongoing strategic
    efforts to strengthen and improve the entire Defense acquisition
    workforce.
        A key tenet of Under Secretary Kendall's Better Buying Power 2.0
    framework is to improve the professionalism of the total acquisition
    workforce; with respect to the IT segment of the total acquisition
    workforce, we have been working hard to accomplish that goal.
    Certification levels for the IT workforce improved from 39 percent in
    fiscal year 2011 to 61 percent in fiscal year 2013. In addition, as
    part of rebuilding the total acquisition workforce, DOD has
    deliberately increased the size of the IT (acquisition) workforce by 49
    percent since fiscal year 2008. Turnover rates have decreased by 2
    percent from fiscal year 2011 to fiscal year 2013.
        In addition to increasing the size of the workforce and improving
    certification rates, DOD has used the Defense Acquisition Workforce
    Development Fund (DAWDF) to fund the DOD Information Assurance
    Scholarships to create a cadre of cyber-informed IT acquisition
    professionals with degrees.
        As part of Secretary Kendall and Ms. Takai's partnership to
    continuously improve the workforce, they sponsor a standing joint
    working group that performs ongoing workforce planning, gap
    assessments, training reviews, and initiatives to enhance the IT
    workforce managing acquisitions. In 2012, the working group completed a
    competency model update and workforce competency assessments. The
    results are being used to improve training and planning for the
    workforce. Currently, the working group is partnering with the DOD
    engineering workforce working group and the Defense Acquisition
    University to ensure cyber competencies are integrated into training.
        Ms. Takai. Several strategies are in place to aid DOD in recruiting
    and retaining a skilled workforce. DOD currently uses a suite of
    civilian hiring authorities: the Federal Direct Hire Authority for the
    IT Management 2210 series, instituted by the Office of Personnel
    Management (OPM), which provides DOD and other Federal agencies some
    flexibility in recruiting information security professionals; Expedited
    Hiring Authority for the Defense Acquisition Workforce (including IT
    acquisition workforce professionals), provided by Congress to DOD
    through 2017; and DOD-specific, Cybersecurity Schedule A Hiring
    Authority, provided by OPM through December 2014, for select IT and
    non-IT civilian job series. These civilian authorities, along with
    military and civilian recruiting and retention bonuses, are used to
    recruit and retain IT personnel and are essential to maintaining the
    health of this community. In addition to these programs, DOD has used
    the Information Assurance Scholarship Program for over a decade to
    award scholarships in IT/cybersecurity disciplines to almost 600
    individuals in exchange for service to DOD.
        DOD is currently in the initial stages of migrating its IT/
    cybersecurity workforce into a broader cyberspace workforce framework,
    which is aligned to the specialty areas established by the National
    Initiative for Cybersecurity Education. As part of this migration, DOD
    will work to achieve an integrated learning continuum that provides a
    variety of academic environments, including traditional classroom
    training; virtual training; hands-on laboratories; realistic,
    operational exercises using Information Assurance (IA) and cyber
    ranges; and postgraduate education opportunities in a variety of IT-
    associated disciplines. DOD is leveraging established training and
    education venues both internally and externally to maximize
    professional development opportunities for its evolving cyberspace
    workforce, and determining where gaps exist. One new initiative is our
    collaboration with the Joint Staff and the National Defense University
    on a cyber-centric Joint Professional Military Education program to
    educate military and civilian leaders on key cyberspace tenets.
                                     ______

                 Questions Submitted by Senator Joe Manchin III
                            military health records
        2. Senator Manchin. Secretary McFarland, last year the committee
    expressed concerns with the progress made on military electronic health
    records. It is my understanding that DOD has created a new acquisition
    process to prepare for the next generation of health record systems for
    the military. Please outline DOD's new acquisition framework currently
    underway, along with your expected timeline, and how this new process
    will ensure success and efficiency.
        Ms. McFarland. DOD has updated the DOD Instruction (DODI) 5000.02
    acquisition policy that replaced the Business Capability Lifecycle
    (BCL) Model that was previously used for the modernization of the
    military Electronic Health Records (EHR) but ensures rapid, tailored
    processes to deliver capabilities in keeping with the BCL concept.
    However, the DOD Healthcare Management Systems Modernization (DHMSM)
    Program's acquisition strategy remains unchanged. The program's
    acquisition strategy was approved on March 17, 2014. The strategy
    supports a full and open competitive approach for acquiring a
    replacement for the Military Health System legacy systems to include
    the DOD's interoperability objectives. The DHMSM acquisition strategy
    is consistent with the DODI 5000.02 and capitalizes on the robust and
    highly competitive health IT commercial marketplace.

        3. Senator Manchin. Secretary McFarland, I understand that you have
    held 2 industry days to gauge interest and assess capabilities. Do you
    have concerns with industry's capability to deliver the necessary
    capabilities required with this system?
        Ms. McFarland. Since October 2013, the DHMSM Program Office has
    conducted 3 well-attended and highly anticipated Industry Days (October
    31, 2013; December 4, 2013; February 19, 2014). The last 2 Industry
    Days were hosted at the Ronald Reagan Building and International Trade
    Center in Washington, DC, with each attended by over 500 interested
    health care professionals representing over 200 companies and
    Government organizations.
        The intent of these Industry Days is to interact frequently with
    interested healthcare companies to gauge and enhance their
    understanding of the DHMSM requirement; which includes the replacement
    of DOD's EHR system. These Industry Days are strategically aligned with
    the release of an iterative set of draft Request for Proposals (RFP)
    which provide interested contractors and healthcare providers early and
    frequent exposure to the Government's evolving DHMSM requirements.
    These early introductions to our ongoing requirements development
    efforts, in advance of a final RFP, will serve to greatly enhance
    prospective offerors and/or interested parties understanding of the
    Government's future requirements while reducing ambiguity. This draft
    RFP process also affords industry an opportunity to offer comments,
    suggestions, and/or pose questions regarding any element of the RFP.
    Additionally, in conjunction and coordination with the draft RFP
    release process, the Government has issued a number of targeted
    Requests for Information to industry to support the technical and
    functional viability determinations regarding industry capablilities in
    delivering a commercial EHR platform in fulfillment of DOD objectives.
    Finally, extensive market research and product assessments/
    demonstrations have been performed by the DHMSM team to ensure
    alignment of DOD requirements with market capabilities. The totality of
    the aforementioned assessment lends for the programmatic certainty that
    the commercial market is more than capable of delivering the requisite
    and desired capabilities.
        At the end of March, the DHMSM Program Office will release its
    second draft RFP and is committed to the continued release of drafts,
    and the holding of Industry Days until the Government is satisfied that
    industry has the requisite grasp of the DHMSM requirement; and is
    capable of accurately bidding to said requirement--the foundation of a
    successful competitive acquisition.
                                     ______

                  Questions Submitted by Senator Kelly Ayotte
                   programs that use an incremental approach
        4. Senator Ayotte. Mr. Powner, in your written testimony, you state
    that many ``poor-performing projects have often used a `big-bang'
    approach--that is, projects that are broadly scoped and aim to deliver
    capability several years after initiation.'' By contrast, you noted
    when Federal agencies used ``smaller increments, phases, or releases of
    larger projects'' they were far more successful. What DOD programs are
    using this incremental approach?
        Mr. Powner. Congress and the Office of Management and Budget (OMB)
    have called for agencies to deliver investments in smaller parts or
    increments. In 2010, OMB called for IT investments to deliver
    capabilities every 12 months, and since 2012, has required investments
    to deliver capabilities every 6 months. The preliminary results of our
    ongoing review of selected agencies' implementation of incremental
    development indicate that only 1 of 37 selected DOD investments plans
    to deliver functionality every 6 months and 10 others plan to deliver
    functionality every 12 months. In May 2014, we plan to issue a report
    requested by the Chair and Ranking Member of the Senate Committee on
    Homeland Security and Governmental Affairs that will contain greater
    detail. Once our report is released, we can provide further detail and
    brief your staff.

        5. Senator Ayotte. Mr. Powner, what programs are not using this
    incremental approach?
        Mr. Powner. As previously noted, the preliminary results of our
    ongoing work on selected DOD investments show that several investments
    have not implemented OMB's guidance on incremental development. These
    investments likely did not plan to deliver functionality in 6-12 months
    because DOD's budget guidance encouraged 12-18 month deliveries.\1\
    While DOD's recently issued acquisition framework calls for investments
    to use incremental development, it does not specify how frequently
    functionality should be delivered.\2\ According to officials at DOD's
    Office of the CIO, longer increments better align with DOD's
    acquisition framework. While we did not examine DOD's entire portfolio
    of IT investments, such guidance increases the likelihood that many of
    DOD's other investments are not following an incremental approach. We
    would be pleased to provide further detail and brief your staff once
    our report is issued in May 2014.
    ---------------------------------------------------------------------------
        \1\ See, for example, Office of the Secretary of DOD, Guidance for
    fiscal year 2013 IT Budget Submissions, Aug. 9, 2011.
        \2\ Defense Instruction Interim 5000.02, Operation of the Defense
    Acquisition System, Nov. 26, 2013.

        6. Senator Ayotte. Mr. Powner, how does DOD determine which
    approach to use for which program?
        Mr. Powner. DOD's acquisition framework includes incremental
    approaches to software development, but does not mandate its use or
    specify timelines for delivery of functionality. Instead, it offers a
    series of basic models which are to be tailored to the unique character
    of the product being acquired. All of the models contain requirements
    and product definition analysis, risk reduction, development, testing,
    production, deployment, and sustainment phases punctuated by major
    investment decisions at programmatic and contractual decision points.

                  proper training of acquisition professionals
        7. Senator Ayotte. Secretary McFarland, in November 2012, DOD
    launched its Better Buying Power 2.0 initiative. One of the most
    important changes from Better Buying Power 1.0 was greater emphasis on
    improving and professionalizing the acquisition workforce. Ensuring
    that DOD has a ``knowledge[able] and experienced IT workforce'' was
    also one the ``guiding principles'' of the 2010 DOD report to Congress
    titled, ``A New Approach for Delivering Information Technology
    Capabilities in the Department of Defense.'' However, the Omnibus
    Appropriations legislation only allocated approximately $51 million for
    DOD's Acquisition Workforce Development Fund, whereas section 1705 of
    title 10 authorizes the fund at $800 million for fiscal year 2014.
    Isn't investing in our acquisition workforce likely to pay for itself
    many times over in lower acquisition costs?
        Ms. McFarland. Yes. DOD supports Congress' continued and sustained
    investments in the defense acquisition workforce through the DAWDF.
    Even in the current austere fiscal environment, maintaining a cadre of
    highly qualified acquisition workforce is essential to executing
    critical missions in support of our Nation's defense. Reducing
    investments in the DAWDF and allowing our workforce and their skillsets
    to atrophy compromises our ability to effectively execute essential
    missions and may lead to long-term acquisition costs. For these
    reasons, continued investments in the defense acquisition workforce is
    the right strategy to improving acquisition outcomes, increasing buying
    power, and ensuring technological superiority for the warfighter.

        8. Senator Ayotte. Secretary McFarland, given some of the major
    acquisition failures in recent years, is $51 million a sufficient level
    of funding to ensure our acquisition workforce is sufficiently trained,
    especially in such technical areas as IT acquisition?
        Ms. McFarland. No, this level is not sufficient. The DAWDF, created
    by this committee, has been a major enabler of acquisition workforce
    improvements, including IT. We must sustain these recent workforce
    improvements and especially during austere times, we must continue
    training and efforts to strengthen the workforce we have. The
    President's fiscal year 2015 budget request of $212.9 million, in
    combination with other planned funding, is required to sustain and
    continue improvements. We appreciate the committee's longstanding
    record of support for a highly qualified acquisition workforce.

                             intellectual property
        9. Senator Ayotte. Secretary McFarland and Ms. Takai, one of DOD's
    most costly oversights has been the failure to secure data rights of
    the systems being acquired. The result is that DOD must pay significant
    sums to gain those rights in order to perform maintenance of upgrades
    to the system. I understand that the new interim DODI 5000.2,
    ``Operation of the Defense Acquisition System,'' includes an
    Intellectual Property (IP) strategy and a preference for open systems
    and architectures. Please explain the importance of the IP strategy and
    a preference for open systems and architectures.
        Ms. McFarland. IP issues present significant challenges for DOD
    programs in a variety of ways. For example, when acquiring commercial
    or proprietary technologies, the standard DFARS license rights do not
    permit DOD to use detailed technical data or computer software source
    code for competitive sustainment activities. In addition, even when DOD
    funds technology development that results in license rights sufficient
    for competitive sustainment, DOD has often been unable to realize an
    appropriate return on that investment by securing the necessary data
    deliverables at competitive prices. These adverse effects are
    exacerbated further in major system acquisitions involving a complex
    mix of DOD-funded and commercial/proprietary technologies that cannot
    readily be segregated from one another--resulting in the entire data
    package being effectively restricted as if it were all proprietary/
    commercial.
        Open Systems Architecture (OSA) describes a technical approach to
    system design that not only facilitates more effective operational
    configurations for systems, but also directly supports more effective
    management of the associated IP issues. More specifically, OSA focuses
    on modular system design, wherein discrete, functional components are
    linked to one another through well-defined interfaces, preferably using
    open standards to allow vendors and suppliers to offer competing
    solutions for the functional modules in a ``plug-and-play'' paradigm.
    This approach to technical design naturally results in the technical
    data and computer software code for the modules being more readily
    segregable from one another, avoiding or mitigating cases in which a
    commercial/proprietary module will restrict the use of a DOD-funded
    module.
        The IP strategy required by DODI 5000.02 will serve as a
    foundational mechanism to help identify and manage IP issues throughout
    the entire program life cycle. A key element in this approach is to
    take advantage of the inherent benefits of modular design approaches,
    such as OSA, to better maintain appropriate distinctions between DOD-
    funded technologies and proprietary/commercial technologies. This
    allows programs to implement an ``open business model'' approach, to
    proactively manage technology investments both from a legal standpoint
    (e.g., data rights), as well as a technical/operational standpoint
    (e.g., data deliverables, modular components linked through defined
    interfaces), ensuring the use of appropriate contractual mechanisms
    that will better achieve the programs' business objectives.
        In addition, the IP strategy will address one of the most
    challenging elements of managing IP issues--the timing. IP rights are
    allocated early in the process, when the technology is first developed
    or first delivered (e.g., at development or initial production);
    however, DOD might not have an operational need to exercise those IP
    rights (which requires the appropriate data deliverables) until much
    later in the program life cycle (e.g., reprocurement, technical
    upgrades, depot level maintenance). Historically, programs have not
    been equipped to plan effectively for such downstream needs, electing
    instead to delay the acquisition of data deliverables, or additional
    data rights to allow competition, until those later life cycle phases
    when the specific needs are more well-defined. This approach typically
    results in DOD seeking to acquire those data deliverables and/or
    license rights in noncompetitive environments.
        The IP strategy seeks to eliminate, or at least mitigate, these
    barriers to competition by requiring programs to initiate the IP
    strategy at the earliest stages in the program, requiring coordination
    and consistency with life cycle sustainment planning, and ensuring that
    the IP strategy is continuously updated throughout the entire program
    life cycle. With this overarching IP strategy in place, our programs
    will be better able to implement tactical measures (e.g., contract
    requirements, including priced options) to manage IP issues and remove
    barriers to downstream competition. DOD is working on a variety of
    mechanisms to provide training and guidance for the acquisition
    workforce on these considerations.
        Ms. Takai. IP issues can be best managed by addressing them as
    early in the acquisition process as possible. Within our Enterprise
    Software Initiative (ESI), we provide broad terms and conditions as
    part of a master software agreement for software acquired through ESI
    procurement vehicles. These broad terms and conditions can then be
    tailored and expanded to include specific requirements related to the
    software acquisition. The IP strategy in DODI 5000.02 is extremely
    important in that it will enforce the rigor of addressing IP issues
    early in the lifecycle to ensure the appropriate terms and conditions
    are established.
        OSA is an important aspect of addressing IP issues in that it
    relies upon non-proprietary interface standards that preclude the need
    to develop unique data exchanges. This requires that developers comply
    with the non-proprietary standards in the management of data associated
    with a capability thereby not locking DOD into a specific vendor
    solution for exchanging data.

                                  past reform
        10. Senator Ayotte. Secretary McFarland, Ms. Takai, and Mr. Scheid,
    DOD has made numerous efforts in the past to overhaul and improve its
    IT architecture, including the establishment of the Business
    Transformation Agency (BTA), by then Deputy Secretary of Defense Gordon
    England in 2005. Please describe what stumbling blocks these past DOD
    efforts encountered and what steps you are taking to eliminate them for
    the future.
        Ms. McFarland. DOD's report, ``A New Approach for Delivering
    Information Technology Capabilities in the Department of Defense'',
    from November 2010, identified a number of strategic initiatives that
    have been initiated or implemented in the areas of requirements,
    acquisition, and portfolio management intended to improve the delivery
    of IT capabilities. A summary of the DOD accomplishments in several
    areas related to IT acquisition are:

             Requirements: For warfighting requirements, DOD
            developed and matured the Joint Capability Integration and
            Development System IT box. The IT Box represents a major change
            for Information Systems (IS) requirements development by
            enabling the delegation of authorities to specifically support
            the more rapid timelines necessary for IT capabilities through
            the Defense Acquisition System process. For business system
            requirements, the Chairman of the Joint Chiefs of Staff
            delegated requirements validation authority to the Defense
            Business Council (DBC) providing DOD with a forum to align
            business system requirements with business strategies as well
            as laws, regulations, and policies that are unique to acquiring
            Defense Business Systems (DBS).
             Acquisition: Many of the acquisition-centric
            initiatives were included in the interim DODI 5000.02 released
            by the Deputy Secretary on November 26, 2013. Significant
            5000.02 changes include:

                     Acquisition Models: The interim DODI 5000.02
                    explains common models of acquisition in order to
                    provide program structures and procedures tailored to
                    the dominant characteristics of the product being
                    acquired and to unique program circumstances (e.g.,
                    risk and urgency). The models are: Hardware Intensive
                    Program, Defense Unique Software Intensive Program,
                    Incrementally Fielded Software Intensive Program,
                    Hybrid Program A (Hardware Dominant), Hybrid Program B
                    (Software Dominant), and an Accelerated Acquisition
                    Program.
                     Short Duration Projects: The templates in the
                    interim DODI 5000.02 aligned to acquisition models and
                    will enable and encourage shorter duration projects.
                     Tailoring: The interim DODI 5000.02 includes
                    guidance to adopt a modular, open-systems methodology
                    with heavy emphasis on ``design for change'' in order
                    to adapt to changing circumstances consistent with
                    commercial agile methodologies.

             IT Infrastructure: DOD is moving towards a common IT
            infrastructure known as the Joint Information Environment
            (JIE). Through the development of common architectures and
            standards and smart implementation of JIE, DOD is striving to
            improve mission effectiveness, increase cybersecurity, and
            realize IT efficiencies. Increment 1 of JIE is focused on
            establishment of core data centers operating behind approved
            single security architecture under the direction of enterprise
            operations centers.
             Portfolio Management: DOD has taken initial steps to
            organize IT systems into portfolios of capabilities starting
            with DBS. Section 901 of the National Defense Authorization Act
            (NDAA) for Fiscal Year 2012, codified at title 10, U.S.C.,
            section 2222, established DOD's single Investment Review Board
            (IRB), known as the DBC to manage DOD business operations
            including DBS spending. The DBC is managing a portfolio of
            approximately 1,180 DBS with an annual cost of $6.7 billion.
            The DBC continues to align planned DBS spending with business
            strategies and requirements retiring 60 DBS over the past 2
            years and identifying an additional 150 legacy DBS that are
            planned to retire over the next 3 years. For fiscal year 2014,
            the DBC decided not to certify for obligation requests totaling
            $617 million. Additionally, in response to section 933 of the
            NDAA for Fiscal Year 2011, DOD established the Cyber Investment
            Management Board to integrate processes, align strategies,
            assess resource requirements, and rapidly provide acquisition
            governance and portfolio management for cyber capabilities.

        Ms. Takai. Our existing IT environment consists of ``stovepipes of
    excellence'' where we have systems and infrastructure that have been
    designed to satisfy specific functions, but not necessarily designed
    and built to integrate or interoperate with other systems that do
    different functions. This has resulted in network and architectural
    complexity that is inefficient and hinders our ability to defend
    against cyber attacks.
        My office is leading a multi-year effort to restructure much of
    DOD's underlying network, computing, and cybersecurity so as to make us
    more agile in deploying new decision support capabilities, improve
    cybersecurity of our core DOD missions, and make us more efficient and
    better stewards of taxpayers' resources. This effort, the JIE, will
    improve the agility and responsiveness of our IT systems in support of
    our warfighters, and improve our ability to defend against cyber
    attacks. We are implementing JIE through and with the Services using
    DOD's existing core--requirements, budgeting, and acquisition process.
        This effort is based on DOD's leadership understanding that our IT
    infrastructure and systems are critical enablers for DOD operations.
    The support of both the Secretary of Defense and the Chairman of the
    Joint Chiefs of Staff has been, and will continue to be, critical to
    the success of this effort.
        Mr. Scheid. DOD continues to improve its business operations
    through efforts to better modernize, integrate, and govern its business
    IT systems. Over time, it became clear that the stumbling blocks to
    success in these improvements were related to the need for more
    comprehensive systems oversight and establishment of Department-wide
    governance. Recognizing these problems, in 2005 DOD created the BTA to
    provide oversight and establish governance mechanisms, including the
    Defense Business Systems Management Committee. Following enactment of
    the NDAA for Fiscal Year 2008, DOD created the position of the Deputy
    Chief Management Officer (DCMO), which further increased the oversight
    and level of visibility on DOD's business systems and processes.
    Changes to the law governing oversight of DBS through enactment of the
    NDAA for Fiscal Year 2012 further enhanced the governance of these
    systems.
        Currently, DOD is considering its next steps forward. As Secretary
    Hagel announced in December 2013, he wants to better align
    responsibility and accountability for IT systems under the CIO; while
    strengthening the role of the DCMO across DOD. These steps are intended
    to drive more efficient and effective business practices and make
    better use of scarce resources.

                          proper conduct of the audit
        11. Senator Ayotte. Mr. Scheid, section 1003 of the NDAA for Fiscal
    Year 2010 charges the Chief Management Officer of DOD, in consultation
    with the Comptroller, with devising a Financial Improvement and Audit
    Readiness plan which describes the specific actions which must be taken
    to ensure that the financial statements of DOD are validated as ready
    for audit by no later than September 30, 2017. Currently, there is an
    argument within DOD over whether to include valuations of property as
    part of the audit which is required to be completed in fiscal year
    2018. Though establishing the value of a company's property is critical
    in the private sector, some argue it may be less necessary to ascertain
    the value of property owned by DOD. They argue that the benefits of
    knowing the value of a destroyer, for example, does not warrant the
    amount of resources required to establish this value. What are your
    views on this debate?
        Mr. Scheid. There is no internal DOD argument or debate about
    whether or not property, plant, and equipment (PP&E) valuation should
    be undertaken. DOD intends to be compliant with the spirit and intent
    of the law to be audit ready in order to achieve a clean opinion. To do
    that, current Federal financial accounting standards require DOD to
    report PP&E assets at full acquisition cost. Given this, DOD has gone
    ahead and published equipment valuation guidance, with various options
    for valuing assets and costs associated with the audit effort.
    Components will determine which options work best within their standard
    business processes.
        A macro perspective would suggest that providing the value of DOD
    assets is prudent. The current value of DOD's PP&E represents more than
    71 percent of the PP&E values reported for fiscal year 2012 for the
    entire Federal Government. To omit DOD's valuations ignores a large
    portion of Federal PP&E.
        However, at a department level, it is questionable whether or not
    DOD would ever use valuations of its PP&E in future decisionmaking, to
    the extent that the practice would yield more worth or benefits than
    the cost of carrying out and maintaining these extremely complex
    enterprise-wide valuations themselves. DOD is not like the private
    sector, where a company's asset value plays an important role in
    characterizing its financial position. Further, it is not likely we
    would, for example, make operational judgments to send a task force
    into action based on the value of task force assets. DOD does believe,
    however, that there are certainly other elements of a PP&E audit, such
    as existence and completion, that could benefit DOD.

        12. Senator Ayotte. Mr. Scheid, would DOD use valuations of
    property?
        Mr. Scheid. At a department level, it is questionable whether or
    not DOD would ever use valuations of its PP&E in future decisionmaking,
    to the extent that the practice would yield more worth or benefits than
    the cost of carrying out and maintaining these extremely complex
    enterprise-wide valuations themselves. DOD is not like the private
    sector, where a company's asset value plays an important role in
    characterizing its financial position. Further, it is not likely we
    would, for example, make operational judgments to send a task force
    into action based on the value of task force assets. DOD does believe,
    however, that there are certainly other elements of a PP&E audit, such
    as existence and completion, that could benefit DOD.

        13. Senator Ayotte. Mr. Scheid, how significant of an additional
    undertaking is it to establish values for property?
        Mr. Scheid. The valuation aspect of auditability will require a
    significant investment of time and resources, one that DOD has never
    undertaken in full. Participation is not just by auditors, but by many
    people across DOD, in every functional area of the Defense business
    space, both horizontally and vertically. That said, I recognize how
    important this information is in reaching full auditability, as
    required by law. DOD is looking into the most cost effective approach
    to establishing values and complying with standards.

        14. Senator Ayotte. Mr. Scheid, how many additional auditors are
    required to establish these valuations?
        Mr. Scheid. DOD is studying the cost of making and auditing
    property and equipment values. Valuation is only one element in the
    audit of PP&E. The valuation effort will require not only auditors but
    also program managers, asset owners, and all other stakeholders to be
    accountable and determine a reasonable methodology of establishing
    values for their assets. This effort will require a significant
    investment of time and resources across DOD. The auditors will verify
    not only the estimated value, but also the existence of our property,
    whether we have inventoried and reported all of our equipment and
    property, and whether we own or have the right to use that property.
    Given the complexity of this effort, a large number of audit staff will
    likely be required to validate the existence of the property and assess
    the reasonableness of the valuation methodology developed by DOD.

        15. Senator Ayotte. Mr. Scheid, are we talking about every M-16 and
    rucksack, or are we talking about larger items, like F-16s and M-1
    tanks?
        Mr. Scheid. In most cases, we do not need to know the value of
    every item of equipment to perform our mission. Our current plan is to
    first compute values on our newer, high-value assets using actual costs
    or estimating methodologies that are permitted. Older assets will be
    valued, if deemed necessary. We do need to know depreciated value and
    remaining useful life of an asset as we make decisions that will shape
    valuation outcomes, such as disposition of equipment in theater.

        16. Senator Ayotte. Mr. Scheid, if this requirement were lifted,
    would it allow DOD to achieve key audit deadlines sooner and then to
    maintain that audit readiness less expensively?
        Mr. Scheid. Lifting the requirement would help but would not
    accelerate the target date, as there are other elements and processes
    associated with the financial statements that DOD is readying for
    audit. Less stringent requirements will certainly help with sustaining
    an audit ready environment once achieved.

                 5000.02 reissuance and the section 804 report
        17. Senator Ayotte. Secretary McFarland and Ms. Takai, section 804
    of the NDAA for Fiscal Year 2014 required the Secretary of Defense to
    develop and implement a new acquisition process for IT systems based
    upon the 2009 recommendations of the Defense Science Board (DSB). This
    resulted in a report from then Deputy Secretary of Defense, William
    Lynn, titled: ``A New Approach for Delivering Information Technology
    Capabilities.'' The report listed five Guiding Principles for crafting
    a new acquisition system. Those Guiding Principles included:

             Deliver Early and Often: on shifting the acquisition
            culture from one which focuses on a single delivery of a system
            to one which comprises multiple deliveries every 12 to 18
            months;
             Incremental and Iterative Development and Testing:
            which is very similar to ``deliver early and often'' but also
            calls for the use of prototyping and moving away from the
            deployment of a ``Big Bang'' approach;
             Rationalized Requirements: which seek to move away
            from customized solutions toward systems using open modular
            platforms based on established standards to ensure
            interoperability and seamless integration;
             Flexible/Tailored Process: specifically an acquisition
            process optimized for IT; and
             Knowledgeable and Experienced Workforce.

        Which of these Guiding Principles were incorporated in the DODI
    5000.02 reissuance and which were not?
        Ms. McFarland. The interim DODI 5000.02 issued on November 26,
    2013, includes a series of models that serve as examples of program
    structures tailored to the dominant characteristics of the product
    being acquired. One of those models is a very flexible process designed
    specifically for Incrementally Fielded Software Programs. As implied by
    the title, the model provides capability via a multi-increment
    approach. Each increment provides rapid delivery of capability through
    several ``limited fieldings'' in lieu of a single full deployment. Each
    limited fielding provides the user with mature and fully tested sub-
    elements of capability. Several limited fieldings will typically be
    necessary to satisfy requirements for an increment and several
    increments will be required to achieve the required capability. This
    model will apply to many IT programs and particularly to cases where
    commercial off-the-shelf software, such as commercial business systems
    with multiple modular capabilities, are acquired and adapted for DOD
    applications. I believe this model, combined with our continued
    commitment to acquire, train, and sustain a first-class acquisition
    workforce is consistent with the five Guiding Principles.
        Ms. Takai. The interim DODI 5000.02 includes guidance reflecting
    each of the five Guiding Principles and is consistent with the intent
    of the 2009 DSB recommendation. An overarching theme of the policy is
    that acquisition program strategies and oversight should be tailored to
    the unique characteristics of the product being acquired. The policy
    describes several acquisition models that accommodate a range of IT
    from command and control systems to those types of IT systems that
    require delivery of capability early and often. Model 3, Incrementally
    Fielded Software Intensive Program, specifically addresses the need to
    quickly deliver incremental and iterative IT capability that satisfies
    DOD's requirements. To meet the increased flexibility of the
    acquisition process, it is critical that the acquisition workforce
    continues to improve. The interim DODI 5000.02 includes minimum
    standards and expectations for the program management office and the
    entire acquisition chain of command.

        18. Senator Ayotte. Secretary McFarland and Ms. Takai, what more
    needs to be done to ensure these Guiding Principles guide DOD
    acquisitions?
        Ms. McFarland. We believe our acquisition policy is well-designed
    and consistent with the Guiding Principles. Our objective is to ensure
    that the policies are institutionalized, effectively employed, and
    achieve the outcomes expected. We will closely monitor and make
    adjustments, when needed.
        Ms. Takai. DOD recently issued guidance that establishes a policy
    framework consistent with the five Guiding Principles. My office will
    work with the office of the USD(AT&L) to ensure this new framework is
    incorporated into new IT acquisition programs and adjusted as necessary
    to ensure IT acquisitions are successful. Additionally, we will be
    working to ensure these concepts are integrated into our workforce
    training efforts.

        19. Senator Ayotte. Mr. Powner, to what degree do you believe these
    Guiding Principles are guiding DOD's IT acquisition processes?
        Mr. Powner. While DOD policies reflect its guiding principles, we
    have found that DOD's implementation of these principles needs to be
    more consistent. For example, as discussed earlier, the preliminary
    results of our ongoing work on selected agencies' implementation of
    incremental development indicate that DOD was lacking in areas related
    to two of these guiding principles (``Deliver Early and Often'' and
    ``Incremental and Iterative Development and Testing''). Specifically,
    only 1 of 37 selected DOD investments was delivering functionality
    every 6 months and departmental guidance was not consistent with OMB's
    guidance. We would be happy to share further details and brief your
    staff once our report is issued in May 2014. Similarly, our work on
    DOD's business systems modernization has found that DOD needs a more
    strategic approach to managing its human capital, which corresponds to
    the ``Knowledgeable and Experienced Workforce'' guiding principle.\3\
    ---------------------------------------------------------------------------
        \3\ GAO, DOD Business Systems Modernization: Further Actions Needed
    to Address Challenges and Improve Accountability, GAO-13-557
    (Washington, DC: May 17, 2013).

     DEPARTMENT OF DEFENSE AUTHORIZATION OF APPROPRIATIONS FOR FISCAL YEAR
                   2015 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                           WEDNESDAY, MARCH 26, 2014

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

                        CURRENT READINESS OF U.S. FORCES

        The subcommittee met, pursuant to notice, at 2:36 p.m. in
    room SR-232A, Russell Senate Office Building, Senator Jeanne
    Shaheen (chairwoman of the subcommittee) presiding.
        Committee members present: Senators Shaheen, Donnelly,
    Hirono, and Ayotte.

        OPENING STATEMENT OF SENATOR JEANNE SHAHEEN, CHAIRWOMAN

        Senator Shaheen. Good afternoon, everyone. I'm going to
    call this hearing to order. This is the Subcommittee on
    Readiness and Management Support, and thank our witnesses for
    being here, and also for your service to the country.
        I'm pleased to be joined by my colleague, the ranking
    member of the Readiness and Management Support Subcommittee,
    and, of course, the other New Hampshire Senator. We sometimes
    call this the New Hampshire Subcommittee. [Laughter.]
        Senator Ayotte. Exactly. [Laughter.]
        Senator Shaheen. Anyway, we are going to try and expedite
    opening statements this afternoon, because, as you may have
    heard, there are votes that are happening shortly. We want to
    get through as much of the testimony as we can before we have
    to recess to go vote and then come back. I will submit my
    testimony for the record.
        [The prepared statement of Senator Shaheen follows:]
                  Prepared Statement by Senator Jeanne Shaheen
        Good afternoon everyone. This hearing will come to order.
        We begin this subcommittee's second hearing of the year alongside
    my colleague from the Granite State. It is a pleasure to lead this
    subcommittee with Senator Ayotte, and I continue to appreciate her
    strong bipartisan support.
        We are joined this afternoon by a few familiar faces from last
    year's readiness hearing: General John F. Campbell, USA, Vice Chief of
    Staff of the Army; General John M. Paxton, Jr., USMC, Assistant
    Commandant of the Marine Corps; General Larry O. Spencer, USAF, Vice
    Chief of Staff of the Air Force; and Vice Admiral Philip H. Cullom,
    USN, Deputy Chief of Naval Operations (CNO) for Fleet Readiness and
    Logistics of the Navy. Gentlemen, I sincerely thank all of you for your
    dedicated and continued service to our country.
        Today, our Nation continues to face a broad range of threats. Last
    year's Bipartisan Budget Act did not fix our force readiness problem.
    It only temporarily stopped the hemorrhaging of readiness.
        Today, all of our Services are making tough choices as they
    struggle to meet their operational requirements while also addressing
    growing equipment and infrastructure maintenance backlogs. For example,
    the Navy's backlog of fleet and infrastructure maintenance requirements
    are growing exponentially. More than half of nondeployed Marine Corps
    units report degraded readiness in their ability to execute core
    missions. More than half of the Air Force's fighter squadrons are not
    prepared to support contingency requirements. And our Army can only
    provide a limited number of units trained for high-end, complex
    operations. The pain of sequestration is felt not only in our Active
    components, but in our National Guard and Reserve units as well.
        So, today, I am interested in hearing from today's witnesses if the
    fiscal year 2015 budget request begins to restore any quantifiable
    balance caused by sequestration and what, if any, capabilities and
    strategic we risk losing by failing to confront sequestration in future
    years.
        I want to thank Admiral Cullom and the Navy for last year's
    Shipyard Modernization Plan, which identified over $4.2 billion in
    facilities maintenance backlog. Yet, I remain concerned that it will
    take an estimated 17 years to complete the plan. And 3.4 percent for
    the Navy's capital investment program is frankly unacceptable, when at
    least 6 percent is required by law. While I understand our near-term
    readiness priorities often force additional risk to be taken in other
    areas, I continue to be concerned that the long-term viability of our
    domestic military installations remains in jeopardy.
        Despite these challenges, I remain confident that we still possess
    the strongest joint force in the world. We are fortunate to have four
    men that exemplify those virtues here with us today. Gentlemen, I thank
    you again for taking the time to join us and I look forward to an
    informative dialogue. We will include your full statements for the
    record, so please summarize your written statements so we can have more
    time for a discussion.

        Senator Shaheen. I would like to say at the start of the
    hearing, that we are all very saddened by the tragic events 2
    days ago at Naval Station Norfolk. It reminds us all of our
    collective responsibility to keep our shipyards and
    installations safe. I know there's an investigation going on,
    but, as we await the outcome of that, we certainly are all
    thinking about the families, the victims, and the shipmates who
    are affected by this tragedy, and our prayers go with them. I
    hope, Vice Admiral Cullom, that you will convey that to the
    Navy.
        I turn it over to my ranking member to see if she would
    like to make any comments.

                   STATEMENT OF SENATOR KELLY AYOTTE

        Senator Ayotte. Yes. First of all, I want to thank the
    chairwoman.
        I also want to pass along my condolences to those who have
    suffered at the Naval Station at Norfolk.
        I just want to thank you all for being here. This is a very
    important time for us, with what's happening around the world
    and with the challenges we face for our military.
        I will be submitting my statement for the record.
        [The prepared statement of Senator Ayotte follows:]
                   Prepared Statement by Senator Kelly Ayotte
        Thank you very much, Madam Chairwoman, I join you in welcoming our
    distinguished panel of witnesses and thank you for holding this
    important hearing.
        General Campbell, thank you for meeting with me yesterday. I want
    to thank you for your continued service and for the service of your
    entire family.
        At a time when our country confronts increasing--not decreasing--
    threats, I cannot think of a more important hearing topic than the
    readiness of U.S. forces.
        A small percentage of our fellow citizens voluntarily step forward
    to wear the uniform and protect our country. Congress has a sacred
    responsibility to make sure that those who have agreed to serve have
    the best possible training and equipment so that they can accomplish
    their missions, protect our country, and return home safely.
        When Congress fails to provide proper training and equipment, we
    risk being confronted with two unacceptable options: deploying troops
    into harm's way who are unprepared or failing to respond in a crisis
    when our national security interests require action. The first choice
    is immoral, and the second is dangerous.
        To avoid such horrible choices, we must have a defense budget that
    is based on our national security interests and the threats to those
    interests. When we fail to match our defense budget with the national
    security realities around us, the gap between the military our Nation
    has and the military our Nation needs grows.
        Unfortunately, I worry that is exactly where we are today.
                             a more dangerous world
        Any objective analysis of the global security environment
    demonstrates that the world is becoming more--not less--dangerous.
        In Iran, we see the world's worst state sponsor of terrorism,
    implementing a shrewd strategy to undermine hard-won international
    sanctions in return for only slowing its pursuit of a nuclear weapons
    capability from a run to a walk. Meanwhile, the Iranian regime
    continues to support Hezbollah and Hamas, while developing an
    intercontinental ballistic missile capability that could strike the
    United States in the coming years.
        In Syria, the conflict rages on with tens of thousands dead and no
    end in sight. The longer the fighting continues, the more foreign
    Islamist terrorists come to Syria, the more the conflict destabilizes
    the region, and the more the conflict there generates threats to our
    Homeland.
        Al Qaeda-affiliated groups and other terrorist groups--such as al
    Qaeda in the Arabian Peninsula, Boko Haram, and Ansar al-Sharia--far
    from being on the run, represent a continued threat. Terrorist groups
    are growing stronger throughout Africa and the broader Middle East.
        In North Korea, a young and unpredictable leader continues to
    expand the rogue state's nuclear program and develop ballistic missiles
    that could threaten the continental United States. Recently, North
    Korea--in a highly provocative act--launched two midrange missiles.
        Meanwhile, China is utilizing its growing economic wealth to create
    a modern military featuring fifth generation fighters, ``carrier
    killer'' missiles, and robust cyber capabilities. In fact, Secretary of
    Defense Hagel recently testified that with, ``. . . other nations
    pursuing comprehensive military modernization, we are entering an era
    where American dominance on the seas, in the skies, and in space [not
    to mention cyberspace] can no longer be taken for granted.''
                              decline in readiness
        Despite this sobering array of threats to our vital interests, we
    are significantly reducing our defense budget.
        While the 2-year budget agreement and the fiscal year 2014
    appropriation have provided the Pentagon some modest budget relief, the
    defense budget is still set to be reduced dramatically in the coming
    years.
        This mismatch between reality and our defense budget has resulted
    in a dangerous decline in readiness across all of the Services and
    throughout the geographic combatant commands.
        For example, in fiscal year 2013, budget constraints forced the
    Army to cancel essential major training exercises for several brigades,
    the Navy to cancel multiple ship deployments, and the Air Force to
    stand-down dozens of squadrons--including several combat-coded
    squadrons.
        We talk of a ``rebalance'' to the maritime-dominated Asia-Pacific
    region, but inadequate resourcing is forcing the Navy to only build two
    Virginia-class submarines a year. As a result, the size of the Navy's
    attack submarine fleet is scheduled to shrink significantly over the
    next decade and a half.
        About half of non-deployed Marine Corps units have reported
    degraded readiness due to equipment and personnel shortages.
        Not surprisingly, General Scaparrotti, the Commander of all U.S.
    Forces in Korea, expressed concerns yesterday about the readiness of
    follow-on forces if a major conflict were to begin on the Korean
    peninsula.
        General Scaparrotti also stated, ``I am concerned about shortfalls
    in critical areas including command, control, communications,
    computers, intelligence, surveillance, reconnaissance, missile defense,
    [and] critical munitions . . . ''
        Despite the fact that al Qaeda affiliates are proliferating
    throughout much of Africa, General Rodriguez, the Commander of Africa
    Command, testified recently that only a small portion of his
    intelligence, reconnaissance, and surveillance requirements are being
    met.
        These are just a few examples demonstrating the consequences of the
    mismatch between our defense budget and the threats we face.
                                   conclusion
        The best way to keep our country safe and prevent war is to be
    ready to fight one. Unfortunately, I fear our country's margin of
    safety is shrinking because there is a mismatch between our defense
    budget and the threats we face.
        I look forward to hearing our witnesses' assessment of the
    readiness of their respective Services.
        Thank you, Madam Chairwoman.

        Senator Ayotte. Most of all, I want to thank each of you
    for your leadership during very difficult times and challenging
    times, and the sacrifice not only you've made, but also your
    families. We look forward to the testimony today.
        Senator Shaheen. Thank you.
        Joining us this afternoon are: General John F. Campbell,
    USA, Vice Chief of Staff of the Army; General John M. Paxton,
    Jr., USMC, Assistant Commandant of the Marine Corps; General
    Larry O. Spencer, USAF, Vice Chief of Staff for the Air Force;
    and Vice Admiral Philip H. Cullom, USN, Deputy CNO for Fleet
    Readiness and Logistics of the Navy. I'm sure they sent you
    because Senator Ayotte and I were both here, and you know we'll
    ask you about the Portsmouth Naval Shipyard. [Laughter.]
        Thank you all very much. We'll begin with you, General
    Campbell.

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

        General Campbell. Ma'am, thank you very much.
        I have provided a written statement. I'd ask you take that
    for the record. I would like to provide some opening comments,
    though.
        Chairwoman Shaheen, Ranking Member Ayotte, thank you very
    much for the opportunity to come today and discuss the
    readiness of your U.S. Army. I appreciate your support and
    commitment to our soldiers, our Army civilians, our families,
    our wounded warriors, and our veterans.
        Today, the Army remains globally engaged with more than
    66,000 soldiers deployed, including about 32,000 in Afghanistan
    and about 85,000 forward-stationed in over 150 different
    countries.
        I'd like to start by thanking Congress for passing the
    fiscal year 2014 Consolidated Appropriations Act. This measure
    provided the Army some relief from previous defense spending
    caps, and gives us predictability in fiscal year 2014 and
    fiscal year 2015. While the restoration of some funding in
    fiscal year 2014 helps the Army restore readiness, it is not
    sufficient to fully eliminate the void in core capabilities
    created over the past decade of counterinsurgency operations,
    and made greater by sequestration. The current level of fiscal
    year 2015 funding will allow the Army to sustain the readiness
    levels achieved in fiscal year 2014, but will only generate the
    minimum readiness required to meet the Defense Strategic
    Guidance (DSG). The anticipated sequestration reductions in
    fiscal year 2016 and beyond severely degrade manning,
    readiness, and modernization efforts, and will not allow us to
    execute the DSG.
        To really understand our current and future readiness, I
    need to quickly provide context with what happened in fiscal
    year 2013. Due to fiscal year 2013 Budget Control Act (BCA)
    spending caps, the Army canceled seven Combat Training Center
    rotations and significantly reduced home-station training,
    negatively impacting the readiness and leader development of
    over two divisions' worth of soldiers. Additionally, 12 years
    of conflict have resulted in an extensive backlog in our
    leadership education and training programs due to reductions of
    schoolhouse capacity. Those lost opportunities only created a
    gap all the way from 2004 to 2011, because we were focused
    exclusively on counterinsurgency. In the event of a crisis,
    we'll deploy these units at a significantly lower readiness
    level, but our soldiers are adaptive and agile, and, over time,
    they will accomplish their mission. But, their success will
    come with a greater cost of higher casualties.
        Further results of sequestration in fiscal year 2013
    include the deferment of approximately $716 million of
    equipment reset into fiscal years 2014 and 2015. Sequestration
    also postponed the reset of nearly 700 vehicles, almost 2,000
    weapons, and over 10,000 pieces of communication equipment,
    Army pre-positioned stocks, and numerous soldier equipment and
    clothing items. The Army was forced to cut routine maintenance
    for nondeployed units, thereby creating an additional $73.5
    million in deferred maintenance costs that carried over to
    fiscal year 2014. All together, sequestration resulted in the
    release of nearly 2,600 civilian and contract personnel,
    eroding critical trade skills in fields such as engineering.
        Affordability is driving the need to reduce the total Army
    end strength and force structure. The Army is in the process of
    an accelerated drawdown to 490,000 in the Active component,
    350,000 in the Army National Guard, and 202,000 in the U.S.
    Army Reserve, by the end of fiscal year 2015. By the end of
    fiscal year 2017, we will further decrease end strength to
    450,000 in the Active, 335,000 in the Army National Guard, and
    195,000 in the Reserve component. These cuts are
    disproportionally on the Active Army, and they will reverse the
    force mix ratio, going from 51 percent Active and 49 percent
    Reserve in fiscal year 2012, to 46 percent Active and 54
    percent Reserve in fiscal year 2017. We'll have a greater
    preponderance in our Reserve component, both our National Guard
    and our Reserve.
        In conjunction with these rapid end-strength reductions,
    the Army is innovatively reorganizing the current operational
    force and eliminating excess headquarters infrastructure in
    order to provide greater combat power across remaining brigade
    combat teams (BCT). The Army will also restructure our aviation
    formation to achieve a leaner, more efficient, and capable
    force that balances operational capability and flexibility
    across the total Army.
        As we continue to draw down and restructure over the next 3
    to 4 years, the Army will have readiness and modernization
    deficiencies. Fiscal realities have caused us to implement
    tiered readiness as a bridging strategy. This concept refers to
    maintaining different parts of the Army at varying levels of
    preparation. Under tiered readiness, only 20 percent of the
    total operational force will conduct collective training to a
    level necessary to meet our strategic requirements, and we have
    accepted risk to the readiness of multifunctional and theater
    support brigades, as well as in home-station training,
    facilities, equipment sustainment, and modernization. Forces
    deployed in Afghanistan will be fully prepared for the security
    assistance mission, but not for other contingencies. Forward-
    stationed units in the Republic of Korea will remain ready, as
    will those dedicated to the Global Response Force.
        Uncertain and reduced funding has degraded our installation
    readiness and infrastructure. Base operation support levels
    remain under-resourced and need to be a future priority as
    additional funds become available.
        This year and next are critical to deciding the fate of
    what is the greatest Army in the world and could have
    significant implications on our Nation's security for years to
    come. Cuts implemented under the BCA and sequestration have
    significantly impaired our readiness.
        Further, I'm concerned about the impact to Army base funds
    in fiscal year 2015 if the Overseas Contingency Operations
    (OCO) budget request is not acted upon by the start of the
    fiscal year. Absent approval of OCO funding, we would be
    required to support OCO-funded missions with base funds, which
    would immediately begin degrading readiness across the total
    Army.
        As we continue to draw down the Army, I can assure you that
    precision, care, and compassion will be hallmarks of our
    process. Ultimately, the Army is about people. As we downsize,
    we are committed to taking care of those who have sacrificed
    for our Nation over the last 12 years of war. Required
    reductions will force out many quality, experienced soldiers.
    We have created the Soldier for Life Program to assist those
    departing and separating from the Army, and a Ready and
    Resilient Campaign to ensure that we care for our soldiers and
    their families, which ultimately improves our readiness. Our
    wounded warriors and our goals to our families remain a top
    priority, and we will protect programs that support their
    needs.
        I thank you again for your steadfast and generous support
    of the outstanding men and women of the U.S. Army. Please
    accept my written testimony for the record. I look forward to
    your questions.
        Thank you very much.
        [The prepared statement of General Campbell follows:]
                Prepared Statement by GEN. John F. Campbell, USA
                                  introduction
        Chairwoman 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, families, wounded warriors, and veterans.
        We live in a world that is as dangerous and unpredictable as it has
    ever been--from continued unrest in the Middle East, to proliferation
    of weapons of mass destruction, to the threat of non-state actors and
    transnational terrorist organizations. The Army remains engaged in
    worldwide contingencies with more than 66,000 U.S. Army soldiers from
    all three components--Active, Guard, and Reserve--deployed including
    nearly 32,000 in Afghanistan. In addition, about 85,000 soldiers are
    forward stationed across the globe in nearly 150 countries. The Army
    remains the best trained, equipped, and led land force in the world,
    although reduced funding levels are contributing to existing challenges
    in Army readiness. Together, we must ensure our force is trained and
    ready to prevent conflict, conduct shaping operations for our
    geographic combatant commanders, and if necessary, win decisively in a
    major combat operation while denying the objectives of--or imposing
    unacceptable costs on--an opportunistic aggressor in a second region.
        A trained and ready Army must be able to rapidly deploy, fight,
    sustain itself, and win decisively against complex state and non-state
    threats in austere environments and rugged terrain. Readiness is
    measured at both the service and unit level. Service readiness
    incorporates installations and the critical ability of the Army to
    provide the required capacities (units) with the requisite capabilities
    (readiness) to execute the missions required by combatant commands.
    Unit readiness is the combination of personnel, materiel and supplies,
    equipment, and training, that, when properly balanced, enables
    immediate and effective application of military power.
        In 2013, sequestration and unanticipated costs in Afghanistan
    resulted in declining readiness throughout the Total Army (Active Army,
    Army National Guard, and U.S. Army Reserve). It will take time to
    recover from the actions we took in 2013 due to sequestration, and a
    return to this method of budgeting would increase the risk to our
    soldiers by not adequately preparing them to fight our Nation's wars.
    We must maintain balance between the three critical areas of end
    strength, readiness, and modernization to avoid becoming a hollow Army.
    An example of a hollow Army is a large force that lacks adequate
    training and modernized equipment, and is therefore not as effective as
    a smaller, well-trained force with cutting-edge technology. Yet cutting
    too much manpower risks not having sufficient forces to fulfill our
    strategic mission and deter our enemies. If we are required to further
    reduce Total Army end strength to 420,000 in the Active component,
    315,000 in the Army National Guard, and 185,000 in the Army Reserve by
    the end of fiscal year 2019, we will be unable to execute the 2012
    Defense Strategic Guidance.
        We are at a critical juncture for readiness in our Army. In the
    past few months we have received relief from sequestration in fiscal
    year 2014 and fiscal year 2015, and are implementing a plan that builds
    readiness into a contingency response force that can partially mitigate
    current strategic and operational risks to combatant commanders. But
    with very tight constraints in fiscal year 2015, and potential
    sequestration in fiscal year 2016, readiness will quickly erode across
    the force. We must have predictable, sustained funding to ensure the
    necessary readiness to execute our operational requirements and the
    Defense Strategic Guidance.
        As we emerge from two wars the force is transitioning from training
    for the conflicts in Iraq and Afghanistan to a comprehensive and
    realistic decisive action training environment that features regular,
    irregular, and insurgent enemy forces. Sequestration in 2013 cancelled
    much of the essential training for this conversion, and while the
    Bipartisan Budget Act (BBA) gives us some relief and predictability for
    fiscal year 2014 and fiscal year 2015, unless Congress comes together
    to build on that model and provide additional relief in 2016 and
    beyond, we will face sequestration levels again, undermining this
    transition.
        Equipment modernization is a critical part of Army readiness and
    the decreasing budget has forced us to reassess many programs. The
    Army's equipment modernization strategy focuses on effectively using
    constrained resources for near-term requirements and tailoring our
    long-term investments to provide the right capabilities for soldiers in
    the future. Because of fiscal constraints, investments will focus on
    Science and Technology and incremental improvements to existing
    systems, with very few new start programs. If allowed to go into effect
    in 2016, sequestration-level spending caps would require a significant
    reduction to Army modernization accounts, with the majority of Army
    programs being affected. Major weapons programs would be delayed,
    impacting the industrial base both in the near and long term.
        Finally, it remains an Army priority to care for our soldiers,
    civilians, and family members who have sacrificed over the last 12
    years of war, and to build a resilient force ready to respond to a
    broad range of contingencies. While we will make every effort to
    protect soldier and family programs, they will be unavoidably affected
    by workforce reductions, cuts to sustainment funding, and challenges
    maintaining Army infrastructure.
        Our civilian workforce will also undergo a draw down concurrent
    with reductions to military end strength. Most have remained with us,
    but the impact of furloughs, pay freezes, and our inability to reward
    our most productive employees with performance-based bonuses has caused
    some of our highest quality civilians to seek employment in the private
    sector. We rely on our civilian teammates and these disruptions
    negatively affect Army readiness.
        The Army's foremost challenge is building rapidly deployable
    contingency capabilities in support of the combatant commanders while
    simultaneously reducing its size across all components and fulfilling
    the existing worldwide demand for forces. We need congressional support
    with adequate, predictable funding, and support for a Total Force
    solution during drawdown. Readiness must be maintained at acceptable
    levels and in balance with modernization and force structure. If it is
    not, we put soldiers at risk, and undermine our ability to deter our
    adversaries.
                           support the current fight
        Our top priority remains the readiness of units deploying to
    Afghanistan and elsewhere. These units will continue to receive the
    highest priorities for both Overseas Contingency Operation (OCO) funds
    and base budget requirements. The Army retains the capability to
    conduct Mission Readiness Exercises (MRE) at the Combat Training
    Centers (CTC) necessary to support forces deploying to Afghanistan or
    other theaters.
        There are six MREs scheduled at the CTCs in fiscal year 2014
    specifically focused on Security Force Assistance missions. It is
    important that Congress continues to provide sufficient OCO funding for
    our deploying forces.
        Retrograde of equipment from Afghanistan continues on pace and we
    are responsibly executing our duty to recover this materiel, but need
    sustained support. We identify the best, most modern equipment to
    recover and Reset for future contingencies. In February 2013, we had
    $28 billion worth of Army equipment in Afghanistan. Currently,
    approximately $15.5 billion worth of materiel remains in place, of
    which we plan to retain $10.2 billion. The Army will divest through
    foreign military sales utilizing Excess Defense Article transfers, or
    demilitarization of approximately $5 billion worth of equipment.
        A fully funded Army Reset program is critical to ensuring that
    equipment worn and damaged by prolonged conflict in harsh environments
    is recovered and restored for future Army requirements. We estimate the
    need for just over $6 billion to reset the remaining equipment from
    both conflicts. We have been consistent in our requests for OCO funds
    for at least 3 years after the last equipment is withdrawn from
    Afghanistan. The Army will need congressional support to complete this
    task that we believe is so important to responsibly ensuring future
    readiness.
                               current readiness
        The Army can currently provide only a limited number of available
    and ready brigade combat teams (BCT) trained for decisive action
    proficiency, which will steadily increase through fiscal year 2014 and
    the beginning of fiscal year 2015. While the Army's base budget
    decreased over the past 2 fiscal years, the Army's responsibilities
    under the Defense Strategic Guidance plus commitments to combatant
    commanders have not receded in commensurate amounts. While the
    restoration of some funding in fiscal year 2014 has helped arrest the
    decline in unit readiness, it has not been sufficient to fill the void
    in core capabilities created over the past decade of counterinsurgency
    operations and by sequestration. We will begin to rebuild readiness
    during fiscal year 2014 and fiscal year 2015 by continuing to focus
    resources on critical unit level training at the CTCs. However, this
    will come at the expense of home station training, installation
    support, and the reset of equipment for the Total Army.
        In order to achieve the most efficient readiness levels within our
    funding limits, the Army is implementing tiered readiness as a bridging
    strategy until more resources are made available. Under this strategy,
    only 20 percent of the total operational forces will conduct collective
    training to a level required to meet our strategic mission, with 80
    percent remaining at lower readiness levels. Unless National Guard and
    Reserve Forces are preparing for deployment, they will largely be
    funded for readiness at the individual, crew, and squad level. Forward
    stationed units in the Republic of Korea will remain ready, as will
    those dedicated to the Global Response Force. Forces deploying to
    Afghanistan will be fully trained for their security assistance mission
    but not for other contingencies. The Army is also concentrating
    resources on a contingency force of select Infantry, Armored, and
    Stryker BCTs, an aviation task force, and required enabling forces to
    meet potential unforeseen small scale operational requirements. The BBA
    improves the Army's ability to increase collective training in fiscal
    year 2014 and fiscal year 2015, but readiness will still take time to
    build.
               training and professional military education (pme)
        Training across the Total Army serves two main purposes: preparing
    units to support combatant commands worldwide and developing leaders
    who can adapt to the complex security environment. To meet demands
    across the full range of military operations, the Army will shift the
    focus of training to rebuilding warfighting core competencies. We are
    reinvigorating our CTCs to challenge and certify Army formations in a
    comprehensive and realistic Decisive Action/Unified Land Operations
    training environment that features regular, irregular, and insurgent
    enemy forces. We will conduct tough, realistic multi-echelon home-
    station training using a mix of live, virtual, and constructed methods
    to efficiently and effectively build soldier, leader, and unit
    competencies over time.
        From 2004 to 2011, all CTC rotations were focused on building
    readiness for assigned missions in a counterinsurgency environment.
    This shift impacted 5,500 company commanders, 2,700 field grade
    officers, and 1,000 battalion commanders. Recognizing the atrophy in
    Direct Action/Unified Land Operations training, the Army returned to
    conducting decisive action CTC rotations in 2011, with a plan to cycle
    nearly all Active Army BCTs by the end of fiscal year 2015 along with
    the requisite amount of Army National Guard BCTs. However, due to
    sequestration, the Army canceled seven CTC rotations in 2013 and
    significantly reduced home station training, negatively impacting the
    readiness and leader development of more than two divisions' worth of
    soldiers. Those lost opportunities only added to the gap created from
    2004 to 2011.
        Even with increased funding accommodated under the BBA, in fiscal
    year 2014 alone the Army will not be able to train a sufficient number
    of BCTs to adequately rebalance the force. Seventeen BCTs were
    originally scheduled to conduct a CTC rotation during fiscal year 2014.
    Current funding enables the addition of another 2 BCT rotations, for a
    total of 19 for the fiscal year. However, due to the timing of the
    additional funding, some BCTs were still unable to conduct a full
    training progression before executing a CTC rotation. Without the
    benefit of sufficient home station training, and with the years away
    from direct action, some BCTs begin the CTC rotation at a low level of
    proficiency and cannot maximize this training event.
        For example, 2nd Armored BCT of the 4th Infantry Division (2-4)
    returned to the National Training Center in 2013 for a direct action/
    unified land operations rotation, its first since 2002. In the interim,
    2-4 had conducted three MREs in preparation for deployments. The return
    to direct action in 2013 revealed that many tank platoon sergeants had
    never performed as a member of a tank crew, some company commanders had
    never maneuvered their units as a part of a combined arms team, and
    field grade officers often had no experience in combined arms maneuver.
    The lack of leader experience in these skills prevented two to four
    from achieving the maximum readiness that a CTC rotation would normally
    provide.
        For BCTs that do not conduct a CTC rotation, we are using available
    resources to train these formations to the highest possible proficiency
    level (roughly battalion-level). The Army will continue to prioritize
    unit training at the CTCs and the fiscal year 2015 budget allows for 19
    rotations.
        Leader development is one of the Army's highest priorities because
    the increasingly complex and dangerous global security environment
    requires well-trained leaders. The unpredictable nature of human
    conflict requires leaders to not only lead in close combat but to
    understand the operational and strategic environment, to include its
    socio-economic, cultural, and religious underpinnings. Our leaders must
    demonstrate the competence, proficiency and professional values
    necessary to achieve operational and strategic mission success. We must
    continue to educate and develop soldiers and civilians to grow the
    intellectual capacity to understand the complex contemporary security
    environment to better lead Army, Joint, Interagency, and Multinational
    task forces and teams. Therefore, we will reinvest and transform our
    institutional educational programs for officers and noncommissioned
    officers in order to prepare them for the complex future security
    environment.
        We are prioritizing our institutional educational programs for
    officers and noncommissioned officers. The fiscal year 2015 budget will
    provide for leader development by funding 8,900 officers to attend
    intermediate level education; 7,500 warrant officers to attend
    professional development schools; and 6,100 noncommissioned officers to
    attend their required professional military education. Additionally,
    the fiscal year 2015 budget increases Army civilian leader development
    and funds over 150 officers to attend the School of Advanced Military
    Studies. While funding for some joint education has declined, we are
    prioritizing quality instruction and instructor development.
                        regionally aligned forces (raf)
        The purpose of regional alignment is to improve the Army
    responsiveness in support of the combatant commands while remaining
    operationally available to respond to global contingencies. Regional
    alignment, therefore, provides combatant commands with mission-ready,
    tailored forces and capabilities that are further prepared with
    cultural, regional and language focused training. This improves the
    ability of these Army forces to work within the physical, cultural, and
    social environments and thus increases its overall readiness.
    Additionally, RAF keeps leaders and soldiers actively engaged
    internationally and acts as a positive retention tool.
        In fiscal year 2014 we continue to regionally align our Corps,
    Divisions, and BCTs. I Corps, stationed at Joint Base Lewis-McChord,
    WA, and assigned to U.S. Pacific Command, provides deployable mission
    command capability for contingencies and enhances an already strong
    Army presence in the Asia-Pacific region. III Corps, stationed at Fort
    Hood, TX, and 1st Armored Division headquarters, stationed at Fort
    Bliss, TX, are both aligned with U.S. Central Command. Active Army
    division Headquarters (HQ) will be habitually aligned to provide at
    least one Joint Force-capable HQ to each combatant command. This is
    perhaps the most important capability the Army is providing to
    geographic combatant commands, as the Division HQs can access a full
    range of capabilities from planning to specific enablers. An example of
    this is the 1st Armored Division, who deployed to Jordan as part of the
    joint exercise Eager Lion, having already coordinated with Central
    Command to understand the worsening crisis in Syria. From there, a
    tactical command post remained in Jordan to assist the Jordanians and
    other partners with a wide range of activities resulting from the mass
    humanitarian crisis to the north.
        For fiscal year 2013, several units below division-level were
    assigned or allocated to combatant commands. The 48th Infantry BCT,
    Georgia Army National Guard, is aligned with U.S. Southern Command and
    has deployed teams to several Central and South American countries. The
    2d Armored BCT, 1st Infantry Division (2-1), currently allocated to the
    U.S. Army Africa Command, is the first brigade task organized to the
    RAF mission. Since March 2013, they have conducted 71 missions in 35
    countries. For example, 2-1 helped train a Niger infantry battalion
    which was selected to participate in the African-led International
    Support Mission to Mali. Elements of 2-1 have also recently deployed to
    Juba, South Sudan to provide embassy protection.
        Maintaining Army readiness in the Pacific is essential to the
    execution of the National Security Strategy and demonstrates how
    regional engagement supports a ready force. Land forces remain the most
    important actors in the region, as the Pacific theater contains 7 of
    the world's 10 largest armies. The U.S. Army has 80,000 Active and
    Reserve troops assigned to or on the periphery of the region; in terms
    of manpower, the Army is the largest contributor to U.S. Pacific
    Command. Based on persistent threats of escalation with North Korea,
    the Army forces on the peninsula are currently maintaining a higher
    readiness posture, which is also an element of the Asia-Pacific
    Rebalance Strategy. The Army will maintain 19,500 soldiers in South
    Korea--partially including a rotating Combined Arms Battalion and its
    enablers--as a key part of the U.S. strategy to fulfill our alliance
    commitments and deter an increasingly unstable North Korea.
              force structure-end strength and total force policy
        Adequate numbers of personnel and properly organized units are
    critical to the Army's ability to remain ready and fulfill the Defense
    Strategic Guidance. The Army is committed to the Total Force Policy:
    the Active Army gives us responsiveness and flexibility; the Army
    National Guard and U.S. Army Reserve give us depth and endurance. Our
    Army is strongest with the contributions off all three components, in
    the right combination.
        Shaping 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. Army senior leaders
    are in constant dialogue with the heads of the National Guard and U.S.
    Army Reserve to manage reductions to all components. The Army must be
    able to implement prudent budgetary decisions in a timely manner to
    address funding cuts while producing the best possible force to meet
    strategic requirements. Delays in resourcing will require shifting of
    readiness funds to personnel accounts, further degrading readiness and
    contributing to the creation of a hollow Army.
        Under the fiscal year 2015 budget request, the Army will decrease
    end strength through fiscal year 2017 to a Total Army of 980,000
    soldiers--the Active component will be reduced to 450,000 soldiers, the
    Army National Guard to 335,000, and the U.S. Army Reserve to 195,000.
    The Army will be able to execute the 2012 Defense Strategic Guidance at
    this size and component mix, but it will be at significant risk. This
    reduction in end strength represents a 21 percent reduction in the size
    of the Active Army, a 5 percent reduction in the Reserve, and 6.4
    percent reduction in the National Guard since 2011, when the Army was
    at a war-time high on total end strength. These cuts largely impact the
    Active component and they will reverse the force mix ratio, going from
    a 51 percent Active component and 49 percent Reserve component mix in
    fiscal year 2012, to a 46 percent Active component and 54 percent
    Reserve component mix in fiscal year 2017.
        If sequestration-level cuts are imposed in 2016, the Army will be
    required to further reduce the Active component to approximately
    420,000 (26 percent), the Army National Guard to 315,000 (12 percent),
    and the U.S. Army Reserves to 185,000 (10 percent) in order to meet
    savings goals and avoid hollowness. Under these conditions, the Army
    will not be able to execute the 2012 Defense Strategic Guidance.
                              aviation restructure
        Aviation is a critically important part of the force and represents
    a large percentage of the Army budget. Instead of the across the board
    cuts imposed by sequestration in 2013, the Army sought an integrated,
    Total Army solution to reducing the costs of aviation, while preserving
    our most modern capabilities. With participation from representatives
    from all components, the Army developed a plan that will better meet
    the operational demands of our combatant commanders, sustain
    operational experience, and reduce costs. In the process, the Army
    aviation force will become smaller by 800 aircraft.
        We will divest three entire fleets of aging and costly aircraft,
    and realign and remission remaining modern aircraft to derive the most
    capability and capacity from a smaller force. We will consolidate all
    AH-64 Apache helicopters in the Active Army, where they will be teamed
    with unmanned aircraft systems for armed reconnaissance or continue
    their traditional attack role. The Active Army will transfer 111
    additional UH-60L Blackhawk helicopters to the Army National Guard and
    U.S. Army Reserve. These aircraft will significantly improve
    capabilities for support of the homeland mission, such as disaster
    response, while sustaining security and support capabilities to civil
    authorities in the states and territories. The UH-72 Lakota will
    replace the TH-67 as the next generation glass cockpit, dual engine
    training helicopter. We will transfer nearly all Active Army UH-72
    Lakota helicopters to our training base at Fort Rucker, AL, and will
    procure an additional 100 UH-72 Lakotas to support the initial entry
    rotary wing training fleet. At current funding levels, this approach
    will enable the Army National Guard to retain all of its 212 LUH-72
    aircraft for general support requirements as well as ongoing border
    security operations. The Active Army's overall helicopter fleet will
    decline by about 23 percent, or nearly 700 airframes, and the Army
    National Guard's fleet of helicopters will decline by 8 percent, or
    just over 100 airframes. The resulting Army aviation restructured force
    will retain our most capable and survivable combat power. Finally, this
    smaller, less expensive force will significantly increase the Army
    aviation capabilities most in demand by our Governors.
    Essential Investments: People and Equipment
        Soldiers, Families, and Army Civilians
        The size and scale of mandatory reductions in end strength may
    force the Army to separate many quality, experienced soldiers.
    Reenlistment quotas are lower, and Officer Separation Boards and
    Selective Early Retirement Boards are taking place for many officers.
    These started with Lieutenant Colonels and Colonels, and now we are
    looking at senior captains and majors in year groups that were assessed
    to support a larger force during the height of the two recent
    conflicts. This force reduction in the officer corps causes a loss of
    valuable leadership and combat experience and thus degrades readiness.
    To ensure we are caring for the needs of those who have served the
    Nation, the Chief of Staff of the Army created the Soldier for Life
    Program in 2012 to facilitate the successful reintegration of our
    soldiers, veterans, and their families into their post-Army careers.
    Our veterans are our best ambassadors and critical to sustaining the
    All-Volunteer Force.
        We will make every effort to protect our most important Family
    programs, but budget cuts are ultimately affecting every facet of the
    Army. To ensure we maintain our focus on rehabilitating, resetting, and
    reshaping the force after 12 years of conflict, we continue to develop
    the Ready and Resilient Campaign (R2C). The purpose of R2C is to
    establish an enduring cultural change that integrates resilience into
    how we build, strengthen, maintain, and assess total fitness,
    individual performance, and unit readiness. The Army's culture must
    embrace resilience as part of our profession and as a key and critical
    component to readiness. The campaign leverages and expands existing
    programs, synchronizing efforts to eliminate or reduce harmful and
    unhealthy behaviors such as suicide, sexual harassment and assault,
    bullying and hazing, substance abuse, and domestic violence. Perhaps
    most importantly, the campaign promotes positive, healthy behaviors
    while working to eliminate the stigma associated with asking for help.
    The Army recently published an update to the R2C order directing the
    incorporation of resilience into our holistic assessment of Soldier and
    Unit Readiness by establishing a unified system of performance
    measurement that will drive actions and culture change.
                                 modernization
        The Army's equipment modernization strategy plays a key role in
    future force readiness. Equipment modernization must address emerging
    threats in an increasingly sophisticated technological environment. The
    Army must maintain its ability to contend with such diverse threats as
    cyber attacks, electronic warfare, unmanned systems, chemical and
    biological agents, and air and missile threats. Yet significant
    budgetary constraints have forced the Army to make substantial
    reductions in modernization investments. Planned research, development,
    and acquisition (RDA) investments in fiscal year 2015 have declined 39
    percent since the fiscal year 2012 budget planning cycle. The Army's
    Equipment Modernization Strategy calls for a mix of divestiture of
    selected legacy systems, incremental upgrades to existing platforms,
    selected investment in new capabilities, and prioritized science and
    technology investments to mature and develop next-generation
    technologies. We have also allocated funding toward building the
    skilled workforce needed for future innovation.
        In the short-term, the Army remains focused on several efforts. We
    are reducing procurement to match force structure reductions. We will
    continue to apply business efficiencies such as multiyear contracts,
    planning for should-cost, and studies to facilitate smarter investing.
    We will tailor capabilities in development to meet requirements under
    affordability constraints. We will not transition four programs to the
    acquisition phase, to include the Ground Combat Vehicle and the Armed
    Aerial Scout. Additionally, we will end 4 programs, restructure 30
    programs, and delay 50 programs. A notable restructure includes the
    Warfighter Information Network Tactical Increment 3.
        Lastly, the divestiture of materiel and equipment, where
    appropriate, will reduce maintenance and sustainment costs and maximize
    resources. Over the long-term, investing in the right science and
    technology and applying affordable upgrades to existing systems should
    allow us to keep pace with technological change and improve
    capabilities.
                          army organic industrial base
        The Army industrial base consists of commercial and government-
    owned organic industrial capability and capacity that must be readily
    available to manufacture and repair items during both peacetime and
    national emergencies. The Army must maintain the critical maintenance
    and manufacturing capacities needed to meet future war-time surge
    requirements, as well as industrial skills sets that ensure ready,
    effective, and timely materiel repair. During fiscal year 2013, the
    Army lost more than 4,000 employees from the organic industrial base
    and will continue to lose highly skilled depot and arsenal workers to
    other industries due to fiscal uncertainty. Hiring and overtime
    restrictions, in addition to furloughs, affected productivity and
    increased depot carryover, not to mention the detrimental effect on
    worker morale. Yet we must continue to size the organic industrial
    workforce and leverage the commercial industrial base appropriately,
    while sustaining core depot and arsenal maintenance competencies to
    support future contingencies.
        The Army is assessing key portfolios and the health of the supply
    chain, and has taken specific steps to mitigate impacts. Mitigation
    measures include advocacy for Foreign Military Sales (FMS), extended
    production in certain programs, and investment in key suppliers on a
    case-by-case basis. The FMS program helps maintain a healthy base by
    keeping production lines and shipping depots active. For example, we
    are advocating the Foreign Military Sale of Chinooks, Apaches, Patriot
    missile systems, Excalibur rounds, Guided MRLS, and Javelin Anti-Tank
    missiles to our most trusted allies. Additionally, stretching out our
    production requirements over multiple years and advocating public-
    private partnerships for dual use items helps maintain workloads and
    keeps production lines open. For example, we are executing a HMMWV
    modernization program for the Army National Guard using a teaming
    agreement between Red River Army Depot and AM General.
        The Army continually assesses the health of key suppliers. For
    example, the A.T. Kearney study on the combat vehicle industrial base
    identified two critical areas of the supply base that might require
    specific mitigation: Abrams tank transmissions and forward looking
    infrared radar (FLIR). To mitigate these specific production gaps we
    will procure up to 124 new transmissions and 560 critical sensor
    components on the FLIR. Similar studies have identified inspectors who
    test and adjust turrets and a small sub-set of welders as critical
    skills to combat vehicle manufacturing that must be protected.
        Finally, in terms of the organic industrial base, the Army has
    initiated Joint Acquisition & Sustainment Reviews to highlight problems
    faced by Program Executive Offices and our depots and arsenals. These
    periodic reviews led by the Army Materiel Command and Army Acquisition
    Executive help us manage the challenges across the materiel enterprise.
                      where we need support from congress
        Congress can help the Army by providing adequate financial support
    for ongoing contingencies including Afghanistan and other named
    operations, as well as the continued costs after these missions
    conclude. The costs associated with Operation Enduring Freedom will
    persist for years to come in the form of redeployment, reset, and
    rehabilitation. The expense of the transfer of equipment is significant
    and reset will continue for 3 years after the last equipment arrives in
    the United States. We will, of course, provide the best available care
    for our wounded warriors, but this also comes at a cost.
        Congress should continue recent efforts to provide the Army a more
    sufficient and predictable budget. The responsibility also lies with
    the Army to mitigate costs, but functioning under sequestration causes
    inefficiency and rapidly undermines readiness. Yet, in 2016, without
    congressional intervention, sequestration-level caps will return. We
    will do our part to ensure the Army is ready to defend the Nation, but
    I ask for Congress' help with a sufficient and predictable budget.
        Finally, we need congressional support of a Total Army solution to
    drawdown. Troop reductions, reforms, and reorganization are necessary
    after 12 years of war to prioritize funding in preparation for future
    contingencies. Cuts must come from the Total Force--Active, Reserve,
    and National Guard--to maintain the balance among all components to
    best execute the Army's strategic mission. Any delay to this process
    will force further cuts to modernization and readiness and slow the
    process of rebalancing the force. We need congressional support to
    achieve a Total Army solution.
                                   conclusion
        Throughout our history we have rapidly grown our Army for wars, and
    then downsized at war's end. Our Army will be smaller than it was in
    2001 and the smallest it has been since before World War II, with less
    capacity to deter aggression, reassure allies, defend the homeland, and
    decisively defeat adversaries. Invariably, there will be a period of
    hollowness and decreased readiness during the downsizing, but the
    severity of cuts combined with the unpredictability of the current
    budget environment and ongoing worldwide commitments has overly
    complicated our challenge of keeping the force in balance. Yet we must
    strive to achieve this balance as we cannot predict when our Nation
    will chose to employ the Army again. If history is any indicator, the
    Army will be needed in the next two decades to fulfill our commitments,
    secure the Nation's interests, and defeat aggression that threatens
    American citizens or territory. We have also learned, in the desert
    passes of North Africa, in the mountains of Korea, and on the streets
    of Iraq, that the penalty for improperly managing the readiness of our
    forces ultimately falls on the backs of our fighting soldiers. It is
    our solemn duty to ensure our Army is prepared to fight when called
    upon.
        Chairwoman 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,
    families, wounded warriors, and veterans. Army Strong!

        Senator Shaheen. Thank you.
        I apologize, we have about 3 minutes left for a vote, so I
    think we're going to recess for about 10 minutes. Hopefully, we
    can get this vote in, and the beginning of the next one, and
    we'll back to hear the rest of the testimony.
        Thank you. [Recess.]
        Let me officially call the hearing back to order. Senator
    Ayotte is about a minute behind me. As usual, the votes took a
    little longer than expected. I think we're going to continue
    with the testimony.
        If I could ask, I hate to do this to all of you, having
    given General Campbell more time, but if you could limit your
    remarks to about 5 minutes, that might help us get through the
    testimony quicker.
        What we're going to try and do for the next votes is switch
    off so that either Senator Ayotte or I are here during those
    votes.
        General Paxton, if I can ask you to begin.
        Thank you.

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

        General Paxton. Thank you, Chairwoman Shaheen. To you and
    Ranking Member Ayotte and the rest of the subcommittee, I
    appreciate the opportunity to report on the readiness of the
    U.S. Marine Corps.
        Today, your Corps is committed to continuing to remain our
    Nation's force in readiness and a force that's truly capable of
    responding to any crisis around the globe at a moment's notice.
    As we gather today, there are 30,000 marines forward-deployed
    around the world, promoting peace, protecting national
    interests, and securing our defense. There are more than 6,000
    marines today in Afghanistan, and they continue to make a huge
    difference to our Nation, our allies, and the world.
        In all, your marines who are forward remain well-trained,
    well-equipped, well-led, and at the highest state of readiness.
    That readiness was proven many times, but at least twice
    significantly in the last year, where the Marine Corps
    displayed its agility and responsiveness. First, in November,
    in the aftermath of the super-typhoon that struck the
    Philippines, and then shortly thereafter, in December, with the
    rescue of American citizens over South Sudan in December. In
    both of those, it demonstrated the reality and necessity for
    maintaining a combat-ready force that's capable of handling
    today's crisis today. Such an investment is essential to
    maintaining our national security and our prosperity in the
    future.
        I appreciate the opportunity today to talk about readiness
    and our ability to maintain it in the future, and how that is
    tied imminently directly to the fiscal realities that our
    Nation and our Department of Defense (DOD) face in the budget
    crisis.
        As our Nation continues to face fiscal uncertainty, we're
    making the necessary choices to protect our near-term readiness
    and to place the Marine Corps on the best trajectory to meet
    all those future defense requirements. I look forward to
    elaborating on examples of the choices that we have made and
    how they impact our training proficiency, our equipment
    maintenance, and our unit readiness, to name a few.
        As we navigate the fiscal crisis, and as we talk here
    today, I would just remind you that we look at things through
    five lenses or five pillars around the Marine Corps. Our first
    pillar is to recruit and retain high-quality people. The second
    one is to maintain the highest state of unit readiness. The
    third one is to meet all the combatant commanders' requirements
    for our marines. The fourth one is to ensure that we maintain
    appropriate infrastructure investments. The fifth one is to
    keep an eye on the future by investing in capabilities that
    we'll need to meet tomorrow's challenges.
        With that, ma'am, I will curtail the rest of the oral
    statement and ask that you take the written statement for the
    record. I look forward to your questions.
        Thank you, Senator.
        [The prepared statement of General Paxton follows:]
              Prepared Statement by Gen. John M. Paxton, Jr., USMC
        Chairwoman 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 Marine Corps readiness and our fiscal year 2015 budget request for
    operations and maintenance. We appreciate congressional support for the
    readiness of our force.
        Today, the Marine Corps, as it has since 1775, remains the Nation's
    crisis response force. Continuing to fulfill this role is our top
    priority. We have earned a reputation as the Nation's most forward
    deployed, ready, and flexible force. The performance of marines over
    the past year underscores the fact that responsiveness and versatility
    is in demand as much today as it will be in the future. Marines formed
    the leading edge of the U.S. humanitarian response to the disaster in
    the Philippines and assisted in the evacuation of U.S. embassy
    personnel in Juba, South Sudan, all while engaging in combat operations
    in Afghanistan and providing forward presence around the globe.
        Currently, there are more than 6,300 Active and Reserve marines
    forward deployed in support of Operation Enduring Freedom (OEF) in
    Afghanistan, a reduction of over 2,000 marines over the past year. The
    transition to advisory and mentoring roles has led to successes for the
    Afghan National Security Forces.
        Additionally in 2013, the Marine Corps supported all six geographic
    combatant commands with task-organized units that conducted over 200
    Theater Security Cooperation (TSC) engagements including TSC exercises,
    bilateral exercises, and military-to-military engagements with the
    armed forces of more than 50 partner nations to build partner capacity.
    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 Marine Corps is committed to remaining the Nation's Force in
    Readiness, a force truly capable of responding to a crisis anywhere
    around the globe at a moment's notice. Readiness is the critical
    measure of the Marine Corps' ability to be responsive and capable.
    Marines are forward stationed and forward-deployed, protecting the
    Nation's security by conducting operations that defeat and deter
    adversaries, support partners, and create decision space for our
    national-level leaders.
        We fully appreciate that our readiness today and the ability to
    maintain it in the future are directly related to the fiscal realities
    of the Department of Defense's budget. As our Nation continues to face
    fiscal uncertainty, we are making hard but necessary choices to protect
    near term readiness and place the Marine Corps on the best trajectory
    to meet future defense requirements. We are protecting readiness with
    the realization that our infrastructure sustainment and modernization
    investments will be negatively impacted over the long term as we
    prioritize limited resources to ensure a ready force now. Such
    tradeoffs portend future increased costs and risks to the long-term
    readiness of the Marine Corps.
        As America's crisis response force, however, your Corps does not
    perceive a choice. We are required to maintain an institutional posture
    and mindset that facilitates our ability to deploy ready forces
    tonight. Programing for acceptable less-ready unit status is not an
    option for the Marine Corps. However, as we continue to face the
    possibility of full implementation of the Budget Control Act from
    fiscal year 2016 to fiscal year 2021, we may well be forced into
    adopting some short term or limited scope variations with selected
    less-ready units over the next few years.
        Taking these realities into account, the Marine Corps' principal
    concerns going forward are the readiness of our nondeployed units and
    the reconstitution of the whole-of-force after over a decade of
    unprecedented sustained conflict. 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 globally
    source equipment and personnel from our nondeployed units, or bench.
    Ultimately, readiness comes at a cost and the high readiness of
    deployed forces comes at the expense of our nondeployed units.
        Our nondeployed forces' principal unit readiness detractor is the
    availability of key items of equipment at the unit level with which to
    outfit and train units. Based on steady state operations and emerging
    requirements, the Marine Corps has accepted risk to both personnel and
    equipment readiness of our nondeployed units in order to fully support
    forces forward deployed. Currently, slightly more than 50 percent of
    our nondeployed units are experiencing degraded readiness in their
    ability to execute core missions. Approximately 62 percent of
    nondeployed units have equipment shortfalls and 33 percent are
    experiencing personnel shortfalls necessitated by the effort to ensure
    that forward deployed units are 100 percent manned and equipped. Such
    realities portray the imbalance of readiness across the Marine Corps.
    This however cannot be our long-term solution to the whole-of-force
    readiness, since our nondeployed operating forces serve as an insurance
    policy, providing a timely response to unexpected crises or large-scale
    contingencies. If those units are not ready, it could mean a delayed
    response to resolve a contingency or to execute an operations plan.
        In regards to reconstitution, the Marine Corps is not conducting an
    ``operational pause'', whereby we will have the luxury of focusing
    exclusively on resetting war-torn equipment and reconstituting the
    force. The Marine Corps' focus is being ready to respond to unforeseen
    crises, source rotational units, and meet the ever-increasing demand
    for theater security cooperation, under the ``New Normal.'' It should
    be noted that our reconstitution efforts remain almost exclusively
    reliant on Overseas Contingency Operations (OCO) funding. Overly steep
    reductions, or the outright loss of OCO funding, will significantly
    impact the ability to reset equipment thus causing depot backlogs and
    subsequently placing readiness at risk.
        The risk to the Nation is too great to allow the readiness of the
    Marine Corps to be degraded. Fiscal year 2015 funding levels protect
    current readiness; however, they do so at the expense of the
    infrastructure sustainment and equipment modernization, which are keys
    to protecting future readiness. This is a logical choice given the
    current fiscal situation, but it is not sustainable over time. Ignoring
    the impact of this required trade-off for any sustained period will
    adversely affect the force in the long term, and create unacceptable
    risk for our national defense.
                              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 unit's anticipated future missions. After more than a decade
    of combat, this requires an unprecedented level of effort. The Marine
    Corps is resetting its forces ``in stride'' while fighting the war in
    Afghanistan and transitioning to meet Defense Strategic Guidance and
    ``New Normal'' requirements.
        The Marine Corps' Operation Enduring Freedom Ground Equipment Reset
    Strategy, released in January 2012, guides the execution of our reset
    and divestiture strategy. The reset strategy prioritizes investment and
    modernization decisions to develop our force. Last year our reset
    liability was estimated at less than $3.2 billion. We continue to make
    significant progress on resetting our equipment with the help of joint
    partners such as U.S. Transportation Command and the Defense Logistics
    Agency. Today, we estimate that our remaining ground equipment reset
    liability, from fiscal year 2015 through the end of the reset mission,
    is approximately $1 billion. We anticipate further refinements as we
    drawdown further and gain a more refined perspective on both the
    totality of the costs associated with returning our equipment from
    Afghanistan and the detailed costs associated with resetting that gear
    after more than 12 years of combat. We will continue to ask for only
    the OCO funds we know we need to reset our force from OEF, and I note
    that DOD's final fiscal year 2015 OCO request will depend on policy
    decisions about our enduring presence in Afghanistan that have not yet
    been made.
        The Marine Corps is on track to complete redeployment of people,
    equipment, and sustainment per the established timeline of the
    Commander, International Security Assistance Force. 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 was formed in May 2012 and represents the
    largest portion of the Marine Corps' contribution to the U.S. Central
    Command Materiel Recovery Element and is tasked with preserving the
    operational capacity of combat units by 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. To date, the R4OG has retrograded
    25,800 Marine Corps equipment items valued at more than $576 million,
    repaired more than 2,500 shipping containers, processed more than $230
    million of excess/serviceable ammunition, and has facilitated the
    retrograde of more than 5 million square feet of aviation matting
    (AM2). Overall, since the start of OEF retrograde operations in 2012,
    the Marine Corps has retrograded 77 percent of its equipment items;
    over 75 percent of the supplies, repair parts, and ammunition; and more
    than 98 percent of its AM2 matting at the high point of operations in
    Afghanistan.
                                 depot capacity
        The bulk of ground equipment reset execution is occurring at our
    depot. The continued availability of depot capacity at our Marine Depot
    Maintenance Command, consisting of depots at Albany, GA and Barstow, CA
    is critical to our ground equipment reset strategy, and our ability to
    reconstitute the force by 2017. The Marine Corps' total OEF ground
    equipment reset requirement includes approximately 71,000 principal end
    items. About 77 percent of those items have begun the reset process,
    and just over 40 percent of our total requirements are reset complete.
    With support of the fiscal year 2015 baseline and our anticipated OCO
    request, we continue on the path to being able to complete the reset of
    ground equipment on time, avert backlogs, and return equipment to our
    Operational Forces as rapidly as possible.
        With regards to Marine aviation, the Bipartisan Budget Act (BBA)
    provides the Department of the Navy with funding relief to buy down the
    previous backlog of airframes and engines; however a depot backlog
    still remains. The Marines Corps' F/A-18A-D depot backlog continues
    primarily due to increased turnaround time and reduced throughput for
    aircraft undergoing depot maintenance. The Marine Corps currently has
    264 F/A-18s in its inventory, 132 of which are currently Out of
    Reporting (OOR). Having 132 F/A-18's OOR increases operational risk and
    creates significant challenges in managing the inventory. Each F/A-18
    squadron requires 12 aircraft per squadron to maintain minimum
    deployable combat readiness (C2). Of our 12 squadrons, 5 are deployed
    at any given time. The reductions to depot throughput have resulted in
    nondeployed squadrons having only 6 aircraft available for training and
    operational support. The long-term effect on nondeployed marines F/A-18
    squadrons is the inability of the unit to achieve and maintain minimum
    deployable combat readiness required for follow-on deployments or
    contingency response. Continued support for aviation depots, and F/A-
    18A-D sustainment and upgrade initiatives are vital for achieving
    aircraft flight line requirements, and ensuring the platform remains
    lethal, survivable, and relevant through the transition to the F-35
    Joint Strike Fighter (JSF).
        The Marine Corps requires continued funding to complete the reset
    of equipment still being utilized overseas, to reconstitute home
    station equipment, and to modernize the force. Any reduction in the
    fiscal year 2015 baseline request, as well as to the anticipated OCO
    request, will defer maintenance requirements to out-years, thus
    increasing the backlog of equipment requiring service. Sustained
    funding reductions such as sequestration cause a ripple effect
    eventually leading to a backlog that will adversely affect near- and
    long-term readiness. Simply put, training a unit with only half of
    their complement of equipment is not possible. When these units are
    called on to prepare for deployment, they will begin with a training
    deficit that may be insurmountable.
                 postured for steady state and crisis response
        The Marine Corps has a strategic trajectory to reconstitute to a
    ready force to meet the Defense Strategic Guidance for both steady
    state requirements and crisis response contingencies. The fiscal year
    2015 budget contains funding for the Special Purpose Marine Air Ground
    Task Force--Crisis Response (SPMAGTF-CR) and Marine Corps Embassy
    Security Group expansion that were added in the fiscal year 2014
    Omnibus Appropriations Bill. These initiatives will leverage the Corps'
    crisis response capability through lighter, more agile, forward-
    deployed forces to meet combatant commander and Department of State
    demands across the globe. Additionally the rebalance to the Pacific
    remains a top priority as reflected by continued resourcing of the Unit
    Deployment Program and operational units based in the Pacific region.
        As we drawdown the Marine Corps' Active component end-strength from
    a wartime high of 202,000 marines, we took the appropriate steps to
    redesign a ready force by fiscal year 2017. Our reconstitution efforts
    will restore and upgrade our combat capability and seek to ensure our
    units are ready for operations across the range of military operations.
    Over the past 3 years, we undertook a series of steps to build our
    current force plan. In 2010, our Force Structure Review Group utilized
    the Defense Strategic Guidance and operational plans to determine that
    the optimum size of the Active component Marine Corps should be a force
    of 186,800. However under the fiscal year 2012 Defense Strategic
    Guidance and constraints of the 2011 Budget Control Act, we estimated
    that a force of 182,100 Active component marines could still be
    afforded, with the realization that reductions in modernization and
    infrastructure support would be difficult but necessary to sustain
    optimal readiness levels.
        Prior to the Quadrennial Defense Review, we came to the difficult
    understanding that, under the threat of continued sequestration or some
    variant, an Active-Duty Force of 175,000 marines is what our Nation can
    afford, when coupled with very steep cuts to USMC modernization and
    infrastructure accounts. This significantly reduced force is a
    ``redesigned'' Marine Corps capable of meeting steady state
    requirements. We will still be able to deter or defeat aggression in
    one region, however with significant strain on the force and increased
    risk to mission accomplishment everywhere else.
        The redesigned force is built to operate utilizing the familiar
    Marine Air-Ground Task Force construct, but it places a greater
    emphasis on the ``middleweight'' Marine Expeditionary Brigades (MEB)
    and their highly versatile and scalable MEB Command Element or
    headquarters. These MEB headquarters will be prepared to serve as a
    ready crisis response flag-level, JTF capable command element for the
    Joint Force. The redesigned force will also persistently deploy
    SPMAGTFs and Marine Expeditionary Units (MEU) to provide combatant
    commanders ready forces for a broad range of missions.
        Essential for augmenting and reinforcing our Active-Duty Force is
    our Marine Corps Reserve. As an integral part of our Total Force, our
    Reserve marines have, for the past 13 years, been engaged in combat
    operations in Iraq and Afghanistan, as well as in regional security
    cooperation and crisis prevention activities in support of geographic
    combatant commander's requirements. This operational tempo built a
    momentum among our Reserve warfighters and a depth of experience
    throughout the ranks that is unprecedented in our current Reserve
    Force.
        Just as we are reshaping our Active Force, so too are we reducing
    the end strength of our Reserve Force. Within the fiscal year 2015
    budget we plan to achieve a Selected Reserve end strength of 38,500
    marines by the end of fiscal year 2017, down from a current end
    strength of 39,600. Despite this reduction in end strength, our
    Reserves remain well postured to provide operational capability and
    capacity to the Active Force during both peacetime steady-state
    operations and crisis response contingencies.
        Maintaining a high state of readiness within the current and near-
    term fiscal climate will be challenging for marines and their
    equipment. For example, the desired 186,800 force supported a 1:3
    deployment-to-dwell ratio to meet emerging steady state demands. The
    redesigned 175,000 force reduces our availability to a 1:2 dwell ratio
    for our operational units. This 1:2 ratio is the same operational tempo
    we operated under during much of the past decade, while engaged in
    combat and stability operations in Iraq and Afghanistan. It is
    supportable in the short-term and mid-term, but long-term
    sustainability may need to be revisited.
        The redesigned force will retain the ability to generate seven
    rotational Marine Expeditionary Units, with one deployer from the east
    coast, one deployer from the west coast, and one deployer from Okinawa.
    Special Purpose Marine Air Ground Task Forces (MAGTF) will respond to
    the greater demand for multi-role crisis response forces, as seen in
    Libya and South Sudan. The Marine Corps also remains fully committed to
    expanding embassy security by adding approximately 1,000 Marine Corps
    Embassy Security Guards as requested by Congress.
        Lastly, to support the rebalance to the Pacific, we prioritized our
    Pacific theater forces activities in the new force structure. Despite
    end strength reductions, III Marine Expeditionary Force--our primary
    MAGTF in the Pacific--remains virtually unaltered. We also restored
    Pacific efforts that were gapped during Operation Enduring Freedom,
    including multiple exercises and large elements of the Unit Deployment
    Program. A rotational presence in Darwin, Australia also expands
    engagement opportunities and regional influence. By 2017 we will have
    approximately 22,000 marines operating and forward postured within the
    Pacific theater.
                             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 as outlined in previous posture statements and congressional
    testimony, these remain:

             High Quality People
             Unit Readiness
             Capacity and Capability to Meet Requirements
             Infrastructure Sustainment
             Equipment Modernization
    High Quality People
        The recruiting and retention of high quality people are essential
    to maintaining a highly ready and professional force. We require the
    right quantities and occupational specialties to fulfill our role as an
    expeditionary force in readiness. Critical enablers of recruiting and
    retaining a high quality force are appropriate levels of compensation
    and benefits; we thank Congress for its focus on this very important
    issue. We rely on Congress' continued support for pay and benefits,
    incentive pays, and selective reenlistment bonuses to meet future
    challenges and shape the All-Volunteer Force to meet emerging defense
    strategies.
        The Marine Corps is committed to attracting, mentoring, and
    retaining the most talented men and women, who bring diverse
    backgrounds, cultures, and skills in service to our Nation. The
    Nation's changing demographics continue to push diversity to the
    forefront as a strategic issue. The Marine Corps is working toward
    completion of the first phase of a landmark diversity initiative
    centered around four diversity task forces: (1) Leadership, Mentoring,
    and Accountability; (2) Culture and Leading Change; (3) Race and
    Ethnicity; and (4) Women in the Marine Corps. Recommendations from
    these task forces will form the basis of a comprehensive strategy to
    manage talent and enable the Marine Corps to improve diversity and
    inclusion across the Corps.
        Our civilian marines support the mission and daily functions of the
    Marine Corps and are an integral part of our total force. They serve
    alongside our marines in uniform all around the world. This workforce
    is the leanest of all Services, with a ratio of 1 appropriated-funded
    civilian to every 10 Active Duty marines (1:10). Additionally, our
    civilian labor represents less than 5 percent of the Marine Corps'
    total Operations and Maintenance (O&M) budget. More than 95 percent of
    our civilians are located outside the Pentagon at our bases, stations,
    depots, and installations. Civilian marines provide stability in our
    training and programs when our marines rotate between units,
    demonstrating that our ``best value'' for the defense dollar applies to
    the total force. As we move forward we will continue to keep faith with
    our All-Volunteer Force of Federal civilians.
        The Marine Corps' Wounded Warrior Regiment (WWR) functions as a
    central pillar of our pledge to ``keep faith'' with those who have
    served. Whether a marine is wounded in combat, suffering from a chronic
    unresolved illness, or injured in a training accident, the WWR remains
    committed to providing comprehensive recovery care. For the Marine
    Corps, recovery care is not a process. Instead it is the holistic
    approach to the well-being entirety of our marines and their families.
    Ultimately marines and their families, Congress, and the public at
    large can be reassured that the Marine Corps, through the WWR, will
    continue recovery care in times of war and relative peace.
    Unit Readiness
        This pillar upholds the importance of maintaining and shaping the
    readiness of the operating forces, to include the necessary O&M funding
    to train to core missions and maintain equipment. Our focus is on
    training to our core expeditionary and amphibious mission capabilities,
    while further restructuring unit and institutional training for
    emerging security demands. Marine Expeditionary Force and MEB readiness
    continues to improve with larger scale exercises focusing on honing
    maneuver and amphibious capabilities not often utilized over the past
    decade. We anticipate incremental increases in the core training
    readiness of units as marines and equipment flows back from
    Afghanistan. The availability and readiness of amphibious and Maritime
    Prepositioning Ships and equipment are critical components in building
    and maintaining readiness for expeditionary, amphibious operations. We
    thank Congress for the continued support to funding the needed
    amphibious and maritime prepositioning ships essential to protecting
    our Nation's defense and economy.
        The fiscal year 2015 budget continues to support the Marine Corps'
    Service-level training program by fully funding an Integrated Training
    Exercise (ITX) program designed to recover full spectrum readiness. The
    ITX provides training for up to 10 infantry battalions, 5 artillery
    battalions, 5 logistics battalions, 25 flying squadrons, and additional
    aviation support elements. Additionally, high altitude and mountainous
    terrain exercises at our training center in Bridgeport, CA, will train
    up to 2 infantry battalions with limited flying squadrons and logistics
    units, and typically will include joint, coalition, and Special
    Operations Forces. Continued funding for Service level training is
    imperative as we drawdown from Afghanistan and prepares the whole-of-
    force for all manner of crisis and contingencies around the globe.
    Capability and Capacity to Meet Requirements
        Force-sizing to meet requirements, with the right mix of capacity
    and capability, is the essence of this readiness pillar. The confluence
    of the ``New Normal'' and possible sequestration-level funding,
    challenged the Marine Corps to adopt its future force posture and
    generate capabilities adaptable to a variety of operational
    requirements. The USMC Future Force Posture Plan improves the forward
    deployed Marine force posture and provides more flexibility in
    employing the Amphibious Ready Group/Marine Expeditionary Unit for
    geographic combatant commanders. Forward presence of marines ashore and
    afloat reduces response times and enables the Marine Corps to better
    shape the security environment for appropriate crisis response or
    follow-on joint force operations. Furthermore, the Future Force Posture
    Plan will provide reach-back capability for additional Marine Corps
    continental United States-based Crisis Response forces, providing the
    national leaders with a myriad of crisis response options, while
    gaining efficiencies in meeting requirements. These future force
    posture additive capabilities to meet ``New Normal'' missions will in
    time improve the readiness and responsiveness of the Marine Corps.
        The Marine Corps provides combatant commanders with regionally
    focused and trained forces to meet their growing demand for theater
    security cooperation engagements. However, this demand continues to
    increase beyond the capacity of any single Service. The Navy is
    uniquely capable of using the sea and waterways as maneuver space as
    well as providing combatant commanders with persistent, self-
    sustaining, sea-based forces to meet the full spectrum of security
    cooperation requirements. The Navy and Marine Corps are executing a
    coordinated and integrated approach as described in the recently signed
    Maritime Security Cooperation Policy (MSCP). The MSCP will provide
    combatant commanders with maritime-specific solutions to their TSC
    objectives.
        We have developed a cadre of officers and staff noncomissioned
    officers (NCO) with a sophisticated understanding of international
    security environments in order to facilitate engagements with partner
    nations and assist the Marine Corps on the asymmetric battlefields of
    the future. These marines support military operations with an expanding
    number of coalition partners in a diverse set of geopolitical
    conditions around the world. Our Foreign Area Officers and Staff NCOs
    develop professional Language, Regional Expertise, and Cultural (LREC)
    knowledge capabilities and insights to help MAGTF, joint, and coalition
    commanders understand the complex human environment where marines
    deploy. Today's operating environment demands a degree of LREC
    capability that requires years, not weeks, of training and education,
    as well as a greater understanding of the factors that drive social
    change.
        Our Corps' future forces will be guided by the principles outlined
    in our Capstone Operating Concept: Expeditionary Force 21. This
    document is our vision for designing and developing the force that will
    continue to fulfill these responsibilities. It is however more than a
    vision--it is also an actionable plan and a disciplined process to
    shape and guide our capability and capacity decisions while respecting
    our country's very real need to regain budgetary discipline. True to
    our expeditionary ethos, we will work with a clear-eyed view of what
    will be asked of us and seek only what we believe is necessary. Nimble
    by organizational design and adaptive by culture, we will rely on open-
    mindedness and creativity and make the best of what we have. Through
    Expeditionary Force 21 we will chart a course over the next 10 years to
    field a Marine Corps that will be the right force in the right place at
    the right time.
    Infrastructure Sustainment
        Readiness also depends on the availability and condition of real
    property and infrastructure. Adequately resourcing the sustainment of
    Marine Corps bases and stations is essential to safeguarding unit
    readiness as they provide the means by which units conduct training to
    deploy. The need to be better stewards of our installations and
    facilities grows as resources become more constrained. The Marine Corps
    is depending on the fiscal year 2015 budget to preserve today's
    facilities at a condition necessary to support those preparing for
    upcoming missions and deployments as well as support their families.
        The Marine Corps continues to accept risk in this pillar, reducing
    funding for several programs that will affect long-term installation
    readiness including military construction (MILCON) and restoration and
    modernization projects. During fiscal year 2008 through fiscal year
    2014, Congress generously provided the Marine Corps $11.4 billion in
    military construction for new facilities to maintain state-of-the-art
    aircraft, improved live-fire training ranges, armories, new applied and
    academic instruction facilities, physical fitness facilities, child
    care centers, barracks, and command and control buildings. We request
    Congress' continued support in the protection of these investments and
    those of facilities sustainment and demolition, family housing,
    environmental management, energy conservation, and essential MILCON
    funding to support critical programs, units, and institutions such as
    infantry regiments, the JSF, MV-22, and Marine Corps Security Forces
    Consolidation. The fiscal year 2015 budget baseline request supports
    the Marine Corps investment to sustain facilities and allows us to
    budget to 75 percent of the Office of the Secretary of Defense facility
    sustainment model, returning to 90 percent in fiscal year 2016 through
    fiscal year 2019.
    Equipment Modernization
        To bolster investments in personnel and unit readiness, the Marine
    Corps has accepted the greatest amount of risk in its equipment
    modernization budget. The Marine Corps' ground and aviation equipment
    must meet the needs of current and emerging security environments. As
    the Marine Corps explores options to adjust to changing fiscal
    realities, there is a clear imperative to upgrade and modernize legacy
    equipment used in OEF and Operation Iraqi Freedom. Aging ground
    platforms, such as the nearly 40-year-old Amphibious Assault Vehicle
    (AAV), underscore the need for investment in modernization and service-
    life extensions to guarantee dominance over future threats. Aging
    platforms are becoming simultaneously more expensive to operate and
    harder to maintain.
        Our modern expeditionary force will require fixed wing aircraft
    capable of flexible basing ashore or at sea in support of our Marine
    units. The JSF 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.
        The Expeditionary Fighting Vehicle (EFV) was envisioned as a ``leap
    ahead'' replacement for our current AAV that would provide high speed,
    long-range maneuver capability in both the seaward and landward
    portions of the littoral. Three years ago, we cancelled the EFV program
    to explore more affordable alternatives for an amphibious combat
    vehicle (ACV). We established an Amphibious Capabilities Working Group
    that examined current and emerging intelligence, surveillance, and
    reconnaissance capabilities, strike capabilities, and their integration
    into potential adversaries' approaches to anti-access, area denial. We
    noted, with particular concern, the impact of future loitering top-
    attack munitions and the proliferation of guided rockets, artillery,
    missiles, and mortars.
        From this threat assessment, we concluded that we would either need
    to expand the scope and duration of our shaping operations, launch our
    forces from greater range than the 10-25 nautical miles offshore
    previously postulated, or apply some combination of these actions.
    Next, as part of the Marine Personnel Carrier (MPC) program we examined
    commercial off-the-shelf/non-developmental wheeled combat vehicles and
    discovered several important points. First, modern wheeled vehicles
    have substantially closed the maneuver performance gap that previously
    existed between tracked and wheeled vehicles. These new eight wheeled
    vehicles have exceptional cross country performance and some limited
    swimming capability.
        We concluded that our concepts for operational maneuver from the
    sea and ship-to-objective maneuver remain valid, but that we will
    execute them by evolving a somewhat different ``toolkit'' than
    originally envisioned. The current ACV program has been re-crafted to
    reflect a family of systems approach to the military problem--the
    necessity to conduct amphibious operations from further offshore while
    enhancing protected mobility for the mission on land. It leverages
    experience gained in the EFV program, the MPC program, threat analysis,
    and combat experience. The ACV program will immediately pursue a medium
    weight wheeled armored personnel carrier with acceptable swimming
    capability close to shore. Concurrently, risk over the midterm will be
    mitigated through a survivability upgrade to a number of our current
    self-deploying AAVs to extend their service life through at least 2030.
    In concert with the Navy, we will continue to explore capabilities that
    better enable us to conduct extended range littoral maneuver from ship
    to objective via high speed surface connectors.
        Informed by our planning for potential and resultant POM15 budget
    decisions, we have the foundation to conservatively adjust our ground
    combat and tactical vehicle strategy and yet enhance this core
    competency across a wide array of capabilities. We will develop and
    procure the Joint Light Tactical Vehicle, while maintaining critical
    modification programs for our tank, LAV, and HMMWV fleets, in
    conjunction with our assault amphibian modernization efforts. We will
    continue to assess our ground vehicle portfolio in order to inform
    forthcoming budgetary decisions.
                            partnered with the navy
        We share a rich heritage and maintain a strong partnership with the
    U.S. 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. The availability of amphibious shipping is paramount
    to our readiness. The Marine Corps' requirement for amphibious warships
    continues to be at 38 platforms. However, due to fiscal realities the
    Marine Corps and Navy agreed to a fiscally constrained minimum of 33
    total amphibious warships to support two MEB assault echelons. The
    Navy's inventory to date is 30 total warships. When accounting for
    steady-state demand and maintenance requirements we are realizing that
    far fewer platforms are readily available for employment. In the near
    term, the Navy and Marine Corps are looking at alternative platforms
    that can complement the current amphibious inventory.
        Partnered with the Navy, we will continue to pursue innovative
    concepts for maritime expeditionary operations with platforms such as
    the Joint High Speed Vessel, the Mobile Landing Platform, and the
    Afloat Forward Staging Base. As new maritime prepositioning force ships
    are integrated into the Maritime Prepositioning Ships Squadrons, 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. 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 223 days and 274 days respectively. This high duration of
    deployment lengths combined with a high operational tempo, reduced ship
    inventory, and deferred/compressed maintenance periods demonstrate the
    imperative to maintain planned/scheduled maintenance cycles and to
    build adequate inventory. These have a direct impact on the readiness
    of the amphibious fleet and on ensuring the ships reach their service
    life.
        An example of the importance of ship maintenance and availability
    occurred during disaster relief efforts in the Philippines in the wake
    of Typhoon Haiyan. Although two forward deployed amphibious ships were
    able to provide some assistance to Operation Damayn, the larger and
    more capable amphibious ships could not leave port due to maintenance;
    restricting the amount of supplies and relief that the MEU could
    provide.
        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. In September 2013, the Commandant of the Marine Corps, Chief of
    Naval Operations, and Commandant of the Coast Guard signed the Maritime
    Security Cooperation Policy. This tri-service policy prescribes a
    planning framework for Marine Corps, Navy, and Coast Guard
    headquarters, regional components, and force providers with the goal of
    providing combatant commanders an integrated maritime approach to
    security cooperation in support of national security objectives.
        Throughout more than a decade of sustained operations ashore in
    Iraq, Afghanistan, and elsewhere, we continued to deploy thousands of
    marines aboard amphibious warships around the globe. The Navy and
    Marine Corps remains postured to provide persistent presence and
    engagement, maintaining a constant watch for conflict and regional
    unrest. The Navy-Marine Corps relationship has never been better; we
    will continue to advance our shared vision as our Nation transitions
    from protracted wars ashore and returns its focus to the maritime
    domain.
                                   conclusion
        On behalf of the Marine Corps 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. We are proud of our reputation for frugality and remain one
    of the best values for the defense dollar. In these times of budget
    austerity, the Nation continues to hold high expectations of its Marine
    Corps, and our stewardship of taxpayer dollars. The Marine Corps will
    continue to meet the needs of the combatant commanders as a
    strategically mobile force optimized for forward-presence, and crisis
    response. Your continued support is requested to provide a balance
    across the five readiness pillars, so 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. Thanks very much. We will certainly
    include the full statement for the record.
        General Spencer.

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

        General Spencer. Madam Chairwoman, Ranking Member Ayotte,
    thank you for the opportunity to share the Air Force's current
    readiness posture.
        Readiness is critical for your Air Force. The Air Force's
    range, speed, and agility enable us to quickly respond to
    national missions, and gives our Nation an indispensable
    advantage that we must retain as we plan for an uncertain
    future. Whether responding to a national security threat or
    humanitarian crisis, your Air Force is expected to respond in
    hours, not days, from home to anywhere in the globe.
        The cornerstone of our success depends on airmen who are
    highly-trained, well-equipped, and always ready to defeat any
    adversary across the range of operations, from the present day
    counterinsurgency environment to a highly contested one.
    Decades of sustained combat operations have stressed our force
    and decreased our readiness to unacceptable levels. Our airmen
    have performed exceptionally well in the counterinsurgency and
    counterterrorism fights in the U.S. Central Command (CENTCOM)
    area of responsibility, as have all our other joint and
    coalition partners. However, our focus on the current fight has
    seriously impacted our readiness to effectively operate in
    contested environments and against potential adversaries that
    have access to ever-increasing levels of advanced warfighting
    technology. We will continue to maintain our ability to respond
    to today's requirements, but we must also regain and maintain
    our ability to effectively operate in the most demanding threat
    environments.
        The bottom line is that, from a readiness perspective, we
    know we are not where we need to be, but our fiscal year 2015
    President's budget submission sets the conditions that enable
    us to begin the road to recovery in the years ahead. But, we
    will need your help to get there.
        The Air Force defines ``readiness'' as the ability, at the
    squadron level, to provide distinct operational capabilities
    within the required timeframe. This means we need to have the
    right number of airmen, with the right equipment, trained to
    the right skill level, and with the right amount of support,
    force structure, weapons, and supplies to successfully
    accomplish what the Nation asks us to do. A good readiness plan
    depends on an optimum level of health in all of these areas
    while also balancing time between critical operational and
    training commitments.
        Sequestration has cut the Air Force budget by billions of
    dollars, so our only option is to reduce our force structure.
    We cannot retain more force structure than we can afford to
    keep ready. As such, readiness requires more than just flying
    hours and exercises. Our plan involves preferred munitions,
    developing training environments, both open-air ranges and
    virtual simulated environments that accurately replicate the
    threats we may face, and modernization efforts that help us
    maintain our technological advantage in war. Readiness also
    includes facilities and installation support, because, whether
    it's Whiteman Air Force Base in Missouri, home of our B-2
    fleet, or Kunsan Airbase in Korea, home of the Fighting
    Wolfpack, in many cases we literally fight and power-project
    from our assigned bases.
        Weapon sustainment health is also critical to our readiness
    plan. For example, as a former vice director of the Oklahoma
    City Air Logistics Center at Tinker Air Force Base, I was able
    to see firsthand how our major logistics complexes contribute
    to the sustainment and readiness of aircraft such as our B-1,
    B-2, B-52, E-3 AWACS, and KC-135, as well as repair and
    management of 19 different types of aircraft and missile
    engines. Said another way, while adequate flying-hour funding
    ensures the aircraft on the ramp are ready to fly, weapon-
    system sustainment funding ensures we have adequate numbers of
    aircraft on the ramps. Keeping aircraft in the air, satellites
    in space, and protecting our network systems require a team
    effort and is a synergy of critical skills, tools, and
    capabilities that culminate in the ability to deliver combat
    power for the Nation.
        To be clear, last year's sequestration trigger placed the
    Air Force readiness posture at an unacceptable level of risk
    that we are still working to recover from. The abrupt and
    arbitrary cuts caused the Air Force to stand down 31 Active
    component squadrons, 13 of which were combat-coded. Today, less
    than 50 percent of those combat squadrons that were stood down
    have returned to their pre-sequestration levels of readiness,
    which, again, were already less than required. The loss of time
    and experience flying, maintaining, supporting, and integrating
    those aircraft equated to a loss of critical readiness for our
    airmen across our operations, maintenance, logistics, and
    support force. If we miss training opportunities or our
    squadrons are forced to stand down, it may take months, or even
    years, to regenerate that global combat power, and we negate
    the responsiveness that is one of air power's inherent
    advantages. We desperately need your help to detrigger
    sequestration going forward.
        Guiding our strategy and budget process were the Air
    Force's unique capabilities and the requirements to gain and
    maintain readiness for the full spectrum of operations. We
    describe full-spectrum operations as operations that span the
    range of low-intensity conflict to major regional conflicts
    against near-peer adversaries. We appreciate the temporary
    relief the Bipartisan Budget Act provides. It puts us on a
    gradual path to recovery. But, our analysis indicates it will
    not fix the Air Force's readiness during the Future Years
    Defense Program (FYDP). Air Force readiness is heavily
    influenced by ongoing operations as time and resources are
    consumed in supporting current operations, limiting
    opportunities to train to the full spectrum of potential
    operations.
        As demonstrated recently after the conclusion of major
    combat operations in Iraq, there will continue to be a high
    demand for Air Force capabilities, even in the wake of post-
    combat drawdowns of deployed ground forces. If we are not able
    to train for the scenarios across the full range of military
    operations and continue with critical modernization efforts, we
    face unacceptable risk to mission accomplishment and to our
    Joint Forces.
        To conclude, Madam Chairwoman, today's Air Force provides
    America an indispensable hedge against the challenges of an
    uncertain future. Properly trained and equipped, your Air Force
    can set the conditions for success in any conflict in any
    region of the world whenever we're called upon. Sequestration
    and the demands of sustained combat operations have decreased
    our ability to train across the full spectrum of operations. We
    have a plan to slowly fix our readiness, but we need your help
    to make sure we can get there. With your support, we can make
    the right cuts and provide our airmen with the resources they
    need to prepare and to respond when called upon.
        Thank you. I look forward to your questions.
        [The prepared statement of General Spencer follows:]
               Prepared Statement by Gen. Larry O. Spencer, USAF
                                  introduction
        America's airmen and Air Force capabilities play a foundational
    role in how our military fights and wins wars. The Air Force's agile
    response to national missions gives our Nation an indispensable
    advantage that we must retain as we plan for an uncertain future.
    Whether responding to a national security threat or humanitarian
    crisis, your Air Force provides the responsive global capabilities
    necessary for the joint force to operate successfully. As our world
    becomes more interconnected and networked, Air Force capabilities that
    allow Americans to see, reach, and affect a situation anywhere on the
    globe within a matter of hours will become even more critical. However,
    the current fiscal environment requires the Air Force to make choices
    that place readiness into direct competition with modernization. To
    best support the national defense requirements, we chose to preserve
    the minimum capabilities necessary to sustain current warfighting
    efforts while investing in capabilities needed to ensure we stay viable
    in a contested battlespace. Moving forward, we aim to maintain a force
    ready for the full range of military operations while building an Air
    Force capable of executing our five core missions of: (1) air and space
    superiority; (2) intelligence, surveillance, and reconnaissance; (3)
    rapid global mobility; (4) global strike; and (5) command and control
    against a high-end threat in 2023 and beyond.
        To prepare for the high-end fight, we need to maintain a ready
    force by focusing on the training required to win against a well-
    trained, technologically-advanced adversary. In the past, we have
    revolutionized warfighting by focusing on technology that produces
    game-changing capabilities for the joint force, such as stealth, Global
    Positioning System, and remotely piloted aircraft. These technologies,
    along with research, development, and test, ensured the Nation's
    strategic and asymmetric advantage. The Air Force has always had to
    balance between what we can do (capability), how much we have to do it
    with (capacity), and how well trained and responsive we need to be
    (readiness). To do this, we must be ready across the Total Force. We
    will continue to be committed to a Total Force that fully leverages the
    strengths of each component. Ultimately, this means we need to have the
    right number of airmen, with the right equipment, trained to the right
    level, and with the right amount of support and resources to accomplish
    what the President tasks us to do and survive.
        Over the past 10 years, our airmen have performed exceptionally
    well during major combat operations in Iraq, Afghanistan, and in other
    conflicts across the globe. However, these operations tend to focus on
    missions conducted in a permissive air environment, which left
    insufficient time and resources to train our airmen across the full
    range of Air Force missions, especially missions conducted in highly
    contested, non-permissive environments. While the decline in full-
    spectrum readiness started before sequestration, it has been
    exacerbated since the law took effect because of the loss of large
    force exercises (e.g., Red Flag, Green Flag, etc.) and the cancellation
    of advanced mission training opportunities, especially on our military
    ranges. To ensure success in the future, we must get back to full-
    spectrum readiness by funding critical readiness programs such as
    flying hours and weapons system sustainment, while also balancing
    deployment tempo and home-station training. This is not going to be a
    quick fix and it will take us years to recover. If we are not able to
    train for scenarios across the full range of military operations, we
    may not get there in time and it may take the joint team longer to win.
                                   readiness
        The Air Force delivers global vigilance, global reach, and global
    power for America through our five core missions. By integrating
    capabilities across these core missions, we bring a unique set of
    options to deter war, deliver rapid, life-saving responses to
    threatened areas anywhere on the planet, and strike precisely wherever
    and whenever the national interest demands. The cornerstone of our
    ability to provide airpower to the Nation and contribute our core
    missions to the joint team lies in our readiness. Readiness ensures our
    military can provide the President with a range of options to deter or
    defeat aggression against our Nation, allies, and our collective
    interests. To support the 2012 Defense Strategic Guidance, as updated
    during deliberations on the 2014 Quadrennial Defense Review, the Air
    Force must always be prepared to respond anywhere in the world. The Air
    Force defines readiness as the ability at the unit level to provide
    distinct operational capabilities within a specified timeframe. It
    encompasses personnel requirements, training, flying hours, weapons
    system sustainment, facilities, and installation support. A responsive
    readiness posture depends on high levels of health in all these areas.
    Because protecting future readiness includes modernizing weapons system
    and their associated equipment, creating combat readiness in the near-
    term is a complex task involving the intersection of personnel,
    materiel, and training. This also includes balancing time between
    operational and training commitments, executing funding from multiple
    sources, informed level of risk, and effectively managing resources to
    achieve the desired state of readiness.
        Due to end strength and force structure changes, we had to mitigate
    the risk associated with a smaller military which requires a more ready
    combat force. If we want to sustain current force levels while
    personnel and operational costs continue to rise, there will be fewer
    resources available to support our installations, maintain current
    aircraft fleets, and invest in future capabilities. Combatant
    commanders require Air Force support on a 24/7 basis. Many of our
    mission sets are high priority missions that cannot be accomplished
    adequately or safely at low readiness levels as suggested by a tiered
    readiness construct. In support of our national defense strategy,
    airmen must be able to quickly respond across the full-spectrum of
    operations and shift between theaters of operation. Slipping to a lower
    state of readiness that requires a long build up to full combat
    effectiveness negates the essential strategic advantages of airpower
    and puts joint forces at increased risk.
        The President's budget reflects our effort to develop and retain
    the capabilities our Nation expects of its Air Force within the
    constraints placed upon us. Maintaining the fiscal year 2015
    President's budget top line level of funding will provide us with the
    flexibility to make strategic resourcing choices to maximize combat
    capability from each taxpayer dollar. If we maintain funding at this
    level, we can continue a gradual path of readiness recovery while
    preserving our future readiness, including munitions inventories,
    protecting our top three acquisitions programs, and protecting
    investments, such as the new training aircraft system and the next
    generation of space systems. The fiscal year 2015 President's budget
    includes an Opportunity, Growth, and Security initiative that will help
    us reduce risk in high-priority areas, including our readiness posture
    by accelerating the modernization of our aging fleets and improving our
    installations around the country. Guiding our strategy and budget
    process were the requirements that we must remain ready for the full
    range of operations and to focus on the unique capabilities the Air
    Force provides the joint force against a full-spectrum, high-end threat
    now and in the future.
    Weapons System Sustainment
        Weapons system sustainment (WSS) is a key component of full-
    spectrum readiness. Years of combat demands have taken a toll across
    many weapons systems, and we continue to see an increase in the costs
    of WSS requirements, which are driven by sustainment strategy,
    complexity of new systems, operations tempo, force structure changes,
    and growth in depot work packages for legacy aircraft. With recent
    force structure reductions, we must carefully manage how we allocate
    WSS in order to avoid availability shortfalls. Per the Office of the
    Secretary of Defense's directive, we plan to fund WSS to 80 percent of
    the requirement in fiscal year 2015. This facilitates recovery of $260
    million of unaccomplished depot maintenance in fiscal year 2013. If
    sequestration continues, it will further hamper our efforts to improve
    WSS. Depot delays will result in the grounding of some affected
    aircraft. The deferments mean idle production shops, a degradation of
    workforce proficiency and productivity, and corresponding future
    volatility and operational costs. Analysis shows it can take up to 3
    years to recover full restoration of depot workforce productivity and
    proficiency. Historically, WSS funding requirements for combat-ready
    forces increase at a rate double that of inflation planning factors.
    Although service-life extension programs and periodic modification have
    allowed our inventory to support 22 years of enabled 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 systems to required levels will be a major
    challenge. To illustrate the challenges we have with our legacy
    aircraft, we can compare our older aircraft to an older car. When you
    first buy a new car, maintenance costs are relatively low, especially
    if the car is covered with a warranty. However, as the car ages,
    maintenance costs rise as more and more components begin to break or
    you need to do more preventive maintenance. The same holds true for our
    aircraft. The longer we fly our legacy aircraft, the more they will
    break and require increased preventative maintenance just like an old
    car. We are now nearing a point where it costs more to sustain our
    aircraft than it does to replace them. We have tankers that are on
    average 52 years old, bombers that are upwards of 30 years old, and
    fourth generation fighters that are an average of 25 years old. If we
    are not able to perform weapons system sustainment on our aircraft or
    modernize them so we can improve upon their speed, range, and
    survivability, we risk our technological edge and superiority.
    Flying Hour Program and Training Resources
        The emphasis on readiness in the Defense Strategic Guidance
    reinforced the Air Force focus on the importance of maintaining our
    flying hour program as part of our full-spectrum readiness. Just as
    with WSS, if sequestration funding levels continue, it will affect our
    ability to improve flying and training readiness. The flying hour
    program will continue to rely on Overseas Contingency Operations
    funding to support Operation Enduring Freedom, aircraft in the U.S.
    Central Command area of responsibility, and the redeployment of forces
    from Afghanistan. In addition to funding, readiness is influenced by
    ongoing operations as time and resources used in supporting current
    operations limit our opportunities to train across the full-spectrum of
    potential mission sets. For example, the operational and combat demands
    over the last decade have eroded our ability to train for missions
    involving anti-access/area denial scenarios. To meet combatant
    commander requirements, we have had to increase our deployment lengths,
    which in turn challenges our reconstitution and training cycles when
    our airmen return from a deployment. Because there will continue to be
    a high demand for Air Force capabilities in future operations,
    balancing these rotational and expeditionary requirements with the
    full-spectrum training required to meet the Defense Strategic Guidance
    will be a critical element of our strategy in the future.
        The fiscal year 2015 President's budget increases flying hours in
    the operation and maintenance accounts which will allow the Air Force
    to fly at levels needed to begin improving readiness. The additional
    funding will help us recover flying hour-related readiness due to the
    fiscal year 2013 sequester and reduced flying in the first 3 months of
    fiscal year 2014 in order to produce a small readiness increase in
    fiscal year 2014 and fiscal year 2015. The fiscal year 2015 President's
    budget request supports adding additional hours to the flying hour
    program in fiscal year 2016-fiscal year 2019 to return the program back
    to the full requirement as much as possible to meet the minimum
    training requirements.
        To complement full-spectrum training, the Air Force remains
    committed to the long-term effort to increase our live, virtual, and
    constructive operational training capability and capacity by funding
    improvements in these types of training devices and networks.
    Adjustments to the flying hour program will continue to evolve as the
    fidelity of our devices and simulators 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. We
    intend to sustain these critical national assets to elevate flying
    training effectiveness for the joint team which will in turn improve
    individual and unit readiness. The same holds true for our munitions.
    The fiscal year 2015 President's budget includes funding that addresses
    the shortfalls in our critical munitions programs and realigns funds in
    order to accelerate production and reduce unit cost. These investments
    also support and maintain our industrial base so we are able to train
    the way we intend to fight.
                                   conclusion
        The Air Force will continue to serve America's long-term security
    interests by giving our Nation unmatched options against the challenges
    of an unpredictable future. Your American airmen are proud of the
    critical role they play in our Nation's defense. We hire the best
    people we can find and we train them better than any other airmen in
    the world. My job is to ensure that whenever America calls, our airmen
    are ready and capable of fighting and winning our Nation's wars.
    Through detailed planning, we aim to improve our near-term readiness
    while continuing to build the force so it is ready for the full range
    of combat operations against a high-end threat in 2023 and beyond.
        The Air Force is a vital element of the best military in the world.
    When we are called, we answer, and we win. That is what we do. In the
    last several decades, Air Force airpower has been an indispensable
    element of deterrence, controlled escalation, and when tasked by the
    Nation's senior leadership, destruction of an adversary's military
    capability--all accomplished with minimal casualties to U.S.
    servicemembers. 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 in order to be successful. Today's Air
    Force provides America an indispensable hedge against the challenges of
    a dangerous and uncertain future, providing viable foreign policy
    options without requiring 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.
        Vice Admiral Cullom.

    STATEMENT OF VADM PHILIP H. CULLOM, USN, DEPUTY CHIEF OF NAVAL
          OPERATIONS, FLEET READINESS AND LOGISTICS, U.S. NAVY

        Admiral Cullom. Chairwoman Shaheen, Ranking Member Ayotte,
    first let me express Admiral Ferguson's appreciation for your
    invitation to testify, and pass on his regrets that he was
    unable to attend. I appreciate the opportunity to be with you
    today to discuss the readiness of our Navy. I'm grateful for
    the chance to be at the table with these distinguished leaders
    of our Joint Force.
        It's my special honor and privilege to represent the
    633,000 men and women of the Navy, sailors and civilians, who
    deliver a ready Navy every day.
        In recent testimony, the CNO and Commandant of the Marine
    Corps both emphasized that the most important thing the Navy/
    Marine Corps team does for the Nation is to deliver ready,
    forward presence. In fiscal year 2013, the Navy worked hard to
    preserve readiness during the extended Continuing Resolution
    and budget sequestration. This year, we have given priority to
    readiness again in how we apply the funding you provided above
    the sequestration level. The Navy continues to deliver ready,
    certified forces forward, and we will not compromise on that.
    It is a fundamental element of our responsibility to our
    sailors and their families, and to the combatant commanders.
        With the budget you've provided for this year, fiscal year
    2014, we're meeting our forward-presence commitment to the
    combatant commanders, we are able to execute the depot
    maintenance plan for our ships and aircraft, and we have
    restored our normal training and readiness progression within
    the fleet.
        Our maintenance plan continues to execute the reset of
    surface ship material condition after a decade of high-tempo
    operations, but, because of the need to drydock ships for much
    of this work, it must continue for at least 5 more years. To do
    all of these things, we accepted increased risk in two of the
    mission areas of the DSG due to slowed modernization and
    restricted ordnance procurement. We also continue a significant
    level of risk to the long-term viability of our shore
    infrastructure.
        The Navy budget submission for fiscal year 2015 continues
    our commitment to the readiness of the force, but also
    continues to carry forward the risks I mentioned. To sustain
    readiness at this level, we have proposed a phased
    modernization plan for 11 Ticonderoga-class cruisers and 3
    Whidbey Island-class dock landing ships. This plan ensures the
    availability of 11 modernized cruisers through the 2030s, when
    they would otherwise be past their service life and require
    replacement, all at a time of expected ship construction
    funding limitations while building the Ohio-class replacement
    strategic deterrence submarines. While we accept some capacity
    risk in the near-term, without this approach we face even
    greater challenges to sustain the readiness of the fleet as a
    whole.
        Despite the DSG mission risk and challenges to near-term
    capacity, the President's budget provides a way forward to a
    ready and capable Navy in 2020. If we must return to
    sequestration levels in fiscal year 2016 and beyond, we will
    continue to strive to have a ready Navy, but it would require
    us to become smaller and less capable. Our soldiers, sailors,
    airmen, and marines are the finest we have ever had, and they
    go into harm's way every day. Each of us at the table has led
    them in forward operations. Navy leadership greatly appreciates
    the work of the members of this subcommittee to support our
    sailors. We must ensure that we continue to provide them the
    right training and capable equipment to meet the challenges
    they face today and will face in the future.
        I look forward to your questions.
        Thank you.
        [The prepared statement of Admiral Cullom follows:]
                Prepared Statement by VADM Philip H. Cullom, USN
        Chairwoman 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 the resources necessary to provide a ready Navy
    in the future as described in our fiscal year 2015 budget request.
    Through the uncertainty of the past two years, our decisions continue
    to be guided by the three tenets Chief of Naval Operations (CNO)
    established when he first took office: Warfighting First, Operate
    Forward, and Be Ready. You will see that theme in deeds throughout my
    testimony.
        Over the past 2 years, sequestration reductions and continuing
    resolutions have challenged our ability to operate most efficiently and
    to fully deliver the capabilities and readiness required to support the
    2012 Defense Strategic Guidance (DSG). However, we have appreciated the
    actions of Congress to help rebuild readiness and extend our planning
    horizon by supporting increases over sequestration funding levels
    through fiscal year 2015 in the Bipartisan Budget Act of 2013 and the
    fiscal year 2014 Consolidated Appropriations Act. In applying these
    additional funds, Navy has prioritized near- to mid-term readiness. The
    fiscal year 2015 Navy budget submission reduces risk in some primary
    DSG missions when compared to a sequestration-level scenario, but it
    accepts greater risk as compared to 2014 President's budget levels. In
    addressing this shortfall, it is important that we make balanced
    choices between capability and capacity, cost and risk, across a wide
    range of competing priorities. We must balance current and future
    readiness to continue to deliver a ready Navy, now and in the future.
        My testimony today will focus on the current readiness of the force
    and the related strategic risk, force structure management, and the
    resource requirements to sustain a ready Navy.
                                 our navy today
        At present, 104 ships (36 percent of the Navy) are deployed around
    the globe protecting the Nation's interests, including 2 Carrier Strike
    Groups and 3 Amphibious Ready Groups with their embarked Marine
    Expeditionary Units. We continue our efforts to reassure allies and
    strengthen partnerships, with particular emphasis in the Asia-Pacific
    region, by leading or participating in more than 170 exercises and 600
    training events annually with more than 20 allies and partners in the
    Pacific and Indian Oceans. The bilateral Talisman Saber 2013 exercise
    featured 10 Royal Australian Navy ships and 14 U.S. Navy ships
    including the USS George Washington (CVN 73) Strike Group, the USS
    Bonhomme Richard (LHD 6) Amphibious Ready Group, and about 28,000
    people. Navy units also played key roles in the multi-national, multi
    nongovernment agency effort for Operation Damayan, supporting the
    typhoon recovery operations in the Philippines, underscoring yet again
    the importance of being ``where it matters, when it matters.'' We are
    now preparing for the biennial Rim of the Pacific 2014 exercise this
    summer. It will be the largest in its 43 year history, with
    participation from 23 nations, including for the first time, the
    Chinese People's Liberation Army (Navy).
        All Navy units continue to deploy independently certified as
    qualified in their required mission areas and capabilities. This will
    not change. However, budget uncertainties plague total force readiness.
    In fiscal year 2013, we were left with no choice but to curtail or
    delay some deployments and our capacity to respond to contingencies was
    reduced as training for non-deployed forces was slowed. Additional
    funding appropriated by Congress above the sequestration level enabled
    the Navy to contribute increased resources to readiness accounts. A
    normal training and deployment cycle for ships and air squadrons is
    being restored, and additional funding is available for post-deployment
    units to improve contingency response capacity. With limited resources,
    funding current readiness at the expense of other accounts slows
    platform modernization and restricts weapons procurement, and erodes
    shore infrastructure.
        Additionally, we ended fiscal year 2013 with a significant aviation
    depot backlog for the first time in quite a few years (16 airframes and
    55 engines). Overtime restrictions and hiring freezes impacted
    productivity in both public shipyards and aviation depots. With
    workload increases we were already seeing from the growth in
    maintenance requirements driven by high operational tempo over the last
    several years, costs and maintenance periods increased, resulting in
    operational impacts across the Fleet and increased schedule uncertainty
    for our sailors and their families.
                                 readiness risk
        In his written statement for the full committee hearing on the
    fiscal year 2015 Department of the Navy Posture, the CNO addresses in
    detail the current and projected level of strategic risk in terms of
    the 10 missions of the DSG. Today, I would like to highlight three
    areas of readiness-specific risk for consideration:

             Balance between readiness funding and force structure,
            both current and future. The fiscal year 2015 Navy budget
            submission, with anticipated Overseas Contingency Operations
            (OCO) funding, provides the operations and maintenance funding
            necessary to maintain, train, and operate the proposed
            operational Fleet structure and sustain required levels of
            readiness. The Navy proposed a phased modernization for 11
            Ticonderoga-class cruisers that will add 137 operational ``ship
            years'' with fully modernized and relevant ships. A similar
            plan is proposed for three Whidbey Island-class LSDs requiring
            modernization. We would prefer to maintain routine deployments
            with these ships and continue a normal modernization schedule,
            but without the associated readiness funding this will create
            an imbalance, negatively impacting readiness across the Fleet.
             Return to sequestration-level funding in fiscal year
            2016 and beyond. Additional force structure adjustments, most
            notably inactivation of one nuclear aircraft carrier and one
            carrier air wing, would be required to fund adequate readiness
            of the remaining force structure if sequestration funding
            levels were our fate across the remainder of the Future Years
            Defense Program (FYDP). This would result in a smaller and less
            capable Navy with insufficient capability and capacity to
            execute at least 4 of the 10 primary DSG mission areas.
            Continuing to address this challenge on an annual basis without
            a realistic FYDP planning horizon sub-optimizes decision-
            making, impacts future readiness and safety, risks long-term
            gaps in the professional development of our personnel, and
            ultimately increases cost.
             Continued leverage of OCO funding for readiness. Navy
            readiness accounts remain leveraged in OCO as in previous
            years, representing future risk to readiness, modernization,
            and force structure. Additionally, while surface ship
            maintenance reset is appropriately funded with OCO, it will
            require continued funding across the FYDP because some work
            requires a dry-dock maintenance availability with intervals
            that average eight years. I also note that the Department of
            Defense's final fiscal year 2015 OCO request will depend on
            policy decisions about our enduring presence in Afghanistan
            that have not yet been made.
                               our navy tomorrow
        The Navy fiscal year 2015 budget request continues the near- to
    mid-term readiness of the Fleet, but risks future readiness from slowed
    modernization, restricted weapons procurement, and limited shore
    infrastructure sustainment. With continued OCO funding, the budget
    request will meet the adjudicated requirements of the fiscal year 2015
    Global Force Management Allocation Plan (GFMAP), including at least two
    Carrier Strike Groups (CSGs) and two Amphibious Ready Groups (ARGs),
    operating forward, fully mission-capable, and certified for deployment.
    Compared to a program at the revised BCA caps (e.g., the sequestration
    level), the 2015 President's budget improves our ability to conduct the
    10 primary missions of the DSG but with increased risk in at least 2
    primary mission areas compared to the 2014 President's budget. We
    continue to expand forward presence and relieve stress on the rest of
    the force through traditional and innovative approaches, including the
    use of new platforms like Joint High Speed Vessel and Mobile Landing
    Platform, to ensure the Navy/Marine Corps team is where it matters,
    when it matters, to achieve the security interests of the Nation.
        Maximizing our presence overseas also requires us to maximize
    operational efficiencies. Our fiscal year 2015 request includes
    investments in energy efficiency that provide our forces with
    endurance, range, and flexibility while on station, which results in
    our Navy's persistent, distributed presence in theaters of enormous
    distance like the Pacific.
    Generating the Force
        Navy manages force generation using the Fleet Response Plan. This
    cyclic process is designed to synchronize periodic deep maintenance and
    modernization necessary to the readiness and training of the Fleet to
    achieve GFMAP forward presence objectives and provide contingency
    response capacity. The reality of the past decade has been the
    continuing employment of our contingency response capacity to generate
    increased presence, while driving up maintenance requirements and in
    turn squeezing the time available to complete required maintenance and
    training. In testimony over the last several years, we have described
    this practice as unsustainable. In fiscal year 2015, Navy will begin
    implementation of the Optimized Fleet Response Plan (O-FRP) to address
    these challenges. Designed to stabilize maintenance schedules and
    provide sufficient time to maintain and train the force while
    continuing to meet operational commitments, O-FRP also aligns
    supporting processes and resources to improve readiness outcomes. In
    addition, it provides a more predictable schedule for our sailors and
    their families.
    Ship Operations
        The baseline Ship Operations request for fiscal year 2015 provides
    for 45 underway operational tempo days per quarter deployed and 20 days
    non-deployed, and would support the highest priority presence
    requirements of the combatant commanders, including 2.0 global presence
    for CSGs, 2.0 ARGs and an acceptable number of deployed submarines.
    Navy's OCO request will provide a level of funding that meets the full
    adjudicated fiscal year 2015 GFMAP ship presence requirement, higher
    operational tempo for deployed forces, and sufficient operating funding
    for organizational (individual ship) level maintenance and training.
    Air Operations (Flying Hour Program)
        The Flying Hour Program funds operations, intermediate and unit-
    level 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 2015
    baseline program provides 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 by
    funding the average T-2.5/T-2.0 USN/USMC training readiness requirement
    in the base budget. OCO funding will be requested for higher deployed
    operating tempo.
    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 as well as improving training
    capabilities for our surface force sailors. Our request continues
    procurement of high speed, maneuverable surface targets to emulate the
    anti-access fast assault craft threat, and continues development of the
    next generation of aerial targets.
        Physical and electronic encroachment on our Navy ranges, operating
    areas, and special use air space continue to impact our ability to
    conduct training, testing, and evaluation activities. Our fiscal year
    2015 budget request continues to mitigate challenges presented by
    traditional and emergent encroachment, such as urban expansion,
    electromagnetic spectrum and frequency loss, ocean observing systems
    deployment, and foreign investment proximate to our installations and
    ranges.
    Readiness Investments Required to Sustain the Force--Ship and Aircraft
            Maintenance
        The Navy maintenance budget requests are built upon our proven
    sustainment models, continue our ongoing investment in improved
    material readiness of our surface combatants, and move forward the
    integration of new capabilities into naval aviation.
        The fiscal year 2015 budget request funds 80 percent of the ship
    maintenance across the force, supporting both depot and intermediate
    level maintenance for carriers, submarines, and surface ships. OCO
    funding will be requested to execute the full requirement, including
    continued reduction of the backlog of maintenance in our surface ships
    resulting from the recent years of high operational tempo and deferred
    maintenance. The request also funds 80 percent of our aviation depot
    maintenance requirement, and supports the transition to new electronic
    attack, helicopter, and maritime patrol aircraft.
    Navy Expeditionary Combat Forces
        Navy expeditionary combat forces support ongoing combat operations
    and enduring combatant commander requirements by deploying maritime
    security, construction, explosive ordnance disposal, logistics, and
    intelligence units to execute missions across the full spectrum of
    naval, joint, and combined operations. Our baseline funding request in
    fiscal year 2015 represents 42 percent of the enduring requirement,
    necessitating supplemental funding to meet the full requirement. As
    U.S. force levels in Afghanistan decrease, Navy expeditionary forces
    remain instrumental to the retrograde and reset of equipment and
    personnel, providing engineering and maneuver support to the joint
    ground combat elements. Continued OCO funding for the reset of deployed
    equipment will be critical to the long-term readiness of the force.
    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. As we have done for several years,
    we continue to take risk in the long-term viability of our shore
    infrastructure to sustain Fleet readiness under the current top line.
    Due to fiscal constraints, the Department of the Navy will not meet the
    mandated capital investment of 6 percent across all shipyards and
    depots described in 10 U.S.C. 2476 in the fiscal year 2015 baseline
    budget. The Navy projects an investment of 3.5 percent in fiscal year
    2015. The 2015 President's budget does, however, fund the most critical
    deficiencies related to productivity and safety at our naval shipyards.
                            our navy into the future
        As we look to the future, we see continuing need for Navy forces on
    station to meet the mission requirements of the combatant commanders.
    Global operations continue to assume an increasingly maritime focus.
    The Navy chiefly maintains regional stability in the deterrence of
    aggression and the assurance of our allies. Our Navy is operating where
    it matters, when it matters--and we see no future reduction of these
    requirements. As the CNO has testified, a return to revised BCA cap
    spending levels in fiscal year 2016 and beyond will lead us to a Navy
    that would be insufficient in size and capability to conduct the
    missions of the 2012 DSG.
        Fortunately, we retain the most critical and foundational element
    of the future force, our sailors. They 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 all very much.
        You've all referred to the effects of sequestration on
    readiness. Can I ask you to talk a little bit more about the
    specific capabilities that we will lose and, if we continue
    sequestration into fiscal year 2015, what the impact will be on
    our ability to do surge capacity? Also, if sequestration
    continues beyond that, to what extent are the effects from
    those cuts reversible, and at what point do we then have a very
    long period in order to reverse damage done by the cuts? I
    don't know who would like to go first on that.
        General Paxton?
        General Paxton. In the case of the Marine Corps, probably
    the most immediate example, in terms of a capability that is at
    risk and then the time to regenerate, I'd refer to our fixed-
    wing aircraft, for example, the F-18s. We have what's called
    ``out of reporting cycle,'' and that's when we have either
    maintenance that needs to be done on the aircraft, or parts and
    supplies that are delayed in arriving there. The Commandant was
    on record, a year ago, about stating exactly where our ``out of
    reporting cycle'' was for the F-18s, and then what he predicted
    would be the case with sequestration.
        Most of our fixed-wing squadrons have 12 aircraft, give or
    take. The prediction was that we would have eight or nine that
    would be on the line--it would be three or four off-line, and
    that we were at risk of getting down to seven or eight. We
    would have four or five aircraft that you could not maintain.
        Indeed, even with OCO money, even with some reversions from
    cash, we are, this year, many of our squadrons, between six and
    seven aircraft that are on the line, and we have five or six
    that are ``out of cycle reporting.'' We are up around the 46 or
    48 percent mark for ``out of cycle reporting.'' We estimate
    that that will continue, at least for the next year.
        Those are aircraft that, not only do you not have on the
    line, but, at the same time, you have the same number of pilots
    there.
        Senator Shaheen. Right.
        General Paxton. You have the same number of pilots training
    on fewer aircraft. You then have to sequence that with night-
    illumination cycles to get time flying with goggles. You have
    to sequence it with ships' availability, which is a whole
    different challenge that Admiral Cullom can talk about, so you
    get deck bounces to keep qualified.
        In essence, it's a downward spiral. Is it reversible?
    Absolutely. If the money were to materialize, if you will, we
    could buy the parts and we could perhaps hire some more
    civilians, and we could fix the backlog of depot maintenance,
    but it would take us months to do it. It wouldn't be days or
    weeks; it would be months to do it. With each time, the month
    would affect another deployment cycle for, for example, another
    Marine Expeditionary Unit (MEU) that goes out.
        I'm not sure if that answers your question. It is
    reversible, but it would take a while, ma'am.
        Senator Shaheen. It's certainly very helpful. If
    sequestration played out through the remainder of the years
    that the BCA projected, are there capabilities that we just
    plain-old lose at the end of that?
        General Paxton. I'll go very quickly through that question,
    Senator, and then turn it over to General Spencer.
        We absolutely would lose capabilities, and the regeneration
    time would then be exceptionally long, because in the case of
    the Marine Corps, we don't want to mortgage your near-term
    readiness. We would continue to source the two MEUs that are
    out, east coast and west coast, and the next ones behind them.
    The result would be, instead of having a uniformed or maybe a
    little bit of a bathtub in readiness, we would be forced, as
    some of the other Service Vice Chiefs said, into some degree of
    tiered readiness. Then you would have no surge capability
    because you would have entire squadrons where there were either
    no aircraft or no trained pilots.
        Senator Shaheen. Thank you.
        General Spencer?
        General Spencer. Yes. Madam Chairwoman, just to be clear,
    we have the sequestration level, and the President's budget
    which is above that. In general, we tried, as best we could, to
    put reversible things in between sequestration and the
    President's budget. Just in case the sequester stood, we could
    reverse those. But, I want to be clear, the sequestration level
    cuts are not reversible. Let me give you some specific
    examples. I know some of the reductions we've proposed already
    might have been controversial, but if we go to the
    sequestration level, we will divest the entire KC-10 fleet,
    that entire fleet of tankers. We will stand down and divest all
    of our Global Hawk Block 40s. We will stand those down. We
    will, as you probably know, we were on our way, be at 50 orbits
    of Intelligence, Surveillance, and Reconnaissance (ISR) now,
    growing to 55. We would have to reduce that to 45 orbits. We
    would have to reduce investments in our KC-46 fleet and our F-
    35s. We'd have to reduce the number of buys. Same with the MC-
    130J, and would go right on down the line. We'd make cuts in
    science and technology (S&T), cuts in new engine technology,
    stop radar ISR sensors, it would slow our readiness recovery,
    and infrastructure. At the sequestration level, we're not
    talking about coming back from that. We would have to take out
    fleets, significantly impacting our readiness, and there's no
    reversibility in there.
        General Campbell. Yes, ma'am?
        Senator Shaheen. General Campbell?
        General Campbell. I'd just add that, for the Army, it's $75
    billion over the next 5 years, and, for the Army, it's about
    people. We're cutting BCTs and we're cutting end strength. But,
    our guidance is to keep a balanced force, so we're mortgaging
    the future of all our Services here. We're not able to put the
    right money into our S&T. We're not able to put our money into
    modernization of equipment. We keep pushing this to the right,
    and we just get smaller and smaller.
        The other thing that we don't talk a lot about is the
    morale, the impact it's going to have on the All-Volunteer
    Force as we move forward. I think that's pretty critical as
    they see us continue to come down and then not provide them the
    right resources to properly train. For the Army, going from
    570,000 on the Active down to 490,000, then down to 450,000,
    and with full sequestration, we go down to 420,000. The Chief
    and Secretary of the Army have said we cannot do the DSG at
    420,000. At 450,000, it's at significant risk. We go below
    450,000, and that's that redline. But, again, that's the
    people, and that's trying to keep it in balance. We can keep
    more people, we can keep more force structure, but then we have
    zero readiness, we have no modernization. For us, it's a
    balance. At the 450,000/335,000 for the Guard, we're at that
    redline balance where we need to be.
        I'm really worried about the number of people that we have
    to bring down. We've been able to go from 570,000 to 490,000
    with attrition, for the most part. Going from 490,000 to
    450,000 is going to get much harder. This has been on the backs
    of these great men and women over the last 12 years, and what
    we're going to have to do with involuntary separations is going
    to be pretty huge here. I can talk more if you want that.
        Senator Shaheen. Thank you.
        Admiral Cullom, I'm going to come back to you, but I'm
    going to give Senator Ayotte a chance to ask questions first.
        Senator Ayotte. Admiral, why don't you answer that, because
    it's an important question, in terms of the impact on
    sequestration on the Navy, and also about our shipyards.
    Senator Shaheen and I are obviously concerned about the attack
    submarine fleet, our capacity to keep the right workforce, and
    make sure that we actually have the capacity we need. It's so
    needed, obviously, not just in the Persian Gulf, but also in
    the Asia-Pacific region.
        Admiral Cullom. Yes, ma'am. Thanks, Senator, for letting me
    respond to that, because we start out as a tiered force from
    the very get-go, so we don't have a place to go if we're
    looking to be able to get to a lower sequestered level. We
    probably need to look no further than what happened as a result
    of last year's sequestration. We took two air wings down to a
    tactical hard deck. The others were down to minimum hours that
    they needed to be able to deploy. There was an impact to the
    Fleet Readiness Centers that General Paxton was mentioning.
    That left us with work in process that was actually on the
    factory floor, if you will, at the end of the year. That's the
    first time in a long time, at the end of the year, that we
    actually had airframes and engines that were just sitting on
    the floor, and the backlog behind it. That is a pretty
    significant impact.
        Then you go to the impact on the public yards. We saw, and
    you see every day up in New Hampshire, the hiring freeze, the
    overtime, and the furloughs. That delayed the starts, and it's
    extended the availabilities of the ships. There's a real impact
    to those things.
        If we go to a sequester level, and we stay at that level
    for any length of time, we think that limits our options and
    the Nation's decision space, because it compels us to go back
    and inactivate a carrier strike group, that's both the carrier
    and the air wing that goes along with it, because there's
    nowhere else to get enough money to be able to do that.
        There's a long-term impact as well on surge ability. In
    case a contingency comes up, the additional contingency
    operational capacity for the carrier strike groups has to be
    ready within 30 days.
        Additionally, modernization and recapitalization would also
    be dramatically reduced; a pretty significant impact.
        Just in terms of presence, there was a 10 percent drop in
    global presence as a result of the sequester, just the last
    time. That was just for 1 year. When you start to extend that
    over several years, it has a cumulative effect that is
    decidedly not good.
        Senator Ayotte. Admiral, we've heard in the past the
    testimony about what the size of our fleet would be if we went
    down the sequestration road, not only over the FYDP, but over
    the full window. Do you have those numbers, both the overall
    size of the fleet, as well as the attack submarine fleet? Even
    with building two replacements of Virginia-class submarines,
    we're only meeting half the combatant commanders' requirements
    now.
        Admiral Cullom. Yes, ma'am. As the CNO mentioned the other
    day, the combatant command demand signal over the request and
    the requirement that we have out there is for 450 ships. That's
    what it would take to be able to do what they need us to do.
    Sequester could take you down to the sustainable force, to the
    240-260 range, in that ballpark.
        Senator Ayotte. Right.
        Admiral Cullom. Of course, ships are aging out; that's one
    of the reasons behind the cruiser phased modernization. We
    would like to keep as many ships around as we can to handle
    contingencies in the future.
        Senator Ayotte. I think we all agree. We have to go over
    and vote and we're going to come back and continue.
        Senator Shaheen. I think we are. We have two more votes, so
    rather than trying to run back and forth, we're going to recess
    again, go do those two votes, and come back and finish the
    hearing.
        Senator Ayotte. Great.
        Senator Shaheen. Thank you for your patience, everyone.
        Senator Ayotte. Thanks. We'll come back. There are
    obviously many more questions, given the concerns we have.
    [Recess.]
        Thank you. Senator Shaheen is on her way back. I'm going to
    just continue the questioning that we were on when I left.
        I was talking to General Campbell, as well as to General
    Paxton. As I understand the force reduction levels that are
    proposed for the Army, as well as for the Guard and Reserve,
    here's what I'm trying to understand. Even without
    sequestration, we're proposing significant reductions, are we
    not? There's some plus-up in the proposal that, in addition to
    sequestration, as I understand, has been submitted to us by the
    administration. With that, we're brought to 420,000 Active,
    315,000 Guard, 185,000 Reserve. Is that right?
        General Campbell. Ma'am, the 420,000/315,000 is with full
    sequestration.
        Senator Ayotte. That's with full sequestration.
        General Campbell. Yes, ma'am.
        Senator Ayotte. Okay. Where are we without full
    sequestration?
        General Campbell. We're trying to hold at 450,000/345,000.
        Senator Ayotte. Okay. That's what I wanted to clarify.
        Here's what I need to understand. What risks are we taking
    on by doing that? What I mean is, let's say we have one
    conflict to respond to. Let's say that, unfortunately, we have
    to respond to aggression by North Korea, where none of us wants
    to end up in a land war, but let's say we had to go into a land
    war. What are we able to do? In other words, even with the
    450,000, what are we able to do? With the 420,000, with the
    sequestration, what are we able to do? What risks are
    associated with that?
        I think it's really important for people to understand that
    we used to have a theory that we could fight two conflicts,
    then we went down to one-and-a-half conflicts. Where does our
    posture now leave us, in terms of ground forces, General? Where
    is our posture left if we go forward with sequestration? I'd
    love to hear from both of you on this point, because,
    obviously, the Marine Corps is experiencing reductions, as
    well.
        General Campbell. Yes, ma'am, thank you for the question.
        What I'd tell you is, start worst-case first. At full
    sequestration, and General Raymond T. Odierno, USA, the Army
    Chief of Staff, testified to this yesterday, the Army
    leadership feels we'd really have a hard time to do a prolonged
    multi-phased major contingency operation. In the past, as you
    talked about, we could do two different places. We've gone to,
    really, one, and maybe hold off on the other at 490,000.
        Senator Ayotte. Like Iraq and Afghanistan.
        General Campbell. Right. We couldn't do that at 420,000.
        Senator Ayotte. You cannot do that at 420,000.
        General Campbell. No, ma'am. At 490,000, we feel
    comfortable that we can complete the DSG. There's a little bit
    of risk there. At 450,000, that risk goes much higher. Below
    450,000, we don't think we'd be able to do it.
        Senator Ayotte. When you describe a 420,000, which is the
    sequestration scenario, and you say one major contingency, you
    seemed to qualify what we'd be able to do in that one major
    contingency. Can you help me understand that?
        General Campbell. Depends on what exactly you're dealing
    with, for how long, and what mobilization you get you have to
    go through.
        It took us 2 to 3 years to grow brigades from scratch.
    People say it's easy to reverse this. It's not that easy, 2 to
    3 years. What Congress gave us with Iraq and Afghanistan was
    temporary end strength relief and some wartime allowance; that
    really helped us as we grew over the last couple of years.
    Remember, we had brigades where we had to drop down to two
    maneuver battalions to get the right number of brigades over
    into Iraq when we had the surge. We're now trying to make those
    brigades back, because we know we need to fight with three
    maneuver battalions, plus a reconnaissance piece, and we're
    trying to reorganize those brigades back and make them more
    capable. Going to 420,000, we would probably not be able to do
    that.
        Senator Ayotte. Wow.
        General Paxton, what would you say with regard to our
    ability to fight a conflict? Where would we be left, in terms
    of our capacity?
        General Paxton. If I may, Senator, build the context first.
        We were about 185,000 on September 10, 2001, and we grew to
    202,000, and that was with congressional authorization and
    funding. We knew we were going to have to come down, that that
    was unsustainable, with both conflicts. We had studied this in
    great detail. The optimal size for your Marine Corps is
    186,800, and we have testified to that. That's a balanced and a
    ready Marine Corps.
        If full sequestration kicks in, the next level of balance
    for us, which we don't like but could do, is 175,000. That's
    what we've testified to. At 175,000, we have, for example, 21
    infantry battalions. If the balloon goes up, it's a one major
    contingency operation force, and we're all in, everybody goes.
        Senator Ayotte. Everyone. There's nobody left behind?
        General Paxton. No, and it may take time, as General
    Campbell said. Some of these are phased arrivals, so some of
    our operation plans, and we'd have to answer this in a
    classified session.
        Some of them will arrive at different times, and we will
    use that time to see what extra monies we could get to build
    readiness. But, we would be flowing according to that
    operational plan and that timeline.
        Senator Ayotte. How do we deal with issues like dwell time?
        General Paxton. If I can, the 175,000 force is, as we spoke
    about 2 weeks ago at a 1:2 dwell.
        Senator Ayotte. Okay.
        General Paxton. That stays at 1:2.
        Senator Ayotte. Good.
        General Paxton. 186,800, we could get many units back close
    to a 1:3 dwell, which would be optimal.
        But, at a BCA force, and all in, that's at a 1:2 dwell,
    too. We believe, because of the 1:2 dwell, that our steady-
    state demand signal may be one of the most pressing
    circumstances, even if a major theater war or major contingency
    operation doesn't happen. Because, as we said before, to
    sustain aircraft readiness, ship readiness, and people
    training, we're going to be pressed to sustain that in the long
    haul, Senator.
        General Campbell. Yes, ma'am, if I could just add to that.
        Senator Ayotte. Yes.
        General Campbell. At 420,000, some of the assumptions that
    went into the planning to bring it down to even those lower
    forces were assumptions such as not rotating. We would not
    rotate forces. I think that's a flawed assumption. See what
    we've done in Iraq and Afghanistan.
        Senator Ayotte. What does that mean, if you don't rotate
    forces?
        General Campbell. That means they go over and they stay.
        Senator Ayotte. What does that do to their morale?
        You obviously need to be able to have some dwell time. Not
    that you wouldn't have dwell, but they're staying. That's a
    huge issue for them.
        General Campbell. That was one of the assumptions, yes,
    ma'am. The other assumption was, whatever we did would be over
    very quickly.
        Senator Ayotte. So this is not a sustainable assumption?
        General Campbell. Right.
        Senator Ayotte. We can ask them, but the damage we would do
    to them would be irresponsible.
        General Campbell. Right, if you have an assumption that's--
    you're going to be gone for X amount of time and come back, as
    we've seen over in Iraq and Afghanistan, that's not a very good
    assumption, either.
        Senator Ayotte. No, it isn't.
        General Campbell. I didn't even get into the number of
    aircraft that we're going to lose through BCA. Right now, with
    the aviation restructure, it would take about 600-plus on the
    Active side, about 111 from the Guard side; 4 combat aviation
    brigades would go away--1 on the National Guard, 3 on the
    Active. The multifunctional brigades, we talk in terms of BCTs
    all the time, but BCTs are only 30 percent of the total Army.
    There's a lot of other stuff that we do every single day.
        The combatant commanders have all the set-the-theater
    forces, so 35,000 soldiers every single day do theater
    logistics, intelligence, signal, et cetera, for all the
    combatant commanders. At some point, we're going to have to go
    back to the combatant commanders and say we can't do that. The
    world we live in today becomes more dangerous. Many of the
    things that we continue to do for emerging crises, like a
    Terminal High Altitude Area Defense in Guam or Patriots to
    Turkey, are covered underneath our base. That's something we
    have to take out of that we don't program for.
        Senator Ayotte. Thank you. I appreciate it.
        Senator Shaheen. As I understand, the Army budget brief
    suggested that units will continue to build progressive
    readiness and achieve the highest training and readiness
    levels, based on available resources. Am I correct in that,
    General?
        General Campbell. Yes, ma'am. I talked about tiered
    readiness.
        Senator Shaheen. Right.
        General Campbell. Progressive readiness is really what
    we've had the last 12 years with an Army Force Generation
    model, where there's predictability, and you went through and,
    at certain times, you continue to have time to build up. You
    had a Latest Arrival Date, in either Iraq or Afghanistan, and
    so you had time to build up to that. All of our units went
    through that and progressive modeled both the Active and the
    National Guard.
        Tiered readiness really focuses on certain units, and
    that's where the money has to go to. Everybody going to
    Afghanistan, if you're in Korea, if you're the Global Response
    Force, you get the resources. Everybody else, you have what you
    have, and your training readiness will continue to go lower.
        That's the difference.
        Senator Shaheen. That's what we're looking at if we're
    looking at year upon year of sequestration, is that correct?
        General Campbell. Absolutely.
        Senator Shaheen. The tiered readiness?
        General Campbell. Yes, ma'am.
        Senator Shaheen. Can I just ask the other branches if you
    are also looking at tiered readiness? General Spencer, you said
    you don't have tiered readiness.
        General Spencer. That's right, Senator. Without going
    classified, based on the timing that the Air Force is required
    to show up in the war plans, we cannot do tiered readiness; we
    have to be ready to go right now. We couldn't do it.
        Senator Shaheen. Is that also true of the Navy, Admiral
    Cullom?
        Admiral Cullom. Senator, I said that the Navy was in tiered
    readiness, and had been for 200 years with ships at sail. When
    General Campbell was talking about the progressive readiness,
    that is, in essence, what my definition was of tiered
    readiness: only the folks that are going out to deploy or those
    that are in a surge capacity that are needed to be able to
    deploy.
        To give you an example, for this year, although we say we
    have two carrier strike groups that are out there today, and we
    can provide a certain number in surge capability, the reality
    is that a good portion of our carriers, and the carrier strike
    groups associated with them, will actually be deployed and
    underway sometime during that fiscal year. It isn't as if those
    carrier strike groups stay at a tiered readiness level that is
    perpetually at a certain level and then continues to grade
    down. They're always in a cycle of working out for that
    deployment and then ultimately deploying. In this case, for
    this year, six of nine carrier strike groups will actually be
    deployed or operating out at sea and away from American shores.
        Senator Shaheen. How about the Marine Corps, General
    Paxton?
        General Paxton. Senator Shaheen, we do not tier readiness,
    either. We have units, obviously, that are in different
    readiness cycles, depending on when they came back from
    deployment and when they may have to go again. In a BCA force,
    though, if we go to a 1:2 dwell and then the balloon goes up,
    it's obvious that, at some point, we have to look at something
    other than either full readiness or no readiness.
        If I may, there are two issues here, and I'll pile onto
    what General Campbell said a little while ago. Even in one
    major contingency operation, regardless of where that theater
    of operation may be, we're all in. The issue then becomes that
    there are no combat casualty replacements, there are no extra
    logistics. There is no surge capacity to deny, to delay, to
    deter anywhere else in the world. We're all in, in that one
    fight.
        In essence, when we get together in uniform and we talk
    about this, we're not presenting national command authority
    options, because it's an option of one: everything goes. Then
    the units that go, you can't even distinguish on the triangle
    whether you want a well-trained, well-equipped, or a well-
    maintained unit, because you're going to get what you get.
        Senator Shaheen. Admiral Cullom, I want to go back to
    follow up on Senator Ayotte's questions about the workforce at
    our public shipyards. Obviously, this is a concern for us, with
    the Portsmouth Naval Shipyard as part of our State. There's a
    graph here, that I think everybody has, that shows the aging
    out of our shipyard workforce and depot workforce.
        [The chart referred to follows:]

        Senator Shaheen. It's a concern that we've been hearing in
    Portsmouth, at the Naval Shipyard. There are a lot of people
    with a lot of years in, and they're looking at the future, with
    continued sequestration and potential furloughs and it's
    discouraging people, not only in terms of staying beyond once
    they get their years in, but also discouraging our ability to
    recruit and retain new workers who are going to be able to
    achieve that level of experience.
        I had a chance to raise this with Admiral Samuel J.
    Locklear III, the Commander of U.S. Pacific Command, earlier
    this week, and he talked about the importance of our shipyards,
    making sure that we have the readiness we need to function.
        I wonder if you can talk about how you view recruiting
    people to replace those workers that we're going to be losing,
    and how we can continue to retain that level of expertise.
        Admiral Cullom. Yes, Madam Chairwoman.
        That's a great graph, because what it really shows you is
    the reductions in force (RIF) of some junior personnel that we
    had on board the shipyards back during the 1990s timeframe.
    During that timeframe, those would be the people that, today,
    had they stuck around, had they been here, would be our
    experienced technicians. Much of what we do today really does
    require some pretty high technical ability.
        We went from 8 shipyards and, I think, about 70,000 workers
    down to 4 shipyards with 21,000 workers. That very clearly
    shows you that they all left.
        Now, we're faced with a pretty junior workforce. We're
    doing a lot of great work in mitigation at the shipyards. The
    folks from Naval Sea Systems Command have put significant
    investment in the training of personnel and in additional
    supervision, to help bring the young workforce that we have
    there now, to develop those skill sets, to learn from those
    people who have been around, and to bootstrap our way back to
    the experience levels that we, in fact, need.
        That does imply, and does end up producing, some amount of
    other indirect costs to it, but it's necessary if we're going
    to provide the technical skill sets that we need with the very
    complex platforms and ships that we have today.
        Senator Shaheen. I just want to ask one followup to that,
    because a number of you have mentioned the effect of morale on
    continuing budget cuts and looking at continued furloughs in
    areas. To what extent is that going to influence our ability to
    continue to recruit good people and retain them at our public
    shipyards and depots?
        Admiral Cullom. Ma'am, I think there will be a challenge
    with that. We are very lucky, very blessed, to have civil
    servants that work in the shipyards and amongst all the
    commands. Even in the Pentagon, we have civil servants that do
    tremendous work, and have a great deal of experience.
        Our folks in the shipyard are experiencing challenges. We
    ought to be very concerned about whether or not they will be
    able to continue to show what I call, ``psychic income.'' It's
    what they get because they know they're doing very important
    things, that they are producing ships. I'm the beneficiary of
    many a ship that was produced up in the yards up there. I have
    to tell you, they are well built by craftsmen who care about
    knowing that young men and women are going to man-up those
    ships and take them to sea and into harm's way. We can't afford
    to lose them.
        Senator Shaheen. Thank you.
        General Campbell, would you like to comment on depots and
    whether there's a similar issue?
        General Campbell. Yes, ma'am.
        The same thing. We have some great civilian employees out
    there. We have to build that trust back with them. Most of them
    hung with us, despite 205,000 put on furlough, loss of 20
    percent of pay for 6 weeks, and not knowing how long that's
    going to go on. It also impacted families, because many of the
    workers would work in hospitals or clinics that would impact
    families, and we had to cut that down. Negative pay on the
    morale, no pay raises for the last 3 years, and no incentive
    pay impacted that they're leaving to go seek employment in the
    private sector. They're very dedicated, but they look to the
    future, and they say that we can't tell them the predictability
    out there. That's been all of our biggest frustration, to deal
    with the unpredictability of the budget issues that we've been
    facing for the last couple of years. We did it last year; we
    all had to do that. If we have to do that again this year, then
    I think that there'll be more of a mass exodus.
        Senator Shaheen. Thank you.
        Senator Ayotte.
        Senator Ayotte. Thank you.
        General Campbell, can you tell us what you are going to
    have to do with involuntary terminations? Assuming there's no
    sequestration with the proposed budget from the administration
    and assuming we do have sequestration, what's the scenario
    there?
        General Campbell. Yes, ma'am. As we've gone from 570,000,
    working our way down to 490,000 on the Active side, most of
    that we've been able to do with normal attrition. In the end,
    and we're probably about 520,000 today, as we get down to
    490,000, probably only about 5,000 will be involuntary
    separation. But, involuntary separation is really a big
    category. It's two-time non-selects for different promotions,
    it's people that reach what we call a retention control point.
    They've been in at certain rank too long, it's us going back
    and being very tough on reenlistments and just saying, you
    cannot reenlist. You're qualified, but as we look at everybody
    here, you're not as good as this next guy. We have to keep the
    very best. There's a qualitative service program, where we take
    a look at our senior noncommissioned officers and how much time
    they have, and some of those have to go.
        Five thousand is really getting down to 490,000. When we go
    from 490,000 to 450,000, that number's going to go up
    significantly. Talking to our personnel folks, it's probably
    going to be in the neighborhood of about 35,000 involuntary
    separations that we're going to have to work with. If we go
    from 450,000 to 420,000, that number's going to go up more.
        We've done colonels and lieutenant colonels this year, with
    a selective early retirement. All of those were eligible for
    retirement, and we worked through that, some great counseling,
    and it was about 150 lieutenant colonels, probably 100
    colonels, when we worked through that piece. But, we're now
    working on captains and majors, and those numbers will be much
    larger. These are young captains that could be company
    commanders in Afghanistan today, and they come back and we tell
    them thanks for your service. It's going to be very tough.
        Senator Ayotte. That is tough. Also, what about employment
    for them? You are going to be putting a lot of people out.
        General Campbell. Ma'am, we have Soldier for Life, where we
    really do work hard on transition.
        Senator Ayotte. Right.
        General Campbell. A year-plus out, we provide them the
    right skill sets to help them get jobs as they get out.
    Industry is working with us, a lot of partnerships to do that,
    so we're very thankful. We have to pay the unemployment if they
    can't get jobs. Last year for the Army, it was above $500
    million that we paid in unemployment. It behooves us to
    continue to work hard to make sure that we set all of our
    soldiers up. They're all going to be better citizens for it,
    they're going to provide to the country as they get out,
    whether they've served a couple of years or all the way through
    retirement. We work very hard on our Soldier for Life program,
    and we're appreciative of all the great support that we have
    with partnerships out there with business in many of the
    communities.
        Senator Ayotte. Sure. I think that it's important, but
    unless I'm missing something, we're doing this pretty quickly.
    It's not the way we would want to do it, right?
        General Campbell. Yes, ma'am. I think, from 570,000 to
    490,000, we were able to set a time and a ramp that we thought
    we could work personnel policies to take care of our soldiers
    and their families.
        Senator Ayotte. Right.
        General Campbell. Now, it is from 490,000 to 450,000, much
    quicker.
        Senator Ayotte. Yes.
        General Campbell. From 450,000 to 420,000 is much quicker,
    and it's going to get much harder.
        Senator Ayotte. General Paxton, obviously the Marine Corps
    is smaller.
        General Paxton. We are smaller, ma'am, the exact same
    challenges that the Army has, we have there. We do not RIF
    right now. We don't have any intention to RIF. We don't see the
    need to do that. But, there's a lot of hard work that goes into
    how you shape the force, strike the balance between the
    sessions, and how many new folks you bring in, and then how you
    properly grade-shape the force so you could get equitable
    reenlistments, equitable promotions, and equitable
    opportunities for command. The ability to predict what the
    money would be, the ability to predict what the timeframe would
    be, as General Campbell brought up, is really critical. BCA
    just accelerates the speed with which you make some of those
    decisions.
        General Campbell. Ma'am, to add on and put it into context,
    keeping it going and continuing to grow for the future, we have
    to bring in about 60,000 new soldiers every year. We have to
    bring in about 4,000 new officers every year. Despite coming
    down, we still have to bring that in, to continue to grow the
    right grade structures as we move forward. That's going to
    continue to make it tougher, as well.
        Senator Ayotte. I don't know if the Air Force and the Navy
    want to add anything on this.
        General Spencer. Senator, I will. I wanted to go back to,
    if I could, the earlier question on the depots, because that's
    a really big deal for us with our civilians.
        Senator Ayotte. Sure.
        General Spencer. We didn't treat our civilians very well
    last year. We sequestered them, we carried thousands of
    vacancies, and we then furloughed them. They hear rumors. Every
    time a cut comes up, why don't you just go cut more civilians
    instead of taking the cut there?
        Coincidentally, I have two sons; one works in a shipyard in
    Newport News, the other works as a computer operator for the
    Defense Intelligence Agency. I have to tell you, they both
    called me last year, asking, should I get out of DOD? They are
    committed to service like I am, and so they want to be a part
    of DOD, they wanted to serve their country, but they have
    families. Fortunately, they didn't jump ship, if you will, but
    they were really worried.
        I think we need to be really careful about our civilian
    employees. Just in the Air Force, as an example, we have
    180,000 civilian employees. Roughly between 4,000 to 5,000 of
    those work in the national capital region. I think sometimes
    there's a view that all civilians work in staff jobs. Not that
    staff jobs are not important, but the vast majority of our
    civilians are out turning wrenches, they're out at depots. For
    example, at our training like at Laughlin Air Force Base, TX,
    they do aircrew training and they train new pilots. Their
    entire maintenance of their T-38 fleets are all done by
    civilians. When we start talking about cutting civilians or
    laying off civilians, that's really direct mission that we're
    cutting.
        Admiral Cullom. Ma'am, for the Navy, we don't see a need
    for a RIF, but, like General Paxton, there are the issues
    associated with force-shaping, and then, for us, the
    reallocation to be able to fill gaps at sea. We have gaps on
    many ships at sea, and we need to reallocate our current force
    structure to some of those ships.
        Senator Ayotte. I think I'll start with General Campbell,
    in particular, and General Paxton about OCO. As I understand
    it, after the last piece of equipment leaves Afghanistan,
    you're going to need 3 years of OCO funding to reset. Can you
    tell me if there is a firm commitment to include this reset
    funding in the budget?
        You know what I always find fascinating about OCO around
    here? Everyone looks at it for everything, to fund every
    project. Can you tell me what you're going to need for OCO
    funding in the coming years?
        General Campbell. Yes, ma'am. The critical piece is what
    you just said there. We've been very consistent, since I was a
    colonel back in the Pentagon in 2004-2005, when we talked about
    having the ability to reset our equipment 2 years after we came
    out. It will now take 3 years after the last piece of equipment
    comes out to reset all that equipment.
        Today, we have about $15 billion worth of equipment in
    Afghanistan. We need $10 billion of that back to be able to
    reset. There's $5 billion that we can work with the Afghans,
    with other countries, that we can divest but we need to get $10
    billion of that back.
        But we've been very consistent, about 3 years to take care
    of all the aircraft and all the ground combat vehicles to come
    back in. We do use OCO for the training piece, because
    everything going to Afghanistan, we've been able to use OCO.
    But last year, when we had the sequestration issues, we had to
    take from the base, because of the OCO issue, at about $3.2
    billion.
        As I talked about in my opening statement, if we can't get
    the OCO at a certain point, then we have to go back into the
    base, because we're not going to leave our men and women
    without what they need in Afghanistan. But that'll impact
    readiness in the end.
        General Paxton. Senator, we are continuing to move our
    gear, which is a recapture, reset, and reconstitution of our
    gear. We've brought about 79 percent out of Afghanistan, to
    date, but when General Campbell and I testified in front of
    both of you last year, it was closer to the 3-year mark for the
    Marine Corps. At that time, it was $3.2 billion. But due to a
    lot of hard work over the last year, that delta is now down to
    about $1.2 billion or $1.3 billion. We're going to need
    probably 2-plus years and about $1.2 billion, and hopefully in
    OCO monies. That's what we'd like to plan around, to get that
    gear reset, ma'am.
        Senator Ayotte. Good work on the number.
        General Paxton. Thanks.
        General Spencer. Senator, if I could add, because reset is
    one thing, and we have reset requirements as well, but there's
    another part. You may have heard the term ``OCO to base.'' As
    some of the other Services, we are coming out of Afghanistan
    and Iraq with more bases than we went into it with. There is
    this enduring requirement of al-Udeid and al-Dhafra. Those
    bases have been coined ``enduring.'' Right now, those bases are
    being funded out of OCO. In addition to having to reset the
    force, we have to figure out what we're going to do with our
    budget to now absorb these enduring bases that remain.
        Admiral Cullom. Yes, ma'am, on the Navy side--and I'd
    actually divide it into three areas. Our OCO, as you said,
    there's a lot of stuff that goes into that, is certainly an
    enduring piece for the Navy as well. On the enduring side, ship
    maintenance and aviation depot maintenance, there's certainly a
    good portion of that that definitely funds enduring things.
    CENTCOM facilities like Isa Air Base, Fujairah, or Jebel Ali
    are also funded with that.
        The reset piece for the Navy, because we've been resetting,
    if you will, in stride, we've also been double-pumping our
    carrier strike groups. As we've done that, there wasn't the
    time to be able to do a lot of the reset. Reset, for us, of 10
    years of operations, and, because with the drydocks up there,
    there's only so many drydocks, and getting them through that
    takes a certain period of time. For us, that's about a 5-year
    process because they drydock once every 8 years. That's going
    to take us a little bit longer on that reset piece.
        Then there's the continuing operations piece. I would
    suggest, although Navy is at $9 billion for 2014 in the total
    OCO amount, that will certainly come down as we pull out of
    Iraq. If we look and think that should go back to where it was
    prior to September 11, 2001, the Navy, prior to September 11,
    2001, was somewhere a little bit north of about $1 billion a
    year for our supplemental monies. It's going to take more than
    that, in the kind of continuing operations that we have in this
    extraordinarily complicated world, particularly with the
    rebalance to the Pacific, as well.
        Senator Shaheen. Thank you.
        Senator Hirono.
        Senator Hirono. Thank you, Madam Chairwoman.
        General, I appreciate your thoughts about the importance of
    the civilian component to our mission. I agree with you.
        Admiral Cullom, the Pearl Harbor Naval Shipyard Apprentice
    Program provides an opportunity to train and educate young
    people in the workforce, providing for development and
    retention of the best and the brightest, ensuring that we
    attract and retain the most capable workforce, and provide for
    educational and professional development. I have had the
    opportunity to attend many of the graduations each year of this
    excellent program, and have spoken with the graduates. They
    consider the work at the shipyards to be of utmost importance.
    It's what they do to serve the country. For a number of them,
    it's generational, that their fathers and even their mothers
    who are now being trained more and more. This is important
    work.
        Given that we have been so successful with this program in
    the past, what are your thoughts about the future of the
    program? Is it right-sized? Does it need to be expanded,
    especially as we see the experience level in the shipyards
    going down for the foreseeable future?
        Admiral Cullom. Yes, ma'am. Thank you for the question and
    your thoughts about it, because it certainly is a family
    tradition for many families, from generation to generation. In
    some cases, it's three or four generations who have been
    serving in that way to ensure that we have the kind of ships,
    and I would also suggest, the aircraft in our aviation depot
    maintenance facilities as well.
        The training programs are absolutely essential. They're not
    just out there busting rust on the deck of the ship, they're
    actually out there doing some pretty complicated repairs and
    also, in many cases, helping us do the modernizations that are
    pretty essential for the ships to be relevant for far into the
    future.
        I think we're happy with where the program is right now. I
    think there are opportunities for us to look at where that can
    be expanded, where it fits within the work that we have to do.
    Certainly, as we were just talking about, with reset, there'll
    be plenty of work to do.
        Senator Hirono. I note in your--is this your chart? Whose
    chart is this?
        Admiral Cullom. Yes, ma'am.
        Senator Hirono. 2014 and beyond will have increasing
    experience in your workers, if training and investment are
    maintained. Is that a big ``if'' for you, or do you expect that
    it's all going to happen?
        Admiral Cullom. The training is continuing. We have a
    fairly good program for that. As we were just talking about,
    the training programs are essential to be able to build that
    level back up so that we get beyond just having apprentices
    that would get into journeymen, and we really develop that
    expertise. We're in the process of doing that, but we're also
    recovering from that whole decade between 1990 and 2000, where
    we sent many of those junior workers away. In that process, we
    lost. I would say we created a notch of experience.
        Senator Hirono. Are you saying that we're doing enough and
    we're putting enough resources to train the workforce that we
    need to keep our shipyards and, basically, our military, our
    Navy, going?
        Admiral Cullom. Yes, ma'am. I think we are. It's a fine
    balance with that, because if you put too much into that, then
    you add to the indirect cost associated with that. But clearly
    we're trusting the judgment of our shipyard commanders, the
    shop personnel, and the shop foremen to ensure that they are
    making the case for which training programs are the most
    relevant, and we evaluate those all the time. Naval Sea Systems
    Command evaluates those for how effective they are and what
    they're doing. I think, for right now, we're okay.
        Senator Hirono. We know that there's been a pretty big cut
    to the military construction funds, and that's important. So
    too are resources for restoration, sustainment, and
    modernization funds, keeping our shipyards at their peak form
    and capabilities. I know that there's pressure everywhere in
    the DOD budget; tradeoffs have to be made while managing RIFs.
    Admiral, how important are these funds to the shipyards, and
    what is your outlook for sustainment, restoration, and
    modernization at our shipyards?
        Admiral Cullom. Yes, ma'am, you're exactly right. We
    recognize that the shipyards are absolutely critical to being
    able to maintain our warfighting readiness. To be able to do
    that, they have to have the infrastructure in the shape that it
    needs to be in, to be able to properly support, so the lights
    work, so that the plumbing and the equipment works, and they
    can be able to do the repairs.
        The budget funds the most critical of the deficiencies
    related to productivity and safety, but we are, right now,
    working very aggressively to look for opportunities, either
    through reprogramming or realignment, to try to be able to get
    that funding up to the 6 percent, where it should be.
        Senator Hirono. Thank you, Madam Chairwoman.
        Senator Shaheen. Thank you.
        Senator Donnelly.
        Senator Donnelly. Thank you, Madam Chairwoman.
        This would be to all of you. I'm concerned about the
    persistent issue of suicides among our servicemembers. It's
    often considered a personnel issue, but I consider it a
    readiness issue as well. As we look at this, I was wondering,
    do you also consider this a readiness issue as well as a
    personnel issue?
        General Campbell. Sir, absolutely, sir. We've been working
    very hard with a lot of different programs and partnerships
    outside of each post, camp, or station. All the Services have
    taken a hard look at this. We're putting behavioral health
    providers in and we've raised those numbers at each post, camp,
    or station. We've made behavioral health teams at the brigade
    level. We did that in Afghanistan and it really helped out.
    We're bringing it back to the continental United States. We've
    increased behavioral staff by 150 percent, where it was 1,300
    in 2003, to over 3,200 in 2013, so we continue to work through
    that.
        Each post, camp, or station does a holistic look at all
    behavioral health, all suicides, everything we put under the
    umbrella of ready and resilience. Resilience, for us, is about
    providing soldiers, family members, and civilians some of the
    skill sets to help them when they face some of those hard
    things in life, whether it's relationship issues or financial
    issues. By looking at resiliency, it really is tied to
    readiness. One suicide is bad. We continue to work through all
    those.
        It's much tougher for our National Guard and our U.S. Army
    Reserve, based on the geographical dispersion, that they have
    the availability to get to some of the post, camp, or station,
    but they're doing some very innovative things in each of the
    States, with partnerships with armories, that kind of thing.
    We'll continue with that program.
        Senator Donnelly. A recent report that came out indicated
    that some of the servicemembers who committed suicide, when
    they looked, said there were previous mental health or had
    suicidal thoughts before they ever joined. I was wondering if
    there's any look at how we can improve or update our screening
    process.
        General Campbell. Sir, we've been looking at that very
    hard. I don't have the numbers here with me that talks about
    the number that we think had some sort of behavioral health
    issue before they came in, so I will provide that information
    for the record.
        [The information referred to follows:]

        The Army never had the ability to know fully whether or not an
    individual had a behavioral health condition or treatment before
    joining the Army. During the accessions process, medical records are
    reviewed and soldiers are asked if there is any history of behavioral
    health care. Certain conditions, when identified, render accession
    candidates ineligible for entry into the uniformed services.
        There are no civilian data systems that track pre-existing
    behavioral health conditions beyond what is self-reported or disclosed
    in copies of medical records provided by the applicant. Therefore,
    there are soldiers who come into the military with mental health
    problems that were either unrecognized or unreported at the time of
    accession.
        After a suicide, the Army can correlate existing behavioral health
    conditions recorded in the military electronic medical record with
    other risk factors that were present in the decedent. Suicide event
    reporting is detailed, and collateral data are often obtained.
    Nonetheless, unless behavior health care obtained prior to entry is
    disclosed by servicemembers during treatment or in other forums (such
    as direct questioning during accession training), there are no
    comprehensive mechanisms to determine if there was a behavioral health
    condition or episode of care prior to entry into the Service.

        General Campbell. I think, with some medical testing, with
    some biomarkers that they've been working here for a couple of
    years, there'll be some tests that we can do in the future that
    could maybe help identify that a little bit better.
        Our screening continues to get better and we are
    identifying soldiers at high risk and returning from
    deployments and being able to make sure that we cover down to
    provide them resources. But we have to switch gears a little
    bit and make sure we do that as soldiers come in as well.
        Senator Donnelly. I was fortunate. Ranking Member Ayotte
    and I were in Israel for just a few days, and when we were
    there, we were fortunate to get a briefing from the Israeli
    Defense Forces (IDF) suicide prevention team. One of the things
    they have done is pushed it pretty far down into the chain of
    command to have people who are looking and keeping an eye out.
    Basically, instead of up here, it starts down here and works
    up. A lot of the leaders right there on the ground are the ones
    who are telling people higher up in the chain that this person
    is struggling a little bit and we'd love to get him help.
        I just recently received a report back from DOD and they
    said, we're not seeing that that provides much help. I would
    like to say here, that when we talked to the IDF, their numbers
    dramatically were reduced, the lower they went into the chain
    of command. People who are with them every day could just give
    a heads-up to other folks, saying this person's really
    suffering a challenge now. If you could take it back to DOD
    that they may want to take another look at this?
        General Campbell. I don't know who you talked to in DOD,
    sir, but I think all of us would tell you, the lower that we
    get the better. You have to know everything about that soldier,
    where he lives, if he's married, not married, financial issues.
    That's all about being good teammates, taking care, and having
    a battle buddy. I think all of the Services do that very well,
    and we'll continue to look at other ways to make sure we do
    that. But if we can set policy and procedures at the four-star
    level, it doesn't matter, it has to happen on the ground with
    battle buddies taking care of each other, making sure that they
    understand if they have an issue, that there's no stigma to
    going to get help.
        We have folks, like Medal of Honor recipient Ty Carter, who
    has come back and has had some issues. His platoon sergeant
    grabbed him and said, you need to get some help. He became
    suicidal. He got that help, now he's a spokesperson. If
    somebody with that type of valor can go forward and say, ``I
    need help,'' we have to continue to spread the word. But it
    starts at the lowest level.
        Senator Donnelly. We really appreciate your help and your
    words on this, because having a good teammate, as we work with
    DOD on this, to enable us to, as you said, have your battle
    buddies be able to give that information, we would appreciate
    the chance to work with you so we can try to further educate
    some of the other folks who are working on this issue. Thank
    you.
        In regards to force structure, General Campbell, you and I
    were fortunate enough to get a chance to talk a little bit
    yesterday, and I know there are proposals that are out there.
    The proposals that are out there, how would you characterize
    them, in terms of referencing what the force structure looked
    like pre-September 11, 2001, to today? Are they going to be
    fairly similar, in terms of mix, or how would we look at that?
        General Campbell. Sir, I think first of all, it depends on
    whether or not we go to full sequestration. If we get help from
    Congress not to go to full sequestration, that will really
    help.
        But, I would tell you it has to be a balance. We're trying
    to balance the end strength, the force structure, the
    readiness, and the modernization. Prior to September 11, 2001,
    the Active Army was at about 483,000 to 484,000; we're going to
    down to 490,000, then down to 450,000. The National Guard was
    probably at about 350,000, they went up to about 358, they're
    going down to 350,000, then maybe 335,000.
        It's going to be lower than pre-September 1, 2001. The
    world we live in continues to be dangerous, but we are doing
    some things to help ourselves out, to remain in balance, to
    reorganize the BCTs, both on the Active and the Guard side, and
    to make sure we have the most capable brigades that we can
    have. But, they're going to be smaller.
        Senator Donnelly. Okay.
        General Campbell. There are some very tough decisions, as
    we go forward, on aviation restructure. We talked a little bit
    about that.
        Senator Donnelly. Other tough decisions are in areas of
    compensation in other areas, as well. As you look at
    compensation changing some of the ways it's going to be handled
    for the future, if there are compensation changes, do you think
    we'll still be able to retain the quality and the people we
    need to protect and defend our Nation? That would be for any of
    you.
        General Campbell. Sir, we talked a little bit about it
    earlier, about the morale and the impact. What I think we
    really have to do is to make sure we do a holistic look, and we
    don't keep piecemealing these soldiers and these families,
    where we're going to take some of this, next year we're going
    to take this, next we're going to take this. We have to do a
    one-time, ``here's what it is,'' because they understand that
    we have to get smaller, they understand that they have to pay a
    little bit of sacrifice here, but they also understand that
    they're part of one-half of 1 percent in this Nation that stood
    up and said, ``Send me to protect everybody else.''
        Senator Donnelly. Right.
        General Campbell. They deserve something special;
    everything that we can do for them, we ought to do.
        But, what we're really trying to do, I think all the
    Services would tell you, is that we're not trying to take away,
    we're just trying to slow down the ramp of where we're at on
    compensation. We were very blessed over the last 12 years for
    what Congress has provided us and all of our soldiers. But, the
    cost of a soldier today, both for medical and everything else,
    has gone up incredibly. We can't continue on that path and be
    status quo without making some very tough decisions, and we
    just have to be smart how we go about it.
        Senator Donnelly. Senator Ayotte and I were also in
    Afghanistan, and, when we were there, the parliamentarians from
    their country said to thank all of the members of our military
    for everything they've done to try to provide them with a
    country where their kids can grow up in peace, where their
    families can grow old, and where their country can have a solid
    future. I wanted to pass on, from all of those folks, and there
    was a number of them, how much they appreciate everything you
    have done to give them that chance.
        Senator Shaheen. Thank you very much, Senator Donnelly and
    Senator Ayotte, for sharing what you heard in Afghanistan.
        Gentlemen, I think everyone here would agree that our men
    and women who are serving in our military are among the best
    and brightest in this country, and we probably have the most
    outstanding force we've had, certainly in my lifetime, and
    probably in the history of this country. But, there have been
    some high-profile scandals recently that I think we need to ask
    about as we're talking about the impact on readiness.
        Admiral Cullom, there was a recent cheating scandal at the
    Navy Nuclear Power School in South Carolina. There was more
    scandal in the Air Force. There have been several very high
    profile stories about leadership on the part of some of our
    leaders serving in the military, and their leadership styles
    and questions about bullying and other behaviors. I wonder if
    you can talk about what systemic efforts are underway to
    address these kinds of challenges, if there are any.
        I know that there are investigations underway of both of
    the scandals that I mentioned, and I'm not going to ask you to
    comment on those, but if you would, talk about what efforts are
    being looked at to address some of these challenges.
        Admiral?
        Admiral Cullom. Yes, ma'am, I'll start out.
        With regard to the Nuclear Power School issue, it certainly
    has the direct attention of the Navy leadership. Admiral John
    M. Richardson, USN, the Director of the Naval Nuclear
    Propulsion Program, is certainly very involved in trying to get
    to the heart of this. We will follow up with Congress when the
    investigation is complete.
        The safety of the nuclear powerplants has been something of
    paramount importance to us, and we've done, I think, a pretty
    good job well over 55 years in doing so. But, that doesn't come
    without a constant vigilance that you have to have for what the
    appropriate standards are for personal responsibility, for the
    rigorous oversight that you have to have for a program like
    that, as well as the highly-trained personnel and what you put
    into them to instill them with the right standards. The
    foundation of the conduct throughout the Navy really is
    integrity, on all these issues, but particularly acute in that
    area.
        I'm a nuclear-trained officer myself, and I can tell you
    that I'm pretty confident that the knowledge and the standards
    are there. There are a few people that choose not to follow
    those. But we have to make sure that we look at and that we
    examine. We are in the process of examining that right now to
    get to the heart of it.
        But, the culture there, as well as the culture throughout,
    I think, all of our Services, is that it demands accountability
    for these things, that we have to make sure that people
    understand what they need to achieve, and what they need to get
    to for that.
        From the leadership side of the house, the CNO has
    instituted a Navy leadership development strategy to strengthen
    our profession and to reemphasize those things. That involves
    professional ethics, modules that are incorporated through not
    only at the flag officer level, but all the way down to newly
    commissioned officers. That's certainly one thing we think will
    certainly help from the leadership perspective, but it has to
    be instilled from the ground all the way up. That's what
    generates the trust, the trust that we have for each other as
    battle buddies, the trust that, frankly, families have. When
    they offer up a young man or woman into the service of their
    country, that's what they expect out of the leadership in
    charge. They will have that trust and have that sense of
    accountability for it, and to ensure that we all operate by the
    right standards.
        Senator Shaheen. Thank you.
        General Spencer.
        General Spencer. Senator, we're similar to the Navy. I can
    tell you what I do know so far about the cheating scandal. Our
    young nuclear officers take periodic tests and some were found
    to be cheating on the tests. What was interesting, though, is
    we found that they weren't cheating to pass the test, which is
    a score of 90, they were cheating to score 100. We're confident
    that they know their job, because as soon as we heard about it,
    we retested not only them, but all three missile wings, and
    they had a pass rate of 96 percent. So we know they can do
    their job. They are tested in a simulator periodically. We
    watch them do their job. We give no-notice inspections. We know
    they can do their job. But there was something there that we're
    getting to the bottom of. There is no excuse for cheating,
    period, so that's an issue that we're addressing. This sense of
    100 versus 90, and why is that so important, it has compelled
    us to examine training versus testing. In other words, is it
    more important to just miss a question and then someone explain
    to you why you missed the question, or, is it more important to
    get the question. We're weighing testing versus training.
        You may be aware, in terms of ethical behavior, Secretary
    of Defense Chuck Hagel is in the process of standing up an
    ethical office. All of us already meet every week with the
    Secretary of Defense on sexual assault issues, and Secretary
    Hagel is having a similar structure for ethical behavior as
    well.
        Senator Shaheen. I was not aware of that.
        Do either of you want to add?
        General Campbell. Yes, ma'am, if I could just add to that.
    I think for all of us, we talk about the three Cs: Competence,
    Character, and Commitment. We really have to continue to work
    through that, and trust between soldier to soldier, trust
    between soldiers and their leaders, and trust between the
    soldier and the American people. In some areas, we've lost a
    little bit of that, based on some of the incidents that you
    talked about.
        I would tell you, though, as I see it, and I work all the
    general officer discipline as a Vice Chief, I think all the
    Vice Chiefs do that for Active, Guard, and Reserve, the number
    is very, very small.
        Senator Shaheen. Sure.
        General Campbell. High profile makes the paper, and we hold
    ourselves to a higher standard. We should. That's what the
    American people expect. But it's a very small number. It's not
    like a newspaper person has an aha moment and found out
    something. We give it to them. We do the investigations. We
    give the information to them. It's not like they're doing
    investigative reporting to find somebody.
        I feel very confident, and I'm still confident, that we
    have the very best men and women that come in. But we have to
    continue to get better. We're doing 360-degree surveys on
    lieutenant colonels, colonels, commanders, and command
    sergeants major now, so they get an assessment of how their
    peers and their subordinates feel. We do much more on command-
    climate surveys at all different levels. General Spencer talked
    about Secretary Hagel's meeting on sexual assault. We do that
    every single week. The Vice Chiefs go. All the Services are
    doing best-practices from each other, to help each other out,
    to continue to go.
        I think we have to come back and show you that we are
    making a difference, and continue to keep the trust of the
    American people. I think you know that all of the Services, as
    they do their polls every year, are very high in the trust of
    the American people.
        This is a very small percentage. That doesn't mean it's
    good. We have to continue to do everything we can to get
    better. But I feel very confident that we're working at this
    very hard.
        Senator Shaheen. Thank you.
        General Paxton, anything you want to add?
        General Paxton. As always, General Campbell hit it all,
    ma'am. We've increased the 360-degree surveys. We've increased
    command-climate surveys. As is always the case, even if you
    have great people and good habits, every now and then you just
    need to turn the lens inward, and maybe you've focused on some
    training, or focused on some deployment, or focused on some
    retrograde, and you just need to go back and reinstill some
    basics. The Commandant, himself, has done that with his ethics
    lecture, his heritage brief, and his reawakening brief. We're
    comfortable that we have the right people focused on the right
    issues here, ma'am.
        Senator Shaheen. Thank you.
        Senator Ayotte.
        Senator Ayotte. Thank you.
        General Spencer, I wanted to ask you about the Special
    Victims' Counsel (SVC) program that was being done as a pilot
    program in the Air Force, and we really took the lead on that,
    and extended it throughout the Services with the recent
    legislation we passed to address military sexual assault. This
    is something that I think is a very important step forward to
    make sure that victims have advocacy for them and within the
    system.
        I wanted to see, from your perspective, how your program
    was going, because it's really the first one that we're going
    to now work to extend to the rest of the Services.
        General Spencer. Sure. Thanks, Senator. In a word, the SVC
    program has been great. We're cautiously optimistic about what
    we're finding, but our reporting is up, which we think is good.
    In fact, 10 percent of our reports that go up are for those
    that had sexual assault before they even came into the
    military. We think we're restoring confidence in the system to
    report.
        One of the big things that we point right at the SVC for is
    our restricted or unrestricted rate has gone up 41 percent. A
    victim or an alleged victim who works with the SVC is now a lot
    more willing to come forward and pursue the case. That's been a
    real success story for us.
        We've had 681 clients since we started this in January
    2013. Ninety-two percent say they were extremely satisfied with
    the service, and 98 percent said if they knew of another
    victim, they would recommend a SVC. It has worked very well for
    us, and we think it's been very successful.
        Senator Ayotte. Excellent, because you're going to lead the
    way for the rest of the Services as they implement this
    program. I'm glad to hear that it's going well in the Air
    Force, because, obviously, all of you will be implementing this
    program and looking to the Air Force for their experience on
    it. I think it's a really important step forward for victims.
        I wanted to get back to General Paxton, because I knew
    there was something you wanted to add on OCO, and give you that
    opportunity if there's something.
        General Paxton. Thank you, Senator. I had almost forgotten.
        This goes to bridging the point that General Campbell and
    General Spencer made when Senator Shaheen was asking earlier.
    Out there in an asymmetric world, we obviously want to
    organize, train, and equip our people to succeed on the most
    dangerous battlefield. In order to do that, the gear that we
    have purchased has become more expensive, and there's more of
    it. It's roughly costing us five-and-a-half times more to equip
    a soldier or a marine today than we did on September 10, 2001,
    and three-and-a-half times more to equip the battalion or the
    grassroots-level unit, in terms of moving capability, a vehicle
    that will withstand an improvised explosive device, that has an
    V-shaped hull, Enhanced Small Arms Protective Insert plates for
    the individual, enhanced communications gear, optics for the
    rifles, night-vision goggles, and things like that.
        Number one, that's the cost in OCO to equip them. Then,
    number two, as they come back after 12 years of the fight, we
    have to figure out what that right balance is, how much of that
    we hold, how much of the old stuff we get rid of. Our motor
    pools need more room, our armories need more room. We want to
    make sure that the good money that you provided for us, and the
    sound investment we made on behalf of soldiers, sailors,
    airmen, and marines, is actually retained. That's some of the
    money that we'll need when we talk about reset. The reset has a
    bigger scope, back here in the United States after the war.
        Thank you, Senator, for coming back.
        Senator Ayotte. Thanks.
        General Campbell, there is something that I've been hearing
    feedback on. I just want to get some thoughts on. I've been
    hearing feedback on the Active Duty reductions: don't like
    them. But also, there are reductions proposed in the Guard and
    Reserve. When they're deployed, I understand they're the same
    cost, however, when they're not deployed, my understanding is
    that the cost structure is less for Guard and Reserve.
        I think you can make an argument that, even though you're
    reducing Active-Duty Forces, you wouldn't necessarily reduce
    Guard and Reserve. I wanted to get your response to that issue,
    because it keeps coming back to me from leadership of the Guard
    and Reserve, to understand why we'd be doing that, in terms of
    cost efficiency.
        Understand that I think the reductions are too low overall,
    so that puts that issue aside for a minute, but I'd like to
    hear your thinking on that.
        General Campbell. Yes, ma'am, thank you.
        The same thinking with our Secretary and with our Chief,
    when we had to take a look at cuts, that we would
    disproportionately cut the Active first, because we grew the
    Active both for Iraq and Afghanistan. The initial round of
    cuts, going from 570,000 down to 490,000, we really didn't
    touch the National Guard, and not really much on the Reserve.
    That was okay, again, as we grew.
        But it's not just about costs. There are many elements of
    the National Guard that are cheaper, and it's designed that
    way. But, once mobilized, as you talked about, they do become
    as expensive, or more expensive. The armor brigades and the
    aviation piece are more expensive, just based on time to train
    and get ready to go.
        Again, there's nobody bad here. We need the Total Force. We
    need Active, we need Guard, and we need Reserve. We just have
    to balance the size of each, and where we go with it.
        There are certain pieces of the Guard that have to be at a
    certain readiness level all the time, just like the Active,
    same thing with the Army Reserve. But we don't need all of them
    at the same time as the Active.
        I'd go around and talk to soldiers I commanded in Iraq and
    Afghanistan. I had National Guard soldiers with me. They would
    tell me they loved being in the National Guard. They loved the
    predictability, they loved being a citizen soldier. If they
    wanted to do it 24/7, they would have stayed on the Active
    side. They don't want to do that. They want to have a family,
    they want to have their other business.
        That's why the Secretary of Defense, years ago, said let's
    get this boots-on-the-ground dwell of 1:5. We'll keep the
    Active at a 1:3. Many of our units, like our aviation, we could
    not get to the 1:3, and many times we were below the 1:2
    overall for our aviation.
        I'll just very quickly talk about the aviation restructure.
    Because of sequestration, if we want to continue to have the
    very best aviation capability in the world, on the rotary side,
    we can't go status quo. That's why we've made some bold shifts
    to try to get rid of some legacy aircraft and continue to
    modernize the Black Hawks, Chinooks, and the Apaches that we
    have, to move forward. If we don't do that, it's really going
    to put us in a bind and cost additional money that we'll have
    to take out of readiness.
        But, again, the numbers we're going to disproportionally
    take out of the Active. But that's okay. We're going to go to
    about a 54 percent reliance on the Guard and Reserve, versus
    about a 46 percent reliance on the Active, and have more
    reliance on the Reserve and the Guard as we go forward.
        Senator Ayotte. Thank you.
        I wanted to raise something, an experience that I had in
    Afghanistan, and particularly wanted to get your take on it,
    General Campbell. I heard a lot from our Special Forces and
    Army guys on the ground about the A-10, for understandable
    reasons, because obviously I've been pretty out there on the A-
    10. For example, I had a Special Forces guy come up to me,
    saying that the night before, the A-10s really saved their
    butts, because they were out with the Afghan national forces in
    the lead, and our Special Forces were with them, and the
    support that the A-10s provided was critical in that setting
    because it was a close-contact setting.
        You've commanded in Iraq and Afghanistan. What has been
    your experience with the A-10, because the feedback I was
    getting repeatedly on the ground from the guys that are really
    taking the fire every day for us, was that this airframe is
    important. What's been your experience with it?
        General Campbell. Yes, ma'am. Commanding the 101st Division
    and Regional Command (RC)-East, where we had A-10 capability to
    come in and provide that close air support (CAS) to our
    soldiers in very bad terrain, what I think the soldiers on the
    ground, both the special operators and conventional forces,
    would tell you that it is a game-changer. It's ugly and it's
    loud.
        Senator Ayotte. I know.
        General Campbell. But when it comes in, and you hear that
    [mimicking A-10 engine noise], it just makes a difference. It
    would be a game-changer.
        But, I fully understand the very tough choices that the Air
    Force has to make, just like the Army, as we go forward. We've
    asked the Air Force to provide us the very best CAS. I'm
    confident that they will.
        Senator Ayotte. Yes. I think we need to understand, though,
    that it's not going to be the same for our guys on the ground.
    They have a different opinion, in terms of whether our other
    airframes can really provide the same kind of protection that
    they feel like they're getting from the A-10.
        I thank you all. I wanted to ask your experience there,
    because I just wanted to share with everyone what I heard from
    the guys on the ground. I wasn't even asking about it, but for
    some reason, they knew I was involved in this issue.
        Thanks.
        Senator Shaheen. Thank you.
        I only have a couple more questions. One emerging
    requirement from combat operations in Iraq and Afghanistan has
    been the development of an enhanced performance round (EPR) for
    firing so that it could better penetrate both hard and soft
    targets. As I understand, that means we had to develop a new
    bullet that could actually penetrate in some places where we
    had not been able to with lead, and that steel and copper has
    been used, rather than lead, in those bullets. I also
    understand that one of the benefits is decreasing groundwater
    contamination and pollution, which sometimes occurs from those
    lead bullets.
        I wonder if you can give us any update on how successful
    those EPRs are, and whether we expect to continue to use those
    kinds of bullets.
        General Campbell. Ma'am, I think the soldiers on the
    ground, and what I've seen myself, is that the M855 Alpha 1,
    the EPR round, is much more effective. We were designing a
    bullet that would be lead-free, but this did that, and it also
    provides more penetrating power. Guys will tell you, as we sit
    there taking shots at that in the past, or they may have taken
    a shot, it went right through, it didn't knock that insurgent
    down. This does the job. It's making a difference, and it has
    saved lives over there.
        Senator Shaheen. Okay, thank you.
        I assume everybody has similar experience?
        Admiral Cullom. Ma'am, on the Navy side, we haven't really
    used the new 855 Alpha 1. Our special operators, however, still
    use the old 855, and we still have several more years worth of
    that inventory left, but certainly understand that the new one
    provides greater capability.
        Senator Shaheen. Thank you.
        My final question has to do with uniforms, because I'm sure
    you're all aware that we put language into the National Defense
    Authorization Act (NDAA) last year on combat and camouflage
    utility uniforms. I understand, in this era of limited
    resources, that this is one place where there might be some
    savings. I also understand that, as part of the language we put
    into the NDAA, we were expecting some implementing guidance to
    foster greater collaboration among the Services.
        I wonder if you all could speak to what the status of that
    guidance is, where we are as we're looking at trying to improve
    development and cooperation among the various Services with
    respect to combat uniforms.
        General Paxton. Thanks, Senator Shaheen. I'll start, and
    then pass to my battle buddy.
        In the case of the Marine Corps, we have two separate and
    distinct uniforms, same pattern, actually patented. We have
    shared some of the technology behind those uniforms. The Army,
    I think, is the Executive Agent for some of that testing there.
    As in everything that we do, there's a high degree of
    collaboration whenever and wherever possible, in terms of
    technologies and designs, whether it's visibility from infrared
    at night, or cold weather, or wet weather, or drying, or
    wicking, or things like that. I think we're all committed to
    continue working together to get the best technology and the
    best capability out there because we want to equip the soldier,
    sailor, airman, and marine to survive on the modern
    battlefield. I don't think there's any reluctance to share
    ideas and things like that.
        As you can probably see from the four of us sitting here,
    we each have a high degree of culture and a real positive
    commitment to keeping those cultures. I really like soldiers,
    airmen, and sailors; I just happen to love marines. [Laughter.]
        But we're committed to share, and we're committed to reduce
    costs, to the best way possible, ma'am.
        Senator Shaheen. General Campbell, would you like to add to
    that?
        General Campbell. Ma'am, I'd agree with General Paxton. The
    Army is committed to making sure we provide our soldiers the
    very best equipment. That includes the uniforms. We're very
    thankful, over the last 12 years, of the ability to adjust and
    make changes to uniforms very quickly when we found out that
    the Army combat uniform that we went to, probably in the 2004
    to 2005 timeframe, was much better than the uniform we had
    before that. It worked well for Iraq, it worked for a little
    bit in Afghanistan, but we saw up in the mountains in RC-East
    that it didn't work, we had to go to a Multicam. We were able
    to get the money from Congress to be able to make those changes
    and adapt very quickly.
        I think we're committed, as all the Services, to make sure
    that we're responsible, based on the budget and where we go,
    and to work together. We're in testing right now over the next
    several months, from March until about October, on a couple of
    different types. I think we're sharing that with all of the
    Services to make sure we're on the same sheet of music as we go
    forward. It makes sense that we have to get better to be more
    fiscally responsible. Uniforms is just one of those things
    we'll take on.
        Senator Shaheen. Should we expect some guidance anytime
    soon on this?
        General Campbell. I don't think we're going to have the
    testing piece for us until probably the end-of-October
    timeframe. I'll make sure that our folks are tied in with the
    Marine Corps and the other Services.
        General Paxton. I think we've worked with the subcommittee,
    full committee, and with the full Senate, so we're quite
    comfortable with the uniforms we have. We have a commitment out
    there that if there are changes in either composition or
    material like that, we'll continue to work within the existing
    pattern, so we'll minimize the cost and then we'll share those
    technologies with other Services. Yes, ma'am.
        Senator Shaheen. Good. Everybody is in agreement that
    that's the way we ought to be operating?
        Admiral Cullom. Yes, ma'am. The collaboration really is
    very strong and ongoing, and our Naval Supply Command has
    received a great deal of information from the Marine Corps, the
    Army, and the Air Force.
        Senator Shaheen. Okay, thank you.
        Given the hour, I don't have any further questions at this
    time. We will leave the record open until the end of business
    on Friday for any other questions that may be submitted for the
    record.
        Again, let me apologize to all of you for the need to
    recess this hearing to go vote. I hate to take your time to do
    that, so we will try and better schedule this hearing the next
    time.
        Again, thank you, to all of you, and to the men and women
    you represent, for what you do to ensure that this country is
    secure.
        This hearing is now adjourned.
        [Whereupon, at 4:54 p.m., the subcommittee adjourned.]

        [Questions for the record with answers supplied follow:]
                 Questions Submitted by Senator Jeanne Shaheen
                     naval shipyard infrastructure backlog
        1. Senator Shaheen. Admiral Cullom, the facilities maintenance
    backlog at Portsmouth Naval Shipyard at the end of fiscal year 2013 was
    $686 million. In fiscal year 2015 readiness briefing materials given to
    Senate Armed Services Committee staff, it is stated that ``Naval
    shipyards are in worse condition than average Navy facilities'' and
    that the Naval Shipyard Depot Maintenance Infrastructure Plan issued
    last year, as requested by the National Defense Authorization Act
    (NDAA) for Fiscal Year 2012, will take 17 years to complete all five
    elements across the public shipyards. If sequestration remains in
    place, what is the Navy's plan to ensure the shipyard maintenance
    backlog is met?
        Admiral Cullom. The Navy recognizes the importance of
    infrastructure investments to improve mission-essential facilities as
    quickly as possible, especially given the critical nature of Naval
    Shipyard facilities and requirements for uninterrupted service for
    aircraft carrier and submarine depot maintenance.
        Whatever funding the Navy is able to commit, within the limits of
    funding available at the time, is prioritized to focus on drydock
    certification, seismic improvements for personnel safety,
    recapitalizing mission essential facilities in the worst condition,
    recapitalizing utility systems to improve reliability, and investments
    to improve efficiency.
        However, the current lack of predictability of future Navy budgets
    and competing requirements within that unpredictable environment will
    require the Navy to address this on a yearly basis with a view towards
    balancing improvements in the material condition of shipyard
    infrastructure with the demands resident in operating our forces
    forward.

        2. Senator Shaheen. Admiral Cullom, what is the effect of not
    having adequate funding for the shipyard modernization plan?
        Admiral Cullom. Although the current infrastructure condition has
    not specifically prevented any naval shipyard from sustained
    performance of mission, the risks of a mission-impacting failure
    remain.
        Given the critical nature of the naval shipyard facilities and the
    requirement for uninterrupted service for aircraft carrier and
    submarine depot maintenance, Navy would prefer to increase
    infrastructure investment to bring mission essential facilities to a
    higher condition of readiness. However, fiscal constraints have
    compelled us to continue accepting risk in shore infrastructure
    investments. Despite these constraints, the President's budget request
    for fiscal year 2015 funds the most critical deficiencies related to
    productivity and safety at our naval shipyards.

           enduring requirements from overseas contingency operations
        3. Senator Shaheen. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, we understand that multiple years of
    Overseas Contingency Operations (OCO) funding will be required to reset
    the Services after combat operations end in Afghanistan. Given the
    uncertainty of OCO funding availability in the coming years, what
    enduring capabilities and activities are you currently transferring to
    base budget requirements, and how would you grade your progress thus
    far?
        General Campbell. The Army continually reviews our OCO budget/
    request for enduring capabilities that should transition to the base
    budget and has attempted to allocate base funding for those
    capabilities. The fiscal year 2015 funding levels allowed for
    transitioning one enduring requirement, the Global Assessment Tool
    (GAT). GAT is a $22.3 million program that provides psychological and
    physical health self-awareness to all soldiers each year and is key
    component to the Army's broader resilience training and development
    program, Comprehensive Soldier, and Family Fitness. The Army is unable
    to move additional capabilities from OCO to base without creating
    unacceptable risk to current base funded programs. For fiscal year
    2015, we will continue to request OCO funding for capabilities funded
    through OCO that will ultimately migrate into the base.
        The Army continues to increase base funding for training and
    readiness as a result of the reduction of OCO deployed units. In fiscal
    year 2015, a reduction in the number of Brigade Combat Teams (BCT) and
    Combat Aviation Brigades drives a base funding increase of $73.0
    million and $134.0 million, respectively.
        General Paxton. The Marine Corps has made modest gains in its
    efforts to fund enduring requirements into the baseline budget, but
    will face challenges to migrate the requirements identified above as
    sequestration has resulted in reduced top lines for all the Services.
    The ability to fund missions with OCO has enabled the Marine Corps to
    limit further reductions in operation and maintenance (O&M) and
    procurement accounts (infrastructure sustainment and equipment
    modernization) in order to support a ready and capable force.
        The majority of Marine Corps OCO funding supports the incremental
    costs of combat operations, equipment and infrastructure repair,
    equipment replacement, military pay for mobilized reservists, deployed
    pay and allowances, and end strength above the baseline Active-Duty
    Force (182,700 in fiscal year 2015). However, as the Marine Corps
    transitions from Operation Enduring Freedom (OEF) in Afghanistan to
    steady state operations, including forward presence and crisis
    response, some of the activities currently funded via OCO will likely
    migrate to the baseline to support enduring missions and requirements.
    The Marine Corps currently estimates this amount to be between $200
    million and $450 million. This represents approximately 8 to 11 percent
    of our total fiscal year 2014 OCO request of $4 billion.
        The $700 million realigned from baseline to OCO in fiscal year 2014
    by Congress in the 2014 Omnibus Appropriations Act is also an enduring
    requirement, and is reflected in the fiscal year 2015 budget as such.
        General Spencer. The Air Force currently uses OCO funding for over
    $10 billion per year in O&M, primarily for flying hours, weapon system
    sustainment (WSS), transportation, and base operating support (BOS) for
    the Air Force-funded installations in the U.S. Central Command
    (CENTCOM) area of responsibility (AOR). The vast majority of our BOS
    costs are for installations outside Afghanistan, and we anticipate
    those requirements and costs will be enduring.
        In the President's budget for fiscal year 2015, the Air Force
    programmed to move between approximately $1 billion and approximately
    $1.5 billion per year from OCO to the baseline WSS account, starting in
    fiscal year 2016. This will keep us at approximately 80 percent funded,
    which is the minimum necessary to maintain readiness. Flying hours,
    BOS, and other current OCO requirements have not been addressed in the
    President's budget for fiscal year 2015 baseline. If the Air Force has
    to revert to Budget Control Act (BCA)-level funding, there is no room
    for any OCO to move to the baseline, including the WSS. Under this
    scenario, WSS will be funded at well under 80 percent, and readiness
    will further degrade.
        Admiral Cullom. Navy has been working to transition OCO funded
    enduring activities to baseline over the last few years. Enduring
    aviation and ship depot maintenance baseline requirements have been
    funded to at least 80 percent in baseline since fiscal year 2011 and
    fiscal year 2012.
        Navy has funded all enduring flying hour operations in baseline for
    several years. Increased operating tempo required of our aircraft and
    ships in the Middle East continue to be OCO funded. For the foreseeable
    future, the combatant command and Joint Staff expect continued
    increased flying and ship operations above baseline levels when
    deployed to the Middle East.
        Since fiscal year 2013, Navy has funded enduring Djibouti BOS costs
    in baseline vice OCO.
        Navy will require OCO funding for some remaining enduring
    requirements. This includes aviation and ship depot maintenance above
    80 percent, ship operations to fully support operational requirements,
    base support operations for several locations in the Middle East, and
    operating support for expeditionary units. Without OCO funding, these
    enduring requirements, combined with the increased flying and ship
    operations above baseline levels when deployed to the Middle East, will
    result in the need for an additional $2.5 billion to $4.0 billion per
    year in baseline funding.
        The Navy continues to work with the Office of the Secretary of
    Defense to identify and plan the possible transition of enduring
    requirements from OCO funding to the baseline.

        4. Senator Shaheen. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, what impacts will the eventual end of OCO
    funding have on the Services' base budgets and overall Service
    readiness?
        General Campbell. The end of OCO funding will increase demand for
    base budget resources, impacting operations world-wide including:
    Resolute Support; Operation Spartan Shield; the Integrated Air and
    Missile Defense; Horn of Africa; Observant Compass (Africa); and the
    Philippines. These overseas presence missions are critical for security
    and maintaining relationships with our allies.
        The eventual end of OCO funding with no corresponding increase to
    the Army's base budget would lead to reduced readiness due to
    shortfalls in programs such as depot maintenance and reset. The Army
    will require reset funding for 3 years after the last piece of
    equipment leaves Afghanistan: Specifically, the Army will require over
    $9 billion in reset funding through at least fiscal year 2017. Training
    previously funded with OCO for readiness will need to be part of the
    base when the OCO-funded deployment offset stops. Increasing pressure
    on static or declining toplines will impair our ability to sustain
    training readiness and to restore infrastructure and equipping
    readiness in future years.
        The Army has used OCO funding for these critical requirements and
    will require funding in the future to pay these bills. The Army's base
    budget topline will need to increase to capture the enduring
    requirements.
        General Paxton. As the Marine Corps winds down its operations in
    Afghanistan, the size of the OCO budget will decrease. We will still
    need OCO funds to support enduring activities and to complete the reset
    of our equipment for 2 to 3 years after that equipment returns from
    Afghanistan. Without an OCO budget for equipment reset, we'll be forced
    to take further risk in our equipment modernization, to include depot
    maintenance and infrastructure sustainment programs, to maintain near-
    term readiness. The result could be some units will not have ready
    equipment needed to deploy in 2017.
        General Spencer. The impact of no OCO funding depends on
    requirements. If all of the requirements--to include flying hours,
    transportation, WSS, and BOS--were to go away, we would only need OCO
    for a finite reset period of a few years, and after that there would be
    minimal impact to terminating OCO funding. However, the Air Force
    anticipates a number of enduring requirements, particularly in terms of
    continued rotational deployments and sustaining the bases in the
    CENTCOM AOR that are not in Afghanistan. If we continue to deploy and
    sustain these bases, all of the associated costs (e.g., flying hours,
    WSS, BOS) must be funded, either by baseline growth or continued
    supplemental funding. Without baseline growth or continued supplemental
    funding, we will be forced to fund these requirements out of our O&M
    baseline, with likely similar impact as fiscal year 2013 sequestration,
    meaning insufficient flying hours to maintain readiness, stood down
    flying units, no ready units for emergent requirements, and potentially
    not enough ready units for rotational demands, such as theater security
    packages in U.S. Pacific Command or CENTCOM.
        Admiral Cullom. OCO funding, in addition to our base budget,
    continues to play a critical role in maintaining the capability,
    capacity, and readiness necessary for the Navy to support our combatant
    commanders, in addition to meeting the missions of the Defense
    Strategic Guidance (DSG). For over 10 years, OCO funding has allowed
    the Navy to operate at a war-time operational tempo throughout the
    Middle East. As the land war draws down, Navy is uniquely challenged
    because our forces continue to serve and provide presence in the
    CENTCOM region as boots-on-the-ground depart. The demand for naval
    presence in this theater remains high and is likely to increase
    elsewhere as we rebalance to the Pacific region.
        If the Navy remains at our current level of operations, it will not
    be sustainable within our base budget alone. OCO funding is also
    necessary to reset our ships and equipment after a decade of higher
    tempo wartime operations. The capital asset nature of our ships makes
    longer-term supplemental reset funding more critical to the Navy. In
    the current fiscal environment, any transition from OCO into base at
    the current base topline, or worse under sequestration levels, would
    drive our base down and pressurize already difficult decisions as we
    work to balance between force structure, modernization, and readiness.
    Without additional supplemental funding, this balance will suffer. For
    readiness specifically, we could be forced to delay maintenance
    activities for our ships and aircraft, reducing their operational
    availability and service life. Training could be reduced, preventing
    ships and aircraft from being ready and available for contingency
    operations.

        5. Senator Shaheen. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, what requirements and activities are you
    eliminating that have been paid for with OCO funding over the last
    decade?
        General Campbell. Over the past 12 years of war, the Army procured
    a variety of theater-unique equipment for the warfighter. As the war
    winds down, the Army is reviewing various theater-unique equipments and
    is in the process of transitioning some to programs of record. However,
    many warfighting systems have been or will be eliminated. For example,
    current plans are to eliminate the following Mine Resistant Ambush
    Protected (MRAP) vehicle variants: FPI Buffalo MRV; FPI Cougar 6x6; BAE
    Systems RG-33L; BAE Systems TVS Caiman; GDLS RG-31A2; FPI Cougar 4x4.
        In the MRAP Study III, the Army approved the M-ATV, the MaxxPro
    Dash ISS, and MaxxPro Plus Ambulance ISS as the three enduring MRAP
    vehicle variants.
        The Army is eliminating the MRAPs by offering them for sale ``as-
    is'' to approved U.S. military allies. The Army is also crunching and
    selling as scrap damaged or washed-out MRAPs to eager Afghan buyers.
        The Army is also eliminating 55 Joint Improvised Explosive Defeat
    Device Office (JIEDDO) force protection systems with an annual
    sustainment cost of $328.4 million. Some of the major commercial off-
    the-shelf JIEDDO systems eliminated include: Hawkeye ($60 million);
    Radiant Falcon ($48 million); Sand Dragon ($45 million); and Gator ($15
    million).
        Eliminated JIEDDO systems are being done in close parallel with the
    drawdown of Afghanistan combat operations.
        General Paxton. The majority of Marine Corps OCO funding supports
    the incremental costs for combat operations, equipment and
    infrastructure repair, equipment replacement, and manpower above the
    baseline Active-Duty Force. These costs include deployed operations,
    equipment sustainment and reset, mobilized reservists, and other
    special pays. These requirements and activities will be reduced or
    eliminated commensurate with the drawdown in Afghanistan. As the Marine
    Corps transitions from OEF to steady state operations and crisis
    response, some of the activities currently funded via OCO will likely
    migrate to the baseline to support enduring missions and requirements.
        General Spencer. The Air Force does not define OCO requirements so
    we are not in a position to eliminate activities funded by OCO. We will
    continue to work with appropriate stakeholders to define and meet
    combatant commander requirements, provided adequate funding exists.
        Admiral Cullom. The following operations are or have been included
    in the Navy's OCO funding:

        1.  Operation Noble Eagle (ONE) 2001 to 2006;

          a.  A portion of the enduring ONE activities supporting Homeland
    security transitioned to Navy's baseline in fiscal year 2006.

        2.  Operation Iraqi Freedom (OIF) 2003 to 2010;

          a.  Navy's activities supporting this operation ceased in fiscal
    year 2010.

        3.  Operation New Dawn 2010 to 2011;

          a.  Navy's activities (e.g., final reset of equipment returning
    from theater) supporting this operation ceased in fiscal year 2012.

        4.  OEF 2001 to present;

          a.  Navy transitioned Djibouti base support requirements
    supporting this operation from OCO to the baseline in fiscal year 2013.
          b.  Navy continues to support activities for this operation in
    the OCO. Once the operation is concluded, it will take several years to
    complete the final reset of equipment returning from theater.

        Based on the operations funded in the OCO provided above, the
    historical Department of the Navy OCO execution from fiscal year 2001
    to fiscal year 2014 is provided below:

                        military ocean terminal concord
        6. Senator Shaheen. General Campbell, given its vital strategic
    role in the Department of Defense (DOD) pivot to the Pacific region,
    how is the Army aligning appropriate resources and ensuring that
    strategic facilities like the Military Ocean Terminal Concord (MOTCO)
    remain in a condition so it is able to respond to operational demand,
    potential contingencies, and operational plans?
        General Campbell. The Army's commitment of significant resources to
    the Pacific is demonstrated by a number of long-term strategic programs
    we are funding and executing. The Army in the Pacific is the largest
    overseas command in the Army--with 80,000 soldiers led by a four-star
    general. The Army conducts a wide-range of operations and sustainment
    projects across the theater in order to support growing U.S. interest
    and engagement in the region. In addition to engagement activities, the
    Army is rotating additional forces to Korea and critical ballistic
    missile defense capabilities to Guam. These forces further increase the
    readiness and potency of the Joint Force. This concept is dependent on
    the ability to move and sustain multiple rotational units into and out
    of the region. Strategic port facilities like MOTCO--and numerous
    others like it--are essential to the joint projection and rotation of
    forces in the Asia-Pacific region.
        MOTCO is a highly visible demonstration of the total Army
    commitment to the Asia-Pacific region, but not the only one. In recent
    years, the Army has held over 20 large-scale exercises annually with
    over a dozen countries. The Army has fully funded a theater engagement
    strategy consisting of multiple exercises and participation in well
    over 200 military-to-military activities, such as small unit exchanges.
    This engagement strategy helps improve readiness and interoperability,
    reinforce our alliance commitments, and strengthen collaboration among
    partner nations. The success of the Army's engagement strategy and
    force commitments is enabled by our ability to sustain our forces in
    the region.
                                     ______

                  Questions Submitted by Senator Kelly Ayotte
                                 navy shipyards
        7. Senator Ayotte. Admiral Cullom, from a perspective of naval
    readiness, how important are the public shipyards and the Federal
    employees who work at these yards?
        Admiral Cullom. The four public sector naval shipyards (Portsmouth,
    Norfolk, Puget Sound, and Pearl Harbor) are vital to Fleet readiness.
    The naval shipyards provide organic capability to perform depot and
    intermediate-level maintenance, modernization, and emergency repair
    work on nuclear-powered aircraft carriers and submarines, and
    complement the private sector's capability for conventional surface
    ship maintenance. Work performed by the naval shipyards is essential to
    meet current operational requirements and achieve the expected platform
    service life of surface ships, aircraft carriers, and submarines.
        The approximately 29,000 Federal employees in the 4 naval shipyards
    are highly-trained artisans, engineers, technicians, and business
    professionals. Their indispensable skills are critical to maintaining
    the readiness of the Navy's most complex nuclear powered ships and
    weapons systems.

                   prepositioned stocks and the mediterranean
        8. Senator Ayotte. General Paxton, 2 years ago I expressed concern
    about the Marine Corps' decision to deactivate one of three Maritime
    Prepositioning Squadrons (MPS), MPS-1, in the Mediterranean. Because of
    readiness concerns related to the Marine Corps' ability to respond to a
    contingency in the North Africa region, I introduced an amendment that
    was included in the NDAA for Fiscal Year 2012 that restricted any funds
    from being used for placing MPS on reduced operating status until: (1)
    the Commandant of the Marine Corps provided a report assessing the
    impact of this move on military readiness; and (2) the Secretary of
    Defense certified that the risks to readiness from such a move are
    acceptable. Both you and the Secretary of Defense certified that the
    risks were acceptable, partly because of prepositioned stocks in
    Norway. MPS-1 has since been deactivated. Meanwhile, instability in
    North Africa has not decreased. What is the condition of our
    prepositioned stocks in Norway?
        General Paxton. The age of the equipment in Marine Corps
    Prepositioning Program-Norway (MCPP-N) varies, however, the age and
    state of maintenance of equipment-by-equipment type is similar to that
    of equipment maintained in the Maritime Prepositioning Force program.
    MCPP-N equipment and supplies are stored in stable temperature and
    humidity controlled facilities and undergo scheduled inspections and
    maintenance services. All equipment and supplies are stored at the
    proper level of preservation to ensure operational readiness and
    serviceability. Normal modifications, technical instructions, and
    retrofits are applied during scheduled maintenance services. Corrective
    maintenance is performed by the Norwegian Defense Logistics
    Organization on an as-required basis, generally after equipment has
    been returned from an exercise. In this regard, MCPP-N benefits from an
    experienced, highly trained workforce and near optimal storage
    conditions directly attributable to our 50/50 burdensharing agreement
    with our Norwegian partners. Marine Corps Logistics Command is
    responsible for overall equipment management for the program which
    includes, but is not limited to: rotation planning of weapons systems
    and equipment; conducting quality assurance inspections; readiness
    reporting; meeting accountability requirements; and support of
    exercises or crisis response, when required.

        9. Senator Ayotte. General Paxton, are the prepositioned stocks in
    Norway fully stocked with the equipment needed to support or respond to
    contingencies?
        General Paxton. Yes. MCPP-N is stocked with equipment and supplies
    that support any Marine Air-Ground Task Forces (MAGTF) responding to
    crisis response within U.S. European Command (EUCOM) and U.S. Africa
    Command (AFRICOM). Over the next several years, MCPP-N will also be
    receiving additional equipment capabilities as a part of its
    transformation and equipment availability as a result of the
    elimination of MPSRON (MPS Squadron)-1, drawdown from combat operations
    in support of OEF, and force reductions.

        10. Senator Ayotte. General Paxton, is the equipment fully
    modernized?
        General Paxton. Yes. The equipment and supplies positioned in
    Norway are maintained at the highest levels of operational readiness
    and routinely modernized through equipment rotation and upgrades as new
    equipment is procured for the Marine Corps. In addition, Headquarters
    Marine Corps has been executing a transformation plan for equipment
    capabilities in Norway designed to enhance the relevance of MCPP-N to
    EUCOM and AFRICOM. This transformation includes developing a new force
    list and corresponding equipment sets to support that force. The
    additional equipment sets include communications and ordnance
    capabilities not previously prepositioned in Norway. The end state of
    the transformation of MCPP-N equipment sets is to provide a more
    balanced capability to support a MAGTF manned specifically to support
    crisis response. The Marine Corps plans to complete MCPP-N
    transformation in fiscal year 2016.

        11. Senator Ayotte. General Paxton, do you believe these
    prepositioned stocks adequately mitigate the risk associated with
    deactivating MPS-1?
        General Paxton. MCPP-N and the MPSRONs are the Marine Corps'
    signature capabilities for larger scale contingency and crisis response
    that require prepositioned equipment. Both programs share a common
    tenet in that they possess the most modern equipment that are kept in
    the highest possible state of readiness to ensure rapid force closure
    in crisis response across the range of military operations. Though they
    share commonality in purpose, they are distinct in their
    responsiveness, size, and scope.
        First, unlike MCPP-N, MPSRONs are afloat prepositioning assets
    which take full advantage of the maritime domain and sea lines of
    communication to move equipment and supplies rapidly to a designated
    port in support of a contingency. Thus, MPSRONs can close on a crisis
    or contingency faster than can be done using MCPP-N due to the inherent
    mobility of the MPSRONs. Second, the MPSRONs and MCPP-N have very
    different missions and, therefore, support different force structures.
    The MPSRONs are each structured and tailored to support a Marine
    Expeditionary Brigade (MEB) (16,000 marines and sailors) for up to 30
    days of major combat operations. MCPP-N, however, is designed to equip
    a balanced MAGTF (4,700 marines and sailors) while simultaneously
    supporting three company-sized elements (390 marines and sailors each)
    for theater security cooperation missions. Lastly, MPSRONs carry Navy-
    specific capabilities not prepositioned in MCPP-N. The Navy equipment
    capability sets include: a Naval Mobile Construction Battalion unit
    set; a Naval Construction Regiment unit set; a Naval Support Element
    equipment set; and a 150-bed Expeditionary Medical Facility. These
    capability sets provide specific engineering, logistics over the shore,
    and medical capabilities to a MEB. In sum, although there are
    commonalities in the equipment found in the MCPP-N program with those
    found in our MPSRONs, the two prepositioning programs are not
    interchangeable.

        12. Senator Ayotte. General Paxton, has the deactivation of MPS-1
    led to a slower potential response time to contingencies in North
    Africa?
        General Paxton. For crises or limited contingencies in the AFRICOM
    AOR, the initial response would most likely come from either a forward-
    deployed Amphibious Ready Group/Marine Expeditionary Unit (ARG/MEU) or
    land-based Special Purpose Marine Air Ground Task Force (SPMAGTF). The
    MEU, together with the ARG, remains the most agile, standing MAGTF
    capable of conducting amphibious operations, crisis response, limited
    contingency operations, to include enabling the introduction of follow-
    on forces, and designated special operations in order to support the
    theater requirements of the geographic combatant commands. SPMAGTF-
    Crisis Response (SPMAGTF-CR) is manned and equipped to self-deploy,
    providing a mobile crisis response force with organic command and
    control that can respond to missions in a non-permissive environment in
    order to protect U.S. citizens, interests, and other designated persons
    in the western region of the AFRICOM AOR. The Marine Corps' SPMAGTF-CR
    was specifically designed to provide a forward deployed crisis response
    capability to the AFRICOM AOR due to amphibious ship capacity
    shortfalls to source a standing ARG/MEU presence in the Mediterranean
    Sea. Similar to the MEU in its expeditionary nature and forward
    deployed posture, SPMAGTF-CR provides rapid response albeit from a
    land-based origin.
        For any contingency beyond the capabilities of the MEU and SPMAGTF,
    however, the deactivation of MPSRON-1 guarantees a slower response time
    to North Africa if the circumstances specifically require a similarly
    equipped afloat prepositioning asset. The nearest such capability
    resides with MPSRON-2 in Diego Garcia. Depending on the circumstances
    and the availability of air and sea ports of debarkation, assets from
    MCPP-N or home station units in the continental United States may be
    used to equip a contingency response force in North Africa. The size
    and scope of the prepositioned assets that MPSRON-1 provided coupled
    with the ability to discharge cargo instream to an unimproved beach,
    however, can only be replicated through the availability of another
    MPSRON.

        13. Senator Ayotte. General Paxton, if the deactivation of MPS-1
    has led to slower response times to contingencies in North Africa, how
    much slower?
        General Paxton. The Nation's premier crisis and initial contingency
    response force remains the forward-deployed MEU embarked aboard ARGs
    operating continuously in various geographic combatant command AORs.
    For crises or limited contingencies in the AFRICOM AOR, the initial
    response would most likely come from either a forward-deployed ARG/MEU
    or land-based SPMAGTF. These units provide the President and the
    geographic combatant commands with credible deterrence and decision
    time across the range of military operations. ARG/MEUs are specifically
    organized, trained, and equipped to respond to crisis within 6 hours of
    notification and self-sustaining for up to 15 days through organic,
    sea-based logistics. Likewise, SPMAGTF-CR remains in a standing alert
    posture, able to respond to a crisis or contingency in North Africa
    within hours.
        For larger contingencies requiring prepositioned equipment, we must
    use the response using ships from MPSRON-2 or MPSRON-3 in order to
    provide a fair comparison to the capability formerly provided by
    MPSRON-1. The response times to North Africa from MPSRON-2 and MPSRON-3
    would be approximately 8 days and 18 days greater, respectively, than
    that of MPSRON-1. The response times using equipment from MCPP-N would
    be approximately 20 to 23 days greater than that of MPSRON-1. MCPP-N
    response times include 10 days for sourcing (surge sealift and/or
    commercial charter) and movement of ship(s) to Norway, an estimated 7
    to 10 days to load ships in Norway, and 9 days transit to the
    destination.

                           army prepositioned stocks
        14. Senator Ayotte. General Campbell, what is the condition of Army
    prepositioned stocks (APS)?
        General Campbell. BCT and Sustainment Brigade sets in APS are all
    above 90 percent fill. The European Activity Set, which is a Combined
    Arms Battalion located in Germany, is our newest activity set and is
    above 99 percent fill. The sustainment munitions uploaded on two APS
    container ships is at 94 percent fill. Maintenance rates remain high;
    however, funding decreases will impact scheduled maintenance resulting
    in corresponding reductions in readiness. Starting in fiscal year 2013,
    the Army began leasing a former Defense Logistics Agency warehouse in
    Kuwait to provide controlled humidity storage for APS-5 equipment.
    Storing APS-5 equipment inside has reduced maintenance requirements for
    the equipment by $50 million per year, at $16 million per year for the
    lease. The long-term solution is to build 30 Army warehouses in Kuwait
    to store APS equipment and discontinue the lease of the current
    warehouses. Additional funding beyond post-war reset requirements will
    be needed to build the warehouses in Kuwait.
        As part of the Army's strategy to improve APS, we are analyzing the
    feasibility of placing additional enabler items on the fleet of APS
    rolling stock. These enablers would enable APS to meet warfighters'
    expectations for movement and maneuver, mission command,
    communications, and protection. These enablers include Counter Remote
    Controlled Improvised Explosive Device (IED) Electronic Warfare (CREW),
    Blue Force Tracker (BFT), Overhead Gunner's Protection Kit (OGPK), and
    Beyond Line of Site Radios. The APS program will need additional
    funding in order to install and maintain these additional enablers.

        15. Senator Ayotte. General Campbell, is the Army full of the
    required equipment?
        General Campbell. BCT and Sustainment Brigade sets in APS are all
    above 90 percent fill. The European Activity Set, our newest activity
    set, is at 99 percent fill. The Army is building APS Sustainment
    Brigade and Fires Brigade equipment sets in Southwest Asia, which are
    both currently at 63 percent fill. Under the President's budget, the
    Sustainment Brigade set is expected to be complete by the end of fiscal
    year 2015 and the Fires Brigade by the end of fiscal year 2016. Army's
    two APS container ships carrying sustainment munitions are at 94
    percent fill. Thanks to Congress' support, the APS program is
    substantially improving its fill rate. Additional funding is needed to
    integrate equipment and enabling systems harvested from OEF to meet
    warfighters' expectations for movement and maneuver, mission command,
    communications, and protection.

        16. Senator Ayotte. General Campbell, is the equipment fully
    modernized and well-maintained?
        General Campbell. APS are fully modernized. For example, the APS
    Armored BCT sets have modernized vehicles--the M1A2 System Enhancement
    Package and the M2A3/M3A3 Bradley Fighting Vehicle. The APS BCTs will
    be reorganized in October 2015 to include three Maneuver Battalions and
    a Brigade Engineer Battalion so they are configured the same as Active
    Duty BCTs. Ninety percent of APS rolling stock is fully armored and
    outfitted with the latest communication equipment.
        APS sets are also maintained at a high level. Army policy directs
    APS sets to be maintained at Army Technical Manual 10/20 standards,
    which means that all faults have been identified, corrective actions
    taken, and preventive services performed on time; all urgent and
    limited urgent Modification Work Orders are applied; and all APS
    equipment is complete with required basic issue items and components
    (on hand or on order). Currently, 94 percent of the APS equipment is
    maintained at those standards.
        Army has recently made decisions to add to APS equipment harvested
    from OEF, specifically MRAPs, MATVs, and MRAP ambulances with associate
    Enabling Technologies including OGPK or Crew Remote Operated Weapons
    Systems, Internal and External Comms (VIC-3, AN/VRC-92), BFT, Drivers
    Vision Enhancer, CREW. Each will be reset to 10/20 standards and
    include the most updated Engineering Change Proposals. Vehicles will
    begin fielding in the fourth quarter of fiscal year 2014. The APS
    program will need additional funding in order to install and maintain
    these additional enablers.

                   army's role in the asia-pacific rebalance
        17. Senator Ayotte. General Campbell, what role do you see the Army
    playing in the pivot to the Asia-Pacific?
        General Campbell. The Army has a longstanding and growing role in
    the Asia-Pacific pivot. The Army in the Pacific is the largest overseas
    command in the Army--with 80,000 soldiers led by a four-star general.
    The Army in the Pacific ``sets the theater'' and plays a critical role
    preparing the region for expanded U.S. diplomacy, military engagement,
    stability, and security operations. To do so, the Army works hand-in-
    hand with the Department of State and specific Country Teams to
    leverage relationships with partner nations to enable access and
    enhance host-nation support towards U.S. national interests.
        The Army also provides many of the sustainment and power projection
    support requirements for our sister Services and Joint missions.
    Logistically, we secure lines of communication, defend forward
    operating bases, and ensure the movement of food, water, fuel, and
    other essential engineering services. Operationally, we provide
    satellite communication nodes and networks as well as missile defense,
    extensive language abilities, and human intelligence capabilities on
    the ground. Finally, we foster an expertise in stability operations
    through interaction with local and national officials in support of
    civil governance functions.
        The Army's engagement activities are generally low-cost and have a
    limited footprint, yet achieve powerful effects. In recent years, the
    Army has held over 20 large-scale exercises with over a dozen
    countries. The Army, through our Regionally-Aligned Force model, has a
    fully-funded engagement strategy consisting of multiple exercises and
    participation in over 200 military-to-military activities, such as
    small-unit exchanges. This engagement plan will help to improve Army
    and partner readiness and interoperability, reinforce our alliance
    commitments, and strengthen collaboration among partner nations. Aside
    from exercises, senior U.S. Army general officers meet regularly with
    their regional counterparts to build personal relationships over the
    long-term. Our willingness to train and prepare together for potential
    crises and humanitarian assistance operations fosters credibility,
    trust, and confidence in not only U.S. Army capabilities, but also an
    expanded U.S. presence and concern in the region.

                   afghanistan retrograde and equipment reset
        18. Senator Ayotte. General Paxton, in your prepared testimony, you
    stated that last year, the Marine Corps estimated its reset liability
    to be less than $3.5 billion. Today, you said reset liability stands at
    about $1 billion. You also stated that since 2012, ``the Marine Corps
    has retrograded 77 percent of its equipment items . . . '' How much
    does the Marine Corps estimate it will need in OCO funding to
    retrograde its remaining equipment?
        General Paxton. Approximately 77 percent of equipment has
    retrograded from theater, however, only approximately 40 percent has
    been reset and returned to the operating forces to support home station
    readiness, or redeployed in support of steady state operations. As
    such, the Marine Corps will continue to require OCO for the next
    several years to complete retrograde and reset requirements after more
    than a decade of sustained combat operations. At this time, the Marine
    Corps estimates the remaining ground equipment reset liability for
    fiscal year 2015 and beyond to be approximately $1.3 billion. In
    addition, the Marine Corps estimates the remaining retrograde
    requirement for fiscal year 2015 and beyond to be between $150 million
    and $250 million based on the anticipated drawdown in Afghanistan and
    the available modes of transportation, neither of which can be absorbed
    within the baseline funding levels.

        19. Senator Ayotte. General Paxton, how does the uncertainty
    regarding our troop presence post-2014 affect the Marine Corps'
    retrograde plan?
        General Paxton. We are currently executing our drawdown plan for
    Afghanistan that will see us meeting all our scheduled operational
    goals. However, we remain flexible to adequately respond to any
    required contingencies or last minute strategic developments as needed,
    or until our official end of mission.

        20. Senator Ayotte. General Paxton, how much OCO funding do you
    estimate will be needed for reset after the Afghan retrograde is
    complete?
        General Paxton. The Marine Corps has experienced over a decade of
    sustained combat operations with much of its ground equipment flowing
    directly from OIF to OEF, resulting in an inability to reset until now.
    The Marine Corps has undertaken an aggressive depot maintenance reset
    strategy to prioritize the repair and redeployment of ground combat
    equipment to the Operating Forces as quickly as possible. As a result,
    approximately 77 percent of the Marine Corps' total OEF reset
    requirement has retrograded from theater, however, only approximately
    40 percent has been reset.
        Last year, our reset liability was estimated at less than $3.2
    billion. The Marine Corps reviews and refines its life-cycle
    sustainment strategies and depot maintenance requirements for its
    ground equipment annually through a deliberate requirements
    determination process. Through this process, we estimate our remaining
    reset liability for fiscal year 2015 and beyond to be approximately
    $1.3 billion, which cannot be absorbed within our baseline funding
    levels. As such, the Marine Corps will continue to require OCO for the
    next several years to complete our reset requirements.

        21. Senator Ayotte. General Paxton, why is this funding necessary?
        General Paxton. The Marine Corps has experienced over a decade of
    sustained combat operations with much of its ground equipment flowing
    directly from OIF to OEF, resulting in an inability to reset until now.
    The Marine Corps has undertaken an aggressive depot maintenance reset
    strategy to prioritize the repair and redeployment of ground combat
    equipment to the Operating Forces as quickly as possible. As a result,
    approximately 77 percent of the Marine Corps' total OEF reset
    requirement has retrograded from theater, however, only approximately
    40 percent has been reset. As such, the Marine Corps will continue to
    require OCO for the next several years to complete our reset
    requirements.

        22. Senator Ayotte. General Campbell, why does the Army need
    continued OCO funding years after the last piece of equipment returns
    from Afghanistan?
        General Campbell. The Army needs OCO funding for 3 years after the
    last piece of equipment returns from Afghanistan so that it can fully
    execute the equipment reset program. Army equipment reset is defined as
    a set of actions to restore equipment to a desired level of combat
    capability commensurate with a unit's future mission. The equipment
    reset program is directly tied to equipment readiness. In fiscal year
    2013, the Army reset approximately 87,000 pieces of equipment at the
    sustainment (depot) level and over 292,000 pieces of equipment (e.g.,
    small arms; night vision goggles) at the unit level. Support for reset
    has allowed the Army to sustain readiness at over 90 percent for ground
    and 75 percent for aviation systems in theater.
        Reset funding must be spread over the additional 3-year period
    because of the factors that influence reset production. These factors
    include: the volume of equipment currently undergoing reset; the pace
    of equipment retrograde from theater; the available capacity within the
    industrial base; and the repair cycle times of major systems. For
    example, due to the previously mentioned factors, the Army cannot
    immediately and simultaneously reset all of our returning AH-64
    Apaches. Each AH-64 Apache takes approximately 27 months to reset, our
    longest repair cycle time.
        It is important to note that much of the equipment deployed in
    Afghanistan today is the most modern and capable equipment the Army
    employs. It is fiscally and operationally prudent for the Army to
    retrograde and reset that equipment to fill shortages, increase
    equipment on-hand, and help meet the Army's future equipment needs. If
    fully funded, we project that our retrograde and reset efforts will
    improve Total Army Readiness equipment on-hand from approximately 88
    percent to approximately 92 percent across the Active, Army National
    Guard, and Reserve Forces. Without reset, we risk access to the full
    capabilities of that equipment.

        23. Senator Ayotte. General Campbell, what will be the impact on
    the Army's readiness if Congress does not provide at least 3 years of
    OCO funding for reset?
        General Campbell. If Congress does not provide at least 3 years of
    OCO funding for reset, some of the Army's most modern and capable
    equipment that was used in Afghanistan will not be reset, thereby
    negatively impacting equipment serviceability and availability, and our
    readiness.
        Reset funding is critical to reversing the effects of combat stress
    on equipment and has been instrumental in sustaining readiness at over
    90 percent for ground and 75 percent for aviation systems. Resetting
    the remaining equipment in Afghanistan will improve Total Army
    Readiness of equipment on-hand from approximately 88 percent to 92
    percent.
        Reset funding must be spread over a 3-year period to align with
    available industrial base capacity and flow of equipment retrograde.
    These factors include: the volume of equipment currently undergoing
    reset; the pace of equipment retrograde from theater; the available
    capacity within the industrial base; and the repair cycle times of
    major systems. For example, due to the previously mentioned factors,
    the Army cannot immediately and simultaneously reset all of our
    returning AH-64 Apaches. Each AH-64 Apache takes approximately 27
    months to reset, our longest repair cycle time.

        24. Senator Ayotte. General Campbell, how has the uncertainty
    regarding our post-2014 troop levels affected the Army's retrograde
    plan?
        General Campbell. The base force posture plan for the theater
    articulates a responsible drawdown of forces. This plan transitions the
    theater over time and has been critical in setting the conditions for
    the train, advise, and assist mission being executed in support of
    Afghan National Security Forces. From an Army perspective, we are
    taking advantage of the drawdown in Afghanistan by shipping equipment
    from the theater to fill Service readiness requirements.
        Although there is uncertainty, the theater force posture assessment
    is that current redeployment and retrograde operations are progressing
    on plan. However, the uncertainty is beginning to result in force
    structure being retained in theater. This puts additional risk on
    retrograde operations in the second half of 2014.
        The risk to Second Destination Transportation (SDT) cost is minimal
    as SDT is made up of sustainment costs (inbound) and retrograde
    (outbound). If there is a zero option (e.g., an unscheduled and
    immediate full redeployment of all personnel and equipment) sustainment
    costs go down over time, while our retrograde transportation costs
    increase due to leveraging multi-modal and direct air methods in order
    to increase retrograde velocity.
        Post-2014, the CENTCOM Material Retrograde Element is a critical
    resource that will facilitate the responsible downsizing and drawdown
    in Afghanistan. If not approved and extended past December 2014, we
    assume risk with regards to the stewardship of resources and property
    accountability.

                            modernization priorities
        25. Senator Ayotte. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, what are your Services' leading
    modernization priorities?
        General Campbell. First and foremost, the soldier and squad are the
    centerpiece of Army equipment modernization, from which we build
    outward by enabling them with the network and key equipment. This
    principle is reflected in our top modernization programs:

        1.  Network (Warfighter Information Network-Tactical (WIN-T);
    Family of Networked Tactical Radios (formerly the Joint Tactical Radio
    System); Joint Battle Command-Platform; Distributed Common Ground
    System-Army; Nett Warrior);
        2.  Armored Multi-Purpose Vehicle;
        3.  Paladin Integrated Management (PIM);
        4.  Joint Light Tactical Vehicle (JLTV);
        5.  Apache; and
        6.  Blackhawk.

        During this period of fiscal constraints, we have accepted greater
    risk in our modernization program and have had to delay many programs.
    This is one reason the Army supports the President's proposal, the
    Opportunity, Growth, and Security Initiative, that would provide an
    additional $26 billion for defense programs in fiscal year 2015.
        Because of reduced Army budgets, we will not transition four
    programs to the acquisition phase, to include the Ground Combat Vehicle
    and Armed Aerial Scout. Additionally, we will end 4 programs,
    restructure 30 programs, and delay 50 programs. We have fully funded
    our priority programs such as the Armored Multi-Purpose Wheeled
    Vehicle, PIM, JLTV, Apache, and Blackhawk. The network also remains a
    modernization priority. However, investments in the network are not
    untouched by resource constraints and, as a result, we will delay
    portions of the WIN-T Increment 3 and reduce investments in tactical
    radio systems.
        General Paxton. The Marine Corps has several critical modernization
    priorities in the fiscal year 2015 budget. These priorities are
    balanced between our ground and aviation programs to continue to
    enhance the flexibility and capability of the MAGTF. Our key ground
    programs are the Amphibious Combat Vehicle (ACV), JLTV, and
    enhancements to our aging Assault Amphibious Vehicle (AAV) fleet. These
    modernization efforts coupled with Navy investments in enhanced surface
    connectors are key enablers of the Marine Corps ability to remain an
    expeditionary force. Our aviation priorities are the F-35B, MV-22, and
    CH-53K. The combination of capabilities that these aviation and ground
    programs provide our Service, and our Nation, are critical to the way
    that the Marine Corps envisions being employed into the 21st century.
        General Spencer. One of the most critical judgments in building the
    Air Force plan for 2015 and beyond was how to balance investment in our
    current aging fleet against the need to buy equipment that will be
    viable against future adversaries. Forced to make tough decisions, we
    favored funding new capabilities (recapitalization) over upgrading
    legacy equipment (modernization). We cannot afford to bandage old
    airplanes as potential adversaries roll new ones off the assembly line.
    For example, the backbone of our bomber and tanker fleets, the B-52 and
    the KC-135, are from the Eisenhower era, and our fourth generation
    fighters average 25 years of age. That is why our top three acquisition
    priorities remain the KC-46A aerial tanker, the F-35A Joint Strike
    Fighter (JSF), and the Long-Range Strike Bomber (LRS-B).
        The KC-46A will begin to replace our aging tanker fleet in 2016,
    but even when the program is complete in 2028, we will have replaced
    less than half of the current tanker fleet and will still be flying
    over 200 KC-135s. Similarly, our average bomber is 32 years old. We
    need the range, speed, survivability, and punch that the LRS-B will
    provide. Tankers are the lifeblood of our Joint Force's ability to
    respond to crises and contingencies, and bombers are essential to
    keeping our Air Force viable as a global force. In our fiscal year 2015
    budget submission, we have fully funded these programs.
        The F-35A is also essential to any future conflict with a high-end
    adversary. The very clear bottom line is that a fourth generation
    fighter cannot successfully compete with a fifth generation fighter in
    combat, nor can it survive and operate inside the advanced, integrated
    air defenses that some countries have today, and many more will have in
    the future. To defeat those networks, we need the capabilities the F-
    35A will bring. In response to tightening fiscal constraints, the Air
    Force has deferred four F-35As in the Future Years Defense Program
    (FYDP). If the President's projected top-line enhancements are not
    realized, and future appropriations are set at sequestration-levels,
    the Air Force may lose up to 19 total F-35As within the FYDP.
        Moving forward, we cannot afford to mortgage the future of our Air
    Force and the defense of our Nation. Recapitalization is not optional--
    it is required to execute our core missions against a high-end threat
    for decades to come.
        Admiral Cullom. In parallel with recapitalization, the fiscal year
    2015 budget request continues modernization of in-service platforms.
    Key priorities include:

             Flights I and II of the Arleigh Burke-class DDG mid-
            life upgrades. To increase operational availability and BMD
            capacity sooner, we will modernize Flight IIAs beginning in
            fiscal year 2017 rather than pursuing an ``oldest-first'' plan.
             Whidbey Island-class and Wasp-class LHD mid-life
            updates. Nine of 12 LSD mid-lifes are complete. Mid-lifes to
            the Wasp-class will complete by fiscal year 2022. The eighth
            LHD, USS Makin Island, will be addressed in a subsequent budget
            submission.
             Phased modernization of 11 Ticonderoga-class cruisers
            (CG). To preserve balance and avoid a permanent loss of force
            structure and requisite ``ship years,'' modernization of these
            11 will be timed to align with the retirements of remaining CGs
            such that updated ships replace those retiring on a one-for-one
            basis.
             Phased modernization of Whidbey Island-class LSDs. Two
            of the three always available for tasking.
             Service Life Extension Program (SLEP) for the legacy
            F/A-18A-D Hornet. With SLEP modifications, this will extend
            some aircraft to 10,000 lifetime flight hours, almost 16 years
            beyond their originally-designed life.

        26. Senator Ayotte. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, does the fiscal year 2015 budget request
    adequately resource these priorities?
        General Campbell. During this period of fiscal constraints we have
    accepted greater risk in our modernization program and have had to
    delay many programs. This is one reason the Army supports the
    President's proposal for the Opportunity, Growth, and Security
    Initiative, that would provide an additional $26 billion for defense
    programs in fiscal year 2015.
        Because of reduced Army budgets, we will not transition four
    programs to the acquisition phase, to include the Ground Combat Vehicle
    and Armed Aerial Scout. Additionally, we will end 4 programs,
    restructure 30 programs, and delay 50 programs. We have fully funded
    our priority programs such as the Armored Multi-Purpose Wheeled
    Vehicle, PIM, JLTV, Apache, and Blackhawk. The network also remains a
    modernization priority. However, investments in the network are not
    untouched by resource constraints and, as a result, we will delay
    portions of the WIN-T Increment 3 and reduce investments in tactical
    radio systems.
        General Paxton. The fiscal year 2015 budget adequately funds the
    Marine Corps modernization priorities (ACV, JLTV, AAV, F-35B, MV-22,
    and CH-53K). However, to do so we have forgone some important
    investments in order to preserve near-term readiness. With the smallest
    modernization budget in DOD, the Marine Corps continually seeks to
    leverage the investments of other Services, carefully meting out our
    modernization resources to those investment areas which are the most
    fiscally prudent and those which promise the most operationally
    effective payoffs.
        Innovative warfighting approaches and can-do leadership are
    hallmarks of the Corps, but these cannot overcome the vulnerabilities
    created by our rapidly aging fleet of vehicles, systems, and aircraft.
    Long-term shortfalls in modernization will have a detrimental impact on
    readiness and, at some point, sustaining fleets of severely worn
    vehicles becomes inefficient and no longer cost-effective. This
    inefficiency reduces available modernization resources from an already
    small account, degrading our ability to effectively operate in today's
    complex security environment.
        General Spencer. In fiscal year 2015, the Air Force must be able to
    execute national defense requirements while also recovering from the
    impacts of fiscal year 2013 sequestration, adjusting to the fiscal year
    2014 Bipartisan Budget Act (BBA) funding levels, and the uncertainty in
    the future years planned budget top line for fiscal year 2016 and
    beyond. We are working hard to make the right choices that maximize
    each taxpayers' dollars and ensure we can meet national security needs
    today and in the future.
        Admiral Cullom. The fiscal year 2015 budget request funds the
    Navy's highest priority modernization requirements. However, delivery
    of some capabilities to the Fleet is slowed--particularly air and
    missile defense--in balancing current and future readiness funding.
    This increases risk in our ability to assure access against a
    technologically advanced adversary, compared to the President's budget
    for fiscal year 2014. In addition, the readiness outcomes of this
    budget request anticipate the ability to redistribute manpower and
    reapply near-term savings from the CG and LSD modernization plans.

        27. Senator Ayotte. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, how will sequestration in fiscal year 2016
    affect your modernization priorities?
        General Campbell. The BCA spending limits will impact the Army's
    ability to meet our modernization priorities. While our strategic
    objectives will remain the same, our ability to meet them will be
    severely challenged. Difficult decisions on funding would likely result
    in adverse impacts to all weapon system and modernization programs. Any
    stoppage or delay of a program lengthens acquisition timelines and
    increases cost over the long-term as well as delaying the capability
    from arriving to the soldier. Some programs that support key
    warfighting capabilities have already endured significant reductions.
    Further reductions in these programs could prove to be terminal. The
    impacts of previous reductions were offset to some degree by using
    unobligated funds. As these and other funds become even more limited
    and if further reductions are required, the risk to our modernization
    priorities becomes greater. The resulting impact to warfighting
    capabilities will diminish the tactical advantage of our soldiers on
    the battlefield.
        General Paxton. A fully sequestered budget in fiscal year 2016 will
    cause the Marine Corps to protect only the ACV and F-35 programs at a
    greater cost to other modernization and infrastructure programs. As the
    Nation's force in readiness, I must and will protect near-term
    readiness. Under sequestration, we will begin to see impacts on
    acquisition programs, large and small. For example the CH-53K program
    could see a delay in Initial Operating Capability by 1 year and 10
    aircraft deferred outside the FYDP.
        General Spencer. A sequestration-level budget would result in a
    very different Air Force. We are aggressively seeking innovative cost
    savings and more efficient and effective ways of accomplishing our
    missions, however these initiatives will not be sufficient to reach
    sequestration funding levels. To pay the sequestration-level bill, we
    will have to sacrifice current tanker and intelligence, surveillance,
    and reconnaissance capacity by divesting the KC-10 and the RQ-4 Block
    40 fleets, all of our major investment programs will be at risk, and
    our readiness recovery will be significantly slowed due to required
    cuts in WSS and ranges.
        Admiral Cullom. Sequestration-level funding in fiscal year 2016 and
    out would have a significant impact on the size of the Navy we could
    affordably sustain and would degrade our ability to modernize the
    Fleet.
        In the President's budget for fiscal year 2015, slowed
    modernization results in increased risk to our ability to meet the DSG,
    particularly when faced with a technologically advanced adversary.
    Sequestration levels of funding in fiscal year 2016 and beyond would
    require us to look at further reductions to recapitalization and
    modernization in order to maintain some balance regarding readiness of
    our forces. This risks having too few ships and aircraft to execute
    certain missions in the future or falling behind competitors in terms
    of capability and relevance.

                               world wide threats
        28. Senator Ayotte. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, during our hearing earlier this year on
    World Wide Threats, Director of National Intelligence Clapper testified
    that over his past 50 years in intelligence, he has ``not experienced a
    time when we've been beset by more crises and threats around the
    globe.'' How would you assess the readiness of the forces to respond to
    the full range of diverse threats?
        General Campbell. As a result of operations over the past 12 years,
    the Army has focused on counterinsurgency operations at the expense of
    Direct Action/Unified Land Operations (DA/ULO). The Army began to
    rebuild DA/ULO readiness before sequestration, but funding shortages in
    fiscal year 2013 stopped it. The increased funding provided to mitigate
    the effects of the BCA has slowed the decline in DA/ULO readiness;
    however, the Army still lacks the ability to fully generate the
    required trained and ready capabilities necessary to achieve the
    ``Guidance for the Employment of the Force'' end states. The most
    demanding combatant commander plans currently require more units than
    the Army has immediately ready and available, requiring us to deploy
    units that are less capable or that would have to be re-directed from
    other steady state missions.
        The Army recognizes the need to increase DA/ULO readiness across
    the force to respond to the full range of military operations. In 2012,
    the Army initiated a plan to aggressively begin building DA/ULO
    readiness with multiple combat training center rotations focused on
    full spectrum conflict. Unfortunately, because of the impact of the
    BCA, the Army cancelled nearly 50 percent of those fiscal year 2013
    rotations, and with increased emergent demand for Army forces across
    the combatant commands, this has delayed the rate at which we can build
    DA/ULO readiness across the force. The Army continues to aggressively
    focus on building full spectrum readiness; however, it will take both
    time and long-term, consistent funding to return the Army to a
    recovering glide path.
        General Paxton. The Marine Corps is committed to remaining the
    Nation's force-in-readiness, a force capable of responding to a crisis
    anywhere around the globe at a moment's notice. The Marine Corps can
    sustain its current operational requirements on an enduring basis;
    however, the readiness of the non-deployed forces to provide a timely
    response to unexpected crises or a large-scale contingency needs to be
    improved through our reconstitution and reset efforts. The Marine Corps
    has a strategic trajectory to reconstitute to a ready force to meet the
    DSG for steady state requirements and crisis response contingencies.
    Our reconstitution efforts will restore and upgrade our combat
    capability to ensure our units are ready for operations across the
    range of military operations. In the face of fiscal uncertainty, we are
    protecting near-term readiness at the expense of our infrastructure
    sustainment and modernization investments, which will be negatively
    impacted over the long-term.
        Entering into the Quadrennial Defense Review (QDR), we came to the
    conclusion that, under the threat of continued sequestration or some
    variant, an Active-Duty Force of 175,000 marines is what our Nation can
    afford, along the continued cuts to modernization and infrastructure
    accounts. The budget-driven, redesigned 175,000 force is capable of
    meeting steady state requirements, crisis response activities, and
    deterring or defeating aggression in one region. However, the 175,000
    force assumes risk at the high end of the range of military operations
    for a major contingency operation (MCO) and for long-term stability
    operations. It incurs a 1:2 deployment to dwell ratio and in the event
    of a MCO, the Marine Corps would be ``all in''; there would not be a
    rotation of forces.
        General Spencer. In order to meet the requirements of the 2012 DSG,
    most Air Force units must be able to respond in hours or days, not
    weeks and months. Thus, the Air Force must maintain a high level of
    readiness across the Total Force.
        Over the last 12 years, Air Force operations have been focused on
    the counterinsurgency/counterterrorism fight in Iraq and Afghanistan.
    As these operations take place in a permissive air threat environment,
    the full-spectrum readiness of our air superiority and global precision
    attack forces to fight in contested and highly-contested environments
    has eroded. Continuous deployments with minimal home station dwell time
    for training and regeneration has particularly impacted high-demand
    assets such as: command and control; intelligence, surveillance, and
    reconnaissance; personnel recovery; Special Operations Forces; and the
    ability of these Air Force communities to integrate and exercise with
    the Joint Force and our foreign partners. As Director Clapper
    suggested, we do not anticipate that deployment rates will appreciably
    decrease in the post-Afghanistan environment, which will continue to
    stress readiness and delay readiness recovery.
        In addition to the impact of high deployment rates in permissive
    environments, sequestration in fiscal year 2013 further degraded our
    readiness. We stood down or curtailed flying in over 30 combat and
    training flying squadrons. We returned to flying in July 2013 after a
    3-month stand-down, but half of these units still have not recovered to
    their pre-sequester (already low) readiness levels.
        Overall, our readiness is not what it needs to be, and it must
    improve. Aided by the NDAA for Fiscal Year 2014 and the BBA, we have
    increased key readiness accounts, such as flying hours, and we expect
    to see improvement. However, given the long road to recovery and
    anticipated persistent high deployment rates, we expect full recovery
    to take up to 10 years.
        Admiral Cullom. Navy forces forward stationed or rotationally
    deployed are trained and certified as ready to perform to the full
    spectrum of their designed mission capabilities. In some cases,
    operational demand might preclude time to train in a particular mission
    set for a specific unit. When this occurs, the decision to do so is
    balanced against risk in anticipated deployed missions and properly
    documented for the receiving combatant commander.
        Navy capacity to surge additional ready forces for contingency
    operations has been degraded by a decade of high-tempo operations,
    exacerbated by budget sequestration in fiscal year 2013. This requires
    both time and funding to improve, but the Navy's fiscal year 2015
    budget request across the FYDP provides a path to deliver sustainable
    presence and appropriate contingency operations capacity. A return to
    sequestration funding levels in fiscal year 2016 and beyond will
    preclude that outcome.
        Readiness to respond to developing threats also requires delivery
    of new platforms and capabilities, continuing modernization of existing
    platforms, and procurement of necessary ordnance. To sustain current
    readiness within current funding levels, Navy is taking some risk in
    each of these categories, leading to increased risk in two mission
    areas of the DSG, particularly against a technologically-advanced
    adversary.

        29. Senator Ayotte. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, what would you consider to be your
    Services' greatest capability gaps?
        General Campbell. The Army's critical capability gaps are the
    ability to rapidly detect threats and disseminate information, the
    ability to survive and maneuver in any operational environment, and the
    ability to defeat rapidly advancing aerial threats and precision fires
    capabilities.
        The centerpiece of all modernization efforts remains the soldier.
    The Army has two modernization priorities to enable the soldier to
    rapidly detect threats and disseminate information: The WIN-T will
    ``enable mission command'' while the Distributed Common Ground System-
    Army (DCGS-A) will ``enable multi-intelligence source analysis.'' To
    permit the soldier to operate in any operational environment, the Army
    has established as a priority the Armored Multi-Purpose Vehicle (AMPV),
    which will fill a critical capability gap in the available vehicle
    inventory for protected mounted maneuver. Finally, to protect the
    soldier and the systems that support the soldier, the Army has
    established a priority for enhanced aerial threat protection, which
    will use systems such as Counter Rocket Artillery and Mortar (CRAM),
    Terminal High Altitude Area Defense (THAAD), and Patriot.
        The development of these capabilities has increased the average
    soldier load, creating the need to develop more efficient energy
    generation and power storage capabilities, lighter protective armor,
    and fully integrated unmanned ground systems.
        Finally, providing standoff detection, characterization, and timely
    alert of chemical, biological, and radiological hazards to maneuvering
    forces continues as a priority science and technology (S&T) focus.
        General Paxton. Our greatest capability gaps are centered around
    our ability to move forces ashore during amphibious operations under
    tactical scenarios that require greater standoff distances of 12 to 25
    miles from ship-to-shore based on the threat. Due to the cancellation
    of the Expeditionary Fighting Vehicle, the Corps is struggling to
    maintain our current capability, which lacks the required capability to
    achieve stand-off distance, while we simultaneously seek a suitable
    replacement that can achieve the required distances and also execute
    its mission once ashore.
        Also, due to the sun-downing of the EA-6B airborne electronic
    warfare capability in 2019, the Corps may experience a void in all the
    required electronic warfare capabilities until new systems come on line
    and a reshuffling of electronic warfare personnel are complete. These
    efforts will need to be complete in order to maintain an air/ground
    electronic warfare capability suited to expeditionary, joint, or
    combined operations across the Marine Corps.
        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
    wherever and whenever the Nation requires, including highly contested
    airspace. Near-term improvements, acquisitions, and funding critical
    readiness programs such as flying hours, WSS, and training ranges 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 against adversary anti-access/area-denial
    (A2/AD) strategies. Air superiority, a prerequisite to modern joint
    warfare, and long-range strike capabilities cannot be assumed. New,
    more-capable 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 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. 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 or not fielded given
    current resource constraints. Potential examples include ballistic
    missile defense and advanced jet engine development.
        Admiral Cullom. 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 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 2015 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 region 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 #30) focus on assuring
    access in each domain, often by exploiting the asymmetric capability
    advantages of U.S. forces across domains.

        30. Senator Ayotte. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, what funding is included in the fiscal
    year 2015 budget request to address those capability gaps?
        General Campbell. To address the Army's key capability gaps, the
    Army is bringing both materiel and non-materiel solutions to the table.
    As in Iraq and Afghanistan, we are continuing to bring asymmetric
    capabilities in the Army inventory through the rapid and deliberate
    introduction of new technologies and strategies. In this vein, the Army
    has programmed over $250 million in the fiscal year 2015 budget request
    to support our top S&T priority--detecting and defeating IEDs. We are
    currently bringing many other selected capabilities, called non-
    standard equipment, into program of record status and keeping those key
    capabilities present in the force until those programs of record come
    on line. The Army will only invest in right capabilities and in the
    right quantities. Other emerging threats that do not have currently
    achievable technological responses are being addressed through other
    S&T efforts. The Army has continually protected this funding, amounting
    to approximately $60 million in fiscal year 2015, even with the overall
    topline reductions.
        Those programs that directly relate to the individual soldier's
    lethality, survivability, and connectivity have been prioritized with
    the Army requesting over $620 million for fiscal year 2015. Maintaining
    the best body armor, improving weapon systems, and networking tactical
    units are all funded in the Army's program. Our top priority materiel
    programs include the AMPV ($90 million in fiscal year 2015) as well as
    enhancing our network operations via the WIN-T ($1.79 billion in fiscal
    year 2015) and the DCGS-A ($179.7 million in fiscal year 2015)
    programs. Furthermore, existing systems such as unmanned ground systems
    are being retained and improved in ongoing programs of record and
    through the maintenance of rapidly procured non-standard equipment.
    Providing active defense against rocket/mortar fire is being
    accomplished with over $40 million programmed for continual development
    and improvement of the CRAM system. Continued investment in THAAD and
    Patriot, with $920 million programmed in fiscal year 2015, also
    contributes to countering increased adversary capabilities.
        From the perspective of non-materiel solutions, leader training and
    development, to include Department of the Army civilian education
    programs, are essential to maintaining the vitality of our Army and we
    propose funding of nearly $650 million in fiscal year 2015 to support
    these programs. In addition to this leader specific training, we've
    funded our domestic Combat Training Centers to support the global force
    requirement as well as programming $5 billion in our ground operational
    tempo accounts primarily focused on improving unit level training and
    readiness targets. Another example of our investment in non-materiel is
    the Army's provision of regionally aligned forces to combatant
    commanders to ensure the Joint Force ability to project power in
    contested environments. We've set aside over $500 million in fiscal
    year 2015 for these Phase 0 cooperative security and partnership
    building activities to play a significant role in shaping the
    operational environment, strengthening relationships, enhancing partner
    capacities, enhancing leader development, and ultimately assuring
    access for friendly forces. These efforts help enable the Army to
    integrate, operate, and project power as part of the Joint Force and
    conduct and sustain decisive operations, in austere and contested
    operational environments.
        General Paxton. We have preserved sufficient funding to continue
    incremental development of the replacement for our aging AAV
    replacement the ACV. The Marine Corps is also partnering with the Navy
    to explore options for improved ship-to-shore connectors and alternate
    forms of lift which will greatly enhance our ability to conduct
    expeditionary operations from greater stand-off distances.
        We are also exploring unmanned aerial vehicle options to replace
    the EA-6B's electronic warfare capabilities while also leveraging the
    inherent capabilities of the F-35.
        General Spencer. The Air Force fiscal year 2015 budget request is
    strategy-based, fiscally informed, and sets a course toward full-
    spectrum readiness of the force to support the defense strategy.
    Furthermore, the fiscal year 2015 request addresses modernization
    challenges and keeps the Air Force top three acquisition priorities
    (KC-46A aerial tanker, F-35A JSF, and LRS-B) on track. These are
    critical programs to ensure the Air Force can operate and win in highly
    contested environments worldwide.
        Specifically, the fiscal year 2015 research, development, test, and
    evaluation budget request includes approximately $800 million for the
    KC-46A and $600 million to support development of the F-35A JSF. It
    also funds approximately $900 million toward efforts to develop a new
    long-range, nuclear capable, penetrating bomber. The fiscal year 2015
    procurement portfolio delivers both immediate and future capabilities
    through investments across four specific appropriations: aircraft,
    missile, ammunition, and other procurement. In fiscal year 2015, the
    Air Force request includes $1.5 billion for procurement of 7 KC-46As
    and just under $4.3 billion to procure 26 F-35As, including spares,
    simulators, and modifications.
        The priorities articulated and funded in the fiscal year 2015
    budget request balance the Air Force's requirement to support the
    current defense strategy in 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.
        Admiral Cullom. The fiscal year 2015 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 Mine Countermeasure (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 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 platforms including
            MH-60R Seahawk helicopters, P-8A Poseidon maritime patrol
            aircraft, 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 large surface combatants and aircraft carriers,
            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 war games
            and real-world exercises including Rim of the Pacific which
            practices high-end ballistic missile defense, anti-surface
            warfare, and anti-submarine warfare 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 Carrier Strike
            Groups 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 infrared 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 includes the Next Generation
            Jammer, Surface Electronic Warfare Improvement Program (SEWIP)
            procurement, 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.
             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 requests training funds to continue 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.

        31. Senator Ayotte. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, what are the risks if we continue to
    consume readiness at the rate you project, without providing the
    funding needed to restore it?
        General Campbell. To meet contingency plan timelines developed by
    the combatant commands, the Army must provide forces that are ready and
    capable of immediately deploying for the full range of military
    operations.
        If we continue to consume readiness at projected rates without
    funding to restore it, we will incur the following risks: (1) less
    flexibility in the employment of Army forces to meet emergent crises;
    (2) the inability to provide the required amount of Army forces on time
    to meet major contingencies; and (3) increased casualties for a major
    contingency due to the employment of less-ready forces.
        General Paxton. The risk is that sustained sequestration would make
    the National Defense Strategy unfeasible. A sequester-level budget does
    not provide a joint force large enough, ready enough, or modern enough
    to meet strategic needs. It would begin making the Marine Corps less
    ready in 2017 and beyond. The cost could be in terms of lives.
        General Spencer. The reality of the Air Force budget is that
    without sufficient readiness funding, we assume greater risk across the
    full range of military operations required to support the defense
    strategy. Current fiscal constraints pose difficult choices between our
    strategy-based modernization/acquisition programs and the need to
    simultaneously address our near- and long-term full-spectrum readiness
    shortfalls. Without adequate readiness funding, the Air Force cannot
    maintain a ready force or even begin reversing our long, downward
    readiness trend, which we are currently addressing in fiscal years 2014
    to 2015 under the funding provided by the BBA.
        The return of BCA funding levels would significantly impact our
    ability to adequately resource WSS, depot maintenance, training ranges,
    preferred munitions, and large-force exercises. If BCA funding levels
    return, readiness will decline across all Air Force core missions and
    we will not be able to meet our 2023 readiness goals.
        Under BCA funding levels, the Air Force will continue to meet
    rotational and combatant commander demand and maintain readiness for
    our units in Korea, but will be hard-pressed to do anything above this
    with ready forces. Depending on the outcome of future BCA-driven
    planning and programming tradeoffs, our units may have to fly at
    reduced training rates and the Air Force may again be forced to stand
    down units similar to actions taken in fiscal year 2013. This will
    result in fewer ready forces available to support the defense strategy.
        Admiral Cullom. Navy continues to prioritize near- to mid-term
    readiness at the expense of new procurement, modernization, and
    ordnance. Driven by the uncertain fiscal environment, this is not a
    cost-effective or sustainable position over the long-term. The fiscal
    year 2015 budget submission provides a path to properly balance current
    and future readiness to meet the mission requirements of the DSG with
    some increased risk compared to the fiscal year 2014 request. We will
    continue to fund readiness of our forward stationed and rotationally
    deploying units. Without the requested funding across the FYDP,
    however, the result will be a smaller and less capable Navy that is
    unable to meet some DSG primary mission areas.

        32. Senator Ayotte. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, is this what General Dempsey refers to
    when he says we could be on a path where the ``force is so degraded and
    so unready'' that it would be ``immoral to use the force''?
        General Campbell. While I cannot speak to precisely what General
    Dempsey was referring, I can say that we all believe the American
    people rightfully expect that if soldiers are sent into harm's way,
    they are properly led, equipped, and trained to accomplish their
    mission and return home safely. Realistic, challenging training is
    necessary if our Army is to meet these obligations in the face of
    committed adversaries.
        The current security environment is complex and constantly
    evolving. U.S. Forces, particularly land forces, must be able to
    contend with both state and non-state actors across the range of
    military operations. To succeed in this threat environment and protect
    U.S. interests, Army forces train to conduct missions that range from
    humanitarian assistance and disaster relief to high intensity combat-
    mission sets that require different skills and competencies. Cuts in
    readiness funding negatively impact our ability to quickly and
    decisively respond to threats and challenges, which can ultimately
    result in increased casualties, increased costs, and increased duration
    of conflicts.
        General Paxton. The risk is that sustained sequestration would make
    the National Defense Strategy unfeasible. A sequester-level budget does
    not provide a joint force large enough, ready enough, or modern enough
    to meet strategic needs. It would begin making the Marine Corps less
    ready in 2017 and beyond. The cost could be in terms of lives.
        General Spencer. It is our title 10 responsibility and sworn duty
    to provide airmen the required training, resources, and equipment so
    that they can successfully accomplish their assigned missions with an
    acceptable level of risk. However, for more than 20 years, Air Force
    readiness has been on a downward trend and funding levels under the BCA
    only serve to accelerate this decline. With recent sequestration-driven
    cuts, our forces may not be sufficiently equipped, trained, and ready,
    which increases risk to the force and risk in our ability to achieve
    desired operational and strategic outcomes. The degree of risk depends
    on a number of factors--such as the threat environment and our
    strategic and operational objectives. Increased risk alters our--and
    our adversary's--decision calculus, which can effectively limit
    strategic options for the President and combatant commanders.
    Ultimately, sequestration has forced us to budget for less than is
    required to field sufficient ready forces that can operate across the
    full spectrum of military operations.
        Admiral Cullom. A return to sequestration-level funding in fiscal
    year 2016 and beyond will result in increased risk in the readiness of
    our nondeployed forces and reductions in future force structure/
    modernization in order to fund readiness of our forward deployed forces
    and those preparing to deploy. Nondeployed forces are those we call on
    for additional contingency response and their readiness would further
    degrade. It is important to recognize that this concern is about more
    than just the immediate readiness of the force. It is also about the
    long-term professional skills and leadership experience of our people.
    Diminished capacity to conduct sustained operational training impacts
    our most important advantage over any potential adversary--our highly-
    trained and motivated sailors. Additionally, reductions in force
    modernization incur long-term risks to Navy's ability to maintain
    asymmetric technological advantages.

                          air force readiness backlog
        33. Senator Ayotte. General Spencer, Air Force Secretary Deborah
    Lee James testified before the House Armed Services Committee a couple
    of weeks ago that under the existing Air Force budget plan, it will
    take 10 years to return to full readiness. Is this 10-year plan built
    to the President's budget and out-year funding that exceeds the BCA
    caps?
        General Spencer. Fiscal year 2015 budget request funding levels are
    the minimum required to achieve Air Force readiness goals by 2023. The
    reality of the Air Force budget is that without sufficient readiness
    funding, we assume greater risk across the full range of military
    operations required to support the defense strategy. Current fiscal
    constraints pose difficult choices between our strategy-based
    modernization/acquisition programs and the need to simultaneously
    address our near- and long-term full-spectrum readiness shortfalls.
    Without adequate readiness funding, the Air Force cannot maintain a
    ready force or even begin reversing our long downward readiness trend,
    which we are currently addressing in fiscal years 2014 to 2015 under
    the funding provided by the BBA.
        The return of BCA funding levels would significantly impact our
    ability to adequately resource WSS, depot maintenance, training ranges,
    preferred munitions, and large-force exercises. If BCA funding levels
    return, readiness will decline across all Air Force core missions and
    we will not be able to meet our 2023 readiness goals.
        Under BCA funding levels, the Air Force will continue to meet
    rotational and combatant commander demand and maintain readiness for
    our units in Korea, but will be hard-pressed to do anything above this
    with ready forces. Depending on the outcome of future BCA-driven
    planning and programming tradeoffs, our units may have to fly at
    reduced training rates and the Air Force may again be forced to stand
    down front line combat units similar to actions taken in fiscal year
    2013. This will result in fewer ready forces available to support the
    defense strategy. Also, the Air Force will be forced to consider
    additional force structure options, such as divesting the KC-10 and
    Global Hawk Block 40 fleets and reducing by 10 the number of MQ-9
    orbits. BCA-level funding means cuts to our readiness and
    recapitalization/modernization accounts and will result in a less
    capable, smaller force that's even less ready for tomorrow's fight.

        34. Senator Ayotte. General Spencer, what will be the impact if
    funding for the next 5 years is limited to caps?
        General Spencer. The return of BCA funding levels would
    significantly impact our ability to adequately resource WSS, depot
    maintenance, training ranges, preferred munitions, and large-force
    exercises. If BCA funding levels return, readiness will decline across
    all Air Force core missions and we will not be able to meet our 2023
    readiness goals.
        Under BCA funding levels, the Air Force will continue to meet
    rotational and combatant commander demand and maintain readiness for
    our units in Korea, but will be hard-pressed to do anything above this
    with ready forces. Depending on the outcome of future BCA-driven
    planning and programming tradeoffs, our units may have to fly at
    reduced training rates and the Air Force may again be forced to stand
    down front line combat units similar to actions taken in fiscal year
    2013. This will result in fewer ready forces available to support the
    defense strategy.

        35. Senator Ayotte. General Spencer, does your 10-year plan become
    a much larger one?
        General Spencer. The return of BCA funding levels will result in
    further readiness erosion across all Air Force core missions. BCA
    funding levels will force us to make significant tradeoffs and program
    cuts among our readiness and recapitalization/modernization accounts,
    preventing us from achieving our readiness goals at all, let alone by
    2023.
        Fiscal year 2015 budget request funding levels are the minimum
    required to achieve Air Force readiness goals by 2023. Without adequate
    readiness funding, the Air Force cannot maintain a ready force or even
    begin reversing our long downward readiness trend, which we are
    currently addressing in fiscal years 2014 to 2015 under the funding
    provided by the BBA.

        36. Senator Ayotte. General Spencer, if your 10-year plan becomes a
    much larger one, to what extent?
        General Spencer. The return of BCA funding levels will result in
    further readiness erosion across all Air Force core missions. BCA
    funding levels will force us to make significant tradeoffs and program
    cuts among our readiness and recapitalization/modernization accounts,
    preventing us from achieving our readiness goals at all, let alone by
    2023.
        The return of BCA funding levels would significantly impact our
    ability to adequately resource WSS, depot maintenance, training ranges,
    preferred munitions, and large-force exercises. Depending on the
    outcome of future BCA-driven planning and programming tradeoffs, our
    units may have to fly at reduced training rates and the Air Force may
    again be forced to stand down front line combat units similar to
    actions taken in fiscal year 2013. This will result in fewer ready
    forces available to support the defense strategy. Also, the Air Force
    will be forced to consider additional force structure options, such as
    divesting the KC-10 and Global Hawk Block 40 fleets and reducing by 10
    the number of MQ-9 orbits.
        BCA-level funding means cuts to our readiness and recapitalization/
    modernization accounts, resulting in fewer ready forces available to
    support the defense strategy and will result in a less capable, smaller
    force that's even less ready for tomorrow's fight.

        37. Senator Ayotte. General Spencer, what would be the risks of
    letting this happen?
        General Spencer. BCA-level funding means cuts to our readiness and
    recapitalization/modernization accounts, resulting in fewer ready
    forces available to support the defense strategy and will result in a
    less capable, smaller force that's even less ready for tomorrow's
    fight.
        Under BCA funding levels, the Air Force will continue to meet
    rotational and combatant commander demand and maintain readiness for
    our units in Korea, but will be hard-pressed to do anything above this
    with ready forces. Depending on the outcome of future BCA-driven
    planning and programming tradeoffs, our units may have to fly at
    reduced training rates and the Air Force may again be forced to stand
    down units similar to actions taken in fiscal year 2013. This will
    result in fewer ready forces available to support the defense strategy.
                           army and air force depots
        38. Senator Ayotte. General Campbell, the Army is projecting that
    they will have $4.7 billion in depot workload carryover as you enter
    fiscal year 2015. Does your fiscal year 2015 budget request allow you
    to work down some of this carryover, and how will it impact your
    ability to reset Army equipment?
        General Campbell. The Army is projecting approximately $4.5 billion
    to $4.7 billion in carryover from fiscal year 2014 to fiscal year 2015,
    which is down from $5.0 billion in fiscal year 2013. Unplanned new
    orders and operational uncertainties may prevent the Army from falling
    within this range. However, the Army has sufficient capacity to
    continue the downward trend in carryover. Planned fiscal years 2014 and
    2015 workload will continue to meet unit readiness objectives for the
    reset of Army equipment.

        39. Senator Ayotte. General Spencer, what depot challenges is the
    Air Force facing?
        General Spencer. The greatest challenge facing the Air Force depots
    is budget uncertainty. This impacts the workforce, suppliers, and
    customers. The uncertainty drives risk in planning for the Air Force
    depot customers due to schedule and availability of assets. The budget
    uncertainty does not allow the depots to size to the workload early in
    the planning process, resulting in staffing uncertainty, impacting
    workforce stability, lowering workforce morale, and causing unnecessary
    production variance, all of which drives reduced efficiency and
    effectiveness at the depots. The budget uncertainty impacts all levels
    of suppliers supporting the depots' workload, since Air Force cannot
    provide suppliers with a firm forecast of the workload. Many of the
    suppliers are small businesses, and the inability of the Air Force to
    provide a firm demand forecast increases inefficiency and drives longer
    delivery times of material in support of depot production. All of these
    challenges will only be exacerbated if sequestration returns in fiscal
    year 2016.

                           cyber readiness reporting
        40. Senator Ayotte. General Campbell, General Paxton, General
    Spencer, and Admiral Cullom, it has come to our attention that the
    readiness reporting for U.S. Cyber Command (CYBERCOM) lacks meaningful
    data to fully evaluate the current readiness of our national cyber
    forces. With plans to build a total of over 6,000 cyber warriors, do
    you agree that improved readiness metrics would benefit each of your
    Services as well as CYBERCOM?
        General Campbell. Improved readiness metrics will benefit both the
    Army and CYBERCOM. CYBERCOM, in coordination with its Service
    components, the Joint Staff, and the Services, is currently developing
    such detailed metrics that will allow us to measure the unit readiness
    of the various teams comprising the cyber mission force. Normal metrics
    include the ability of a unit to conduct its mission essential tasks,
    measures of personnel, equipment (on-hand and conditions), and
    accomplishment of individual and collective training. CYBERCOM is well
    along in developing a detailed training and readiness manual that
    defines the mission essential tasks of the various team types as well
    as the individual and collective training standards. The effort to
    determine equipment requirements for the teams is lagging somewhat, but
    that process is in development as well. We are confident that the
    appropriate metrics will be put in place as we grow and mature this
    force.
        General Paxton. Our Service component to CYBERCOM, Marine Forces
    Cyber Command, has already developed mission essential tasks with
    detailed standards for the component headquarters that it reports in
    Defense Readiness Reporting System-Marine Corps. CYBERCOM, in
    coordination with its Service components, the Joint Staff, and the
    Services, is in the process of developing detailed metrics which will
    allow us to measure the readiness of the cyber mission force. Normal
    metrics include a capability assessment against a defined mission
    essential task list, and appropriate measures for personnel, equipment,
    and training. CYBERCOM is well along in developing a detailed training
    and readiness manual which defines the mission essential tasks of the
    various team types as well as the individual and collective training
    standards. Determining the equipment requirements for the teams is
    lagging somewhat, but is in development as well. We will continue to
    work with CYBERCOM to put appropriate readiness metrics in place as we
    grow the cyber mission force.
        General Spencer. CYBERCOM, in conjunction with the Services,
    continues to develop and refine the Cyber Forces concept of operations
    and the associated training and readiness manual. Our end state is a
    Joint Mission Essential Task (JMET) list with measurable standards, and
    we are working with CYBERCOM and the Services to reach that goal.
    Toward that end-state, the Service cooperation and contributions
    experienced so far are positive and progress is measureable. In the
    meantime, the standards that we are using allow us to monitor and
    report our cyber mission force build status and readiness reporting
    based on the quantitative statistics and commander assessments. Those
    measures include an assessment of:

        (1)  Personnel, Individual Training, and Collective Training
        (2)  Network Access and Equipment Access
        (3)  A Capability Assessment

        Readiness metrics that are: (a) based on JMETs; (b) inherited
    through the Defense Readiness Reporting System; and (c) quantifiable or
    measurable in a red, yellow, or green status (90-100 = green, 75-89 =
    yellow, etc.), will benefit both the Air Force and CYBERCOM.
        Admiral Cullom. Improved readiness metrics would benefit both Navy
    and CYBERCOM. Navy is working to enable Navy Cyber Units to assess
    cyber-related mission essential tasks in the Defense Readiness
    Reporting System-Navy. Upon completion, these unit assessments will be
    imported by Defense Readiness Reporting System-Strategic and represent
    Navy's input to CYBERCOM's strategic assessment of the overall
    readiness of our national cyber forces.

                              air force munitions
        41. Senator Ayotte. General Spencer, are you experiencing any
    shortfalls in ammunition for training and operational requirements?
        General Spencer. Yes, the Air Force procured fewer practice
    munitions than we plan to expend to keep combat crews certified in
    fiscal years 2014 and 2015. If funding is not increased, a training
    munitions shortfall is expected to occur. Also, the Air Force faces
    operational munitions inventory shortages, particularly in preferred
    munitions. Correcting this remains a high priority for the Air Force,
    but the current fiscal environment has forced us to make tough choices.

        42. Senator Ayotte. General Spencer, do you have inventory
    shortfalls in precision air-to-air weapons and air-to-ground weapons
    such as Advanced Medium-Range Air-to-Air Missiles, Joint Direct Attack
    Munitions (JDAM), and High-speed Anti-Radiation Missiles?
        General Spencer. Yes, Air Force preferred munitions (AIM-120, AIM-
    9X, JDAM, JASSM/ER, SDBI/II, Hellfire) inventories are short of
    inventory objectives. Preferred munitions remain a high priority for
    the Air Force; however, the current fiscal environment has forced us to
    make tough choices.

             force structure, end strength, and total force policy
        43. Senator Ayotte. General Campbell, I understand regardless of
    what happens with sequestration, the Army will be required to further
    reduce end strength to 420,000 Active, 315,000 Army National Guard, and
    185,000 Army Reserve. In terms of BCTs, at the fiscal year 2019 force
    level, this translates to 24 Active BCTs and 22 Army National Guard
    BCTs, down from the current 33 Active BCTs and 28 National Guard BCTs.
    Would you please articulate the risk associated with reducing Army end
    strength to these levels?
        General Campbell. In line with the 2014 QDR, the Army is planning
    to reduce the force to 450,000 Active component, 335,000 National
    Guard, and 195,000 Reserve (a total of 980,000 soldiers) by fiscal year
    2017. As the Chief of Staff of the Army has testified, a force at
    980,000 is the absolute minimum force size to execute the DSG albeit at
    high risk. Achieving an acceptable outcome with this force structure
    requires a series of assumptions that history has generally proven to
    be inaccurate; specifically, that any combat operation or contingency
    is short and relatively bloodless, and that there are no requirements
    for a long-term presence of U.S. forces.
        If implemented, BCA spending caps can result in an Army end
    strength of 920,000 in fiscal year 2019. At these force levels, the
    Army would be unable to successfully conduct all components of a major
    combat operation under terms acceptable to the United States. As a
    result, the very real probability exists that U.S. Forces would be
    unable to sustain conflict long enough to mobilize, train, and deploy
    additional formations. This will lead to an outcome inconsistent with
    DSG goals and objectives.
        If the BCA continues, the end result will be an Army unable to
    respond quickly or decisively enough to ensure an outcome consistent
    with American goals and objectives. Further, any outcome that is
    achieved will come at a much higher cost in terms of blood, treasure,
    and time.

        44. Senator Ayotte. General Campbell, what are the readiness
    implications of driving the Army to these levels?
        General Campbell. As the Army gets smaller, the readiness of
    individual units (i.e. capabilities) is overshadowed by a shortfall in
    the quantity of Army forces (i.e. capacities) needed to prosecute the
    National Security Objectives specified in the Guidance for the
    Employment of the Force. The assumption that a smaller Army with more
    highly ready units can execute the National Military Strategy ignores
    the historical trends that clearly depict the sustained consumption of
    Army readiness that resulted from successive operational deployments to
    Iraq, Afghanistan, and elsewhere in support of the combatant
    commanders. For example, in 2013 the combined effects of over a decade
    of operational requirements, the impacts from the BCA, and the rapid
    downsizing of Army end strength, created conditions that led to the
    Army only having two fully trained and ready BCTs able to execute
    contingency operations with minimal risk.
        At the proposed levels of force structure and end strength, the
    Army would not have the capacity of ready units to provide decisive
    land forces necessary to defeat an adversary while simultaneously
    fulfilling required day-to-day National Military Strategy demands
    within acceptable levels of risk.

        45. Senator Ayotte. General Campbell, what can be done to mitigate
    the impact on readiness?
        General Campbell. There are three primary factors that impact Army
    readiness: strategy; resourcing; and demand for Army forces. Clearly,
    Army resourcing levels have been reduced, and are projected to shrink
    to a lower level thru the FYDP. Without any change to the Army top line
    resourcing levels, to preserve readiness we will either have to modify
    our strategy or reduce the daily demand for Army forces.

        46. Senator Ayotte. General Paxton, the Marine Corps will be forced
    to reduce to an end strength of 175,000 marines and 21 battalions down
    from 182,700 marines and 28 battalions. Would you please articulate the
    risks and the readiness implications of drawing down the Marine Corps
    to these levels?
        General Paxton.

             The current budget supports the 175,000 force at
            moderate risk. At this force level, 20 of our 21 battalions
            will be required for a major war, but those battalions would be
            adequately trained and ready. We're all in until the war is
            over. We will have very little left for crises that could occur
            in other parts of the world.
             A return to sequestration in fiscal year 2016 with a
            175,000 force would equate to high risk. At this lowered
            resource level, our units that deploy to combat would not be as
            well-trained, and would be slower arriving. This means that it
            will take longer to achieve our objectives, and the human cost
            will be higher. This is what we mean when we say high risk.
             A fully resourced 182,000 force is capable of
            supporting the QDR at moderate risk with increases in capacity
            and reduced operational tempo. While this force is not our
            preferred force of 186,000, it does lower risk by creating
            additional fully resourced units. This would require an
            additional $3 billion over the FYDP above the President's
            budget for fiscal year 2015.
             Manning the Marine Corps at 182,000 under the
            President's budget for fiscal year 2015 creates a danger of a
            hollow force. This is the worst option for us. We'll have more
            units than we can train and equip properly.
                                     ______

                    Questions Submitted by Senator Mike Lee
                          army aviation restructuring
        47. Senator Lee. General Campbell, the President's budget proposes
    a restructuring of Army aviation that would see all National Guard
    Apache helicopters transferred to Active Duty units and Blackhawks
    transferred to the National Guard. This would mean that the Army
    National Guard will lose its entire Apache attack capability, and the
    military will lose the vast experience gained by National Guard Apache
    crews and mechanics over this past decade of war. I understand that the
    budget cuts mean very hard decisions and sacrifice from all elements of
    the force. Are you concerned about this loss of well-trained and
    experienced National Guard Apache units?
        General Campbell. No, we are not concerned with moving Apaches from
    the National Guard. Shrinking budgets, exacerbated by the BCA, drove us
    to reevaluate the strategy for Army aviation. Careful analysis resulted
    in the reduction of three Active component aviation brigades and the
    restructuring of remaining aviation brigades to optimize their
    efficiency and utility at Home and abroad. Central to this
    restructuring were the complete divestment of the OH-58D helicopter and
    the transfer of all AH-64s to the Active component.
        Considering all OH-58D and AH-64 battalions in the Total Force, the
    Army currently has 37 ``shooting'' battalions. However, following the
    divestment of the aged and increasingly costly OH-58D, the Army will
    only have enough attack aircraft to man 22 AH-64 battalions. Based on
    national security strategy and expected combatant commander demands,
    these low-density, high-demand battalions must reside in the Active
    component at higher readiness levels and reduced deployment
    restrictions. Any change to this plan introduces significant risk to
    the Army's capacity to meet mission requirements.
        I am also not concerned about losing well-trained and experienced
    National Guard Apache crews because under the Army's plan, we will
    still be benefitting from their experience in transformed UH-60
    Blackhawk battalions. To be sure, not all personnel will remain in the
    National Guard; however, those Apache-qualified personnel who
    transition to other aircraft will bring their quality and experience to
    enhance the capabilities of those platforms and formations. They will
    still provide efficient and effective support at Home and abroad, they
    will just be doing so in different helicopters.
        Ultimately, the Army, including all components, will reduce
    structure to meet the constraints of funding. However, the aviation
    restructure plan enables the Army to meet the demands abroad and within
    the Homeland. Single-role Apache attack helicopters will be best
    positioned to respond to requirements abroad. The National Guard will
    receive 111 additional UH-60L Blackhawks to augment their capacity to
    address Homeland missions while remaining essential for combat
    deployments in the assault and medical evacuation roles.

        48. Senator Lee. General Campbell, what effect will the loss of
    this Guard attack capability have on readiness?
        General Campbell. The Aviation Restructure Initiative (ARI)
    increases the readiness of the Army, and the transfer of AH-64 Apache
    helicopters from the National Guard to the Active component is central
    to the plan.
        Fiscal constraints forced the Army to reduce structure in the Total
    Force. In order to avoid a hollow army by retaining structure at the
    expense of readiness, the Army will reduce structure. The ARI adroitly
    reduces structure and cost while simultaneously maintaining readiness
    and capacity to meet mission demands at Home and abroad. Central to the
    plan is the complete divestment of the aged and increasingly costly OH-
    58D Kiowa fleet and the transfer of all AH-64 Apaches to the Active
    component.
        The Army has sufficient amounts of AH-64s to fully equip and man 22
    AH-64 battalions. Combatant commander mission demands require all of
    those battalions to remain at the highest levels of readiness with the
    least amount of deployment restrictions. Only by placing all of those
    high-demand, low-density assets in the Active component can the Army
    maintain the necessary readiness and deployability dictated by national
    security requirements.
        In return for transferring AH-64s to the Active component, the
    National Guard will receive 111 UH-60L Blackhawk helicopters. These
    dual-role aircraft, with reduced training requirements, will increase
    National Guard readiness and capacity to address Homeland missions.
    Additionally, the National Guard will be increasingly ready and
    relevant to contribute to combat missions in the assault and MEDEVAC
    roles.
        The ARI, particularly the transfer of AH-64s to the Active
    component, increases the readiness of the Army to meet mission demands.
    Alternate courses of action that include the National Guard retaining
    AH-64s markedly decrease readiness and preclude the Army's capacity to
    fully address national security requirements.

        49. Senator Lee. General Campbell, what does the Army estimate it
    will save per year with this aviation restructuring?
        General Campbell. The ARI will reduce operations and sustainment
    costs by approximately $1.1 billion annually due to the reduction in
    overall structure.
        Additionally, the ARI avoids approximately $12 billion in imminent
    costs. If the Army does not execute ARI, we would be forced to retain
    many of our oldest and least capable aircraft while divesting several
    hundred modernized airframes. For example, upgrades to the Kiowa
    Warrior would cost over $10 billion and replacing the legacy TH-67
    training helicopter would add another $1.5 billion. In addition, lower
    procurement rates of modernized aircraft would cost the Army
    approximately $15 billion. These costs would be unbearable for the Army
    under the current budget constraints and would risk creating a hollow
    force, with less overall capability and less investment in
    modernization.

        50. Senator Lee. General Campbell, is the Apache helicopter the
    best equipment to fill the Scout role that needs to be filled because
    of the Kiowa Warrior's divestment?
        General Campbell. Yes, under the current fiscal constraints and
    available options the AH-64 Apache helicopter is the best equipment
    solution to fill the Scout/reconnaissance role. The Apache, when teamed
    with an unmanned aircraft system (UAS), clearly outperformed all other
    competitors during the analysis of alternatives. It will allow the Army
    to use an existing airframe and capability while simultaneously
    reducing overall costs.

        51. Senator Lee. General Campbell, what analysis was used to reach
    this conclusion?
        General Campbell. The analysis of alternatives conducted following
    the cancellation of the Armed Reconnaissance Helicopter major
    acquisition program determined that the best solution for armed
    reconnaissance was a team of AH-64E Apache helicopters and UASs.
        The Apache outperformed competition in adverse environmental
    performance conditions (high temperature and altitude), and was more
    lethal due to sensor capabilities and increased weapons payload. The
    Apache also proved itself as being the most responsive (range and speed
    capabilities) and survivable, as well as being the most interoperable
    with joint platforms.
        In the original analysis the AH-64 and UAS manned-unmanned-teaming
    solution was not chosen because it was unaffordable to buy and sustain
    additional AH-64s; however, the final decision to reduce aviation force
    structure is what will allow the Army to employ AH-64s and Shadow UASs
    that the Army already owns and sustains to meet the Army's Armed Aerial
    Scout requirement. The AH-64 with its Modernized Target Acquisition and
    Designation System, teamed with unmanned platforms, is already being
    employed with tremendous success across Afghanistan.

                              air force readiness
        52. Senator Lee. General Spencer, the President's budget proposes
    to retire the A-10 Warthog in favor of using multirole platforms to
    perform its job. What will be the effect on Air Force readiness if the
    A-10 is not retired?
        General Spencer. Without an approximately $4.2 billion addition to
    the Air Force's topline that is necessary to maintain the current A-10
    fleet, the Air Force would be forced to shift critical funds out of our
    readiness and recapitalization/modernization accounts. Depending on the
    outcome of these budget-driven tradeoffs, units may be forced to fly at
    reduced training rates, resulting in fewer ready forces to meet the
    requirements of the defense strategy. In addition, the Air Force may
    again be forced to stand down units similar to actions taken in fiscal
    year 2013 and from which (as of April 2014) the Air Force has yet to
    fully recover.
        If the Air Force is directed to retain the A-10 fleet without a
    requisite increase to our budget topline, we will be forced to divert
    vital funds out of our readiness and recapitalization/modernization
    accounts, resulting in fewer ready forces available to support the
    defense strategy and a less capable, smaller force that is even less
    ready for tomorrow's fight.

        53. Senator Lee. General Spencer, in the face of the decreased
    budget that the Air Force has to work with, do you believe that the
    work being done at the Air Force depots to maintain and modernize our
    current weapons systems becomes more critical to your readiness?
        General Spencer. Depot maintenance and contract logistics support
    (CLS) are funded via our WSS accounts. WSS is a critical component of
    our overall readiness, and our Air Force depots will continue to play a
    critical role in maintaining that readiness. WSS directly impacts fleet
    availability and the ability of our front line units to generate
    aircraft at a rate that can support our flying hour program, and hence,
    our ability to train for the full spectrum of operations as called for
    in the defense strategy.
        Currently, the Air Force is reliant on OCO funds to adequately
    resource our WSS accounts, of which depot activities are a significant
    part. Should OCO funding not be made available in future budgets and
    without an equivalent increase to the Air Force's topline, depot
    throughput would be significantly impacted and jeopardize our ability
    to meet our 2023 readiness goals.

        54. Senator Lee. General Spencer, how can our maintenance and
    modernization work be used in a way that increases readiness and saves
    money for the Air Force?
        General Spencer. Depot maintenance and CLS are funded via our WSS
    accounts. WSS is a critical component of our overall readiness. WSS
    directly impacts fleet availability and the ability of our front line
    units to generate aircraft at a rate that can support our flying hour
    program, and hence, our ability to train for the full spectrum of
    operations as called for in the defense strategy.
        To address the high demand for WSS in a resource constrained
    environment, the Secretary of the Air Force directed improvements in
    the linkage between resources and readiness. This 5-year initiative
    seeks appropriate strategy, process, and programming changes necessary
    to improve risk-based decisionmaking relative to WSS costs in support
    of readiness requirements. To accomplish this, the Air Force has begun
    a cross-functional sustainment enterprise effort to identify and
    improve WSS requirement drivers using three broad categories: (1)
    reducing costs; (2) improving risk-based decisions while avoiding
    material readiness impacts; and (3) balancing costs and performance.

     DEPARTMENT OF DEFENSE AUTHORIZATION OF APPROPRIATIONS FOR FISCAL YEAR
                   2015 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                            WEDNESDAY, APRIL 2, 2014

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

    MILITARY CONSTRUCTION, ENVIRONMENTAL, ENERGY, AND BASE CLOSURE PROGRAMS

        The subcommittee met, pursuant to notice, at 9:36 a.m. in
    room SR-232A, Russell Senate Office Building, Senator Jeanne
    Shaheen (chairwoman of the subcommittee) presiding.
        Committee members present: Senators Shaheen, Donnelly,
    Hirono, Kaine, and Ayotte.

        OPENING STATEMENT OF SENATOR JEANNE SHAHEEN, CHAIRWOMAN

        Senator Shaheen. Good morning, everyone. Let me call the
    hearing to order and point out that since we scheduled the
    hearing, there is going to be a vote this morning. It is going
    to be at 10 a.m. I think it is only one vote. We will recess,
    go vote, and then return. I apologize for the interruption. I
    think they decided to vote after we scheduled the hearing.
        I have an opening statement and I will try and be brief.
    Hopefully we can get through Senator Ayotte's comments and at
    least half of the panel before we have to leave for the floor
    to vote.
        Today, the subcommittee meets to hear the testimony on the
    Department of Defense (DOD) fiscal year 2015 budget request for
    installations, military construction (MILCON), energy, the
    environment, and base closure programs.
        Testifying this morning we have representatives from each
    of the Services and the Office of the Secretary of Defense
    (OSD) who are responsible for these programs. We look forward
    to your testimony. I want to extend a special welcome back to
    our witnesses from the great State of New Hampshire, Mr. Conger
    and Ms. Ferguson.
        The President's budget request for MILCON and family
    housing is $6.56 billion in fiscal year 2015, which is nearly
    $4.5 billion, or 40 percent, less than what was requested last
    year. In addition, I understand that facilities sustainment,
    restoration, and modernization requirements across DOD are
    funded at only 65 percent of the requirement necessary to keep
    our facilities in good working order. These reductions are no
    doubt a reflection of the tough budget choices and the need to
    protect funding for readiness and operations to the fullest
    extent possible.
        However, these reductions also assume a significant amount
    of risk and ultimately a higher cost over the longer-term. I
    look forward to hearing more from our witnesses about the level
    of risk to our military facilities.
        I am disappointed that DOD has again requested a base
    realignment and closure (BRAC) round in 2017. I do not believe
    that DOD has yet adequately explained how the significant cost
    growth we saw in the 2005 BRAC round would be avoided this time
    around or made sufficient progress in reducing the
    infrastructure overseas, particularly in Europe.
        Facility and operational energy issues are also a major
    focus of today's hearing. In this difficult budget environment,
    it is critical that we pursue every possible opportunity for
    cost savings. Energy efficiency is not only the cheapest,
    easiest way to reduce operating costs; it also has the
    potential to continue to improve our warfighting capability and
    energy security. I look forward to hearing from each of you
    more about this today.
        The President's budget request also includes $3.5 billion
    for defense environmental programs, down from last year's
    request and representing the fifth consecutive year of
    decreases in the funding. Despite limited resources, I look
    forward to hearing how DOD will continue to balance between
    environmental protection and readiness.
        Last, I would like to note my strong support for the Air
    Force's proposed funding. I am sure I echo Senator Ayotte in
    this----
        Senator Ayotte. Absolutely.
        Senator Shaheen.----for the bed-down of the KC-46A tanker
    at Pease Air National Guard Base. We are very proud of the
    157th Air Refueling Wing in Pease, and of our National Guard,
    and I know that they will continue to provide the exceptional
    refueling support that the Air Force needs for decades to come.
        Now, before our witnesses provide their opening remarks, I
    will turn to Senator Ayotte for her remarks.

                   STATEMENT OF SENATOR KELLY AYOTTE

        Senator Ayotte. Thank you, Madam Chairwoman.
        I appreciate the witnesses being here. I want to thank all
    of you for your service at a very important time in our
    country's history. Of course, yahoo to the New Hampshire people
    who are here. It is fantastic.
        Our country right now is facing a diverse, complex set of
    threats around the world. I appreciate the challenges that you
    are facing right now in terms of making sure that our troops
    have the training and equipment they need. But, I think, as Mr.
    Conger said in his written statement, installations support our
    military readiness. This is an important part of readiness as
    well and yet, it is often, I think, the first area that DOD has
    to turn to and has turned to cut. This year really is no
    exception.
        The administration is proposing a significant cut to MILCON
    and facilities, sustainment, restoration, and modernization
    funding. As Senator Shaheen outlined, the fiscal year 2015
    request for new construction and family housing is 33 percent
    lower than fiscal year 2014 enacted levels and 40 percent lower
    than the fiscal year 2014 request. This, as I look at this
    proposal, funds only what is required to keep DOD
    installations, as well as housing and other facilities, safe,
    secure, and operational. Many important decisions on deferring
    routine maintenance are being held off, including major
    purchases, where we are going to be accepting more risks and
    really hoping that we are able to sustain that another year. I
    think that is the challenge that we face here. I think,
    unfortunately, we have accepted more risks for the past 5 years
    and we have many systems that are in poor condition.
        I am concerned about the condition of some of the
    facilities in which our service men and women operate. DOD has
    an increasing number of facilities that are in poor to failing
    condition, and this is true across all the Services, the Total
    Force, not just Active Duty, but also the Guard and Reserve.
    Certainly, I think, this is an important part of the hearing
    today about what risks we are taking on with this proposal.
        In Senator Shaheen's and my home State of New Hampshire,
    the average condition index for assessed Army National Guard
    facilities was poor, trending to failing. In fact, since the
    mid-1960s, the New Hampshire Army National Guard has only been
    able to construct one new readiness center for soldiers. We are
    grateful for that, but the New Hampshire Army National Guard's
    largest readiness center in Manchester was constructed in 1932.
    It is grossly undersized. It does not comply with building code
    standards, as well as some of the key health and safety
    standards, as well as anti-terrorism force protection
    standards.
        This, to me, as we think about this, is not just the
    investment we are making in the Active Duty, but we know that
    in the conflicts we have had in Afghanistan and Iraq, it has
    really been our Guard and Reserve who have been operational as
    well. These facilities are very important to ensure that our
    men and women in uniform, and our Guard and Reserve, are not in
    sub-par facilities that really have health and safety issues.
        I look forward to better understanding how the Army
    determines the MILCON requirements in States as well and
    ensures that those requirements are met.
        Let me just echo what Senator Shaheen said about the
    prioritization of funding for the Air Force investment in the
    KC-46, both with development and stationing. I share Senator
    Shaheen's views that this is great to see you prioritize this
    funding, and obviously we are incredibly proud that the Air
    Force chose the Pease Air National Guard Base to be the first
    Air National Guard Base to receive the KC-46A next-generation
    tanker. Thank you for prioritizing that in this proposal.
        For the Navy, at our four public shipyards, I remain
    concerned that critical MILCON projects are still being
    delayed. That can negatively impact readiness and efficiency.
    Certainly, I appreciate some of the advances that we have made
    for the Portsmouth Naval Shipyard. But at the Portsmouth Naval
    Shipyard, there are two projects that have been tentatively
    delayed by a year, the P285 barracks, from fiscal year 2015 to
    fiscal year 2016, and the P309 rail project from fiscal year
    2016 to fiscal year 2017. These are projects that I am
    concerned about. I am also concerned that the public shipyards
    may not receive the 6 percent in MILCON funding as required by
    the minimal capital investment plan. I look forward to
    discussing these issues with our witnesses.
        Again, let me just echo the comments of my colleague and
    the chairwoman that the administration's proposal for another
    BRAC round; I am very concerned about this proposal. It is not
    a proposal that I can support. The Government Accountability
    Office (GAO), as Senator Shaheen talked about, has done a
    number of studies of the 2005 BRAC round which found, among
    other things, that BRAC implementation costs grew to about $35
    billion, exceeding the initial estimates that were given for
    the cost of this BRAC round by $21 billion, or 67 percent.
        I certainly understand that DOD will make the case that
    this was somehow a unique BRAC round, but I remain concerned
    that we are going to be in a position where the costs we put
    into this will not be the return that we receive. In addition
    to that, I believe that if we look at, for example, the needs
    we have right now, one of them being in the Navy, and of our
    four public shipyards, that we do not have excess capacity and
    we do not have a need for a BRAC round at this point.
        With regard to the maintenance, for example, at the
    Portsmouth Naval Shipyard of our attack submarine fleet, they
    are booked for a number of years, and really the work is there
    that needs to be done to ensure that our attack submarine fleet
    is prepared.
        In addition, with DOD's shift to the Asia-Pacific region,
    now more than ever, I would like to hear from the witnesses
    where you believe that there is excess capacity, if any, that
    would justify a BRAC round at this point.
        Finally, I appreciate the work that DOD and each of the
    Services are doing to increase energy efficiency and to ensure
    that DOD energy programs allow for greater cost efficiency and
    mission effectiveness. Thank you for your work there. I think
    that is important.
        I thank the chairwoman for holding this hearing, and I want
    to thank again all the witnesses for your service to our
    country during challenging times.
        Senator Shaheen. Thank you, Senator Ayotte.
        As I previously said, hopefully we can receive as much of
    the witnesses' testimony as possible before we go to vote. I
    would ask that we take testimony in the following order: the
    Honorable Sharon E. Burke, Assistant Secretary of Defense for
    Operational Energy Plans and Programs; Mr. John C. Conger,
    Acting Deputy Under Secretary of Defense for Installations and
    Environment; the Honorable Katherine G. Hammack, Assistant
    Secretary of the Army for Installations, Energy, and
    Environment; the Honorable Dennis V. McGinn, Assistant
    Secretary of the Navy for Energy, Installations, and
    Environment; and Ms. Kathleen I. Ferguson, Acting Assistant
    Secretary of the Air Force for Installations, Environment, and
    Logistics.
        Secretary Burke, would you please begin.

       STATEMENT OF HON. SHARON E. BURKE, ASSISTANT SECRETARY OF
           DEFENSE FOR OPERATIONAL ENERGY PLANS AND PROGRAMS

        Ms. Burke. Chairwoman Shaheen and Ranking Member Ayotte,
    Senator Hirono, thank you for the opportunity to discuss with
    you today the activities of the Office of Operational Energy
    Plans and Programs and provide highlights of the President's
    fiscal year 2015 budget in this area.
        You have my statement for the record, so I will not repeat
    it here today.
        I am honored to join all of my colleagues from OSD and
    military departments. I know that you have a range of very
    important installation issues to discuss today as you just made
    clear. But, I thought it might be helpful to start with just a
    short overview of how we all fit together when it comes to
    energy.
        DOD is, of course, the country's single largest consumer of
    energy at a cost of about $20 billion a year. We all have
    various roles and missions relating to that energy use, but we
    also have a common narrative that unites us and that is by
    design. Last year, then-Deputy Secretary of Defense Ashton
    Carter directed DOD's senior leaders to come up with that
    common narrative, one to guide the full range of defense energy
    activities, including operational and facilities energy, and
    the energy-related elements of mission assurance.
        In the intervening months, we have all worked together to
    write that narrative, which we hope to formalize soon. But I
    believe it is very fair to say that the basic principles
    already guide our activities and have for some time, and so I
    can give you a preview of what is in that policy.
        The policy states that DOD will enhance military
    capability, improve energy security, and mitigate costs in its
    use and management of energy. We will do so by improving the
    energy performance of our weapons, installations, and military
    forces, by diversifying and expanding our energy supplies and
    sources, including renewable energy and alternative fuels, by
    analyzing the requirements and the risks related to our energy
    use, and finally by promoting innovation for our equipment and
    education and training for our personnel. The bottom line is
    that DOD values energy as a mission-essential resource and one
    that can actually shape the mission as well.
        As DOD's lead official for operational energy, or the
    energy required to train, move, and sustain forces and
    platforms for military operations, I am delighted to tell you
    that the President's fiscal year 2015 budget request advances
    the goals of that common narrative. Energy, and liquid fuel in
    particular, is the lifeblood of military operations. It powers
    our vehicles, our ships, our aircraft, and the generators that,
    in turn, provide electricity to a range of systems.
        It can also be a vulnerability on the battlefield, and our
    adversaries in Afghanistan have targeted our supply lines at
    times. While we have had no operationally significant
    disruption of those fuel supplies, the opportunity costs,
    including in lives lost, has been higher than it has to be.
        This has potential to be an even bigger concern as DOD
    rebalances to the Asia-Pacific region where full-spectrum
    operations and vast distances create even greater logistical
    challenges. Also, potential adversaries or range of adversaries
    are growing the capabilities to constrain or deny logistics,
    including with more precise weapons.
        The overall demand for operational energy today and in the
    future varies from year to year. It depends on our missions and
    on our operations tempo, but in fiscal year 2015, DOD estimates
    it will consume 96 million barrels of liquid fuel at a cost of
    approximately $15 billion.
        In fiscal year 2015, we will also invest $1.7 billion in
    initiatives to improve how we consume that energy for military
    operations and about $9 billion over the Future Years Defense
    Program (FYDP). More than 90 percent of that investment will go
    to improve the energy performance of our weapons and our
    military forces. That includes procurement of equipment, such
    as the Army's efficient generator program. It includes major
    innovation efforts, such as engine programs for fighter
    aircraft and helicopters. Seven percent of that overall
    investment will go to diversifying and securing our supplies of
    operational energy, and that includes, for example, the Marine
    Corps program to procure tactical solar generation and solar
    battery charging systems.
        Underlying all of these investments are efforts to develop
    better analytical tools for the whole force development
    process. These will inform our strategy development, our plans,
    our requirements, and the acquisition process. This has been a
    key focus of my office since our inception. We are about 4
    years old now. We are a new office, and it has been an
    important area of activity for us. We have seen, in that short
    period of time, a great deal of progress in this area with
    energy and energy logistics increasingly incorporated into all
    of those processes, including major war games, and there is now
    a mandatory key performance parameter for energy in the
    requirements process that the Chairman of the Joint Chiefs
    enforces.
        In addition to this focus on future force development, my
    office will continue to promote operational energy innovation,
    including through our own investment fund. We will continue to
    study and analyze how global energy dynamics affect national
    security and shape the defense mission. We will continue to
    analyze how climate change will affect our operational
    missions. Finally, we will continue to look for ways to support
    deployed forces with operational energy solutions, from rapid
    fielding of new technologies, to adapting war plans, to
    incorporating energy into international partnerships, and we
    are gathering and applying the lessons learned in Afghanistan.
        Thank you for your time today. I look forward to your
    questions.
        [The prepared statement of Ms. Burke follows:]
                    Prepared Statement by Hon. Sharon Burke
                                  introduction
        Chairwoman Shaheen, Ranking Member Ayotte, and distinguished
    members of the subcommittee, thank you for the opportunity to discuss
    my office in the Department of Defense (DOD), Operational Energy Plans
    and Programs (OEPP). Today, the Department faces continued operational
    energy challenges as our defense posture adjusts to meet the rapidly-
    changing global security environment. The dynamic global energy
    landscape adds to our strategic challenges and opportunities. I will
    provide some perspective on those issues, along with an update of our
    progress and some information on the President's fiscal year 2015
    budget request as it relates to operational energy.
                                mission of oepp
        Established in 2010, my office's primary purpose is to strengthen
    the energy security of U.S. military operations. Specifically, the
    office's mission is to help the Military Services and combatant
    commands improve military capabilities, cut costs, and lower
    operational and strategic risk through better energy planning,
    management, and innovation. By statute, operational energy is defined
    as the energy required for training, moving, and sustaining military
    forces and weapons platforms for military operations. In June 2011, the
    Department released ``Energy for the Warfighter: The Department of
    Defense Operational Energy Strategy,'' which set the overall direction
    for energy use in the Department: to assure reliable supplies of energy
    for 21st century military operations. It outlines three ways to meet
    that goal: reducing the demand for energy; expanding and securing the
    supply of energy; and building energy security into the future force.
        These goals are especially important as we build a military force
    that is prepared and postured for a complex, global security
    environment, ``capable of simultaneously defending the homeland;
    conducting sustained, distributed counterterrorist operations; and in
    multiple regions, deterring aggression and assuring allies through
    forward presence and engagement,'' as the Secretary of Defense called
    for in the 2014 Quadrennial Defense Review (QDR). The QDR also directly
    connects energy to capability, noting that, ``Energy improvements
    enhance range, endurance, and agility, particularly in the future
    security environment where logistics may be constrained.'' To these
    ends, OEPP has achieved considerable progress by supporting current
    operations and energy innovation, building operational energy
    considerations into the future force, and promoting institutional
    change within the Department.
                           changing energy landscape
        DOD's efforts to transform our own energy use are occurring as the
    global energy landscape rapidly changes. Here at home, the significant
    surge of domestic oil and gas production is fundamentally altering the
    balance of the energy markets we have known for the past 40 years. The
    U.S. is expected to become the world's largest producer of natural gas;
    around the country, massive terminals built to import natural gas are
    now rapidly being converted to export it.\1\ Oil imports have been
    reduced by about 2.5 million barrels a day in just the last 5 years \2\
    while U.S. production is expected to increase by a further 3 million
    barrels per day by the end of the decade.\3\ The United States now
    exports around 3 million barrels per day of refined product, an
    increase of more than 2 million barrels per day since 2005.\4\
    ---------------------------------------------------------------------------
        \1\ http://www.eia.gov/todayinenergy/detail.cfm?id=13251
        \2\ http://www.eia.gov/dnav/pet/hist/
    LeafHandler.ashx?n=pet&s=wcrimus2&f=w
        \3\ http://www.eia.gov/forecasts/aeo/er/early--production.cfm, EIA
    Annual Energy Outlook, Early Release Overview, ``U.S. production of
    crude oil (including lease condensate) in the AEO2014 Reference case
    increases from 6.5 MM bbl/d in 2012 to 9.6 MM bbl/d in 2019.''
        \4\ http://www.eia.gov/dnav/pet/hist/
    LeafHandler.ashx?n=PET&s=MTPEXUS2&f=M, EIA data on U.S. exports of
    finished petroleum products indicates monthly U.S. exports of finished
    petroleum products in November 2013 was 3 million bbls/d compared to
    811,000 bbls/d in November 2005.
    ---------------------------------------------------------------------------
        This rebalance is significantly altering the flow of the global
    energy trade. Energy shipments from West Africa that used to cross the
    Atlantic are now headed to Europe or through the Indian Ocean en route
    to Asia. Permits to export natural gas are now being approved and by
    the end of the decade we can expect U.S. natural gas to be available
    for markets in Europe and Asia. It is not just the supply patterns that
    are changing. Energy demand in the developed world has leveled off. The
    majority of the growth in the world's energy consumption over the next
    decade will come from the developing world with China, India, and other
    non-Organization for Economic Co-operation and Development countries
    increasing their energy consumption 50 percent in the next 20 years.\5\
    ---------------------------------------------------------------------------
        \5\ http://www.eia.gov/forecasts/ieo/world.cfm-According to EIA,
    non OECD countries consumption will rise from 307 quadrillion BTUs in
    2013 to 460 by 2030.
    ---------------------------------------------------------------------------
        As imports from regions which have previously exported to the
    United States are re-directed to new customers, our economic,
    political, and military relationships with those countries will evolve
    as well. As the Department considers base access, security cooperation,
    and partnerships, we must be cognizant of these changing underlying
    economic forces.
        We also see how the appearance of new energy resources is
    influencing the Department's strategic direction. Last year, Secretary
    of Defense Chuck Hagel unveiled DOD's first-ever Arctic Strategy and
    addressed the driving force behind it--global climate change. According
    to the U.S. Navy's Task Force Climate Change, ``average Arctic
    temperatures have increased at almost twice the global average rate''
    in the past 100 years, and ``in 2012, Arctic sea ice reached its
    smallest extent in recorded history, 1.3 million square miles.'' The
    changes in that region have opened up new areas to energy development
    and shipping. As the Arctic region becomes more accessible to other
    nations, expanded capabilities and capacity may be required to increase
    U.S. engagement in this region.
        Changes in the climate, driven by global energy use, will affect
    military operations elsewhere as well. Specifically, as the 2014 QDR
    found, climate change can act as threat multiplier, as heat waves,
    drought, downpours, floods, and severe storms may significantly add to
    the associated challenges of instability, hunger, poverty, and even
    conflict. At the installation level, climate risks may disrupt
    training, testing, and direct support to ongoing operations. In fact,
    the National Intelligence Council estimates over 30 U.S. military
    installations face elevated risks from rising sea levels. In the cases
    of severe weather events, demands on the Department for humanitarian
    assistance or disaster response--both within the United States and
    abroad--may increase as the climate changes.
        However, even with all these changes, some constants remain. First,
    it is important to point out that most of the Department's operations
    occur outside the United States, and we will continue to buy energy
    overseas to simplify our supply chains, limit costs, and increase
    flexibility for the warfighter. Second, a large proportion of global
    energy will continue to flow through a relatively small number of
    chokepoints. Today, nearly a fifth of all oil and nearly 25 percent of
    globally traded liquefied natural gas transit the Strait of Hormuz.
    Current and planned pipelines across the Arabian Peninsula and around
    the Strait would provide only limited relief in the event of a blockage
    and would do little to cushion any global price spike. The Strait of
    Hormuz will continue to pose an outsize risk to global prices for the
    foreseeable future--and to prices at the pump here at home.
        Indeed, the Middle East will remain a major source of oil for
    nations across the globe, particularly our allies in Asia. Even so, the
    2014 QDR states that ``competition for resources, including energy and
    water, will worsen tensions in the coming years and could escalate
    regional confrontations into broader conflicts--particularly in fragile
    states,'' in the Middle East. As long as petroleum powers our
    transportation sector, we may experience the economic consequences of
    price volatility from events in any oil-producing region. At the United
    Nations General Assembly this past September, the President made clear
    that the United States will continue to ensure the free flow of energy
    from the Middle East to the world, even as the United States is
    steadily reduces our dependence on imported oil. It is important to
    remember that even as the United States is able to meet more of our
    energy needs ourselves, the price for oil and petroleum products will
    still be set by a global market.
                the defense energy challenge--today and tomorrow
        As a critical enabler for military operations, the Department
    consumes significant amounts of energy executing missions around the
    globe. While only accounting for approximately 1.3 percent of U.S. oil
    and petroleum consumption in fiscal year 2013, the Department is the
    single largest energy user in the Nation. In fiscal year 2013, the
    Department consumed almost 90 million barrels of liquid fuel at a cost
    of $14.8 billion, with more than 60 percent of that outside of the
    United States. In fiscal year 2014, the Department estimates it will
    consume nearly 105 million barrels of liquid fuels at a cost of $16
    billion. In fiscal year 2015, the Department estimates it will consume
    96 million barrels of liquid fuel at a cost of approximately $15
    billion.
        The Department's demand for operational energy varies according to
    the missions assigned to the Department, as well as the equipment used
    in to execute those missions. Including training, exercises, and the
    full range of military operations, the Department uses operational
    energy to maintain readiness and deploy, employ and sustain forces
    around the globe. Year over year, operations tempo reflects unexpected
    demands (i.e., post-9/11 operations, humanitarian relief missions) as
    well as changes in the magnitude of other ongoing operations like
    Afghanistan.
        In Afghanistan, the Department used more than 9 million barrels of
    liquid fuels to support Operation Enduring Freedom in fiscal year 2013.
    In addition to the fuel provided to vehicles and aircraft, the demand
    for electricity on the battlefield has steadily increased over years of
    sustained combat operations. Combat outposts and forward operating
    bases are the hubs for our troops--to project power from, fight from,
    and live in. However, they consume tremendous amounts of energy and
    have, therefore, been a steady focus of recent efficiency efforts.
        The reliance on diesel generators to supply battlefield and
    contingency base electrical power produces an unintended consequence--a
    growing energy sustainment burden that must be sourced, in many cases,
    from great distances. Unfortunately, that logistics effort consumes
    fuel as well. The two main fuel distribution routes into Afghanistan
    present daunting challenges that range from the political effort needed
    to sustain them, to long distance transport on unimproved roads with
    multiple choke points and poor weather conditions which can slow
    movement to a trickle, and the threat of attack from insurgents or
    thieves. Each of these challenges adds time, manpower, and cost to the
    supply process. Once the fuel reaches larger distribution points inside
    Afghanistan, it still needs to be deployed to a nationwide network of
    bases and outposts. Given the terrain and the threat, aerial
    distribution of supplies, including fuel, is often used to sustain
    coalition efforts across Afghanistan. Delivering all of this fuel takes
    a toll on aircraft, vehicles, and personnel. Looking further back in
    the supply chain, DOD has depended on political support from countries
    that allow our energy supplies to flow into Afghanistan through
    northern or southern transportation routes, which can be disrupted at
    any time.
        The growing requirement for troop-borne capability has launched
    another sustainment burden--portable batteries--which represents a
    serious logistical challenge for the warfighter as our troops are
    increasingly overburdened platforms themselves. They carry gear which
    sends and receives data from remotely powered aircraft and far-away
    command posts, and integrates the information into intelligence
    collection, surveillance, and targeting like never before. Soldiers and
    marines have scopes, sights, and radios that give them unsurpassed
    awareness and accuracy. But, this capability requires a steady supply
    of power, and for dismounted operations that means batteries, and lots
    of them. Consider an Army estimate that an average troop on a 3-day
    patrol may carry up to 23 batteries weighing nearly 14 pounds. While
    these batteries support important capabilities, the trend of increasing
    weight is unsustainable from both re-supply and soldier loading
    perspectives. Battery resupply requirements can greatly diminish a
    patrol's combat radius, and soldier-carried weight already impedes
    mobility on the battlefield and presents a significant risk of
    musculoskeletal injuries.
        These fuel and battery requirements also place a significant
    logistics burden on planners, troops, equipment, and supply lines.
    Reducing the demand for energy on the battlefield has a direct effect
    on reducing the energy logistics burden and freeing up manpower and
    equipment resources previously engaged in logistics tasks to
    operational commanders for use in generating combat power.
        As we draw down forces from ongoing operations in Afghanistan and
    adapt to a changing security environment, the Department's use of
    energy will continue to be of great importance. Generally speaking, our
    future operating environment will include a range of threats--from
    homemade improvised explosive devices and suicide bombers to GPS-guided
    mines and missiles, computer viruses, and electronic warfare--that may
    not only characterize actual combat, but also situations short of war.
    At the same time, the lessons of the last 12 years have not been lost
    on our potential adversaries, who are increasingly developing or
    acquiring capabilities that threaten our ability to project and sustain
    this power. These asymmetric and ``anti-access/area-denial''
    capabilities will likely target those U.S. capabilities that may be
    more susceptible to disruption, such as logistics, energy, and command
    and control.
        More specifically, the President and the Secretary have emphasized
    that we shift our strategic focus to the Asia Pacific, a region whose
    security and prosperity is indispensable to our own. Promoting our
    interests in the area--and much of that will focus on non-military
    tools--means long distances, far from our own shores. For example,
    intra-theater lift in Afghanistan requires a fraction of the fuel that
    will be required for intra-theater lift in the Pacific. A cargo plane
    flying from Bagram to Kandahar burns around 3,000 gallons of fuel, but
    that same aircraft will burn around 11,500 gallons of fuel flying from
    Guam to Seoul and over 16,000 gallons flying from Guam to Singapore. In
    this environment, demands for fuel, electricity, and energy logistics--
    aerial refuelers and oilers, for instance--can become a limiting factor
    for military operations. Not only will we need extended range and
    endurance to operate--whether for today's relief missions in the
    Philippines or for other military missions--but we also will need to be
    interoperable with our allies and partners from an energy and logistics
    perspective to effectively carry out coalition operations. In fact,
    energy can be a positive tool for cooperating with emerging partners to
    help support U.S. presence and operations with U.S. forces.
                                reducing demand
        Increasing combat effectiveness in current operations through
    reductions in fuel demand has been a significant DOD focus since OEPP's
    establishment in 2010. To quote the former International Security
    Assistance Force/U.S. Forces--Afghanistan Commander General John Allen,
    ``Operational energy equates exactly to operational capability.'' \6\
    We aspire to achieve the most ``mission per gallon'' by reducing the
    demand for energy and decreasing the logistics effort necessary to
    support the warfighters. The Department has made progress, particularly
    at the tactical edge where fuel logistics cost the most and resupply
    risks are the greatest. However, DOD's fuel demand still accounts for a
    large percentage of the overall logistics burden and many opportunities
    remain to build a more efficient future force. In general, this is a
    huge incentive for improving our materiel capabilities and is reflected
    in $1.7 billion in fiscal year 2015 and $8.3 billion across the Future
    Years Defense Program that the Services have budgeted for operational
    energy initiatives and efficiency improvements. That equates to 91
    percent of the operational energy (OE)-related budget invested in
    reducing the demand for energy.
    ---------------------------------------------------------------------------
        \6\ ISAF/USFOR-A memo, ``Supporting the Mission with Operational
    Energy,'' 11 Dec 2011
    ---------------------------------------------------------------------------
        Let me sketch out some key activities to highlight the OEPP's
    efforts in partnership with the combatant commanders.
    U.S. Central Command
        The Operational Energy Division (OED) within the Joint Program
    Integration Office at U.S. Forces-Afghanistan (USFOR-A) was established
    in 2011 with a mandate to improve operational capabilities and
    warfighter effectiveness by reducing our forces' reliance on liquid
    fuels. Staffed with technical experts, the OED continues to develop and
    implement materiel and non-materiel energy solutions to reduce
    dependence on petroleum fuels and increase operational effectiveness.
    OED coordinates directly with OEPP, and we maintain a close
    relationship to address operational energy issues and initiatives in
    theater. In 2012, OEPP and OED combined efforts with the Army's Program
    Manager--Mobile Electric Power (PM-MEP) to answer an Operational Needs
    Statement with $110 million worth of advanced, energy efficient power
    generation and distribution equipment. OED and OEPP also collaborated
    to fund and support an operational demonstration of an advanced
    tactical microgrid to gather data for future microgrid technology
    development.
        This past year, OED also provided significant support to Operation
    Dynamo. Improvements in energy efficiency produce the greatest leverage
    at the extreme tactical edge, since the risks and costs to provision
    fuel there are so great and potentially so disruptive to the
    operational mission. In a tactical environment, electrical demand has
    usually been met by multiple diesel powered generators, sized for peak
    loads but often operating far from peak capacity and efficiency. The
    consequence of poor generator loading is significant fuel waste,
    increased maintenance effort, and decreased reliability. In an attempt
    to address those issues, PM-MEP, in coordination with USFOR-A OED,
    recently completed Operation Dynamo I and II, which assessed the
    electrical supply and demand footprint at 67 forward operating
    locations. Mission-specific advisory teams developed more efficient
    power generation and distribution plans, replaced older equipment with
    more than 500 fuel efficient Advanced Medium Mobile Power System
    generators and 430 Improved Environmental Control Units, updated
    distribution systems to improve reliability and safety, and trained
    local soldiers to operate and maintain the equipment properly. This
    effort spotlights the value of operational energy advisors teamed with
    expert technicians and military standard equipment and their ability to
    become a significant combat force multiplier for operational
    commanders. Building on the success of its predecessors, Operation
    Dynamo III is underway now to oversee the right sizing of power assets
    during the drawdown in Afghanistan to ensure as we reduce our forces we
    continue to apply the lessons we have learned.
    U.S. Pacific Command
        OEPP has embraced emergent energy challenges in the Pacific and
    partnered with U.S. Pacific Command (PACOM) and other key stakeholders
    to understand and address them.
        The vast expanse of the oceans and seas that comprise PACOM's Area
    of Responsibility put a premium on the ability of maritime forces to
    foster relations with partner nations, protect commercial and military
    shipping, and execute offensive operations on and from the sea. The
    Navy is exploring many technologies, such as Hybrid Electric Drive,
    stern flaps, and improvements to marine-growth reducing hull and
    propeller coatings, to reduce fuel consumption. The Naval Postgraduate
    School-developed Replenishment at Sea Planner is great example of an
    inexpensive, in-house software solution to reduce our logistics burden.
    It is intended to optimize logistical transit plans and the fuel
    necessary for both warships and military sealift logistics vessels to
    prepare for and execute underway replenishment. This software tool is
    already in use in Fifth and Seventh Fleets and is expected to save
    millions of dollars in fuel costs each year.
        OEPP remains engaged in the Department's ongoing efforts to improve
    liquid fuel delivery ashore in areas where little to no distribution
    infrastructure exists. I attended the Joint Logistics Over-The-Shore
    demonstration in Korea in April 2013. This recurring, combined U.S./
    Republic of Korea event exercises our ability to deliver fuel,
    supplies, and equipment from ships at sea to encampments ashore where
    sufficient maritime port facilities do not exist. We have impressive
    over-the-shore fuel distribution capabilities, and yet they may be
    stressed in some scenarios. I am pleased that the Navy has programmed
    $34 million between fiscal year 2013-2017 to fund a replacement for an
    aging Offshore Petroleum Discharge System ship the USS Petersburg,
    while the Army develops the next generation of Inland Petroleum
    Distribution System. Each Service needs to continue to ensure that this
    capability can meet current and future challenges.
        As the DOD operational energy strategy has evolved, OEPP and the
    combatant commanders have expanded our efforts beyond improving only US
    force capabilities. Teaming with partner nations to improve fuel
    efficiency and reduce energy demand across our combined forces benefits
    global cooperation and our combined security in the region. To that
    end, my office is currently exploring options within the Asia-Pacific
    region to identify and assess low-cost, high-payoff operational energy-
    related security cooperation opportunities that could contribute to
    broader U.S. and Asia-Pacific partner policy objectives. The results
    are intended to inform future guidance to other combatant commands,
    PACOM planning guidance, and to build partnership capacity activities
    for PACOM, the Joint Staff, the Office of the Secretary of Defense
    (OSD), and interagency partners. Additionally, ongoing contingency
    basing energy technology demonstrations and experimentation events
    during joint and combined exercises, such as Crimson Viper in Thailand
    and Balikatan in the Philippines, are improving our own capabilities
    and those of key partner nations through focused military-to-military
    engagements.
    U.S. Africa Command
        In the U.S. Africa Command (AFRICOM) area of responsibility, OEPP
    is mentoring a growing and effective headquarters staff effort to
    incorporate operational energy across their operations and theater
    security cooperation activities. The staff recently assigned its first
    dedicated operational energy advisor and, in addition, continues to
    benefit from a Department of Energy (DOE) employee serving as a liaison
    to advise the commander on energy issues. Additionally, my office
    supported the establishment of the governance structure for the
    command's Interagency Energy Security and Environment Working Group
    which considers operational energy equities in operations and
    exercises.
        As the United States increases its focus on the African continent,
    the Department is similarly stepping up its efforts to support the
    combatant commander across a range of operational energy issues. The
    austere operating environment is compounded by the lack of
    infrastructure which introduces a challenging sustainment picture. The
    Army's Rapid Equipping Force recently conducted an energy assessment of
    remote and urban locations supporting U.S. forces across the Trans-
    Sahara region to help them increase electrical power generation,
    improve electrical safety, and increase drinking water production and
    safety. The Naval Facilities Engineering Command, in coordination with
    the National Renewable Energy Laboratory, completed an energy
    assessment at Camp Lemonnier, Djibouti. Camp Lemonnier, though an
    enduring site, contains some equipment more typical of contingency
    locations, so OEPP collaborated with the Office of the Deputy Under
    Secretary of Defense for Installations and Environment on energy issues
    at the Camp by identifying peak electrical load requirements and
    analyzing the energy demand impact of several new environmental control
    system configurations. In addition, my office recently partnered with
    the U.S. Agency for International Development to exchange information,
    establish a working forum, and begin leveraging DOD lessons learned in
    Afghanistan to assist the Power Africa initiative in its mission to
    improve power distribution to rural villages and towns.
        In general, as part of my office's focus on contingency basing, we
    recently helped identify measures in U.S. Central Command, U.S.
    Southern Command, and AFRICOM to reduce fuel demand in contingency
    plans and to determine the potential operational value of that fuel
    demand reduction. Employing improved power generation equipment and
    shelter construction standards, and future fuel efficiency improvements
    to aerial resupply vehicles, will help operational commanders optimize
    in-theater fuel resupply plans as part of larger contingency planning
    efforts.
    Operational Energy Capability Improvement Fund
        My office is also supporting longer-term innovation and change via
    the Operational Energy Capability Improvement Fund (OECIF). The OECIF
    began in fiscal year 2012 with the goal of funding innovation that will
    improve the operational energy performance of our forces while creating
    institutional change within the Department. It promotes partnering and
    joint programs and encourages Service teaming. The programs started in
    fiscal year 2012 have concentrated on reducing the energy load of our
    expeditionary outposts. For example, there is a joint Army/Air Force
    program developing ways to improve the energy efficiency of soft
    shelters (i.e. tents), which has demonstrated improved tents and camp
    architectures in Kuwait, resulting in a 50 percent reduction in power
    consumption. Another program demonstrated a 54 percent reduction of the
    energy needed to cool hard shelters (i.e. containerized living units)
    used in Djibouti, Africa. In fiscal year 2012, OECIF also started a
    program to demonstrate and evaluate load reduction technologies for
    expeditionary outposts in tropical environments--something particularly
    suited to our shift to the Pacific environment--by participating in
    exercises in Thailand, the Philippines, and elsewhere By combining
    upgraded environmental control units (ECUs) with light emitting diode
    lighting and hybrid automatic/manual controls, energy savings as high
    as 80 percent over earlier technologies have been demonstrated. The
    OECIF is also supporting the development of technology for more
    efficient ECUs, which heat and cool our deployed shelters and consume a
    great deal of energy, including through a partnership between the Navy
    and the DOE's Advanced Research Projects Agency for Energy.
        The OECIF programs begun during fiscal year 2013 emphasized
    establishing organizations aimed at involving a wide variety of
    organizations in solving our operational energy problems. OEPP
    encouraged the use of innovative business methods, such as consortia,
    to involve small businesses and non-traditional defense contractors.
    For example, one of these programs, led by the Army, is focused on
    energy for our dismounted warfighters. Our soldiers and marines benefit
    from the world's most technologically advanced weaponry; however, this
    equipment can require that a warfighter carry around 14 pounds of
    batteries on lengthy patrols. The Army-led OECIF program is meant to
    comprehensively address this problem through developing better system
    engineering techniques and technologies to improve both the energy
    demand and supply in order to reduce the weight burden. Other programs
    begun in fiscal year 2013 are developing standards for tactical
    microgrids to promote their interoperability and adoption, developing
    planning methods and control technologies for designing and running
    more efficient expeditionary outposts, and engineering surface coatings
    to reduce aircraft drag.
        Most recently, for fiscal year 2014, OECIF is pursuing new programs
    to develop the analytic methods and tools necessary to support the
    thorough analysis and consideration of operational energy issues
    throughout DOD's various planning and management processes. The basic
    idea is to give decision makers within the Department better ways to
    factor operational energy into their decisions. This focus was partly
    driven by our experience in the last few years and partly by
    observations we made during our budget certification process, where we
    found shortcomings in the ability of the Department to consider energy
    in its decisions. We are using the OECIF to help solve it, which is
    consistent with its goal of creating institutional change.
                             increase/assure supply
        Another element of our strategy is diversifying and securing
    military energy supplies to improve the ability of our forces to get
    the energy they require to perform their missions.
    Alternative Energy and Fuels
        The Department's operational energy investments are focused on
    meeting warfighter needs, including by diversifying the Department's
    supply options. One focus is on energy that can be generated or
    procured locally near deployments to lessen the burden on supply lines.
    The Services are evaluating, and, where appropriate, deploying tactical
    solar technologies to generate electricity on contingency bases or to
    recharge batteries to increase patrol range and mission duration. OEPP
    is assisting in these efforts by coordinating information sharing
    amongst the Services and between the Services and DOE, which has broad
    technical expertise in civilian solar technologies. Additionally, the
    Department is funding research in deployable waste-to-energy systems
    that could reduce the volume of waste requiring disposal and create and
    generate energy on contingency bases. Other technologies in which the
    Department is investing include hydrogen-powered and solar-powered
    unmanned aerial vehicles, which have the potential to achieve much
    longer mission durations than those powered by traditional petroleum-
    based products.
        Another component of the Department's operational energy strategy
    is alternative fuels. As the Nation's largest consumer of energy, the
    Department recognizes that our military will need alternatives to
    petroleum to diversify sources of supply. Over the long term, the
    Department will need fuels derived from various feedstocks that are
    cost-competitive, widely available around the world, and compatible
    with existing equipment and storage infrastructure, as our existing
    fleet of ships, planes, and combat vehicles will be with us for decades
    to come. So the Department is investing around 2 percent of its
    operational energy funding over the next 5 years on alternative fuels.
    The Services are focusing the majority of their alternative fuels
    efforts on certifying aircraft, ships, tactical vehicles, and support
    equipment to use these emerging fuels, as they have been doing since
    2006. These initiatives improve the flexibility of military operations
    by ensuring that our equipment can operate on a wide range of fuels
    when they are cost competitive and commercially available.
        To create clear guidelines on the Department's alternative fuels
    investments both now and in the future, on July 5, 2012, the Department
    of Defense Alternative Fuels Policy for Operational Platforms was
    released, pursuant to Section 314 of the National Defense Authorization
    Act of 2012. The policy establishes coordinated, Department-wide rules
    to guide and streamline its investments in the development and use of
    alternative fuels. The policy states that the Department's primary
    alternative fuels goal is to ensure operational military readiness,
    improve battlespace effectiveness, and further flexibility of military
    operations through the ability to use multiple, reliable fuel sources.
    All Department investments in this area are reviewed during the
    Department's annual operational energy budget certification process.
        To date, the Department has only purchased test quantities of
    biofuels for testing and certification purposes. These test fuels are
    often more expensive than commercially-available petroleum fuels
    because they tend to be produced at small, not-yet-commercial scale
    facilities using novel conversion technologies. However, the policy
    formalized what was already the practice for all the Military Services:
    that the Department will not make bulk purchases of alternative drop-in
    replacement fuels unless they are cost competitive with petroleum
    products. With this policy in place, the Department will continue to
    steward its alternative fuels investments towards the ultimate goal of
    enhancing the long-term readiness and capability of our joint force.
        Because the Department does have long-lived platforms designed to
    use liquid fuels, there is a long-term defense interest in fuels
    diversification. The Department also supports a larger national goal to
    promote the development of low-carbon, renewable fuels. The Defense
    Production Act (DPA) advanced drop-in biofuels production project, led
    by the OSD Manufacturing and Industrial Base Policy Office, is a DOD
    partnership with the private sector and the Departments of Energy and
    Agriculture, which have the lead roles for the Federal Government for
    biofuel feedstocks and production. This project works to accelerate the
    development of cost-competitive advanced alternative fuels for both the
    military and commercial transportation sectors. The fiscal year 2012
    DPA funding for Phase 1 was awarded to four companies in May/June 2013
    and is being used for competitive commercial-scale integrated
    biorefinery design efforts. Awards totaled $20.5 million, which was
    matched by $23.5 million in private sector funds. Reviews of Phase 2
    proposals will begin in April 2014.
    Securing Our Energy Supplies
        There is rising concern about risks to the U.S. electric grid that
    powers most DOD bases, ranging from cyber-attacks to hurricanes. The
    risks and vulnerabilities of the U.S. electric grid and overseas
    electricity supplies supporting DOD facilities are not well
    characterized. Today, military operations can include warfighters
    conducting missions remotely from domestic facilities; the disruption
    of electric power in one location could adversely affect the outcome of
    a battle thousands of miles away. In the event of a major domestic
    outage, as with Hurricane Sandy, the lack of adequate power could
    create tension between Defense support for civilians and the
    Department's own needs.
        We recognize the need for better information and coordination on
    risks to the grid and are exploring the Department's role in building
    resiliency into the system. To that end, OEPP and other lead offices in
    the OSD, in partnership with the Department of Homeland Security's
    Office of Infrastructure Protection, led an interagency, scenario-based
    workshop to gain a better understanding of how the Department would
    respond to a prolonged and widespread power outage in the National
    Capital Region that affected military bases and missions in the area.
    We continue to engage in discussions with utility service providers,
    Federal agencies and other DOD entities to address this challenge.
        In addition to electrical power concerns we are also looking at the
    security of our liquid fuel supply. OEPP is currently examining
    logistical challenges generated by the vast distances and extensive
    operating areas present in the Asia-Pacific theater. My office is
    working with the Defense Logistics Agency and the Joint Staff in
    studying nodes and transportation links to support modifications to the
    Global Petroleum Distribution System.
    Building Energy Security into the Future Force
        The Department continues to make strides in improving energy
    security for the future force. We have invested a significant amount
    into the development and deployment of operational energy initiatives
    to increase the combat effectiveness of our warfighters. Programs of
    note include the:

             Adaptive Engine Technology Development (AETD)
            program--AETD is focused on developing a ``sixth-generation''
            fighter engine which could provide better fuel-burn rates. At
            the core of the program is a move to a design with three
            streams of air, allowing more flexibility for the engine to
            operate efficiently under varying conditions. AETD's goal is to
            provide 25 percent greater fuel efficiency which will increase
            range and endurance of fighter aircraft and decrease the
            requirement for tanker aircraft to support AETD-equipped
            aircraft. This year, the Department announced a follow on
            program, the Advanced Engine Technology Program, to carry the
            engine through technology maturity risk reduction.
             Improved Turbine Engine Program (ITEP) program--This
            program provides an improved engine for the Apache and
            Blackhawk helicopter fleets to replace the current T-700
            engine. ITEP will improve operational effectiveness by giving
            commanders an improved aviation fleet with longer loiter time,
            increased altitude limits, increased payload, and lower fuel
            and maintenance costs. The Army expects a 25 percent fuel
            reduction from current engine consumption levels.
             Hybrid Electric Drive (HED) program--The Navy will
            begin installing HEDs in Arleigh Burke-class (DDG 51)
            destroyers in 2016. HED is an electric motor attached to the
            main reduction gear of DDG-51-class ships that allows for an
            electric propulsion mode resulting in improved fuel economy.
            Installation of an HED on a single ship has the potential to
            save over 5,000 barrels of fuel per year, which equates to
            approximately a 7 percent reduction from current usage or 11
            additional underway days, each year, and provides our
            commanders at sea improved operational flexibility.
             Medium Tactical Vehicle Replacement (MTVR)--This
            effort includes developing and demonstrating a fuel efficiency
            improvement of 15 percent over the existing MTVR while
            maintaining affordability, mobility, and survivability.
            Additionally, within this program, the Marine Corps funded the
            procurement of prototypes of the On-Board Vehicle Power sources
            to reduce fuel requirements at idle, which is the majority of
            the vehicle drive cycle.

        We have worked with the Joint Staff and the Services to implement
    the Energy Key Performance Parameter or energy Key Support Attribute
    across all acquisition categories. This includes Acquisition Category I
    programs such as the Armored Multipurpose Vehicle, Joint Light Tactical
    Vehicle, DDG-51 Flight III, and the Air Missile Defense Radar, along
    with smaller acquisition programs such as the MTVR, Prime Power Mobile
    Production System, and the Force Provider-Expeditionary Program.
        In regards to shaping the requirement and acquisition systems, the
    Department is working to conduct operational energy analysis earlier;
    that will provide a greater opportunity to consider the tradeoffs and
    options among a more energy secure force, more effective or efficient
    equipment, or a more capable logistics force. The Joint Staff, the
    Service Energy Offices, and my office have worked together to make
    operational energy an integral part of the Services' Title X War Games,
    such as the Army's Unified Quest/Deep Futures II and the Navy's Naval
    Global 14, which will occur later this year. We are developing a tool
    to provide the war gamers timely feedback about attacks on our
    logistics and energy supplies. We are also working together to ensure
    operational energy supportability analysis is conducted during the
    Services' concept development, which provides a realistic energy
    distribution and allows simulated enemy forces to interdict our energy
    supplies, to more closely approximate real world conditions.
        Moving forward, we must continue to fund analysis to identify which
    capabilities and missions to target for operational energy
    improvements. We have found that engaging earlier, well before
    Milestone A, will give us the greatest opportunity to provide greater
    capabilities through operational energy improvements.
                institutionalizing operational energy in policy
        In the long term, the Department must build operational energy
    considerations into the regular rhythm of how the Department operates.
    To begin with, the Secretary of Defense signed the Operational Energy
    Strategy Implementation Plan in March 2012 and identified seven
    targets:

        1.  Measure operational energy consumption;
        2.  Improve energy performance and efficiency in current operations
    and training;
        3.  Promote operational energy innovation;
        4.  Improve operational energy security at fixed installations;
        5.  Promote the development of alternative fuels;
        6.  Incorporate energy security considerations into requirements
    and acquisition; and,
        7.  Adapt policy, doctrine, professional military education, and
    Combatant Command activities to include operational energy.

        The Department is making great progress implementing the strategy;
    further details are available in our Operational Energy Annual Report
    to Congress and budget certification reports, which are available on
    the OEPP website (http://energy.defense.gov/).
        More recently, in June 2013, the Deputy Secretary of Defense issued
    ``Deputy's Management Action Group Guidance for a Comprehensive Defense
    Energy Policy.'' This guidance highlighted how changes in the
    Department's use of energy are needed to enhance military capability,
    improve energy security, and mitigate costs, and initiated the
    development an overarching DOD energy policy, to be completed this
    year. When complete, the policy will adapt core business processes--
    including requirements, acquisition, planning, programming, budgeting,
    mission assurance, operations, and training--to improve the
    Department's use and management of energy.
        The Department also issued other policies over the past year to
    support the operational energy mission. In January 2013, the Under
    Secretary of Defense for Acquisition, Technology, and Logistics
    released DOD Directive 3000.10, ``Contingency Basing Outside the United
    States.'' In addition to outlining Department policy related to
    interoperability, construction standards, and other areas, the
    Directive specified the role of operational energy and identified a
    smaller logistics footprint as enabling more effective and capable
    contingency bases.
        In addition to the strategy, guidance, and policy set forth by my
    office and that of OSD, the Military Services have followed with their
    own initiatives. In the past year, the Army and the Air Force have
    updated their own energy strategies while the Marine Corps issued
    guidance for improving the incorporation of energy into their
    acquisition programs. Similarly, the Navy has moved out, leading the
    Department with efficiency upgrades to their legacy aircraft and
    propulsion innovations in their ships.
                                   conclusion
        In November 2013, Secretary Hagel stated, ``DOD invests in energy
    efficiency, new technologies, and renewable energy sources at our
    installations and all of our operations because it makes us a stronger
    fighting force and helps us carry out our security mission.''
        Our vision to better manage the Department's use of energy will
    continue to improve military capability across all missions. As we
    adapt to threats and geopolitics shaped by energy, now is the time to
    drive long-term innovation and energy improvements into our core
    business processes, force structure, and planning to ensure we have the
    military we need to succeed in the future.
        Going forward, the Department is committed to addressing how energy
    shapes our capabilities and operations as well as how it affects what
    the missions of the Department are. This past year, the Department has
    made great strides in reforming core business processes and decision-
    making, supporting current operations, and applying energy
    considerations to the development of the future force. All that said,
    institutional change within the Department is difficult, time consuming
    and not for the faint of heart; we appreciate this committee's
    continued support of OEPP.

        Senator Shaheen. Thank you.
        Mr. Conger.

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

        Mr. Conger. Good morning. Chairwoman Shaheen, Ranking
    Member Ayotte, distinguished members of the subcommittee, I
    appreciate the opportunity to appear before you to discuss
    DOD's fiscal year 2015 budget request for installations and
    environment.
        The testimony I have submitted for the record describes the
    $6.6 billion that we are requesting for MILCON and family
    housing, the $8 billion more that we are requesting for
    sustaining and restoring our facilities, and the $3.5 billion
    that we are seeking for environmental compliance and cleanup.
        Because infrastructure generally has a long, useful life
    and its associated degradation is not as immediate, DOD
    components are taking more risk in the MILCON program in order
    to decrease risk in other operational and training budgets.
        In addition, reducing MILCON reduces investment risk, as we
    contemplate the uncertain allocation of force structure cuts
    and the possibility of a new round of BRAC.
        The MILCON request alone, as was indicated earlier, is a 40
    percent reduction from what we requested last year, and the
    facilities sustainment request is only 65 percent of the
    modeled requirement.
        The budget challenges facing DOD are deep and they extend
    for many years. We continue to believe that an important way to
    ease this pressure is with base closure, allowing us to avoid
    paying upkeep for unneeded infrastructure and making those
    funds available for readiness and modernization of the forces.
        That said, I know the high cost of BRAC 2005 has left a bad
    taste in many Senators' mouths. We have long talked about the
    emphasis in 2005 on transformation rather than efficiency. But
    that answer did not satisfy Congress' concern about the $35
    billion cost, and it certainly did not explain why we were not
    going to end up with more of the same if another round were
    authorized.
        I was not satisfied either, and I tasked my staff to review
    each of the recommendations from BRAC 2005. What we found was
    that we actually ended up conducting two parallel BRAC rounds.
        One was about transformation. The recommendations were
    expensive, and they did not pay back. But there were some moves
    that you could only do during a BRAC round. Looking at nearly
    half of the last round's recommendations that either did not
    pay back at all or are paid back in 7 years or more, we found
    that this transformation BRAC cost $29 billion out of the $35
    billion and resulted in only $1 billion in recurring savings.
    In other words, the reason we were doing those moves was not to
    save money.
        That said, the other half of the recommendations was
    focused on saving money. They had payback of less than 7 years.
    They ended up costing a total of $6 billion out of that $35
    billion and yielded recurring savings of $3 billion a year.
    This efficiency BRAC proves that when we are trying to save
    money, we do.
        That is the kind of round we are seeking to conduct now. It
    is fair to say that DOD needs to save money now.
        During the hearing with Secretary of Defense Chuck Hagel,
    Madam Chairwoman, you specifically asked about the European
    infrastructure consolidation effort. Many members have said
    that we should close bases overseas before we do a BRAC. So, we
    have embarked on a BRAC-like process in Europe. However, we are
    not looking in that process to bring forces back to the United
    States. It will not take any pressure away from the need for a
    BRAC round. The analysis has taken longer than expected, but we
    are nearing the finish line and anticipate completing our
    report this spring. We have affirmed several recommendations
    already and have offered classified briefings to subcommittee
    staff. In fact, we have scheduled an update with this
    subcommittee staff next week.
        Finally, Madam Chairwoman, I understand that you wanted to
    spend some time focused on DOD's energy programs. I applaud
    your focus on energy efficiency. I agree completely with the
    statement you have made in the past that the cheapest energy is
    the energy we do not use.
        Let me make three quick points on facilities energy before
    I yield back.
        First, many of our energy efficiency projects and most of
    our renewable ones are funded by third parties, minimizing our
    upfront costs and resulting in long-term cost reduction.
        Second, for those projects that we do fund ourselves, we
    are focused on the business case and ensuring good payback.
    These are smart investments.
        Third, one of the risks that is associated with reduced
    levels of facilities sustainment funding is reduced energy
    performance. Put simply, a hole in the roof or a malfunctioning
    high ventilation and air conditioning system has a significant
    effect on a building's energy efficiency. To paraphrase your
    quote, the most expensive energy is the energy we waste. That
    is what you get if you underfund maintenance.
        Thanks for the opportunity to testify. I look forward to
    your questions.
        [The prepared statement of Mr. Conger follows:]
                     Prepared Statement by Mr. John Conger
                                  introduction
        Chairwoman Shaheen, Ranking Member Ayotte, and distinguished
    members of the subcommittee: Thank you for the opportunity to present
    the President's fiscal year 2015 budget request for the Department of
    Defense (DOD) programs supporting installations, facilities energy, and
    the environment.
        First, let me thank you for your support for our installation
    mission. DOD operates an enormous real property portfolio encompassing
    over 562,000 buildings and structures on 523 bases, posts, camps,
    stations, yards, and centers. The replacement cost of the Department's
    installations is $850 billion, excluding the cost of the 27 million
    acres of land that our installations occupy. Our installations remain
    critical components of our ability to fight and win wars. Our
    warfighters cannot do their job without bases from which to fight, on
    which to train, or in which to live when they are not deployed. The
    bottom line is that installations support our military readiness.
        In addition, I would like to express my thanks to Congress for an
    fiscal year 2014 budget that allowed us to avoid a catastrophic budget
    year. The funding levels for the facilities accounts and the relative
    timeliness of the budget compared to fiscal year 2013 allowed us to
    recover from the disproportionate burden that facilities sustainment
    and base operations bore last year. While this will still be a
    challenging budget year, the funding levels and the certainty achieved
    by striking a budget deal and taking sequestration off the table for
    the year will allow us to manage our resources and conduct our
    operations more effectively.
        Still, the fiscal year 2015 budget request reflects the assumption
    that Budget Control Act funding levels are likely to continue. The
    recent budget deal provided more assistance to fiscal year 2014 than
    fiscal year 2015, and in order to meet the overall budget numbers, we
    had to scale back programs across the Department, to include military
    construction (MILCON). As such, the fiscal year 2015 request for MILCON
    and family housing is $6.6 billion, a 40.4 percent decrease from the
    fiscal year 2014 request. Because infrastructure, generally, has a long
    useful life, and its associated degradation is not as immediate, the
    DOD components are taking more risk in the MILCON program in order to
    decrease risk in other operational and training budgets. In addition,
    reducing MILCON reduces investment risk as we contemplate the uncertain
    allocation of force structure cuts and the possibility of a new round
    of Base Realignment and Closure (BRAC).
        Tighter budgets have driven the Services to take more risk in their
    Facilities Sustainment accounts. While continuing to assume risk in
    these accounts over time will result in increased repair requirements
    and decreased energy efficiency, we are accepting near term risk in
    facility maintenance while the Department adjusts to the new funding
    profile.
        To address this and other shortfalls driven by the funding caps,
    the President's budget includes the Opportunity, Growth and Security
    Initiative. This initiative would provide an additional $26 billion for
    the Defense Department in fiscal year 2015, including substantial
    investments in military construction and facilities sustainment.
        Finally, we persist in our request for another BRAC round, though
    given Congress' rejection of our previous request in 2015 and the time
    it takes to execute the BRAC process, we are now asking for a round in
    2017. We maintain that the Department has well documented excess
    capacity and is on a path for even more as we reduce our force
    structure. As Secretary Hagel indicated, we cannot afford to spend
    money on infrastructure we don't need while we continue to take risk in
    military readiness accounts.
        My testimony will outline the fiscal year 2015 budget request and
    highlight a handful of top priority issues--namely, the
    administration's request for BRAC authority, our progress on the
    European Infrastructure Consolidation analysis, new developments on the
    Pacific realignment, an overview of our facility energy programs, and a
    discussion of the steps DOD is taking to mitigate the risk posed by
    climate change.
       fiscal year 2015 budget request--military construction and family
                                    housing
        The President's fiscal year 2015 budget requests $6.6 billion for
    the MILCON and Family Housing Appropriation--a decrease of
    approximately $4.5 billion from the fiscal year 2014 budget request.
    This decrease primarily reflects the declining budget environment
    resulting from the Budget Control Act and the recent budget agreement.
    In light of the sharp reductions in the construction budget, the DOD
    components focused principally on sustaining warfighting and readiness
    postures. As I noted in the introduction, infrastructure degradation is
    not immediate, so DOD components are taking more risk in the MILCON
    program in order to decrease risk in other operational and training
    budgets.
        This funding will still enable the Department to respond to
    warfighter requirements and mission readiness. However, the reduced
    budget will have an impact on routine operations and quality of life as
    projects to improve aging workplaces are deferred. In addition to new
    construction needed to bed-down forces returning from overseas bases,
    this funding will be used to restore and modernize enduring facilities,
    acquire new facilities where needed, and eliminate those that are
    excess or obsolete. The fiscal year 2015 MILCON request ($4.9 billion)
    includes projects in support of the strategic shift to the Asia-
    Pacific, projects needed to support the realignment of forces, a few
    projects to improve and update facilities used by the Guard and Reserve
    Forces, and although at a reduced level, it includes some projects to
    take care of our people and their families, such as unaccompanied
    personnel housing, medical treatment facilities, and schools.

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

        DOD also continues to encourage the modernization of Unaccompanied
    Personnel Housing (UPH) to improve privacy and provide greater
    amenities. In recent years, we have heavily invested in UPH to support
    initiatives such as BRAC, global restationing, force structure
    modernization, and Homeport Ashore--a Navy program to move Sailors from
    their ships to shore-based housing when they are at their homeport. The
    fiscal year 2015 MILCON budget request includes $150 million for five
    construction and renovation projects that will improve living
    conditions for trainees and unaccompanied personnel.
        The Military Services completed the initial Military Housing
    Privatization Initiative award phase before the end of fiscal year
    2013. The Air Force awarded the final 3 projects to complete its
    program, bringing the total privatized inventory to about 205,000
    homes. The new challenge will be to manage the government's interests
    in these privatized projects to ensure they continue to provide quality
    housing for 50 years.
    Facilities Sustainment and Recapitalization
        In addition to new construction, the Department invests significant
    funds in maintenance and repair of our existing facilities. Sustainment
    represents the Department's single most important investment in the
    condition of its facilities. It includes regularly scheduled
    maintenance and repair or replacement of facility components--the
    periodic, predictable investments an owner should make across the
    service life of a facility to slow its deterioration, optimize the
    owner's investment, and save resources over the long term. Proper
    sustainment retards deterioration, maintains safety, and preserves
    performance over the life of a facility, and helps improve the
    productivity and quality of life of our personnel.
        The accounts that fund these activities have taken significant cuts
    in recent years. In fiscal year 2013, DOD budget request included $8.5
    billion of Operations and Maintenance (O&M) funding for sustainment of
    our real property. This amount represents 82 percent of the requirement
    based on the Facilities Sustainment Model (FSM). Due to sequestration
    reductions, by the end of fiscal year 2013, the Department had only
    obligated $6.7 billion for sustainment, which equates to 65 percent of
    the modeled requirement. The Department's fiscal year 2014 budget
    request for sustainment included just $7.9 billion of O&M funds (78
    percent of the modeled requirement) and Congress appropriated only $7.3
    billion, or 74 percent of the modeled requirement, for this purpose.

        For fiscal year 2015, the Department's budget request includes $6.4
    billion for sustainment and $1.6 billion for recapitalization. The
    combined level of sustainment and recapitalization funding ($8 billion)
    reflects a 23.6 percent decrease from the fiscal year 2014 President's
    budget request ($10.5 billion). While the Department's goal is to fund
    sustainment at 90 percent of modeled requirements, the funding level
    noted above supports an average DOD-wide sustainment funding level of
    65 percent of the FSM requirement. Due to budget challenges, the
    Military Services have taken risk in maintaining and recapitalizing
    existing facilities. The Services have budgeted facility sustainment
    between 63 and 77 percent of the DOD-modeled requirement, with the
    Marine Corps taking the least risk by budgeting sustainment at 77
    percent and the Army assuming the greatest risk by budgeting
    sustainment at 63 percent. Continued decreases in sustainment coupled
    with inadequate investment in recapitalization of existing facilities
    will present the Department with larger bills in the out-years to
    restore or replace facilities that deteriorate prematurely due to
    underfunding their sustainment.
    Facility Investment Policy Initiatives
        Military Construction Premium
        Last year, the Department completed a study to quantify elements of
    the MILCON process that increases construction costs compared to
    similar construction efforts in the private sector. We are now
    conducting additional analysis in two areas where military cost
    premiums were high.
        First, we are taking a close look at anti-terrorism standards for
    construction. With current policy that prescribes significant minimum
    anti-terrorism construction standards, many construction projects must
    absorb excessive and disproportionate requirements, which in turn drive
    up costs. On December 7, 2012, the Deputy Secretary of Defense issued
    policy for DOD to adopt the Federal Interagency Security Committee
    security standards for off-base DOD-leased space consistent with other
    Federal agencies. In addition, the Department is evaluating revisions
    to DOD requirements for building antiterrorism protection on our
    installations, which currently calls for the same minimum standards for
    nearly all on-base buildings. We are working to establish a process
    whereby risk and appropriate antiterrorism mitigation would be
    determined for each new project, similar to the policy we adopted for
    off-base leased facilities. For example, this risk assessment would
    take into account whether a building was well within a secure
    perimeter.
        Second, we are undertaking a study to better understand the life-
    cycle cost impacts of our design practices in each of seven major
    building systems by comparing facilities designed for an extended
    service life (40 years or more) to those designed for the typical
    commercial practice of 20 to 25 years. We intend this study to inform
    decisions on design-life requirements in our technical standards. We
    believe our existing standards reduce life-cycle costs even where there
    appears to be an increase of initial costs; however, it is important to
    review them for improvement and/or validation.
        Facility Condition Standards
        We have been working for some time to develop a policy that relates
    the condition of facilities to requirements for recapitalization. While
    straightforward on its surface, it has turned out to be far more
    complex than originally thought, requiring underlying policy
    adjustments to enable the implementation of a policy on facility
    investment related to facility condition standards.
        For example, each of the Military Services uses slightly different
    processes to measure the Facility Condition Index (FCI), a functional
    indicator used across the Federal Government to assess facility
    condition, expressed in terms of the relationship between what it would
    cost to repair a facility to a like-new condition and what it would
    cost to replace that facility (e.g., an FCI of 90 percent means that
    the cost to restore a facility is 10 percent of the cost to replace
    it). In order to increase the reliability of DOD's FCI data and to
    ensure the figures for each Service were comparable, the Department
    issued policy and implementation guidelines in September 2013 that
    reinvigorate and standardize our facility condition assessment and
    reporting processes, to include using a common inspection tool and
    ensuring qualified professionals conduct the inspections.
        With standardized and reliable FCI data, we will be in a better
    position to develop a facility investment strategy based on the
    condition of the Department's real property portfolio, either as an
    aggregate portfolio or by looking at individual assets. Generally, we
    would like to maintain an average portfolio FCI of Fair (80 percent,
    formerly referred to as Q2), and we are seeking to replace, repair,
    excess, or demolish buildings that are in such bad shape that they are
    rated as Failing (FCI less than 60 percent, formerly the Q4
    designation). Today, our average FCI for all DOD facilities is 86
    percent, and we have more than 17,000 buildings that are rated as
    Failing across the enterprise. Taking risk by underfunding sustainment
    will drive these figures in the wrong direction, and we will need a
    strategy to improve the condition of our real property inventory in the
    coming years.
        Payment in Kind Projects
        In 2013, the Senate Armed Service Committee released a report that
    focused on host nation funded construction in Germany, South Korea, and
    Japan. The report raised several concerns regarding the selection and
    prioritization of DOD construction projects using host nation funds,
    particularly those funds provided to the Department as in-kind
    contributions. As a result, the National Defense Authorization Act for
    Fiscal Year 2014 requires that the Department obtain advance
    authorization for construction projects funded through payment-in-kind
    from host nations. While we disagree with the provision because it is
    overly restrictive, we understand Congressional concerns and will work
    with you to ensure we not only comply with this restriction but keep
    you better informed about all projects funded with host nation
    contributions.
            fiscal year 2015 budget request--environmental programs
        The Department has long made it a priority to protect the
    environment on our installations, not only to preserve irreplaceable
    resources for future generations, but to ensure that we have the land,
    water, and airspace we need to sustain military readiness. To achieve
    this objective, the Department has made a commitment to continuous
    improvement, pursuit of greater efficiency, and adoption of new
    technology. In the President's fiscal year 2015 budget, we are
    requesting $3.5 billion to continue the legacy of excellence in our
    environmental programs.
        The table below outlines the entirety of the DOD's environmental
    program, but I would like to highlight a few key elements where we are
    demonstrating significant progress--specifically, our environmental
    restoration program, our efforts to leverage technology to reduce the
    cost of cleanup, and the Readiness and Environmental Protection
    Integration (REPI) program.

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

        By the end of 2013, the Department, in cooperation with State
    agencies and the Environmental Protection Agency, completed cleanup
    activities at 79 percent of Active and BRAC IRP and MMRP sites, and
    FUDS IRP sites, and is now monitoring the results. During fiscal year
    2013 alone, the Department completed cleanup at over 800 sites. Of the
    more than 38,000 restoration sites, almost 30,000 are now in monitoring
    status or cleanup completed. We are currently on track to exceed our
    program goals--anticipating complete cleanup at 96 percent of Active
    and BRAC IRP and MMRP sites, and FUDS IRP sites, by the end of 2021.
        Our focus remains on continuous improvement in the restoration
    program: minimizing overhead; adopting new technologies to reduce cost
    and accelerate cleanup; and refining and standardizing our cost
    estimating. All of these initiatives help ensure that we make the best
    use of our available resources to complete cleanup.
        Note in particular that we are cleaning up sites on our active
    installations in parallel with those on bases closed in previous BRAC
    rounds--cleanup is not something that DOD pursues only when a base is
    closed. In fact, the significant progress we have made over the last 20
    years cleaning up contaminated sites on active DOD installations is
    expected to reduce the residual environmental liability in the
    disposition of our property made excess through BRAC or other reasons.
    Environmental Technology
        A key part of DOD's approach to meeting its environmental
    obligations and improving its performance is its pursuit of advances in
    science and technology. The Department has a long record of success
    when it comes to developing innovative environmental technologies and
    getting them transferred out of the laboratory and into actual use on
    our remediation sites, installations, ranges, depots, and other
    industrial facilities. These same technologies are also now widely used
    at non-Defense sites helping the Nation as a whole.
        While the fiscal year 2015 budget request for Environmental
    Technology overall is $172 million, our core efforts are conducted and
    coordinated through two key programs--the Strategic Environmental
    Research and Development Program (SERDP)--focused on basic research)
    and the Environmental Security Technology Certification Program
    (ESTCP)--which validates more mature technologies to transition them to
    widespread use). The fiscal year 2015 budget request includes $57.8
    million for SERDP and $26.5 million for ESTCP for environmental
    technology demonstrations. (The budget request for ESTCP includes an
    additional $25.0 million for energy technology demonstrations.)
        These programs have already achieved demonstrable results and have
    the potential to reduce the environmental liability and costs of the
    Department--developing new ways of treating groundwater contamination,
    reducing the life-cycle costs of multiple weapons systems, and
    improving natural resource management.
        Most recently, SERDP and ESTCP have developed technology that
    allows us to discriminate between hazardous unexploded ordnance and
    harmless scrap metal without digging up an object. This technology
    promises to reduce the liability of the MMRP program by billions of
    dollars and accelerate the current cleanup timelines for munitions
    sites--without it; we experience a 99.99 percent false positive rate
    and are compelled to dig up hundreds of thousands of harmless objects
    on every MMRP site. The rigorous testing program for this technology
    has experienced some delays due to sequestration and is now expected to
    be complete in 2015. Even as the technical demonstrations are ongoing,
    the Department has been pursuing an aggressive agenda to transition the
    technology to everyday use. We are proceeding deliberately and
    extremely successfully with a testing and outreach program designed to
    validate the technology while ensuring cleanup contractors, State and
    Federal regulators, and local communities are comfortable with the new
    approach. We are already beginning to use this new tool at a few
    locations, but hope to achieve more widespread use within the next few
    years.
        Looking ahead, our environmental technology investments are focused
    on the Department's evolving requirements. We will work on the
    challenges of contaminated groundwater sites that will not meet
    Department goals for completion because no good technical solutions
    exist; invest in technologies to address munitions in the underwater
    environment; develop the science and tools needed to meet the
    Department's obligations to assess and adapt to climate change; and
    continue the important work of reducing future liability and life-cycle
    costs by eliminating toxic and hazardous materials from our production
    and maintenance processes.
    Environmental Conservation and Compatible Development
        In order to maintain access to the land, water, and airspace needed
    to support our mission needs, the Department continues to manage
    successfully the natural resources entrusted to us--including
    protection of the many threatened and endangered species found on our
    lands. DOD manages over 28 million acres containing some 420 federally
    listed threatened or endangered species, more than 520 species-at-risk,
    and many high-quality habitats. A surprising number of these species
    are found only on military lands--including more than 10 listed species
    and at least 75 species-at-risk. That is 9 times more species per acre
    than the Bureau of Land Management, 6 times more per acre than the
    United States Fish and Wildlife Service (USFWS), 4.5 times more per
    acre than Forest Service, and 3.5 times more per acre than the National
    Park Service.
        The fiscal year 2015 budget request for Conservation is $381
    million. The Department invests so much to manage not only its
    imperiled species but all its natural resources, in order to sustain
    the high quality lands our service personnel need to train and to
    maximize our flexibility when using those lands. Species endangerment
    and habitat degradations can have direct mission-restriction impacts.
    That is one reason we work hard to prevent species from becoming
    listed, or from impacting our ability to test and train if they do
    become listed.
        As a result of multiple law suits, the USFWS has entered into
    court-approved agreements to make decisions on 250 species that are
    ``candidates'' for listing as threatened or endangered under the
    Endangered Species Act by 2016. The Department has already analyzed the
    250 species and 37 of them, if listed and critical habitat was
    designated on DOD lands, have the potential to impact military
    readiness at locations such as Yakima Training Center and Joint Base
    Lewis-McChord (JBLM). To minimize the potential impacts, these
    installations have already begun to appropriately manage these species
    and to consult with USFWS. USFWS and DOD have long worked
    collaboratively to minimize any critical habitat designation on DOD
    lands and to ensure that listed species conservation is consistent with
    military readiness needs.
        Our focus has been on getting ahead of any future listings. I have
    tasked the Military Departments to get management plans in place now to
    avoid critical habitat designations.
        While we make investments across our enterprise focused on
    threatened or endangered species, wetland protection, or protection of
    other natural, cultural, and historical resources, I wanted to
    highlight one particularly successful and innovative program--the REPI
    Program. Included within the $381 million for Conservation, $43.6
    million is directed to the REPI Program. The REPI Program is a cost-
    effective tool to protect the Nation's existing training, testing, and
    operational capabilities at a time of decreasing resources. In 11 years
    of the program, REPI partnerships have protected more than 314,000
    acres of land around 72 installations in 27 States. This land
    protection has resulted in tangible benefits to testing, training, and
    operations, also made a significant contribution to biodiversity and
    endangered species recovery actions.
        Under REPI, DOD partners with conservation organizations and State
    and local governments to preserve buffer land near installations and
    ranges. Preserving these areas allows DOD to avoid much more costly
    alternatives, such as workarounds, segmentation, or investments to
    replace existing test and training capability, while securing habitat
    off of our installations and taking pressure off of the base to
    restrict activities. REPI supports the warfighter and protects the
    taxpayer because it multiplies the Department's investments with its
    unique cost-sharing agreements. Even in these difficult economic times
    for States, local governments, and private land trusts, REPI partners
    continue to directly leverage the Department's investments one-to-one.
    In other words, we are securing these buffers around our installations
    for half-price.
        In addition, DOD, along with the Departments of the Interior and
    Agriculture, announced the Sentinel Landscapes Partnership to protect
    critical DOD missions, working lands, and environmentally sensitive
    habitat. The Sentinel Landscapes Partnership further strengthens
    interagency coordination, and provides taxpayers with the greatest
    leverage of their funds to advance the mutually-beneficial land
    protection goals of each agency. The pilot Sentinel Landscape project
    at JBLM helped USFWS avoid listing a butterfly species in Washington,
    Oregon, and California, citing the ``high level of protection against
    further losses of habitat or populations'' from JBLM's REPI investment
    on private prairie lands in the region. These actions allow significant
    maneuver areas to remain available and unconstrained for active and
    intense military use at JBLM.
                               highlighted issues
        In addition to the budget request, there are several legislative
    requests and other initiatives that have received interest from
    Congress. In the sections that follow, I highlight five specific items
    of interest: (1) BRAC; (2) European Infrastructure Consolidation; (3)
    Relocation of Marines to Guam; (4) DOD Facilities Energy Programs; and
    (5) DOD's Response to Climate Change.

        1.  BRAC

        For the third year in a row, the administration is requesting BRAC
    authority from Congress. This year, we are requesting authority to
    conduct a BRAC round in 2017.
        The Department is facing a serious problem created by the tension
    of declining budgets, reductions in force structure, and limited
    flexibility to adapt our infrastructure accordingly. We need to find a
    way to strike the right balance, so infrastructure does not drain
    resources from the warfighter. Our goal is therefore a BRAC focused on
    efficiency and savings, and it is a goal we believe is eminently
    achievable.
        We believe the opportunity for greater efficiencies is clear, based
    on three basic facts:

             In 2004, DOD conducted a capacity assessment that
            indicated it had 24 percent aggregate excess capacity;
             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; and
             Force structure reductions--particularly Army
            personnel (from 570,000 to 450,000 or lower), Marine Corps
            personnel (from 202,000 to 182,000 or lower) and Air Force
            force structure (reduced by 500 aircraft)--subsequent to that
            analysis point to the presence of additional excess.

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

        2.  European Infrastructure Consolidation

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

        3.  Rebasing of Marines from Okinawa to Guam

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

        4.  Facilities Energy Programs

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

        5.  Climate Change Adaptation

        The issue of climate change has received increasing attention in
    recent months--especially given the release last year of the
    President's Climate Action Plan and Executive Order 13653, Preparing
    the United States for the Impacts of Climate Change--and I wanted to
    take a moment to discuss the Department's approach to addressing this
    issue.
        It is important to understand that DOD looks at climate change
    impacts through the lens of its mission. Using that perspective and
    focusing on mission impacts, the changes to the global climate affect
    national security in two broad categories.
        First, climate change shapes the operating environment and the
    missions that DOD must undertake: retreating Arctic ice creates new
    shipping lanes and an expansion of the Navy's operating area across the
    northern pole; increased storm intensity will lead to increased demands
    for humanitarian assistance or disaster response; and changes in
    availability of food and water will serve as an instability accelerant
    in regions that aren't sufficiently resilient to adapt to those
    changes.
        In short, climate change will mean more demands on a military that
    is already stretched thin.
        Second, climate change affects the execution of missions we have
    today. Sea-level rise results in degradation or loss of coastal areas
    and infrastructure, as well as more frequent flooding and expanding
    intrusion of storm surge across our coastal bases. Facilities and
    transportation infrastructure are already impacted by thawing
    permafrost around our Alaskan installations. The changing environment
    increases the threat to the 420 endangered species that live on our
    installations, leading to increased probability of training and
    operating restrictions. Increased high-heat days impose limitations on
    what training and testing activities our personnel can perform.
    Decreasing water supplies and increased numbers of wildfires in the
    Southwest may jeopardize future operations at critical ranges.
        Our warfighters cannot do their jobs without bases from which to
    fight, on which to train, or in which to live when they are not
    deployed. When climate effects make our critical facilities unusable,
    that is an unacceptable impact.
        As was made clear in my discussion of energy above, even those
    activities that reduce greenhouse gas emissions are justified by the
    benefits they bring to our mission capability. Increasing energy
    efficiency of our combat systems allows greater performance and lowers
    requirements for vulnerable supply lines. Our investments in facility
    energy efficiency help to reduce our $4 billion annual facilities
    energy bill, or at least slow its increase. In the future, this on-base
    renewable energy generation promises the opportunity to increase energy
    security and insulate our operations from the vulnerable electric grid.
    The result will be fewer greenhouse gas emissions, but that is a co-
    benefit. We are focused on the mission benefits of managing our energy
    portfolio.
        Even without knowing precisely how the climate will change, we can
    see that the forecast is for more sea level rise; more flooding and
    storm surge on the coasts; continuing Arctic ice melt and permafrost
    thaw; more drought and wildfire in the American Southwest; and more
    intense storms around the world. DOD is accustomed to preparing for
    contingencies and mitigating risk, and we can take prudent steps today
    to mitigate the risks associated with these forecasts. These range from
    the strategic (DOD's new Arctic Strategy) to the mundane (ensuring
    backup power and computer servers are not in basements where facilities
    are facing increased flood risk). In 2013, DOD released the Climate
    Change Adaptation Roadmap, which highlights a wide range of climate
    impacts that affect DOD, and highlights our decision to incorporate
    consideration of climate change risks into our existing policies rather
    than to create climate change stovepipes within the Department.
        Along these lines, we have updated policies on master planning our
    installations to minimize construction in low lying areas; emphasized
    smart planning in floodplains and water-scarce regions; and revised
    guidance on natural resources management to ensure we are accounting
    for climate shifts as we protect endangered species on our
    installations.
        In addition, we are conducting studies of our coastal installations
    to assess their vulnerability to extreme weather events and other
    climate effects--an analysis that should be complete by July--and we
    will subsequently review the vulnerabilities of our inland bases. We
    are conducting research on the effects of thawing permafrost on our
    Alaskan infrastructure, where we've already seen significant damage to
    foundations and road infrastructure. In the southwest, we've seen
    initial studies that indicate critical installations could run out of
    water within 2 decades. Not only do we need to begin reducing this risk
    today, but we need to comprehensively review our installation footprint
    to identify similarly vulnerable installations.
        In recent years, extreme weather events such as Hurricane Sandy and
    derechos have caused power outages, damage from floods, high winds, and
    storm surges. Climate change increases the likelihood of such events,
    and the DOD must be prepared for, and have the ability to recover from,
    utility interruptions that impact mission assurance on our
    installations, an ability we characterize as power resilience. In fact,
    the policy directing this already exists and we have embarked on an
    effort to review installation-level compliance with policies that
    require identifying critical loads, ensuring back-up power is in place,
    maintaining back-up generators, and storing an appropriate amount of
    emergency fuel.
        The bottom line is that we are dealing with climate change by
    taking prudent and measured steps to reduce the risk to our ability to
    conduct missions. We consider climate change an important national
    security consideration and one that will affect the Department's
    ability to operate in the decades to come.
                                   conclusion
        Thank you for the opportunity to present the President's fiscal
    year 2015 budget request for DOD programs supporting installations,
    facilities energy, and the environment. As you can see, our budget
    constraints have required us to accept risk across the portfolio, but
    it is risk we are already managing and believe we can manage with this
    budget.
        We appreciate Congress' continued support for our enterprise and
    look forward to working with you as you consider the fiscal year 2015
    budget.

        Senator Shaheen. Thank you very much.
        Secretary Hammack.

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

        Ms. Hammack. Thank you, Chairwoman Shaheen, Ranking Member
    Ayotte, and members of this subcommittee. On behalf of
    soldiers, families, and civilians of the U.S. Army, thank you
    for the opportunity to discuss our fiscal year 2015 MILCON
    budget.
        For fiscal year 2015, the Army is asking for $1.3 billion,
    which covers MILCON, family housing, and the Army's share of
    the DOD base closure account. This represents a 39 percent
    reduction from fiscal year 2014. It is part of the overall $13
    billion Army budget which includes installation, energy,
    environmental programs, facilities sustainment, restoration and
    modernization, and our base operations support.
        Due to the fiscal reductions required by current law and
    the end of combat operations in Afghanistan, the Army is
    shrinking our Active component end strength to 490,000 by the
    end of fiscal year 2015. The 2014 Quadrennial Defense Review
    calls for an Army end strength to decline further to around
    450,000 or 440,000. As end strength and force structure
    decline, we must assess and right-size the supporting
    infrastructure to ensure that training and readiness needs are
    met. This requires us to achieve a difficult balance between
    maintaining infrastructure with force structure.
        Last year, the subcommittee asked when we had last
    conducted a capacity analysis, so the Army went ahead with a
    capacity analysis at a macro level. The magnitude of excess
    capacity showed that with an Army of 490,000, excess Army
    capacity will range between 12 and 28 percent, depending upon
    the facility category group, with an average of 18 percent
    excess. Additional end strength reductions below 490,000 will
    increase excess capacity.
        As Mr. Conger mentioned, we are all participating in the
    European infrastructure consolidation review to address excess
    capacity in Europe. The Army has been addressing excess
    capacity in Europe for many years. But currently we have 10 to
    15 percent excess that we are participating with looking to see
    whether there is joint opportunities with the other Services.
    We are on track to shrink our overseas infrastructure,
    overhead, and our operating budgets.
        But in the United States, we need BRAC authorization to do
    the same. BRAC is a proven means to address excess capacity in
    the United States. Prior BRAC rounds are producing $2 billion
    in cumulative net savings to the Army each and every year, and
    we achieve recurring savings from the BRAC 2005 round of about
    $1 billion a year. We have a clear business case for a BRAC
    round in 2017. There is a clear path forward for Congress to
    agree to a new round of BRAC.
        As Mr. Conger mentioned, the BRAC 2005 round could be
    considered as two parallel BRAC rounds, transformation BRAC and
    efficiency BRAC. The efficiency BRAC round was the component
    that produced half of the savings for the Army. The BRAC 2005
    selection criteria reflected DOD's stated goal at that time to
    achieve transformation, in addition to savings.
        We relocated two large brigade combat teams from Europe. In
    Europe, the infrastructure was built by the Germans, funded by
    the Germans. A lot of our energy costs were paid for by the
    Germans. When we relocated them back to the United States, we
    had to build that infrastructure here with American taxpayers'
    dollars. We had to operate them with American taxpayers'
    dollars and pay for energy costs with American taxpayers'
    dollars. The transformation BRAC was part of the BRAC strategy
    but not intended to achieve savings.
        We look forward to working with Congress to shape the
    selection criteria for BRAC 2017 to reflect our need for an
    efficiency BRAC round. The Army does have a strong commitment
    to reducing our costs, especially our energy costs through
    energy and water security measures. We have accelerated our
    partnerships for energy and water efficiency with the private
    sector through energy savings performance contracts (ESPC). We
    have also accelerated our partnerships for renewable energy
    with the private sector, and we continue to identify ways to
    curb the rapid growth in utility costs through evaluation of
    new technologies.
        Although the Army is reducing our missions in Afghanistan,
    we are not shrinking our focus on operational energy
    efficiency. Army missions around the globe, whether
    humanitarian assistance, disaster relief, or conflict, require
    energy as a critical enabler. Investments in more efficient
    helicopter engines that Secretary Burke mentioned extend
    operational capabilities. Energy efficient expeditionary
    shelters reduce ground resupply logistics. The Army operational
    energy modernization investments provide efficient, reliable,
    and maintainable systems that increase capabilities and
    maintain dominance.
        Thank you for the opportunity to appear before you today. I
    look forward to your questions on our recommended 2015 budget
    and our request for a badly needed efficiency BRAC round in
    2017.
        [The prepared statement of Ms. Hammack follows:]
                Prepared Statement by Hon. Katherine G. Hammack
                                  introduction
        Chairwoman Shaheen, Ranking Member Ayotte, and members of the
    subcommittee, 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 2015 Military Construction (MILCON) and Army Family
    Housing (AFH) budget request.
        The President's fiscal year 2015 MILCON budget request supports the
    strategic priorities of developing a globally-responsive and
    regionally-engaged Army. We ask for the committee's continued
    commitment to our soldiers, families, and civilians and support of the
    Army's military construction and installations programs.
                                    overview
        The Army's fiscal year 2015 President's budget includes $13 billion
    for installation energy, environmental programs, facility sustainment,
    restoration, and modernization, base operations support, and MILCON.
    This funding will enable the Army to sustain, restore, and modernize
    facilities to support the Army's priorities. The Installation
    Management Community is focused on providing the facilities necessary
    to enable a ready and modern Army. As part of the $13 billion, the Army
    is requesting $1.3 billion for MILCON, AFH, and Base Closure Accounts
    (BCA). The MILCON budget request represents 1 percent of the total Army
    budget. Of this $1.3 billion request, $539 million is for the Active
    Army, $127 million is for the Army National Guard, $104 million is for
    the Army Reserve, $429.6 million is for AFH, and $84 million is for
    BCA.
        The budget request reflects an overall 39 percent reduction from
    fiscal year 2014 in the MILCON accounts as a result of the reductions
    in the Army end strength and force structure. The Army reviewed
    facility investments necessary to support the force, taking into
    consideration the fiscal reality that we are facing as a Nation: the
    Budget Control Act of 2011, the Bipartisan Budget Agreement of 2013,
    and the department's strategic shift to realign forces toward the Asia/
    Pacific theater. This MILCON budget request reflects the focused
    investments necessary in training, maintenance, and operations
    facilities to enable the future force of the All Volunteer Army in a
    constrained fiscal environment.
                              army force structure
        Fiscal reductions required by the current law, along with the end
    of ground combat operations in Iraq and Afghanistan, have put the Army
    on a path to shrink its Active Duty end strength from its peak of
    570,000 to between 440,000 and 450,000. This is a reduction of 120,000
    to 130,000 soldiers, or approximately 22 percent from the Active
    component. These reductions will affect every installation in the Army.
    The Army must retain our adaptability and flexibility to provide
    regionally-aligned and mission-tailored forces in support of national
    defense requirements. As the first part of the drawdown, the Army is
    reducing its Active component from 45 Brigade Combat Teams (BCTs) to 32
    by fiscal year 2015. As part of the BCT reduction, the Army will
    reorganize Infantry and Armor BCTs by adding a third maneuver
    battalion, and additional engineer and fires capability. The Army will
    reduce or reorganize numerous non-BCT units as part of the drawdown.
        When we evaluated our initial force structure reductions from
    570,000 to 490,000 soldiers, we conducted a Programmatic Environmental
    Assessment (PEA), which was prepared in accordance with the National
    Environmental Policy Act.
        The PEA analyzed potential environmental impacts that could result
    from the force reductions, including socioeconomic impacts at specified
    DOD personnel reduction thresholds. Following publication of the PEA,
    the Army conducted approximately 30 community listening sessions at all
    Army installations with military and civilian populations of 5,000 or
    more. The community listening sessions gave communities an opportunity
    to contribute feedback on socioeconomic impacts associated with force
    structure downsizing. Since the Army's Active component end-strength
    will decline further than 490,000, the Army initiated a supplemental
    PEA analysis in February 2014 to analyze additional potential
    population loss scenarios. We will host another round of community
    listening sessions associated with these deeper reductions.
                           facility capacity analysis
        As the Army reduces and reorganizes over the next 5 to 7 years, the
    Army must gauge the current and future installation capacity that will
    be required for a ready and resilient Army. The Army has begun
    conducting a facility capacity analysis to determine how much excess
    capacity will be available at the enterprise level, as the Army
    decrements its end strength. The Army is taking steps to ensure we do
    not execute MILCON projects that are in excess of documented
    requirements based on the Total Army Analysis (TAA) and programmatic
    review of all MILCON facility requirements.
        While additional efforts are underway to understand changing
    facility requirements as our force structure declines, the Army is
    conducting some analyses of real property to support an end strength of
    490,000 Active component soldiers (and the accompanying force
    structure). Preliminary results indicate that the Army will have nearly
    18 percent excess capacity, totaling over 167 million square feet of
    facilities spread across our worldwide installations. The Army
    estimates it costs about $3 per square foot to maintain occupied and/or
    underutilized facilities, which could cost the Army over $500 million a
    year in unnecessary operations and maintenance. For some facility
    category types, such as small unit headquarters facilities (for example
    Company Operations Facilities), the Army has facility shortfalls. We
    are reviewing our requirements with an eye towards finding practical,
    efficient solutions that meet soldier needs and which we as an Army can
    afford.
        Additional excess capacity will be created if the Active component
    shrinks further, necessitating incremental facility capacity analyses.
        Excess capacity will range between 12 and 28 percent, depending on
    facility category group, with an average of approximately 18 percent.
    We are working now to confirm our excess capacity overseas; our current
    focus is in the European area of responsibility.
        A year ago, the Secretary of Defense directed the conduct of a
    European Infrastructure Consolidation (EIC) review for the specific
    purpose of reducing ``expenses by eliminating excess capacity in Europe
    while ensuring our remaining base structure supports our operational
    requirements and strategic needs.'' The Army is fully engaged in the
    conduct of this review. We are active participants in the steering
    group governing this work and employing the principles of capacity and
    military value analysis, developed originally for Base Realignment and
    Closure (BRAC), to guide our work. Our target date to complete the DOD
    and Army analysis and evaluation is Spring 2014. Current Army Capacity
    Analysis reflects 10 to 15 percent of excess capacity in Europe.
        The Army's work in this EIC review is wholly consistent with its
    commitment to reducing unneeded infrastructure. Consistent with changes
    in both the strategic and fiscal environments, we have been working
    aggressively to ensure we achieve the difficult balance between the
    cost of maintaining our infrastructure and force readiness. Our
    strategy is to: (a) consolidate on larger, more capable installations;
    (b) divest older and inadequate infrastructure; and (c) invest in the
    remaining footprint in order to provide adequate facilities to
    accomplish our mission--while meeting the needs of our soldiers and
    their families.
        The Army has been downsizing our footprint in both Europe and Asia
    for many years in the post-Cold War era. Since 2006, Army end strength
    in Europe has declined 45 percent, and we are on track to shrink the
    supporting infrastructure, overhead, and operating budgets by over 50
    percent. Similarly in Korea, the Army decreased the number of soldiers
    by about a third (10,000 soldiers) and is on pace to shrink our acreage
    and site footprint by about half.
        Overseas, the Army has the tools and authorities we need to
    identify and reduce excess capacity. Inside the United States, however,
    the best and proven way to address excess and shortfalls in facility
    requirements in a cost-effective and fair manner is through the BRAC
    Commission process.
        The Army continues to need additional BRAC authorization to reduce
    excess infrastructure effectively. As the Army's end strength and force
    structure decline alongside its available funding, hundreds of millions
    of dollars will be wasted maintaining underutilized buildings and
    infrastructure. Trying to spread a smaller budget over the same number
    of installations and facilities will inevitably result in rapid decline
    in the overall condition of Army facilities. Without a future round of
    BRAC, the Army will be constrained in closing or realigning
    installations to reduce overhead. This ``empty space tax'' of about $3
    a square foot on our warfighters will simply result in cuts to
    capabilities elsewhere in the budget.
        As the committee considers the President's request to authorize
    another round of BRAC, I urge the members to think about the following
    considerations:
        First, if Congress fails to authorize another round of BRAC, this
    defense drawdown is likely to repeat a very unfortunate historical
    pattern of hollowed-out forces dispersed across hollowed-out
    installations.
        Second, postponing BRAC does not prevent defense communities from
    experiencing the consequences of smaller forces and lower off-post
    economic activity. The soldiers and families at the installations will
    be gone, and their spending power and requirements will go with them.
        Third, postponing BRAC means that excess infrastructure and
    civilian overhead cannot be properly addressed at sites experiencing
    the biggest reductions of workload. Declining budget targets must still
    be met. Therefore, without BRAC, communities hosting our highest
    military value installations are likely to see greater negative
    economic impacts than they would if the Army could close or realign
    some installations.
        The Army has the authority to close and realign U.S. installations
    outside the BRAC process as long as the congressional notification
    thresholds detailed in 10 U.S.C. Sec. 2687 are not triggered.
    Historically, however, the Army and Congress together have concluded
    that using non-BRAC authority to address excess infrastructure is not
    as transparent or economically advantageous to local communities.
        Local communities, including those where installations have closed,
    have benefitted in many ways from the BRAC property disposal
    authorities, as described below in the ``Base Closure Account'' section
    of this testimony.
                       facility investment strategy (fis)
        As we shape the Army of 2020 and beyond, through a series of
    strategic choices, the Installation Management Community looks to
    implement the FIS to provide quality, energy-efficient facilities in
    support of the Army Leadership priorities.
        FIS provides a strategic framework that is synchronized with the
    Army Campaign Plan, TAA, and Army Leadership priorities in determining
    the appropriate funding to apply in the capital investment of Army
    facilities at Army installations and Joint Service bases across the
    country. FIS proposes a cost effective and efficient approach to
    facility investments that reduces unneeded footprint, saves energy by
    preserving efficient facilities, consolidates functions for effective
    space utilization, demolishes failing buildings, and uses appropriate
    excess facilities as lease alternatives in support of the Army of 2020
    and beyond.
        FIS uses MILCON funding to replace failing facilities and build out
    critical facility shortages. We apply Operations and Maintenance (O&M)
    funding to address existing facilities' repair and maintenance. O&M
    Restoration and Modernization funding is used to improve existing
    facility quality. O&M Sustainment funding is used to maintain existing
    facilities. Demolition and disposal funding is used to eliminate
    failing excess facilities. Focused investments from MILCON and O&M
    funding will support facilities grouped in the following categories:
    Redeployment/Force Structure; Barracks; Revitalization; Ranges; and
    Training Facilities. The fiscal year 2015 budget request implements the
    FIS by building out shortfalls for unmanned aerial vehicle units, the
    13th Combat Aviation Brigade, initial entry training barracks, selected
    maintenance facilities, and Reserve component facilities. Additional
    departmental focus areas are Organic Industrial Base and Energy/
    Utilities.
          fiscal year 2015 budget request--military construction, army
        The fiscal year 2015 Military Construction, Army budget requests an
    authorization of $405.3 million and appropriations for $539.4 million.
    The appropriations request includes $58 million to fund the third and
    final increment of the fiscal year 2013 Cadet Barracks at the U.S.
    Military Academy and $76.1 million for planning and design, minor
    military construction, and host nation support.
    Barracks ($110 million)
        Provides 480 training barracks spaces at Fort Jackson, SC, and
    funds the previously discussed cadet barracks at the U.S. Military
    Academy, which was fully authorized in fiscal year 2013.
    Redeployment/Force Structure ($217.7 million)
        Invests $124 million to construct unmanned aerial vehicle hangars
    at Fort Irwin, CA; Fort Carson, CO; Fort Campbell, KY; and Fort Drum,
    NY, to support the activation of Gray Eagle requirements. Fort Carson
    will also receive $60 million for an aircraft maintenance hangar to
    support the 13th Combat Aviation Brigade. The Military Ocean Terminal,
    Concord, CA, will receive $9.9 million to construct an access control
    point in support of ammunition shipments. The remaining $23.8 million
    will support other redeployment/force structure requirements.
    Revitalization ($135.6 million)
        The Army is requesting five projects to correct significant
    facility deficiencies or facility shortfalls to meet the requirements
    of the units and/or organization mission. Projects include a $5.3
    million general purpose maintenance shop at the Military Ocean
    Terminal, Concord, CA, to alleviate known safety risks; a $96 million
    command and control facility complex, including a sensitive
    compartmented information facility, at Fort Shafter, HI; a $16 million
    rebuild shop addition at Letterkenny Army Depot, PA; a $7.7 million
    tactical vehicle hardstand at Joint Base Langley-Eustis, VA; and a
    $10.6 million missile magazine at Kadena Air Base, Japan supporting
    Patriot missile storage.
                   military construction, army national guard
        The fiscal year 2015 Military Construction, National Guard (MCNG)
    budget requests an authorization of $95.6 million and an appropriation
    for $126.9 million. The request includes appropriations for $31.3
    million in planning and design and minor military construction. The
    MCNG program is focused on the MILCON categories of Modularity and
    Revitalization.
    Modularity ($38 million)
        The fiscal year 2015 budget request provides for a readiness center
    in Helena, MT. The project is an addition and alteration to the
    existing readiness center, which will address critical space shortfalls
    created by force structure changes. The project will facilitate unit
    operations, enhancing unit readiness.
    Revitalization ($57.6 million)
        The Army National Guard budget requests four projects to replace
    failed or failing facilities as part of the FIS. This category includes
    two vehicle maintenance facilities and two readiness centers. The $10.8
    million maintenance facility in Valley City, ND, will improve the
    safety and efficiency of operations by replacing the existing facility
    that provides only 11 percent of the authorized unit space. An unheated
    storage facility included in the project will preserve equipment and
    increase readiness. The $4.4 million maintenance facility in North Hyde
    Park, VT, combines two undersized facilities into one properly-sized
    facility. This new building will meet current standards to create a
    safe, productive work environment. In Augusta, ME, multiple repurposed
    World War II era facilities will be replaced with a $30 million
    readiness center. The $12.4 million readiness center project in Havre
    De Grace, MD, replaces a facility built in 1922, originally for a race
    track clubhouse, and subsequently acquired by the National Guard. The
    new readiness centers will meet existing construction standards and
    will be configured and sized for the current units. All four projects
    will provide modern facilities to enhance the Army National Guard's
    operational readiness.
                      military construction, army reserve
        The fiscal year 2015 Military Construction, Army Reserve (MCAR)
    budget requests an authorization of $92 million and appropriations for
    $104 million. The appropriations request includes $12 million for
    planning and design, and minor military construction. The MCAR program
    is focused on the MILCON category of Revitalization.
    Revitalization ($92 million)
        The fiscal year 2015 Army Reserve budget request includes five
    projects that build out critical facility shortages and consolidate
    multiple failing and inefficient facilities into energy efficient
    facilities. The Army Reserve will construct new Reserve Centers in
    California, New Jersey, and New York ($71 million) and an addition to
    an existing Reserve Center in Colorado ($5 million) that will provide
    modern training classrooms, simulations capabilities, and maintenance
    platforms that support the Army Force Generation cycle and the ability
    of the Army Reserve to provide trained and ready soldiers when called.
    The request also includes a Total Army School System Training Center in
    Virginia in support of the One Army School System model ($16 million).
                              army family housing
        The Army's fiscal year 2015 AFH budget request of $429.6 million
    includes $78.6 million for construction and $351 million for housing
    operations worldwide. The AFH inventory includes 16,009 government-
    owned homes, 3,277 government-leased homes, and 86,077 privatized-end
    state homes. The Army has privatized over 98 percent of on-post housing
    assets inside the United States. All Army overseas family housing
    quarters are either government-owned or government-leased units.
    Operations ($70.5 million)
        The Operations account includes four sub-accounts: management,
    services, furnishings, and a small miscellaneous account. Within the
    management sub-account, Installation Housing Services Offices provide
    post housing, non-discriminatory listings of rental and for-sale
    housing, rental negotiations and lease review, property inspections,
    home buying counseling, landlord-tenant dispute resolution, in-and-out
    processing housing assistance, assistance with housing discrimination
    complaints, and liaison between the installation and local and state
    agencies. In addition, this account supports remote access to housing
    information from anywhere in the world with direct information or links
    to garrison information such as schools, relocation information,
    installation maps, housing floor plans, photo and housing tours,
    programs and services, housing wait list information, and housing
    entitlements.
    Utilities ($82.7 million)
        The Utilities account includes the cost of delivering heat, air
    conditioning, electricity, water, and wastewater support for owned or
    leased (not privatized) Family housing units.
    Maintenance and Repair ($65.3 million)
        The Maintenance and Repair account supports annual recurring
    projects to maintain and revitalize AFH real property assets. and is
    the account most affected by budget changes. This funding ensures that
    we appropriately maintain the 16,009 housing units so that we do not
    adversely impact soldier and family quality of life.
    Leasing ($112.5 million)
        The Army Leasing program is another way to provide soldiers and
    their families with adequate housing. The fiscal year 2015 budget
    request includes funding for 895 temporary domestic leases in the
    United States, and 2,382 leased units overseas.
    Privatization ($20.0 million)
        The Privatization account provides operating funds for portfolio
    and asset management and government oversight of privatized military
    Family housing. The need to provide oversight of the privatization
    program and projects is reinforced in the National Defense
    Authorization Act (NDAA) for Fiscal Year 2013, which requires more
    oversight to monitor compliance, review, and report performance of the
    overall privatized housing portfolio and individual projects.
        In 1999, the Army began privatizing family housing assets under the
    Residential Communities Initiative (RCI). The RCI program continues to
    provide quality housing that soldiers and their families and senior
    single soldiers can proudly call home. All scheduled installations have
    been privatized through RCI. The RCI program met its goal to eliminate
    those houses originally identified as inadequate and built new homes
    where deficits existed. RCI Family housing is at 44 locations, with a
    projected end state of over 86,000 homes--98 percent of the on-post
    family housing inventory inside the United States. Initial construction
    and renovation investment at these 44 installations is estimated at
    $13.2 billion over a 3- to 14-year initial development period (IDP),
    which includes an Army contribution of close to $2 billion. All IDPs
    are scheduled to be completed by 2019. After all IDPs are completed,
    the RCI program is projecting approximately $14 billion in future
    development throughout the 44 locations for the next 40 years. From
    1999 through 2013, our RCI partners have constructed 31,935 new homes,
    and renovated another 25,834 homes.
        The Privatized Army Lodging (PAL) program is the Army's primary
    means of revitalizing and building new transient lodging facilities and
    providing for their long-term sustainment. Operations and Maintenance
    account funds are programmed to provide portfolio and asset management
    oversight for PAL. The PAL program is a natural extension of the
    success achieved through the RCI. The program conveyed existing
    transient lodging assets and executes a 50-year lease for the
    underlying ground to a qualified developer and hotel operator. To date,
    39 installations are privatized under the PAL program, and will
    increase to 41 installations by 2016. PAL encompasses all current
    lodging operations in the continental United States, Alaska, Hawaii,
    and Puerto Rico, with a projected end state of 14,135 hotel rooms.
    Construction ($77.3 million)
        The Army's fiscal year 2015 Family Housing Construction request is
    for $77.3 million for new construction and $1.3 million for planning
    and design. The Army will construct 33 single Family homes at Rock
    Island Arsenal, IL, to support senior officer and senior
    noncommissioned officer and families. These new homes will enable the
    Army to begin to address the housing deficit and to reduce dependency
    on leased housing. Additionally, the Army will construct 90 apartment-
    style quarters at Camp Walker in Daegu, Korea to replace aged and worn
    out leased units with on-post construction to consolidate Families.
                              base closure account
        BRAC property disposal remains an Army priority. Putting excess
    property back into productive re-use, which can facilitate job
    creation, has never been more important than it is today.
        The NDAA for Fiscal Year 2013 consolidated the Prior BRAC and BRAC
    2005 accounts into a single DOD Base Closure Account (BCA). The Army's
    portion of the fiscal year 2015 BCA budget request is for $84 million.
    The request includes $30 million for caretaker operations and program
    management of remaining properties, and $54 million for environmental
    restoration efforts. In fiscal year 2015, the Army will continue
    environmental compliance and remediation projects at various BRAC
    properties. The funds requested are needed to keep planned
    environmental response efforts on track, particularly at legacy BRAC
    installations including Fort Ord, CA; Fort McClellan, AL; Fort Wingate,
    NM; Pueblo Chemical Depot, CO; and Savanna Army Depot, IL.
    Additionally, the funds requested support environmental projects at
    several BRAC 2005 installations, including Fort Gillem, GA; Fort
    Monmouth, NJ; Fort Monroe, VA; Lone Star Army Ammunition Plant, TX; and
    Kansas Army Ammunition Plant, KS. Completing environmental cleanup is
    critical to transferring property back to local re-use authorities for
    productive re-use and job creation.
        In total, the Army has disposed of almost 224,000 acres (75 percent
    of the total acreage disposal requirement of 297,000 acres), with
    approximately 73,000 acres (25 percent) remaining. The current goal is
    for all remaining excess property to be conveyed by 2021. Placing this
    property into productive reuse helps communities rebuild the local tax
    base, generate revenue, and, most importantly, replace lost jobs.
        BRAC-impacted communities have leveraged planning grants and
    technical assistance from the DOD Office of Economic Assistance, as
    well as BRAC property disposal authorities, to adjust in ways that are
    often not possible outside the BRAC process.
        The Newport Chemical Depot in Vermillion County, IN, was closed
    during the BRAC 2005 round, and successfully completed the property
    transfer process for 7,236 acres in a relatively short period of time.
    This allowed the surrounding rural community to remain focused on
    redevelopment, and reduced the Army's caretaker costs. In 2013, Scott
    Pet Products, Inc., a pet supply manufacturer, opened a 50,000-square
    foot manufacturing and distribution facility on this closed
    installation, and plans to expand there, which will create new jobs.
    Newport Pallet Inc. moved into an 80,000-square foot building at the
    site in 2010, and the General Machine and Saw Company announced plans
    in February 2013 to move into facilities at the re-designated
    Vermillion Rise Mega Park.
        At Fort Monmouth, NJ, another BRAC 2005 closure site, the Army has
    started transferring property to return it to productive re-use.
    Construction crews are progressing ahead of schedule on a new 275,000-
    square foot facility to expand the capacity of the software data
    storage firm, CommVault. This is the first of several planned
    expansions by CommVault, with the potential to create over 1,500 jobs.
    The Army successfully transferred the old Paterson Army Health Clinic
    parcel in September 2013. The Local Redevelopment Authority (LRA) will
    sell it to a healthcare provider (AcuteCare). Locally-stated plans will
    create up to 200 new jobs, invest approximately $15 million in
    renovations, and will enable the LRA to avoid about $1 million in
    planned demolition expenses.
                                     energy
        The Army is moving forward to address the challenge of energy and
    sustainability on our installations. In fiscal year 2015, the
    Installation Energy budget total is $1.6 billion and includes $48.5
    million from the DOD Defense-wide MILCON appropriation for the Energy
    Conservation Investment Program (ECIP), $79 million for Energy Program/
    Utilities Modernization program, $1.47 billion for Utilities Services,
    and $8 million for installation-related Science and Technology research
    and development. The Army conducts financial reviews, business case and
    life cycle cost analysis, and return on investment evaluations for all
    energy initiatives.
    ECIP ($48.5 million)
        The Army invests in energy efficiency, on-site small scale energy
    production, and grid security through the DOD's appropriation for ECIP.
    In fiscal year 2014, the DOD began conducting a project-by-project
    competition to determine ECIP funding distribution to the Services. In
    fiscal year 2015, the Army requests $48.5 million for 11 projects to
    include 7 energy conservation projects, 3 renewable energy projects,
    and 1 energy security project.
    Energy Program/Utilities Modernization ($79 million)
        Reducing consumption and increasing energy efficiency are among the
    most cost effective ways to improve installation energy security. The
    Army funds many of its energy efficiency improvements through the
    Energy Program/Utilities Modernization program account. Included in
    this total are funds for energy efficiency projects, the Army's
    metering program, modernization of the Army's utilities, energy
    security projects, and planning and studies. In addition, this account
    funds planning and development of third-party-financed renewable energy
    projects at or below grid parity through the Energy Initiatives Task
    Force (EITF). The EITF currently has 8 large-scale renewable energy
    projects in the acquisition phase with a potential of over 175 MW of
    production capacity.
    Utilities Services ($1.47 billion)
        The Utilities Services account pays all Army utility bills
    including the repayment of Utilities Privatization, Energy Savings
    Performance Contracts (ESPCs), and Utilities Energy Service Contracts
    (UESCs). Through the authority granted by Congress, ESPCs and UESCs
    allow the Army to implement energy efficiency improvements through the
    use of private capital, repaying the contractor for capital investments
    over a number of years out of the energy cost savings. The Army has the
    most robust ESPC program in the Federal Government. The ESPC program
    has more than 180 Task Orders at over 75 installations, representing
    $1.32 billion in private sector investments and over 360 UESC Task
    Orders at 45 installations, representing $568 million in utility sector
    investments. We have additional ESPC projects in development, totaling
    over $400 million in private investment and $100 million in development
    for new UESCs. From December 2011 through December 2013, under the
    President's Performance Contracting Challenge, the Army executed $498
    million in contracts with third-party investment using ESPCs and UESCs,
    doubling historical trends.
    Installation Science and Technology Research and Development ($8
            million)
        Installation Science and Technology programs investigate and
    evaluate technologies and techniques to ensure sustainable, cost
    efficient, and effective facilities to achieve resilient and
    sustainable installation and base operations. Facility enhancement
    technologies contribute to cost reductions in the Army facility life
    cycle process and support installation operations.
                                  environment
        The Army's fiscal year 2015 budget requests $1.149 billion for its
    Environmental Programs in support of current and future readiness. This
    budget supports legally-driven environmental requirements under
    applicable Federal and state environmental laws, BRAC authority,
    binding agreements, and Executive orders. It also promotes stewardship
    of the natural resources that are integral to our capacity to
    effectively train our land-based force for combat.
        This budget maintains the Army's commitment to acknowledge the past
    by restoring Army lands to a usable condition and by preserving
    cultural, historic, and Tribal resources. It allows the Army to engage
    the present by meeting environmental standards that enable Army
    operations and protect our soldiers, families, and communities.
    Additionally, it charts the future by allowing the Army to
    institutionalize best practices and technologies to ensure future
    environmental resiliency.
                    sustainment/restoration & modernization
        This year's sustainment funding is $2.4 billion or 62 percent of
    the OSD Facilities Sustainment Model requirement for all the Army
    components. Due to this lower level of sustainment funding, we are
    accepting a level of risk in degraded facilities due to deferred
    maintenance. Our facility inventory is currently valued at $329
    billion.
        In keeping with the FIS, the Army continues its investment in
    facility restoration through the O&M restoration and modernization
    account ($358 million). Our focus is to restore trainee barracks,
    enable progress toward energy objectives, and provide commanders with
    the means of restoring other critical facilities. The Army's demolition
    program has been reduced by 36 percent to $22.7 million, which slows
    our rate of removal of failing excess facilities. Facilities are an
    outward and visible sign of the Army's commitment to providing a
    quality of life for our soldiers, families, and civilians that is
    consistent with their commitment to our Nation's security.
                            base operations support
        The Army's fiscal year 2015 Base Operations Support (BOS) request
    is $8.6 billion and represents a 17 percent reduction compared to
    fiscal year 2013 execution. Although this reduction is in accordance
    with the BCA, Army's fiscal year 2015 BOS funding will create
    challenges to our installations as they seek to provide a sustainable
    base for training and quality of life for our military families. The
    Army's fiscal year 2015 installation funding strategy continues to
    prioritize Life, Health, and Safety programs and services ensuring
    soldiers are trained and equipped to meet the demands of our Nation.
    The Army remains committed to its family programs and continues to
    evaluate these services in order to maintain relevance and
    effectiveness. Ensuring the resiliency of our soldiers and families is
    the priority of programs such as Army Substance Abuse Program, Soldier
    Family Assistance Centers, and Suicide Prevention.
        We continue to seek internal efficiencies/tradeoffs as
    sequestration is producing real-life consequences on our installations.
    Army continues to face challenges meeting day-to-day installation
    readiness requirements. Army installations and local communities felt
    the effects of sequestration in fiscal year 2013. Our efforts to
    balance expectations and stretch funding involve a contract management
    review process that enables better visibility for making decisions on
    how to terminate/down-scope, modify, or bundle current contracts to
    reduce overhead rates and compete for better rates. Without a reduction
    in the number of installations, the Army will be forced to sacrifice
    quality of life programs at the expense of maintaining excess capacity.
    The cumulative effect of funding reductions over the years stress the
    overall quality of life on our installations and adjoining communities
    as the Army realigns its military and civilian population and reduces
    supporting service program contracts across the garrisons.
                      intergovernmental support agreements
        Under the authority provided in the NDAA for Fiscal Year 2013,
    section 331 (codified as 10 U.S.C. 2336), the Services may provide,
    receive, or share installation support services with their community
    counterparts if determined to be in the best interests of the
    department. Key elements include the ability to sole source to public
    entities; that State or local government wage grades may be used; and
    that the Intergovernmental Support Agreements (IGSAs) serve the best
    interests of the Department by enhancing mission effectiveness or
    creating efficiencies and economies of scale, including by reducing
    costs.
        The Army developed an overarching strategy and is following its
    implementation plan to use the expanded public-public partnership
    authority to enter into IGSAs. An execution order was issued to Army
    Commands to collect, benchmark, and analyze data for potential IGSAs.
    From the information gathered from the Commands, 29 IGSAs have been
    proposed. As of December 2013, four proposals are being developed in
    conjunction with local communities. Once complete, the agreements will
    be submitted to Army headquarters for final approval. These initial
    proposals will assist the Army in developing a standardized process for
    identifying, evaluating, and approving IGSAs.
                                   conclusion
        The Army's fiscal year 2015 installations management budget request
    is a balanced program that supports the Army as it transitions from
    combat, and supports our soldiers, families, and civilians, while
    recognizing the current fiscal conditions.
        The Army's end strength and force structure are decreasing. At
    490,000 Active component soldiers, we have initial evidence that the
    Army will have about 18 percent excess capacity. The Army needs the
    right tools to reduce excess capacity. Failure to reduce excess
    capacity is tantamount to an ``empty space tax'' diverting hundreds of
    millions of dollars per year away from critical training and readiness
    functions.
        BRAC is a proven and fair means to address excess capacity. BRAC
    has produced net savings in every prior round. On a net $13 billion
    investment, the 2005 BRAC round is producing a net stream of savings of
    $1 billion a year. In this case, BRAC 2005 is producing a non-inflation
    adjusted 7.7 percent annual return on investment. That is a successful
    investment by any definition. A future round of BRAC is likely to
    produce even better returns on investment. We look forward to working
    with Congress to determine the criteria for a BRAC 2017 round.
        In closing, thank you again for the opportunity to appear before
    you today and for your continued support for our soldiers, families,
    and civilians.

        Senator Shaheen. Thank you, Secretary Hammack.
        We have had a slight change of process. Senator Ayotte has
    gone to vote. We are going to keep the hearing going, and when
    she returns, I will go vote. I am not sure when Senator Hirono
    wants to vote, but that way, we can keep the testimony going
    and we will not delay everyone as much.
        Secretary McGinn.

    STATEMENT OF HON. DENNIS V. McGINN, ASSISTANT SECRETARY OF THE
            NAVY FOR ENERGY, INSTALLATIONS, AND ENVIRONMENT

        Mr. McGinn. Chairwoman Shaheen, Senator Hirono, you have,
    in your opening statements, outlined key important issues that
    are relevant to our program for fiscal year 2015.
        In the interest of time, I would simply like to submit my
    written statement for the record. I look forward to answering
    your questions about our program that we believe best supports
    giving the funding available to the finest expeditionary force
    the world has ever known, our Navy and Marine Corps, and their
    families and the civilians that support them.
        Thank you very much, madam chairwoman.
        [The prepared statement of Mr. McGinn follows:]
                  Prepared Statement by Hon. Dennis V. McGinn
        Chairwoman Shaheen, 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.
     the challenge of ``forward presence'' & achieving balanced investments
        From our Nation's infancy, the U.S. Navy and Marine Corps Team has
    operated far from our shores to protect our vital security and economic
    interests. ``Forward presence'' is no less important today than in 1802
    when Congress authorized President Jefferson to ``employ such of the
    armed vessels of the United States as may be judged requisite . . . for
    protecting effectually the commerce and seamen thereof on the Atlantic
    ocean, the Mediterranean and adjoining seas.'' The nature of today's
    threats, however, is far more lethal and insidious than 200 years ago.
    The means and methods available to those who wish us harm range in
    sophistication from advanced nuclear and cyber weaponry to improvised
    explosive devices detonated by cell phone. Our Navy and Marine Corps
    must be manned, trained, and equipped to deter and respond to
    belligerent actors wherever, whenever, and however they strike.
        Yet the fiscal imperative to reduce the Nation's debt and control
    the deficit introduces additional complexity as the Department strives
    to strike the right balance of resources, risk, and strategy. The
    Navy's President's budget for fiscal year 2015 (PB 2015) supports the
    2014 Quadrennial Defense Review, which embodies key elements of the
    2012 Defense Strategic Guidance and is informed by the Strategic
    Choices and Management Review completed last year. Fortunately, prudent
    infrastructure investments made in prior years will enable the
    Department to achieve forward presence without undermining the shore
    establishment in the near term. We welcome the additional flexibility
    Congress provided in the Balanced Budget Act of 2013, but challenges
    remain.
                        investing in our infrastructure
    Overview
        Our installations provide the backbone of support for our maritime
    forces, enabling their forward presence. The Department is requesting
    $10.5 billion in various appropriations accounts, a reduction of $1.6
    billion from amounts appropriated in fiscal year 2014 to operate,
    maintain, and recapitalize our shore infrastructure. Figure 1 provides
    a comparison between the fiscal year 2014 enacted budget and the PB
    2015 request by appropriation.

        While the overall fiscal year 2015 budget request represents an
    appreciable reduction from previous years, it demonstrates continued
    investment to enhance combatant commanders' capabilities, continue
    support for the introduction of new weapons systems and platforms,
    maintain servicemember and family quality of life, and recapitalize
    aging infrastructure. The fiscal year 2015 budget also manifests the
    Department's commitment to energy security by funding cost effective
    efforts that will improve our energy infrastructure and reduce our
    consumption.
    Military Construction
        Our fiscal year 2015 President's budget request of just over $1
    billion supports several key objectives of 2014 Quadrennial Defense
    Review. For instance, the Navy and Marine Corps are investing
    approximately $181 million to enhance warfighting capabilities in the
    Asia-Pacific region including: facilities that will support current and
    future Marine Corps training requirements on Guam ($51 million);
    modifications to existing facilities that enables the Marine Corps to
    relocate its unmanned aerial vehicle squadron to Marine Corps Base
    Hawaii ($51 million); and a submarine training facility at Joint Base
    Pearl Harbor-Hickam, HI ($9.7 million).
        Additionally, the Navy is investing over $80.3 million in projects
    such to support the basing of the new P-8A Poseidon in Washington State
    ($24.4 million) and Florida ($21.7 million) that will ensure the United
    States remains capable of projecting power in anti-access and area
    denial environments. The fourth and final increment of the Explosive
    Handling Wharf ($83.8 million) at Naval Submarine Base Bangor and the
    Transit Protection System at Port Angeles ($20.6 million), both in
    Washington State, support the objective of maintaining a safe, secure,
    and effective nuclear deterrent. Finally, the Department is investing
    $81 million in laboratories and testing facilities to sustain key
    streams of innovation and maintain our technological advantage over
    potential adversaries.
        The Department continues efforts to reduce our energy costs. The
    fiscal year 2015 request includes $47 million to decentralize steam
    plants at Naval Base San Diego, installing new gas-fired energy
    efficient space and domestic water-heating systems for 10 piers and
    approximately 45 buildings. Additionally, the Department will benefit
    from nearly $55 million in energy and water conservation projects
    funded through the Defense-Wide Energy Conservation Investment Program.
    These funds will increase sources of cost effective renewable energy
    ($14.6 million); improve water conservation efforts ($2.4 million); and
    increase energy efficiency in many other locations ($30.7 million).
    While the Department plans to invest another $271 million of operations
    and maintenance funding in shore energy projects; however, the
    reduction of $930 million in SRM/O&M and Base Operating Support (Figure
    1 above) from the fiscal year 2014 levels--and compounded by the fiscal
    year 2013 sequester--will make the statutory energy intensity goals
    more difficult to achieve. Moreover, reduced investments 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 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 operation and maintenance 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, and heating and cooling
    systems).
        The Navy budgeted $1.3 billion (70 percent of the model) in fiscal
    year 2015, an increase of $62 million (7 percent) enabled by the
    additional topline provided in the Balanced Budget Act of 2013. The
    Marine Corps funds sustainment at 75 percent of the model ($498.8
    million), dropping below the DOD goal for the first time since the
    criteria was established. Both Services will manage the risk to its
    shore infrastructure by prioritizing work to address life-safety issues
    and mission-critical facilities in poor condition.
        Restoration and Modernization provides major upgrades of our
    facilities. In fiscal year 2015, the Department of the Navy proposes a
    total investment of $1 billion to restore and modernize existing
    infrastructure: $427 million in Military Construction projects, $361
    million in Operation and Maintenance funds, and $216 million in Working
    Capital funds.
                            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.
    Training and Education
        Of the $1 billion request for military construction, the Navy and
    Marine Corps together have programmed over $301 million in operational
    and technical training and academic facilities. For example, the Navy
    will construct facilities to support training for the Littoral Combat
    Ships homeported at Naval Station Mayport ($20.5 million) and will
    continue efforts begun in fiscal year 2014 to accommodate increased
    student loading at the Nuclear Power Training Unit in South Carolina
    ($35.7 million). Finally, the Department will construct a Cyber
    Securities Studies Building ($120.1 million) at the U.S. Naval Academy
    to develop sophisticated and technically savvy Navy and Marine Corps
    officers able to leverage our strategic advantage in the cyber domain.
    Unaccompanied Housing
        The Navy plans to make $35 million in operations and maintenance-
    funded repairs to its bachelor housing inventory, focusing on the
    barracks in the worst condition. The Marine Corps completed its program
    of substantial investment in unaccompanied housing in support of the
    Commandant's Barracks Initiative. Its fiscal year 2015 investment will
    provide new berthing facilities at Naval Weapons Station, Yorktown, VA,
    enabling the Marine Corps Security Force Regiment and its Fleet
    Antiterrorism Security Teams to continue consolidating various elements
    that are dispersed within the Hampton Roads area.
    Family Housing
        The Department 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 relies on government-owned, privatized,
    or leased housing. The fiscal year 2015 budget request of $370 million
    supports Navy and Marine Corps family housing operation, maintenance,
    and renovation requirements, including $16 million to revitalize 44
    homes at Marine Corps Air Station Iwakuni, Japan. The budget request
    also includes $260.2 million that will provide for the daily operation,
    maintenance, and utilities expenses necessary to manage its military
    family housing inventory.
        To date, over 60,000 Navy and Marine Corps family housing units
    have been privatized through the Military Housing Privatization
    Initiative. As a result, the Department has leveraged its resources to
    improve living conditions for the majority of sailors, marines, and
    their families. The Department has programmed $27.9 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. Although the Navy and
    Marine Corps have identified several remaining phases associated with
    existing projects, no funds are requested in the fiscal year 2015
    budget.
                             managing our footprint
    Overview
        It is a basic tenet that the Department of Defense 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
        The Navy is completing its evaluation of various basing scenarios,
    including joint use, at its four primary bases in Europe: Naval Station
    Rota, Naval Air Station Sigonella, and the Naval Support Activities in
    Naples and Souda Bay These analyses will inform the basis for DOD
    recommendations that are expected to be released in spring 2014.
    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, and the
    Department of the Navy supports the administration's request to
    authorize a single round of BRAC in 2017. Since the first round of BRAC
    in 1988, the Navy has closed 186 domestic installations and activities,
    including 52 major installations. Figure 2 demonstrates the evolution
    of the Department's force structure since 2005:

        The Department has programmed $95 million and plans to utilize an
    additional $43 million in prior year funds to continue environmental
    cleanup, caretaker operations, and property disposal. By the end of
    fiscal year 2013, we had disposed 93 percent of our excess property
    identified in prior BRAC rounds through a variety of conveyance
    mechanisms with less than 14,000 acres remaining. Here are several
    examples of what we were able to achieve in the past year.
        In May 2013, the Department conveyed 1,917 acres at the former
    Naval Station Roosevelt Roads to the Commonwealth of Puerto Rico Local
    Redevelopment Authority under an Economic Development Conveyance
    bringing the total property transferred to over 8,521 acres. The same
    month, the Department also conveyed the 118 acre Federal City West
    Property at Naval Support Activity New Orleans to the Algiers
    Development District. The remaining 24 acres of the East Bank Property
    was conveyed to the City of New Orleans via an Economic Development
    Conveyance in October 2013.
        In June 2013, the Department completed the Phase I conveyance of
    1,380 acres at the former Naval Air Station Alameda to the City of
    Alameda under a No-Cost Economic Development Conveyance. This
    conveyance is the first significant transfer of property at NAS Alameda
    since 2000.
        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 21 installations remaining with property to
    dispose. We anticipate reducing this number by four 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 cleanup and disposal challenges from prior BRAC rounds remain,
    we continue to work with regulatory agencies and communities to tackle
    complex environmental issues 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 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, 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.
        The Department of Defense 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 and
    restrictive easements in partnership with States, local governments,
    and non-governmental organizations. Figure 3 represents the activity
    and funding for restrictive easements the Department acquired in fiscal
    year 2013:

        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 understands that energy exploration, on land and
    off-shore, plays a crucial role in our Nation's security and are
    activities not necessarily incompatible with military training.
    However, we must continue to actively work to sustain freedom of
    maneuver or avoidance of restrictions to tactical action in critical
    range space to ensure 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
    mission compatibility evaluation of 2,075 proposed energy projects
    submitted through the Federal Aviation Administration Obstacle
    Evaluation process during calendar year 2013. Ninety-six percent
    (1,992) of the projects were assessed to have little or no impact on
    military operations. As of December 31, 2013, the remaining 4 percent
    (84 projects) were either still under review (76) or assessed to have
    sufficient adverse impact to military operations and readiness (8) to
    warrant establishment of a Mitigation Response Team (MRT). The MRTs
    were established to engage in mitigation discussions with the developer
    to determine whether agreements can be reached to prevent negative
    impacts to military training and readiness.
                           protecting our environment
    Overview
        The Department 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. The
    funding request for fiscal year 2015 is about 8 percent less than
    enacted in fiscal year 2014, as shown in Figure 4. Included in this
    request are two military construction projects totaling $58 million: a
    replacement for the water treatment plant at Marine Corps Air Station,
    Cherry Point, NC ($41.6 million) and a collection system that will
    capture industrial process water from the dry docks at Puget Sound
    Naval Shipyard for treatment prior to discharge ($16.4 million).

        The Department continues to be a Federal leader in environmental
    management by focusing our resources on achieving specific
    environmental goals, achieving efficiencies in our cleanup programs,
    proactively managing emerging environmental issues, and integrating
    sound environmental policies and lifecycle cost considerations into
    weapon systems acquisition to achieve cleaner, safer, more energy-
    efficient, and affordable warfighting capabilities.
    Conservation and Military Training are Compatible
        Last year, the Department of the Navy highlighted our conservation
    achievements on the Navy's San Nicolas Island and San Clemente Island
    off the coast of California, which 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. This delisting
    reflected our successful recover efforts for these species and will
    also reduce the regulatory encumbrances the Navy experiences at San
    Clemente Island--the Navy's premier land, air, and sea combination live
    fire range. The Navy appreciates congressional approval in 2014 of our
    land withdrawal requests, as this provides us the opportunities to
    exercise our stewardship skills which provide for critical military
    training lands while simultaneously managing those lands for species
    recovery.
                           relocating marines to guam
    Overview
        Guam remains an essential part of the United States' larger Asia-
    Pacific strategy of achieving a more geographically distributed,
    operationally resilient, and politically sustainable force posture in
    the region.
    Moving Forward
        The Department appreciates the limited exceptions provided in the
    National Defense Authorization Act for Fiscal Year 2014, as well as the
    authorization and appropriation of nearly $86 million for construction
    of the Marine Corps hangar at the North Ramp of Andersen Air Force
    Base. Together, these provisions will enable the Relocation to stay on
    track and support current and future Marine Corps training activity in
    Guam and the Commonwealth of the Northern Marianas Islands. The scope
    of the ongoing Supplemental Environmental Impact Statement, which the
    Department expects to release a draft for public comment in spring
    2014, includes the live fire training range complex, alternatives for
    the location of the main cantonment area, family housing, and
    associated infrastructure. Presently, the Department anticipates
    signing a record of decision in spring 2015.
        The fiscal year 2015 budget request includes funding for two
    military construction projects on Guam for a total investment of $51
    million: Ground Support Equipment Shops ($21.9 million) and facilities
    for the Marine Wing Support Squadron ($28.8 million). Both projects
    support current and future operations and were addressed in the Record
    of Decision signed in September 2010.
        Finally, the United States and Japan are continuously looking for
    more efficient and effective ways to achieve the goals of the
    Realignment Roadmap. Toward this end, the Governor of Okinawa signed
    the landfill permit request to build the Futenma Replacement Facility
    (FRF) at Camp Schwab on December 26, 2013. While the United States and
    Japan no longer link the requirement of ``tangible progress'' on FRF
    construction to the relocation effort, this is another indication of
    Japan's commitment to the Roadmap. Both countries remain steadfast in
    maintaining and enhancing a robust security alliance, and the United
    States remains committed to enhancing the U.S.-Japan Alliance and
    strengthening operational capabilities.
                               fueling our future
    Overview
        Power and energy are central to our naval forces and our ability to
    be in the right place, around the world. It is what we need to get them
    there and keep them there. The Navy has a long, proud history of energy
    innovation. From sail to coal to oil to nuclear, and now to alternative
    fuels, the Navy has led the way.
    The Strategic Imperative
        Energy is a national security issue and can be, and is, used as a
    geostrategic weapon. Even with domestic oil production up, imports
    declining, and new oil and gas reserves being discovered, energy is
    still a security concern and military vulnerability. DOD is the largest
    single institutional consumer of fossil fuels on earth and budgets
    about $15 billion each year on fuel. The more we spend on fuel, whether
    from increased consumption or increased unit cost, the fewer resources
    we have for maintenance and training. But more importantly, the cost of
    meeting our high fuel demand can also be measured in the lives of
    marines killed or wounded guarding fuel convoys. During the height of
    operations in Afghanistan, we were losing 1 marine, killed or wounded,
    for every 50 convoys transporting fuel into theater. That is far too
    high a price to pay. Burning cleaner fuel, or burning less fuel, is
    better for the environment but that is not our primary incentive. We're
    pursuing these alternatives because they can make us better
    warfighters.
        Under a Presidential Directive, the Department of the Navy is
    working with the Departments of Energy and Agriculture to help promote
    a national biofuel industry. This past year, under the authority in
    Title III of the Defense Production Act (DPA), we took an important
    step forward, with a DOD DPA award to four companies which committed to
    produce 160 million gallons of drop-in, military-compatible biofuels
    each year at an average price of well below $4.00 per gallon, a price
    that is competitive with what we are paying today for conventional
    fuels. DOD policy and my prior commitment has been that we will only
    buy operational quantities of biofuels when they are cost competitive.
    This initiative moves us far down that road. At full production,
    biofuels combined with conventional fuel at a 50/50 blend hold the
    promise of being able to cost-effectively provide our fleet with much
    of its annual fuel demand, providing real competition in the liquid
    fuels market.
        We also continue to develop our energy efficiency through research
    and development of more efficient propulsion systems, shore-based power
    management and smart-grid technology, and conservation measures. For
    example, in the past year the Naval Facilities Engineering Command's
    Engineering and Expeditionary Warfare Center provided technology
    demonstrators at Camp Lemonnier, Djibouti which reduced fuel
    consumption 9 percent base wide, even with a 3 percent increase in
    energy demand because of an increased population. At Joint Base Pearl
    Harbor Hickam a $2.2 million contract for the Daylight Project was
    awarded, which will use sunlight to light warehouse spaces and utilize
    photo sensors to automatically turn off lights when daylight levels are
    sufficient. In aggregate, fiscal year 2013 energy programs in Hawaii
    are projected to save the government $4.7 million a year. The Marine
    Corps' development of expeditionary power solutions, through the
    Experimental Forward Operating Bases has made them better warriors who
    are lighter and more agile in the face of today's global threats.
        The Navy has a long and successful history of partnering with
    industry to promote business sectors and products important to our
    Nation's military and economic security. From the development of the
    American steel industry to nuclear power, the Navy has helped the
    country develop economically while helping sailors benefit from the
    cutting edge of technology to defend our Nation. These programs are
    about diversifying fuel supplies, stabilizing fuel costs, and reducing
    overall energy needs. In achieving these energy goals, we will maximize
    our reach and maintain our global presence and make our Navy and Marine
    Corps more combat capable.
                                   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. As the threats facing our Nation continue to evolve, the fiscal
    reality creates its own challenges in striking the right balance. The
    Department's fiscal year 2015 request supports critical elements of the
    2014 Defense Quadrennial Review by making needed investments in our
    infrastructure and people; reducing our world-wide footprint; and
    preserving access to training ranges, afloat and ashore.
        Thank you for the opportunity to testify before you 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.

        Senator Shaheen. Thank you.
        Ms. Ferguson.

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

        Ms. Ferguson. Good morning, Chairwoman Shaheen and
    distinguished members of the subcommittee. Thank you for the
    opportunity to speak to you today about the Air Force's MILCON,
    environmental, energy, and base closure programs. On behalf of
    the Secretary of the Air Force, Ms. Deborah Lee James, and the
    Chief of Staff of the Air Force, General Mark A. Welsh III,
    USAF, I would like to thank the subcommittee for your
    unwavering support to the Air Force and our airmen.
        The current fiscal environment required the Air Force to
    make some difficult choices. We attempted to strike the balance
    between a ready force today and a modern force tomorrow. To
    help achieve the balance, the Air Force took risk in
    installations support, MILCON, and facilities sustainment
    programs.
        In this budget, the Air Force is asking for $1.9 billion in
    MILCON, family housing, and BRAC. This reflects a 28 percent
    decrease in MILCON. We deferred infrastructure recapitalization
    requirements while supporting combatant commander requirements
    and weapons system beddowns like the KC-46 and the F-35. This
    budget request also distributes MILCON funding equitably
    between the Active, Guard, and Reserve components.
        The Air Force is the largest single consumer of energy in
    the Federal Government, with over $9 billion spent last year to
    fly aircraft and power our installations. In fiscal year 2015,
    we are requesting over $600 million for energy initiatives to
    identify opportunities and invest in solutions. So far, our
    efforts have helped us avoid $2.7 billion in total fuel and
    electricity costs just last year, compared to baseline years.
        At 86 percent, our aviation fuel represents the largest
    share of our energy bill. To address this, the Air Force has a
    goal to improve aviation energy efficiency of our fleet by 10
    percent by 2020. While there are significant upfront costs to
    those improvements, there are also significant long-term
    savings. For example, we are working to re-engine the KC-135 by
    upgrading the engine's high pressure components. This effort
    will improve each engine's efficiency, reliability, and
    maintainability, and while it costs nearly $100 million, this
    investment is expected to save approximately 85 million gallons
    worth of fuel through 2046. Additionally, there are maintenance
    savings which will start in 2025, and they should save an
    additional $3.1 billion.
        The Air Force has also reduced its facility energy
    intensity by over 22 percent since 2003, and last year resulted
    in savings or cost avoidance of $270 million.
        Right now, we are working to meet our target to develop
    over $400 million in energy efficiency contracts, and these
    projects are a win-win. They address our sustainment shortfalls
    and implement new technology and obtain funding through third
    party financing.
        Last year, 8 percent of electricity came from renewable
    energy, which was above our goal of 7.5 percent, and we are
    continuing to build on our successes. Just recently, we cut the
    ribbon on a 16.4 megawatt solar array at Davis-Monthan Air
    Force Base in Arizona, the largest of its kind on any DOD
    installation.
        My closing topic is BRAC, and the bottom line for the Air
    Force is we need another round of BRAC and to support the
    fiscal year 2015 President's budget request. While the Air
    Force has not done a recent capacity analysis, our analysis
    from 2004 estimated that we had 24 percent excess
    infrastructure capacity. BRAC 2005 directed the Air Force to
    close under 1 percent of our plant replacement value. Since
    that time, the Air Force has reduced aircraft by more than 500,
    our military end strength by nearly 8 percent, and in our
    fiscal year 2015 budget request, have asked to reduce force
    structure and military personnel even further. Even though we
    have not done an updated capacity analysis, we intuitively know
    we have excess infrastructure capacity and continue to spend
    dollars maintaining that that could be put toward readiness and
    modernization.
        In conclusion, the Air Force made hard choices to our
    budget formulation. We attempted to strike the delicate balance
    of a ready force today and a modern force tomorrow, while
    adjusting to budgetary reductions. To help achieve that
    balance, the Air Force elected to accept risk in installations
    support, MILCON, and facilities sustainment. We believe this
    risk is prudent and manageable in the short term, but we must
    continue the dialogue on right-sizing our installations for a
    footprint that is smaller but more capable.
        Members of the subcommittee, thank you for your strong
    support of the airmen and men and women of the U.S. Air Force,
    Active, Guard, Reserve, and civilians.
        This concludes my statement. I look forward to your
    questions.
        [The prepared statement of Ms. Ferguson follows:]
                 Prepared Statement by Ms. Kathleen I. Ferguson
                                  introduction
        The mission of the U.S. Air Force is to fly, fight and win . . . in
    air, space and cyberspace. We do so through our six core capabilities
    of air and space superiority, global strike, rapid global mobility,
    precision engagement, information superiority, and agile combat
    support. These capabilities 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. As such, the health
    of our installations, environment, and energy programs directly
    contributes to overall Air Force readiness.
                                 installations
        Ready installations are an integral part of ensuring a ready Air
    Force. We view our installations as foundational platforms comprised of
    both built and natural infrastructure which: (1) serve as enablers for
    Air Force enduring core missions--we deliver air, space and cyberspace
    capabilities from our installations; (2) send a strategic message to
    both allies and adversaries--they signal commitment to our friends, and
    intent to our foes; (3) foster partnership-building by stationing our
    airmen side-by-side with our coalition partners; and (4) enable
    worldwide accessibility in times of peace, and when needed for
    conflict. Taken together, these strategic imperatives require us to
    provide efficiently operated sustainable installations to enable the
    Air Force to support the Defense Strategic Guidance.
        In our fiscal year 2015 President's budget request, the Air Force
    attempted to strike the delicate balance between a ready force for
    today with a modern force for tomorrow while also recovering from the
    impacts of sequestration and adjusting to budget reductions. To help
    achieve that balance the Air Force elected to accept risk in
    installation support, military construction (MILCON), and facilities
    sustainment. The Air Force funded facilities sustainment at 65 percent
    of the Office of the Secretary of Defense's (OSD) Facilities
    Sustainment Model; reduced the restoration and modernization account by
    33 percent and MILCON by 28 percent from the fiscal year 2014
    President's budget. In doing so, we acknowledge near-term facilities
    sustainment, restoration & modernization, and MILCON program reductions
    will have long term effects on the health of infrastructure. However,
    these reductions are critical to maintaining adequate resourcing across
    the Future Years Defense Program for some of the Air Force's unique
    capabilities.
        In total, our fiscal year 2015 President's budget request contains
    $3.32 billion for MILCON, facility sustainment, restoration and
    modernization, as well as another $328 million for Military Family
    Housing operations and maintenance. For sustainment, restoration, and
    modernization, we request $2.3 billion; and for MILCON, we request $956
    \1\ million, which is $366 million less than our fiscal year 2014
    President's budget request. This decrease in MILCON defers
    infrastructure recapitalization requirements while supporting combatant
    commander requirements, weapon system beddowns, capabilities to execute
    the Defense Strategic Guidance, and distributes MILCON funding
    equitably between Active, Guard, and Reserve components.
    ---------------------------------------------------------------------------
        \1\ $956 million is the Total Force funding request including
    Active, Guard, and Reserve
    ---------------------------------------------------------------------------
                                   readiness
        Our fiscal year 2015 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 space posture at Clear Air
    Force Station, AK, and support Total Force cyberspace and intelligence,
    surveillance, and reconnaissance projects at several locations
    including W.K. Kellogg Airport, MI; Willow Grove, PA; and Des Moines
    International Airport, IA.
        Consistent with Defense Strategic Guidance, the Asia-Pacific
    Theater is a key focus area for the Air Force where we will make key
    investments to ensure our ability to project power into areas which may
    challenge our access and freedom to operate, and continue efforts to
    enhance resiliency. Guam remains one of the most vital and accessible
    locations in the western Pacific. For the past 8 years, Joint Region
    Marianas-Andersen Air Force Base (AFB) has accommodated a continuous
    presence of our Nation's premier air assets, and will continue to serve
    as the strategic and operational center for military operations in
    support of a potential spectrum of crises in the Pacific.
        To fully support Pacific Command's strategy, the Air Force is
    committed to hardening critical infrastructure, mitigating asset
    vulnerabilities, and increasing redundancy, as part of Pacific Airpower
    Resiliency. In 2015, we plan to continue the development of the Pacific
    Regional Training Center by constructing a combat communications
    infrastructure facility, a Red Horse logistics facility, and a
    satellite fire station. 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 2015 President's budget request includes key
    infrastructure investments to support the beddown of the F-35A and KC-
    46A. Our ability to support the beddowns of our new fighter and tanker
    aircraft depends on meeting construction timelines for critical
    infrastructure--facilities such as aircraft maintenance hangars,
    training and operations facilities, and apron and fuels infrastructure.
    This year's President's budget request includes $187 million for the
    beddown of the KC-46A at three locations. This consists of $34 million
    at McConnell AFB, KS, the preferred alternative for Main Operating Base
    (MOB) 1, $111 million at Tinker AFB, OK, for KC-46A depot maintenance,
    and $42 million at Pease International Tradeport Air National Guard
    Base, NH, the preferred alternative for MOB 2. This request also
    includes $67 million for the beddown of the F-35A at two locations,
    consisting of $40 million at Nellis AFB, NV, and $27 million at Luke
    AFB, AZ.
        Our fiscal year 2015 program also supports vital combatant
    commander priorities, such as continuation of a multi-year effort to
    recapitalize the U.S. Strategic Command headquarters facility at Offutt
    AFB, NE, construction of the U.S. Cyber Command Joint Operations Center
    at Fort Meade, MD, and construction of the U.S. European Command Joint
    Intelligence Analysis Center Consolidation (Phase 1) at RAF Croughton,
    United Kingdom.
                                     people
        During periods of fiscal turmoil, we must never lose sight of our
    airmen and their families. Airmen are the source of Air Force airpower.
    Regardless of the location, the mission, or the weapon system, our
    airmen provide the knowledge, skill, and determination to fly, fight,
    and win. There is no better way for us to demonstrate our commitment to
    servicemembers and their families than by providing quality housing on
    our installations. We are proud to report that as of September 2013,
    the Air Force has privatized our military family housing at each of our
    stateside installations. To date, the Air Force has awarded 32 projects
    at 63 bases for 53,323 end state homes.
        The Air Force continues to manage more than 18,000 government-owned
    family housing units at overseas installations. We use Military Family
    Housing Operations and Maintenance sustainment funds to sustain
    adequate units, and MILCON to upgrade and modernize homes older than
    20-plus years, to meet the housing requirements of our airmen and their
    families, and the joint servicemembers we support overseas.
        Similarly, our focused and efficient investment strategy for
    dormitories has enabled the Air Force to remain on track to meet the
    DOD goal of 90 percent adequate permanent party dorm rooms for
    unaccompanied airmen by 2017. The fiscal year 2015 President's budget
    request for MILCON includes one dormitory at Hanscom AFB, MA--our
    Dormitory Master Plan's top priority. With your support, we will
    continue to ensure wise and strategic investment in these quality of
    life areas providing modern housing and dormitory communities. More
    importantly, your continued support will take care of our most valued
    asset, our airmen and their families.
                           closures and realignments
        We do all of this while recognizing that we are carrying
    infrastructure that is excess to our needs. This excess infrastructure
    and pending future force structure and personnel reductions make it
    clear the Air Force needs another round of Base Realignment and Closure
    (BRAC).
        While we have no recent excess infrastructure capacity analysis
    from which to draw, the Department's capacity analysis from 2004
    estimated that the Air Force had 24 percent excess infrastructure
    capacity. BRAC 2005 directed the Air Force to close only 8 minor
    installations and 63 realignments affecting 122 installations. Since
    then the Air Force has 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 we still have excess infrastructure.
        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 44.2 million square feet of aging
    building space that was excess to our needs and we estimate the
    resultant savings at greater than $300 million. We have demolished
    antiquated administrative facilities, ill-suited for today's
    technological age; we have eliminated aircraft operations and
    maintenance facilities that we no longer need based on reductions to
    the size of our aircraft fleet; and 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.
        Despite our best efforts and the innovative programs, the Air Force
    continues to spend money maintaining excess infrastructure that would
    be better spent recapitalizing and sustaining our weapons systems,
    training to improve readiness, and investing in the quality of life
    needs of our airmen. Divestiture of excess property on a grander scale
    is a must; the Air Force strongly supports DOD's fiscal year 2015
    President's budget request for another round of BRAC.
                     european infrastructure consolidation
        The Secretary of Defense directed a capacity analysis to explore
    opportunities for reducing long-term expenses through infrastructure
    consolidation in Europe, and the Air Force fully supports this effort.
    Since 1990, the Air Force has reduced the number of MOBs in Europe from
    25 to 6 and reduced the number of aircraft, personnel, and
    infrastructure in Europe by almost 75 percent. Currently, the Air Force
    is thoroughly evaluating its European infrastructure. Today we operate
    from six main operating bases to support our North Atlantic Treaty
    Organization commitments and provide throughput and global access for
    six unified combatant commands. We removed one A-10 squadron in Europe
    in fiscal year 2013, programmed for the reduction in the level of
    operations at Lajes Field, Portugal to better match infrastructure
    requirements to mission demand, and divested one Air Control Squadron
    and two Air Support Operations Squadrons. Through the OSD-led European
    Infrastructure Consolidation study, we are using a comprehensive
    process to analyze a variety of scenarios.
                                 environmental
        Our environmental programs priorities are to: (1) comply with legal
    obligations; (2) reduce risk; and (3) continuously improve. The
    President's 2015 budget request seeks a total of $919 million for
    environmental programs. This is $127 million less than last year and
    reflects savings in two broad areas--centralized program management and
    innovative acquisition strategies. Through centralized program
    management, Air Force has reduced approximately 12 percent of our
    overhead and management costs allowing us to eliminate 270 positions.
    Further, our environmental programs are designed to provide the
    mission-ready people, infrastructure, and natural resources necessary
    to meet mission requirements today and tomorrow.
                           environmental restoration
        Our fiscal year 2015 President's budget request seeks $494 million
    in Environmental Restoration funding for cleanup of both current
    installations and those closed during previous BRAC rounds. We
    established our cleanup program in 1984 to clean-up former hazardous
    waste disposal sites on these installations. Our focus has been on
    completing investigations and getting remedial actions in place, to
    reduce unacceptable risk to human health and the environment in a
    prioritized manner. Ultimately, we seek to make real property available
    for mission use at our non-BRAC installations, or for transfer and
    reuse at our BRAC installations. We believe this balanced approach
    continues to serve our mission needs, our regulators' requirements, and
    our stakeholders' interests well.
        With over 7,100 restoration sites at our non-BRAC installations,
    and over 5,800 sites at our BRAC installations, the Air Force has made
    progress over time in managing this complex program area. In addition
    to regulatory and mission requirements, the DOD has committed to
    restoration program execution goals to help ensure an acceptable pace
    is maintained in program execution. While our BRAC restoration sites
    are on-track to meet the next DOD milestone to have 95 percent
    remedies-in-place by the end of fiscal year 2014, our non-BRAC
    restoration sites are currently projected to fall 19 percent short of
    this goal.
        In early 2011, we recognized our performance for this goal at our
    non-BRAC restoration sites was not acceptable and put into place a new
    policy and a new contracting strategy specifically to improve our
    performance. Since a large component of our cleanup program relies on
    expertise acquired under contracts, this policy made a change to fixed-
    price, performance-based contracts that reward increased use of
    innovative technologies and cleanup strategies that consider the total
    life cycle cost of getting remedies in place and sites cleaned up.
        After 2-plus years of focused effort, our new policy and
    performance-based contracting strategy has generated substantial
    improvements, but work still remains to meet DOD goals for non-BRAC
    installation cleanup. With our new approach, we are finding better
    solutions and are cleaning up sites faster with lower projected
    lifecycle costs. Due to the efficiency and effectiveness of this
    approach, we expect our performance and progress to accelerate over the
    next year.
        We continue to meet Federal, State, and other stakeholder
    requirements in implementing this new approach. We have received
    positive feedback from many regulators on our intent and means to
    finish clean-up more expediently and more efficiently. Our focus is to
    return real property for mission use or reuse under BRAC.
                             environmental quality
        Our fiscal year 2015 President's budget request seeks $425 million
    in Environmental Quality funding for environmental compliance,
    environmental conservation, pollution prevention, and environmental
    technology investments. We have programmed for all known, eligible
    environmental quality requirements to keep us in compliance with the
    law and allow us to continue to be good stewards of the environment.
        In our environmental quality programs, we have refocused our
    efforts to streamline and more effectively manage our compliance,
    conservation, and environmental planning activities. We have instituted
    a standardized and centralized requirements development process that
    prioritizes all Air Force environmental requirements in a manner that
    minimizes risk to airmen, the mission, and the natural infrastructure.
    Our environmental quality budget request follows our prioritized list
    and ensures the continued availability of land, air, and water
    resources at our installations and ranges so we can train and operate
    today and into the future.
        The Air Force remains committed to a robust environmental
    conservation program in fiscal year 2015. Prior appropriations allowed
    the Air Force to invest in conservation activities on our training
    ranges, providing direct support to mission readiness. The conservation
    program in fiscal year 2015 builds on the efforts of past years to
    continue habitat and species management for threatened and endangered
    species, improve the inventorying and management of Cold War context
    and other historic properties, and enhance our consultation activities
    with Native American tribes. The fiscal year 2015 President's budget
    request also provides for continued cooperation with other agencies,
    like the U.S. Fish and Wildlife Service, to maintain current Integrated
    Natural Resource Management Plans, and to operate the Wildland Fire
    Center to manage risk from wildfires, enhance ecosystem resilience
    through application of prescribed fire, and provide key fire-related
    information for planning and incident response.
        We will maintain our strong performance as good environmental
    stewards complying with legal requirements, reducing risk to our
    natural infrastructure, and honing our environmental management
    practices. Working together with regulatory agencies, other Federal
    partners, and industry experts, the Air Force continuously innovates
    and adopts best practices to lessen environmental financial liabilities
    and the impact of our operations. We do this to maintain the Air
    Force's mission-ready posture and meet combatant commander
    requirements. With this approach, we seek the sustainable management of
    the resources we need to fly, fight, and win into the future.
                                     energy
        Energy is a corner stone of the Air Force's ability to maintain
    global vigilance, reach, and power which requires a robust energy
    security posture. Energy security means ``having assured access to
    reliable supplies of energy and the ability to protect and deliver
    sufficient energy to meet operational needs.'' To enhance its energy
    security, the Air Force is focused on four priorities:

        (1)  Improve resiliency to ensure the Air Force has the ability to
    recover from energy interruptions and sustain the mission,
        (2)  Reduce demand through operational and logistical efficiencies
    and new technologies, without losing mission capabilities,
        (3)  Assure supply by diversifying the types of energy and securing
    the quantities necessary to perform its missions, and
        (4)  Foster an energy aware culture by increasing our airmen's
    understanding of energy and its impact to the mission.
                                 budget impact
        The Air Force is the largest single consumer of energy in the
    Federal Government. As energy costs increase and budgets decrease,
    energy places greater pressure on the Air Force budget. In fiscal year
    2013, the Air Force spent approximately $9 billion on fuel and
    electricity, with over 85 percent of those costs dedicated to aviation
    fuel. That $9 billion represented over 8 percent of the total Air Force
    budget, and this is only expected to increase in future years as the
    price of energy continues to rise. Every dollar the Air Force does not
    need to spend on energy allows the Air Force to invest that dollar into
    enhancing a high quality and ready force.
        As part of our ongoing effort to achieve our energy vision to
    sustain an assured energy advantage, the Air Force is requesting over
    $614 million for targeted energy initiatives in fiscal year 2015. This
    includes $24.5 million for aviation energy, over $60 million for
    facility energy initiatives, and $193.7 million for materiel
    acquisition and energy research, development, test, and evaluation
    opportunities. Additionally, over $200 million of our facility
    sustainment, restoration, and modernization projects will have
    additional energy savings as a secondary benefit by updating
    inefficient infrastructure and building components. While these energy
    improvements are small on a project-by-project basis, collectively they
    make a meaningful contribution to reducing the Air Force's energy
    consumption and build upon the nearly $855 million the Air Force has
    invested for such projects over the last 4 years.
        Although sequestration in fiscal year 2013 deferred the spending of
    the $216 million energy focus fund until late in the fiscal year, the
    Air Force did fund 135 of the planned 220 projects to improve our
    facility energy efficiency. The savings from these investments are
    expected to begin in fiscal year 2015, and the majority are expected to
    payback before or just shortly after the Future Years Defense Program.
    However, the delay due to sequestration may cause the Air Force to miss
    its 2015 target year energy intensity reduction of 30 percent.
    Additionally, sequestration deferred spending on facility audits,
    advanced meter and advanced meter reading system installations, and
    delayed utilities privatization contract awards.
                              energy conservation
        The Air Force takes a centralized asset management approach in
    infrastructure investments, which has led to a reduction in our overall
    facility energy intensity by more than 22 percent since fiscal year
    2003. However, the 67 percent increase in energy unit costs over that
    same period has resulted in a relatively stable amount the Air Force
    spent to power its facilities since fiscal year 2006. Nonetheless, our
    energy conservation efforts have helped the Air Force cumulatively
    avoid over $1.7 billion in facility energy costs since 2003, enabling
    the Air Force to use those funds to increase mission effectiveness.
        The Energy Conservation Investment Program (ECIP) is a critical
    element of the Air Force's strategy to improve the energy performance
    of its permanent installations. The Air Force fiscal year 2014 program
    includes 12 ECIP projects totaling $35.1 million. The Air Force fiscal
    year 2015 program submitted to OSD includes 14 projects totaling $40.8
    million. The Air Force is also looking to reduce demand by using
    smarter construction methods that maximize energy efficiency and use
    environmentally-friendly materials while continuing our initiative to
    identify and demolish 20 percent of our old, unnecessary, and high-
    energy use facilities by 2020.
        By reducing our aviation fuel consumption more than 24 percent
    since fiscal year 2006, the Air Force avoided almost $2.5 billion in
    aviation fuel costs in fiscal year 2013, compared to fiscal year 2006.
    Moving forward, the Air Force is looking towards an efficiency goal to
    improve our aviation productivity by 10 percent by fiscal year 2020. At
    our installations, the Air Force spent more than $1 billion in fiscal
    year 2013 for facility energy. However, without our efforts to reduce
    consumption over the last 10 years, our facility energy bill would have
    been over $270 million higher last year.
                                renewable energy
        The Air Force is looking to improve its energy security and
    diversify its energy supply through the increased use of renewable
    energy. In fiscal year 2013, 8 percent of the electrical energy used by
    the Air Force was produced from renewable sources, and the amount of
    renewable energy used by the Air Force continues to increase every
    year. Moving forward, our goal is to develop 1,000 megawatts (MW) of
    renewable energy capacity on our installations. By making the most of
    private sector knowledge, technology, and financing, we plan to
    capitalize on underutilized land on our installations to develop those
    projects. Currently, the Air Force has 256 renewable energy projects in
    operation across a wide variety of renewable energy sources, including
    wind, solar, geothermal, and waste-to-energy projects, increasing
    energy production by over 53 percent from 2012 to 2013. This year, we
    are planning projects that are expected to provide over 31 MW of
    capacity, with another 31-41 MW of capacity planned for fiscal year
    2015.
        The Air Force is not limiting its efforts to renewable energy
    projects, but is also incorporating alternatively fueled ground
    vehicles into our fleet. With the support of private and public
    stakeholders, the Air Force is currently working to develop an all-
    electric vehicle fleet at Los Angeles AFB, CA, the first Federal
    facility to replace 100 percent of its general-purpose vehicle fleet
    with electric vehicles. Additional vehicles are slated for several
    other DOD installations, including Joint Base Andrews--Naval Air
    Facility Washington and Joint Base McGuire/Dix/Lakehurst.
                             third-party financing
        While the Air Force has made considerable progress to reduce our
    energy consumption and increase our energy diversity, there is still
    more to do. The Air Force is pursuing a third-party financing approach
    for both renewable and energy conservation projects.
        Direct Air Force renewable energy project funding through Air Force
    capital sources is rarely cost-effective when compared to commercial
    utility rates. To address this, the Air Force is using existing
    authorities, such as Enhanced Use Leases and Power Purchase Agreements,
    to attract private industry to develop renewable energy projects. We
    see tremendous potential for third-party investments to construct on-
    base renewable projects.
        The Air Force is reinvigorating third-party financing to fund
    energy conservation projects through Energy Savings Performance
    Contracts (ESPC) and Utility Energy Service Contracts (UESC). Since
    fiscal year 2012, the Air Force awarded $94 million in such contracts,
    improving our energy conservation with no upfront capital required.
    Over the next 2 years, the Air Force anticipates awarding five ESPC and
    five UESC projects. These projects will help the Air Force achieve its
    goal under the President's Federal Energy Performance Contracting
    Challenge.
                                   conclusion
        The Air Force made hard strategic choices during formulation of
    this budget request. The Air Force attempted to strike the delicate
    balance between a ready force for today with a modern force for
    tomorrow while also recovering from the impacts of sequestration and
    adjusting to budget reductions. To help achieve that balance the Air
    Force elected to accept risk in installation support, MILCON, and
    facilities sustainment. 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, more capable force that sets
    the proper course for enabling the Defense Strategy while addressing
    our most pressing national security issue--our fiscal environment.
        In spite of fiscal challenges, we remain committed to our airmen
    and their families. The privatization of housing at our stateside
    installations provides our families with modern homes that improve
    their quality of life now and into the future. We also maintain our
    responsibility to provide dormitory campuses that support the needs of
    our unaccompanied airmen.
        Finally, we continue to carefully scrutinize every dollar 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 very much, Ms. Ferguson. Thank
    you all for your testimony.
        Everyone, except Secretary McGinn, has mentioned BRAC as
    part of their testimony, so I want to begin with that.
        I know, Mr. Conger, you did a good job of explaining and
    describing the difference between the transformational aspects
    of the 2005 round and the savings aspects. But looking at GAO's
    report, they pointed out that even in the savings round, that
    the costs of the 2005 BRAC changes were 15 percent higher than
    were projected.
        I wonder if you could respond to that, why those were
    higher, and then if you could talk about whether you are
    beginning or have developed an estimate for what the
    implementation costs would be for another round in 2017 and
    when the real savings would actually begin.
        Mr. Conger. Sure. First, on cost escalation, there are a
    variety of factors that drove those costs up. For the most
    part, the costs that increased during the last BRAC round were
    driven by additional requirements in MILCON, whether it was
    because renovations turned into construction projects or new
    requirements were placed on DOD. One of those examples is the
    world-class hospitals requirement. It was added during the BRAC
    round and literally added billions of dollars of costs to the
    implementation. But that said, that is not the only factor.
        What the GAO said was that it was more specific than
    systemic when it came to those cost escalations. You can
    account for the preponderance of the cost increases at a
    relatively small number of the recommendations.
        We are hopeful. The preponderance was in the transformation
    section of the BRAC round. We are hopeful that we can mitigate
    and minimize those. But it is a fair point, and we have to keep
    our eyes open.
        One example is the information technology (IT) costs. IT
    costs were higher than anticipated. We have learned a lesson
    from that, and our cost projections going forward will
    accommodate a larger investment in IT for these
    recommendations.
        Senator Shaheen. Can I just ask you why were IT costs
    higher than anticipated?
        Mr. Conger. I do not have the detail at my fingertips, but
    I think we did not fully model the costs for IT in that
    environment.
        Senator Shaheen. Again, to the second part of the question,
    have you begun to estimate what implementation costs would be
    for another round?
        Mr. Conger. We have an estimate and we have programs within
    DOD's FYDP. For a BRAC round, if it started in 2017, it would
    cost $6 billion to implement. It would cost $2 billion in the
    initial years. Keep in mind that as you begin the
    implementation of a BRAC round and you get closures early in
    the round, savings would appear as well, early in that BRAC
    round. By about the third year, savings would outweigh costs.
    By the end of the 6 years, we anticipate the cumulative savings
    would be about a wash. It would cost about $6 billion, but we
    will have already saved $6 billion at that point in time.
        This is all based on a projection of an approximately 5
    percent reduction in plant replacement value. It is not
    specific installations that we are looking at or anything like
    that.
        Senator Shaheen. I apologize. We are about to run out of
    time on this vote. I am going to have to recess the hearing for
    a few minutes until Senator Ayotte comes back. [Recess.]
        Senator Ayotte [presiding.] Hi, everyone. We are obviously
    dividing today and trying to make the most of the time before
    us. I appreciate all of your patience.
        I wanted to ask all of you what steps you are taking to
    prepare to prevent and respond to threats to personnel and
    facilities in light of not only the 2009 Fort Hood shooting,
    but also last year's shooting at the Washington Navy Yard and
    last week's shooting at Naval Station Norfolk. Obviously, our
    thoughts and prayers go to all those who have been affected by
    those incidents. But I think it raises this idea of insider
    threats and how your Services are addressing those threats.
        Mr. McGinn. Senator, thank you. That is a very important
    question.
        Much of the information related to what not only the
    Department of the Navy but, indeed, DOD is doing to recognize
    and mitigate these threats is contained in a package that was
    sent to the committee the week before last. Secretary Hagel and
    Secretary Mabus rolled out the results of all of the
    investigations that have been conducted in the wake of the Navy
    Yard shooting. These include the judge advocate general manual
    investigation report that Admiral John Richardson did for the
    Secretary of the Navy, and two reports for Secretary Hagel, one
    an internal report that was done under the guidance of Mr.
    Vickers, and another one that was done by former Admiral Olson
    from Special Operations Command and Mr. Stockton, a former
    member.
        In the package that was sent up is a list of all of the
    recommendations, and in the case of the Department of the Navy,
    the actions that have been taken. Screening people for
    clearance, access, physical security, and anti-terrorism
    efforts have already been taken and will be taken in the future
    for the ones that have not already been implemented.
        I would like to just point out that as tragic as the
    shooting was last week in Norfolk, and I was aboard the naval
    station when that happened, there was a difference. That was
    not an insider threat, but rather someone who was a proven
    criminal that got unauthorized access through circumstances
    that are being investigated now. The results were tragic.
        But I assure you, this has the attention of everybody in
    the Department of the Navy, indeed, in talking with my
    colleagues in DOD and other Services, to take actions that help
    us identify threats and mitigate them.
        Senator Ayotte. Does anyone else want to comment on that?
        Ms. Hammack. Yes. All the Services are working together on
    this, have reviewed the report, and are working jointly to
    identify actions to take.
        One of the things that Secretary McGinn mentioned is
    identifying and deterring potential hostile actors before they
    have a chance to act. One of the recommendations in the report
    was a continuous evaluation process of security clearances
    versus the current 5- to 10-year periodic reevaluation system.
    That will help ensure that potential problems are flagged and
    dealt with in a more timely manner.
        Senator Ayotte. I appreciate that. I also serve on the
    Senate Homeland Security and Governmental Affairs Committee,
    and Senator Collins, Senator Heitkamp, and I have a bill that
    would require periodic random auditing rather than the 5- to
    10-year window. When we look at the situation with the Navy
    Yard, obviously things can change pretty dramatically over a 5-
    to 10-year window, particularly with the history that we saw
    there. I hope that DOD will consider taking a look at our
    legislation as a tool as well.
        I agree with you that we do need to have more regular
    vetting of these security clearances for those who have access
    to our most sensitive facilities and also, most importantly,
    our personnel. But I also think we are in a position where
    there needs to be more regular auditing and also with the
    contractors that we are working with. I think that is a
    significant issue to ensure that to the extent we are working
    with contractors, that they are sufficiently accountable to us.
    I think that needs to be reviewed as well.
        I appreciate that all of you have a priority on that.
    Secretary McGinn?
        Mr. McGinn. Senator, one other thing related to your other
    committee's work. There was an additional report called ``The
    120-Day Report'' that was managed by the Office of Management
    and Budget and the Office of Personnel Management that would be
    very relevant to overall Homeland security. It certainly
    affects DOD. We participated very actively in the development
    of that report and its recommendations.
        But to the point about continuous evaluation and not
    letting folks have clearances that just go un-reinvestigated
    for a long time--I think we are moving quickly beyond that.
        Senator Ayotte. Yes, and I think that Congress will move
    quickly on that with you. I appreciate that.
        I raised in my opening statement an issue related to the
    Portsmouth Naval Shipyard. That is two projects that I
    mentioned in the opening statement. One is the P285 barracks
    project that has been tentatively delayed from fiscal year 2015
    to 2016 and the P309 rail project that has been delayed from
    2016 to 2017.
        I am hoping, Secretary McGinn, that you can comment on
    these projects. I would also like to see a list of delayed
    projects that are for public shipyards, but also, obviously,
    any comment you have to make on these two particular projects.
        Also, on this issue of the 6 percent in MILCON funding as
    required by the law, if you could comment on the minimal
    capital investment plan. I would like an answer to the question
    of whether the Navy plans to comply with section 2476 of title
    10 on this 6 percent issue. If you are able to answer that, I
    would appreciate it.
        Mr. McGinn. On the first point about the projects, I would
    like to take that question for the record and give you some
    detailed information on that.
        [The information referred to follows:]

        The naval shipyards are essential to meet operational requirements,
    and the Navy is committed to sustaining and recapitalizing shipyard
    infrastructure. Yet, fiscal constraints and competing priorities have
    caused the Department to delay some Military Construction projects at
    the naval shipyards in our 2015 budget request, including P285 for
    barracks and P309 for rail improvements at Portsmouth Naval Shipyard.

        Mr. McGinn. Regarding the 6 percent, we will do our utmost
    in the execution year of 2015 to meet that criteria. We fully
    intend to comply with the requirement.
        At Portsmouth, as in all of our public shipyards, the
    throughput is absolutely critical to getting the kind of
    product out there in the fleet. You mentioned submarines in
    particular, but new ship construction as well and refitting. We
    recognize that we cannot take too much risk too much longer in
    any of our infrastructure projects, but especially our
    shipyards and aviation depots.
        Senator Ayotte. I appreciate that and I look forward to the
    more detailed answer.
        My time is up, so I would like to turn it over to Senator
    Hirono.
        Senator Hirono. Thank you very much.
        I want to start by saying that I am disappointed in the
    overall MILCON reductions, as I am sure all of you are, but I
    do understand the need to help shore up our operations and
    readiness accounts.
        That said, Mr. McGinn, you just mentioned that you do have
    a concern about the MILCON cuts to our shipyards, and of
    course, we have Pearl Harbor in Hawaii. I hope that the risks
    taken on by delaying some of these projects will be mitigated
    as additional MILCON funds become available through other
    efficiencies or sources. One of the opportunities to increase
    these available resources is to attain energy savings, and all
    of you have talked about that.
        My question is to Ms. Burke. At the end of your testimony,
    you state that ``institutional change within DOD, which is the
    biggest energy user, is difficult, timeconsuming, and not for
    the faint of heart.'' Recognizing that your office was only
    established in 2010, would you say that DOD has learned from
    the operational energy challenges it has had to address over
    the last decade? Is the memory of the impact of energy price
    spikes, in-theater threats to fuel convoys, and other
    constraints placed on DOD by its energy needs being fully
    internalized and included in the future planning to the degree
    that it should be? If so, how? Can you describe briefly what
    everybody is doing to make sure that energy savings is very
    much a part of the decisionmaking within DOD?
        Ms. Burke. Thank you, Senator Hirono. You have been a great
    champion of energy security, so we have appreciated your
    support.
        One of the reasons in my written statement that I said that
    this kind of institutional change is so difficult is because
    you cannot just buy something to fix it. You have to get into
    the whole process of how we plan for the future and incorporate
    energy as a consideration.
        When it comes to operational energy, the number one
    consideration is always going to be capability, which is what
    we need to do in order to get the mission done. That is where
    we are looking to press for innovation and for change, to make
    sure we have the energy we need and that we are using the very
    best options to get the mission done. We want more range. We
    want more endurance. We want a lighter footprint in terms of
    our logistics and our supportability. Those are all things
    that, as we have seen in Iraq and Afghanistan, are important
    both in terms of the volume of fuel we are putting on the
    battlefield but also the fuel at the last tactical mile where
    it is not a lot of volume, but it is the hardest fuel to get to
    the warfighter.
        Our number one goal is to improve the mission and the
    capabilities when it comes to operational energy. We often
    achieve savings in the process, but it is not the number one
    goal. The number one goal is to support the warfighter.
        Yes, I think we have learned those lessons, but
    incorporating them is not an easy prospect because you have to
    get into how we conduct war games, how we conduct requirements
    generation, and how we plan with our operational planning and
    with our scenario planning. All those things are improved. All
    these people at the table have put a great deal of time and
    effort to changing the processes, and we will see a change in
    the demand signal for a more efficient force and a force that
    takes advantage of a greater range of technologies.
        Senator Hirono. For the other members of the panel, would
    you say that in the Army, Air Force, and Navy that energy needs
    and the efficiencies that we should attain are being
    internalized?
        Ms. Hammack. From the Army's standpoint, I would say they
    are being internalized.
        What is challenging to many is they see the energy costs on
    our installations as one of those almost uncontrollable
    budgets. One base that I was at last week said that their
    energy consumption had declined 37 percent in the last 6 years,
    but over the same time period, their energy costs went up 57
    percent. They are working very hard on efficiency, and that is
    helping to curb some of the rapid growth in energy costs. That
    is why we have such a focus on renewable energy because that
    helps dampen some of the costs that are driven by dramatic
    increases in fossil fuel.
        But in operational energy, that is one of the areas that
    our soldiers are seeing immediate returns. There is a forward
    operating base that we worked with in Afghanistan, that was
    getting an aerial resupply every 3 days. That meant every 3
    days, they had to stop fighting. They had to secure a drop zone
    to pick up fuel. With energy efficiency and operational
    efficiency, we brought it to one air drop every 10 days. That
    is direct impact on mission, as Secretary Burke mentioned, and
    that is what helps institutionalize energy measures. It has a
    direct return to mission capability.
        Senator Hirono. I would say that probably the energy costs
    in the installations are very obvious, and there are things
    that all of you are doing to decrease those costs, and you are
    probably doing that in partnership with the private sector. To
    the extent that you are dependent on the grids that are already
    there, you are doing work in that area also. I know that you
    are all nodding your heads. I assume that all of you are doing
    similar kinds of things to attain energy efficiencies.
        I have a continuing concern about DOD's ongoing commitment
    to energy efficiency. Climate change is here. There was a
    recent report that acknowledged climate change and the impacts
    on energy costs. For all of you, and particularly for Secretary
    Burke, how important is research and development (R&D) in the
    energy side of things?
        Ms. Burke. R&D and test and evaluation is a very important
    part of the investment that we make. Certainly, my office has a
    specific fund that we manage for those purposes and we look at
    where the gaps in funding are that we can help address. Those
    investments are looking across the board for everything from
    better engine and propulsion systems technologies to better
    materials. We are looking at materials that reduce drag on
    aircraft, for example. We have test and evaluation investments
    for alternative fuels, of which I know you are very aware. We
    have investments in R&D across the board that are really
    important for our future capabilities in this area. Our Under
    Secretary for Acquisitions, Technology, and Logistics has gone
    to great lengths to protect those investments.
        Mr. McGinn. Senator, we think, all of us, in three
    different dimensions related to energy efficiency or
    alternative energies. We certainly talk about the technology,
    and that seems to start the conversation. But equally important
    are partnerships, partnerships among our Services, partnerships
    in the Federal Government, for example, the Navy's partnership
    with the Departments of Agriculture and Energy for our biofuels
    program, and especially partnerships for energy efficiency with
    the private sector, third party financing, ESPCs, and utility
    energy savings contracts. We want to use all of these
    partnerships to further our goals.
        The last area, and perhaps in some ways the most important,
    is culture. We all have very aggressive programs to educate and
    increase the awareness at every level, every member of DOD
    about energy and how it directly relates, as Ms. Burke pointed
    out in her statement, to warfighting capability and operational
    efficiency.
        Senator Hirono. Thank you. My time is up. Thank you, Madam
    Chairwoman.
        Senator Shaheen. Thank you.
        Senator Kaine.
        Senator Kaine. Thank you, Madam Chairwoman.
        I appreciate the witnesses being here. I was coming from
    another hearing, and I am going to apologize because I suspect
    I will repeat a little bit of what might have been asked
    before.
        Secretary McGinn, in particular, I want to talk about the
    incident at the shipyard last week. I think Senator Ayotte may
    have talked with you about it as well.
        It was a horrible thing, this Petty Officer Mayo in
    Norfolk. It really rocked the community there, and I know it
    rocked the entire DOD world. In the aftermath of the shooting
    last fall at the Navy Yard here, it raised a lot of questions
    about the issuance of these Transportation Worker
    Identification Credential (TWIC) access permits, but more
    broadly, are we doing what we need to do.
        If you could, address this TWIC issue and how this
    individual was able to get one of these identifications with a
    criminal record, to the extent that you can talk about details.
    I am sure there is an investigation that is ongoing. But then
    talk more generally about what you are doing to try to make
    sure that our installations are as secure as possible.
        Mr. McGinn. Yes, Senator. The Secretary of Defense and the
    Secretary of the Navy, Ray Mabus, released the results of three
    investigative reports the week before last. They were
    precipitated by the tragedy that happened on September 16 here
    in the Washington Navy Yard. The package that was sent to the
    committee includes all of those investigative reports, which
    have a long list of actions that have been taken or are
    underway to increase our security on bases, whether that is
    physical security or the clearances to help diminish the threat
    from insider threats, for example.
        Last Monday, I was at Naval Base Norfolk when that tragedy
    occurred, and as you rightly point out, Petty Officer Mayo, the
    sailor who was killed, was absolutely a hero. He saved a
    shipmate's life.
        We are looking at that with a great deal of scrutiny,
    trying to see if there were lessons learned from the Washington
    Navy Yard shooting that could have or should have been applied.
    We think that there is a significant difference. This was an
    outside threat who, by the way, was unarmed, entered an
    unauthorized area and ultimately made it to the ship's
    quarterdeck. But we will take a strong look, including the type
    of documentation he had, this so-called TWIC card, to help him
    gain access through the main gate at Naval Base Norfolk.
        I will be happy to provide a more detailed response on
    exactly what we are doing about that type of transportation
    pass that allows some of our trucking agencies to get onboard.
        [The information referred to follows:]

        The Navy is supporting the Department of Defense (DOD) Physical
    Security and Policy Branch review of all security procedures for access
    control, including the Transportation Worker Identification Credential
    (TWIC). DOD authorized the use of the TWIC primarily for those
    transportation personnel who deliver or pick up materials/goods, as
    well as mariners who work on our installations. The TWIC is a
    Federally-issued ID card and was specifically designed for the purposes
    of facilitating physical access to designated secure areas under the
    Department of Homeland Security purview. Navy policy requires a
    purpose/justification and a government or commercial bill of lading (in
    the case of transport) for TWIC holders to be granted access.

        Senator Kaine. Secretary McGinn, I do not know if you can
    answer this question, and the details might have been in a
    press account that I missed, but has it been established
    whether this individual received the TWIC card prior to his
    criminal conviction and the card was never revoked or whether
    he received the TWIC card in spite of having a manslaughter
    conviction?
        Mr. McGinn. I do not have the answer now, but I will
    provide it to you, Senator.
        [The information referred to follows:]

        The Transportation Worker Identification Credential is administered
    by the Transportation Security Administration (TSA), not the Department
    of the Navy. I believe any inquiries regarding TSA vetting procedures
    and protocols or details regarding any individual card holder are best
    answered by the TSA.

        Senator Kaine. Thank you.
        When I was Governor, there was the horrific shooting at
    Virginia Tech University and we engaged in a significant
    investigation, and we found all kinds of problems. Some were
    system problems. Some were errors in judgment. Some were
    funding problems. We were underfunding certain kinds of
    community mental health services, and that was one of the
    factors that led to this horrible shooting. I am sure there is
    a whole series of things both with the Navy Yard and perhaps
    with this Norfolk Naval Station incident, maybe some human
    error, maybe some systems improvements, or maybe some funding
    issues.
        I know this subcommittee and the Seapower Subcommittee I
    just came from are very worried about sequester going forward
    and how it affects everything that we do. We were able to work
    to find some sequester relief in 2014 and 2015 in connection
    with the 2-year budget. The White House and DOD, from 2016
    going forward, has asked for sequester relief, not sequester
    elimination. Madam Chairwoman, I am impressed with the fact
    that as they have come to us and asked us for sequester relief,
    they basically said we will absorb more than 50 percent of the
    sequester cuts over the entire length of the sequester. Give us
    relief so that we can eliminate about 45 percent of the
    sequester cuts, which seems like a very reasonable request to
    me, maybe a little too reasonable, but very reasonable. You are
    trying to work with the will of Congress to try to deal with
    the deficit in this strategy.
        It is my hope that we are not, but, I frankly think we are,
    tightening the belt in ways that will come back to bite us in a
    lot of different ways. I do not know if security is one of
    those ways, but everything costs money, and if we are trying to
    foolishly save here or there, I just worry that we have
    instances like this, or all kinds of other things that go
    wrong, that would not go wrong if we were taking a more
    strategic approach. That is an editorial comment, not a
    question.
        I look forward to getting the answer about this particular
    instance. I was not aware that you were there on that day. You
    know how seriously the Hampton Roads community----
        Mr. McGinn. Yes, sir. Senator, I talked directly with
    Admiral Bill Gortney, the Commander of Fleet Forces Command;
    Admiral Dixon Smith, Regional Commander, and they are all
    extremely focused on getting every answer we possibly can
    related to that tragedy.
        Senator Kaine. Thank you. Thank you, Mr. Secretary.
        I have a question on R&D to follow up a little bit from
    Senator Hirono's questions. We have a lot of DOD R&D facilities
    and labs in Virginia. We have the highway sign planted right in
    the heart of Arlington. This is where the Defense Advanced
    Research Projects Agency first created ARPANET, which is the
    foundation of the Internet on which so much of the global
    economy now depends.
        Our research capacity depends upon people, but it also
    depends upon having the infrastructure we need to do the R&D.
    Please talk a little bit about R&D challenges in the DOD right
    now. The civilian R&D has been hit very hard in sequester
    through the National Institutes of Health and other civilian
    R&D. How much have you been able to shelter or protect the R&D
    priorities of DOD in this tough environment?
        Ms. Burke. Senator, thanks for the question.
        I can really only speak for the R&D that I have oversight
    of, but we certainly will take the question for the record back
    to our colleague, Al Shaffer, who oversees all research and
    engineering for DOD.
        [The information referred to follows:]

        The Department of Defense (DOD) must protect the future. Although
    the science and technology (S&T) budget has been relatively flat since
    2005, the fiscal year 2015 budget request represents a strong S&T
    investment, but shifts priorities to the Defense Advanced Research
    Projects Agency and key capability areas like anti-access/aerial
    denial. The S&T program has developed a number of key emerging
    technologies, with advances in future capabilities, such as Directed
    Energy where we are deploying a high energy laser on the USS Ponce in
    the summer of 2014, and a new class of turbine engines that offers the
    promise of a 25 percent reduction in fuel use. S&T investments have
    also led to the development of new classes of high performance radars,
    as well as rapid development of unmanned aerial and autonomous systems.
    DOD must make sound investments in the next generation of technologies
    to maintain our military and technological superiority.

        Ms. Burke. Mr. Conger and I are certainly aware that Under
    Secretary Kendall has put a very high priority on protecting
    those investments. It is our seed corn and we have to do that.
        For energy, we are seeing a consistent investment in R&D in
    this area. There has been some reduction, but it is consistent
    with the reduction in the overall budget.
        In my own funds that I manage, for R&D they have been
    consistent and we have been able to protect those investments.
    Again, those are aimed at military capabilities and some of
    them for the short term, for the fight. We think they are very
    important investments, and we have been able to keep them
    consistent.
        Senator Kaine. Thank you, Madam Chairwoman.
        Senator Shaheen. Thank you.
        Secretary McGinn, as you are sharing the reports of the
    Navy shooting, if you could share those with the subcommittee,
    we will make sure that everybody receives them as well.
        Mr. McGinn. I will, Senator.
        Senator Shaheen. Thank you.
        Senator Donnelly.
        Senator Donnelly. Thank you, Madam Chairwoman, and thanks
    to all the witnesses.
        Mr. Conger, as you look forward, how are facilities that
    promote the mental well-being of our servicemembers and
    military families being prioritized as installation funding
    changes?
        Mr. Conger. You are speaking specifically about the subset
    of health facilities that deal with mental health?
        Senator Donnelly. Yes, sir.
        Mr. Conger. In fairness, I should probably take that for
    the record if we are talking about the construction or
    maintenance. From a health care perspective, in the programs
    managed by the Defense Health Agency, we have done our best to
    maintain the maintenance accounts that are associated with
    those specific facilities. Where DOD, as a whole, has taken
    significant risk in facility maintenance, in our health
    facilities, we have maintained those accounts.
        [The information referred to follows:]

        As a general rule the mental health facilities within the
    Department of Defense (DOD) are included as a functional component
    housed in the medical treatment facility or in limited cases, stand-
    alone facilities. In all cases, DOD prioritizes military construction
    projects based upon the strategic priorities of the Military Health
    System. All potential projects received by DOD are processed through
    the ``Demand Signal'' process, which takes into consideration
    enterprise priorities, clinical and business case analyses, as well as
    a number of other criteria facilitating the appropriate prioritization
    of a potential facility project.

        Mr. Conger. From a construction perspective, there have
    been reductions in health care, hospitals, and clinics, just
    the same as across the board.
        Senator Donnelly. As you make MILCON and other installation
    management decisions, do you take the access to readily
    accessible mental health services into account for men and
    women as you make those decisions as to how easy it is to
    obtain those services?
        Mr. Conger. Let me take that for the record simply because
    there are so many individual processes within DOD where things
    are prioritized, that there is not an overarching governance to
    make sure that these particular kinds of facilities get this
    particular amount of money.
        [The information referred to follows:]

        The Department of Defense is continually seeking opportunities to
    increase availability of and access to mental health services for our
    servicemembers. Decisions involve consideration of both facility and
    functional factors that will facilitate quick and effective delivery of
    the services needed. For example, Embedded Behavioral Health Teams have
    been used to align mental health resources with operational units in
    order to improve access to care, continuity of care, communication
    between mental health and line leaders, mission readiness, and safety
    of servicemembers. Decisions regarding facilities for these teams
    ensure they are collocated with the supported operational unit and are
    within walking distance for those seeking services. Mental health
    providers are also being placed within Patient-Centered Medical Homes,
    which further expands the range of locations for receiving mental
    health care as well as improves access and convenience.

        Senator Donnelly. Okay.
        Ms. Burke, I apologize. I had to vote. I got here as quick
    as I could. You may have already answered this. Can you tell
    us, as you look, what percentage of the energy used overall is
    now American energy or that it came from this country?
        Ms. Burke. Senator, DOD uses about $20 billion a year worth
    of energy. Three-quarters of that is for military operations,
    and one-quarter of that is to support facilities.
        For the facilities, which my colleagues are the experts on,
    we are generally on the commercial grid. We are generally
    relying on civilian commercial infrastructure for that energy.
        For military operations, it is almost all petroleum fuels,
    and we have a tactical and operational imperative to buy it as
    close as we can to where we operate. Approximately 60 percent
    of that fuel we purchased overseas where our operations were
    taking place. It really depends on where we are operating.
        Senator Donnelly. Okay. As you move forward, what are the
    most cutting-edge areas you have for our own facilities and for
    other things, obviously, other than the imperatives of having
    to purchase fuel where you are when you are in military
    actions? For our facilities, what are some of the things we can
    look forward to over the next 5 years?
        Ms. Burke. I will let my colleague answer for facilities.
        Mr. Conger. We have a R&D program specifically focused on
    facilities and energy efficiency, on micro-grids, and on
    various ways of production. There is a long list of projects. I
    think that you will see fruition in building efficiency.
    Certainly we have a lot of micro-grid programs going on right
    now, but they are each testing a different facet of the overall
    picture. These are research programs not necessarily designed
    to end up in a project.
        But we do have a small amount of money in an energy test
    bed that we are taking technologies and programs that are pre-
    commercial but that have not gotten the data to push them over
    the edge into viability where they might be able to be
    purchased by the entire Department. I can get you a list of
    what those projects are.
        [The information referred to follows:]

        The following table provides the Environmental Security Technology
    Certification Installation Energy Test Bed projects:

        Senator Donnelly. That would be great.
        Secretary McGinn, I am from Indiana. We have Naval Surface
    Warfare Center (NSWC) Crane, with over 3,000 Navy employees; 67
    percent of them are scientists, engineers, or technicians doing
    some of the most cutting-edge work. We were wondering, as we
    look forward to improve the infrastructure there, if you know
    of those MILCON plans or if you can get to us the
    infrastructure improvement plan that we have moving forward?
        Mr. McGinn. Senator, I look forward to actually visiting
    NSWC Crane in about 3 weeks. I am going to go out there to your
    great State and visit NSWC Crane to see some of those
    facilities.
        Senator Donnelly. Do you need a ride from the airport, sir?
    [Laughter.]
        Mr. McGinn. No, sir. I am also going to go to Purdue
    University and see some of the good research they are doing on
    biofuels up there. I will take a close look at what is going on
    and what is needed.
        NSWC Crane has some world-class capabilities in battery
    technology, everything from watch-sized batteries to batteries
    in intercontinental ballistic missiles. That is critical. We
    want to keep that viable.
        Senator Donnelly. Thank you.
        Secretary Hammack, one thing, in looking at how things are
    being done, is the different standards of liability protection
    for hazardous waste risks at former Army facilities, for
    instance, in cases where they are closed by a BRAC, there is
    help with hazardous waste. If not a BRAC, often not. If the
    only substantive difference is how the facility was closed, how
    do you make those determinations and why the difference in
    treatment?
        Ms. Hammack. I appreciate your highlighting one of the
    benefits of BRAC in the base closure operations.
        Senator Donnelly. You will not have that happen too often,
    ma'am. [Laughter.]
        Ms. Hammack. I want to take advantage of it for the record
    here, sir, and I appreciate that.
        The BRAC program does give additional protections for both
    base transfer and base closures in dealing with environmental
    liabilities. For bases that were closed prior to that, it is
    difficult, if not impossible, to go backwards in giving
    protections once a base has been closed and already
    transferred. At the time of transfer, there are terms and
    conditions of that transfer. There are terms and conditions
    that are agreed upon by all parties that we work forward on.
        I understand there is some legislation that is looking at
    grandfathering things backwards called the Base Redevelopment
    and Identification Correct Act. I have not had a chance to
    thoroughly review that. We will review it and take a look at
    it. But I think using BRAC as a closure mechanism by some of
    the prior year mechanisms in the early 1980s does highlight
    benefits to the community.
        Senator Donnelly. Thank you, Madam Chairwoman.
        Senator Shaheen. Thank you.
        I am glad Senator Donnelly got us back to BRAC because I
    want to pick up on the line of questioning that we were
    discussing before I had to go vote.
        Mr. Conger, I think one of the things you were talking
    about was the fact that some of the construction requirements
    had changed. You mentioned hospitals, in particular. GAO has
    said DOD did not include some of those MILCON requirements that
    were needed to implement the recommendations as envisioned and,
    therefore, the additional requirements increased costs. I am
    paraphrasing what GAO said.
        I still want to go back to the idea of how you are
    improving on the ability to accurately assess what the cost of
    another BRAC round would be? I think I am accurately quoting
    your response to the GAO report where you said that: ``I am
    concerned with the report's emphasis on establishing goals,
    measurements of effectiveness, and capacity reduction targets,
    because it seems to me that that is exactly what we ought to be
    doing as we are thinking about how we develop a proposal for
    another BRAC round.'' I wonder if you could enlighten me a
    little more on how we are looking at assessment. Secretary
    Hammack, if you have anything you want to add, feel free to do
    that too.
        Mr. Conger. There are two things that I think you mentioned
    that I would like to touch on, and if anybody else has
    amplifying comments.
        The reason that we are concerned about goals is because
    while we execute a BRAC round to save money, the individual
    recommendations have been premised on the idea that they are
    focused, first and foremost, on military value. We do not want
    to reduce military value through these actions. The intent is
    to amplify it. We specifically do not want to have a
    requirement set out at the beginning of a BRAC round that says
    you have to close this many bases. That is what I am concerned
    about. You do not want to get down to a point on the list of
    items under consideration and say these are the ones that I
    would do if it made sense, but I need 10 more bases to close in
    order to meet my targets. We do not want something like that,
    and that is my concern with the GAO.
        Senator Shaheen. That makes sense to me, but it still makes
    sense that there should be goals for cost savings in a BRAC
    round. Also, those goals might include not just cost savings,
    but also what kind of value we want to maintain for the
    operations that we want to continue. It is the whole metrics
    piece, how we model those assessments, the extent to which we
    are comfortable with what is in them, the accuracy of them, and
    that Congress is aware of how we are doing this, so that we can
    avoid what happened in 2005 from happening again.
        Mr. Conger. You are asking how we measure the effectiveness
    of a BRAC round, I think.
        Senator Shaheen. No, I am asking a little bit of a
    different question, and that is, how do we anticipate the costs
    and the effectiveness of a BRAC round?
        Mr. Conger. Let me talk to costs.
        Senator Shaheen. Okay.
        Mr. Conger. I think if you look at the specific
    recommendations in 2005 that had the most cost associated with
    them, they were the actions that were characterized as
    transformational. I know that word gets thrown around a lot, so
    let me play that out a little bit more.
        If you consolidate all of the criminal investigative
    services at one particular location down at Quantico, that is
    more of a transformational thing rather than being done for the
    sake of savings. If you colocate the various Services' health
    functions in one building, that is more of a transformation,
    looking for efficiencies and effectiveness, but not necessarily
    in cost savings. Those are the things that had a lot of costs
    associated with them but did not necessarily drive savings.
        But I think there is a finer point here. If you look at the
    previous BRAC rounds where we were driven by closure or driven
    by efficiency, the MILCON requirements associated with those
    actions were very small. If you look at the 2005 round and you
    segregate the closure and efficiency actions from the
    transformation actions, there was a relatively small component
    of MILCON in those efficiency recommendations, keeping in mind
    the fact that the entire cost is not a MILCON cost. There is
    operation and maintenance (O&M). You have to move people from
    place to place. There are a variety of O&M costs as well. But
    the MILCON costs associated with the 2005 BRAC round were an
    order of magnitude larger than the MILCON requirements from the
    previous round, and that was because of the kinds of
    recommendations that were put forward and accepted.
        Senator Shaheen. I think it would be helpful to this
    subcommittee, and probably to the full committee, to have a
    better understanding of how you assess what you are trying to
    achieve through another BRAC round.
        Secretary Hammack, do you want to respond?
        Ms. Hammack. Yes, I would like to.
        One of the things that we are doing in the European
    infrastructure consolidation process is looking at a very
    methodical process. First, determine the military value and
    rank the military value of each site. Second, look at the
    capacity analysis from every type of building that is located
    on that base, such as headquarters buildings, barracks, motor
    pools, et cetera. Where do you have excess capacity? Third, do
    a scenario analysis. What are the various scenarios? What could
    you move where to consolidate, and what is that cost?
        In prior rounds, a budget has been set. As Mr. Conger spoke
    of, you set a $6 billion budget, and as you are looking at all
    the different scenarios, you evaluate those that have the best
    return on investment to return the best military value to take
    up as much capacity as you can. It can be a very analytical,
    mathematical process. Yet, military value of the locations is a
    priority to ensure that we are appropriately positioned.
        From the Army's standpoint, if you look at BRAC 2005, the
    cost to the Army was $13 billion. Of that, $2 billion was
    efficiency BRAC. Of that $2 billion, we are getting $574
    million in savings every year, and that is about a 3.4-year
    return on investment. I think that is a good deal. I think that
    is the efficiency BRAC.
        That is what I want to see from the Army's standpoint in
    the next round. Give me a budget and we will do the military
    value. We will do the capacity analysis. We will run some
    scenarios and we will identify those scenarios with the best
    efficiency that we can return to this Nation.
        In the BRAC process, it is all with congressional
    oversight. You will appoint a BRAC commission that will take a
    look at all the details here before it comes to Congress for a
    vote. I think it can be very clear. I think it can be very
    transparent. It can be very focused on efficiencies. We want to
    work with you to identify the characteristics of the next round
    of BRAC because we need it in order to work within the budgets
    that this Nation is asking of us.
        Senator Shaheen. My time is up, but I just want to get a
    clarification. I assume the excess capacity analysis that you
    are doing now is going to be part of the European
    infrastructure consolidation review.
        Ms. Hammack. Yes, it already is. We have already finished
    our capacity analysis in Europe on a site-by-site basis, and it
    shows us a range of 10 to 15 percent excess capacity in Europe.
    We are running through the scenario analysis right now to
    determine what have the best returns on investments.
        Senator Shaheen. Because I think, given the request from
    this subcommittee and the full committee about getting that
    report, and I know you addressed it in your comments, Mr.
    Conger, but that is the kind of information that is very
    helpful as you are asking us to make decisions about another
    BRAC round.
        So my time has ended. Senator Kaine?
        Senator Kaine. Thank you, Madam Chairwoman. I am going to
    follow up for 1 minute on this same topic, really more to say
    what I do not necessarily like about BRAC, being a former
    Governor.
        I can see why DOD likes the BRAC process. I can see why it
    was established.
        Being Lieutenant Governor and Governor during the 2005 BRAC
    round, my objections are not the cost savings issue. My primary
    objection is a process one.
        DOD makes budgetary recommendations to us about everything,
    what weapons systems to buy, what weapons systems not to buy,
    whether to have one uniform, whether to have multiple. You make
    recommendations to us about everything and you do not need
    external panels except in rare instances to make
    recommendations to us.
        I would prefer that the base decision be like everything
    else and that DOD make recommendations to us. Then we would
    kick them around up here and we would not agree with all of
    them. We would probably agree with two-thirds of them, just
    like we do about weapons systems. Maybe 50 percent. Maybe not
    two-thirds.
        But you are the experts in a way that we are not, and we
    rely on your expertise.
        My observation about a BRAC process: when a BRAC process
    starts, every community in the country that has a military
    asset, whether the asset is actually in jeopardy or not, has to
    lawyer up and lobbyist up, and they start to spend tons of
    money to make this big effort to protect what they have, even
    communities whose assets really are not in jeopardy. I saw a
    community in Virginia that says we do not think this is in
    jeopardy. There is important stuff that goes on here. But if we
    do not hire all the lawyers and lobbyists and make this big
    effort and then we end up on the short end of the stick, people
    will say you are a dope, you should have done this.
        I think there is an enormous wasted energy in a BRAC
    process for communities needing to come together and make this
    massive case, even when there is really no likelihood there is
    ultimately going to be a recommendation that would change the
    status of the installation.
        My preference would be that DOD come to us with
    recommendations about installations like they do anything else,
    and then we debate them and kick them around. I know you are
    going to bring the European consolidation study to us, and I
    gather that because those are external bases, those are not
    subject to the same requirements of congressional approval.
    Yet, when that report comes, if Members of Congress do not like
    a piece of it, they will probably put in some kind of
    legislation to say yes, but do not do that one thing that you
    mentioned. By legislation, we can always overturn a
    recommendation even if there is not a requirement of approval.
        As we think about the way to deal with these installation
    questions, I would like DOD to give us their professional
    recommendation about installations, recognizing that Congress
    would kick them around, recognizing that local politics and
    everything else would create headwinds and crosswinds. But that
    is the same as in every other line item in the budget.
        Mr. Conger. Right. BRAC was not created for no reason. BRAC
    was created because before BRAC, there was a lot of politics in
    these decisions, and there were accusations of partisanship in
    which bases ended up closing. This enforced a process that was
    deliberate, that was analytical, that treated all bases
    equally, and set forth a way that was defensible and auditable
    for DOD to determine the ones to keep. These are the places of
    highest military value, and I would like to fill those in even
    if it is more empty.
        In an environment where we are not able to do that, then
    you are probably going to end up with folks looking at the
    places that have more capacity even if they are of higher
    military value. That is a concern. You end up with actions that
    are more subject to litigation, especially since BRAC takes the
    place of some of the National Environmental Policy Act process.
    What you will end up with is rather than less lawyering up, you
    will end up with far more lawyering up if you do not have BRAC.
        Senator Shaheen. Sadly, Senator Kaine, everybody is not as
    reasonable as you and me. [Laughter.]
        Senator Kaine. Thank you, Madam Chairwoman.
        Senator Shaheen. Thank you.
        Secretary Hagel, in his remarks to the press when the
    budget was released, said that he was mindful that Congress has
    not agreed to BRAC requests in the last 2 years. ``If Congress
    continues to block these requests, even as they slash the
    overall budget, we will have to consider every tool at our
    disposal to further reduce infrastructure.''
        Mr. Conger, what tools was Secretary Hagel referring to?
    What are you considering in terms of using them in the absence
    of any authorization for a BRAC round in 2017?
        Mr. Conger. Clearly he was listening to Senator Kaine
    saying to do things outside of the BRAC process. [Laughter.]
        The Secretary has amplified his comments subsequent to that
    and noted that there is an authority that Congress provided DOD
    in 10 U.S.C. 2687. It has a process for how one would take base
    closure and realignment actions independent of a BRAC round.
        The Secretary has also said he would much rather do this
    through a BRAC process. It is apolitical. It is analytical. It
    is transparent. It is the preferred way of doing business, and
    it makes the most sense to DOD. That is why we asked for BRAC
    authority.
        Senator Shaheen. I assume that DOD does not have an
    interest in getting into a back and forth with Congress over
    taking action that Congress has not authorized in a way that
    would produce a backlash in Congress.
        Mr. Conger. Of course not. We will only use authorities
    that Congress has provided. Moreover, even if we are using
    existing authorities, DOD often has consultations with Congress
    in advance of actually using those authorities. The MILCON
    statutes are replete with examples of notification requirements
    where we come up and have that conversation, and if the
    committees advise against taking a particular action, that we
    accede to the will of the committees. Those kinds of things are
    there already.
        I do not think you are witnessing a desire to have a back
    and forth with Congress per se, but you are recognizing a
    degree of frustration and a recognition, as has been
    demonstrated by the witnesses up here, that we are paying for
    facilities and bases that are essentially waste. You do not
    want to do that. You do not want to tax the warfighter in order
    to pay for facilities that you do not need and for bases that
    you do not need. If you have a way to save money and are able
    to plow that money back into readiness, we really would like to
    do that.
        Senator Shaheen. I think that is the interest on the part
    of all of us here, but if we do not have information on which
    to assess what is being proposed, it is really hard. All we
    have is past history, and past history, at least the 2005 past
    history, is not a very good example of what we would want to
    accomplish in the future. I am just saying to all of you the
    more you can provide information for us about how you assess
    what you are looking at in the 2017, if you are coming up with
    a 2017 proposal, how you get to savings, and what you are
    trying to achieve before we get to the BRAC process, I think
    the better audience you are going to have for what you are
    trying to do.
        Ms. Hammack. I understand that, but the BRAC process is
    where we bring you those ideas. That is what the BRAC process
    is, and that is where we do the site-by-site capacity analysis
    and the site-by-site military value and put it together as part
    of an analytical process with the ground rules defined in the
    BRAC authorization.
        Senator Shaheen. I get that, but I am not going to go home
    to my constituents in New Hampshire and say I have authorized
    something when I do not have a good idea of where I think the
    outcome of that might be. I think I probably represent most of
    the Members of Congress when I say that.
        I understand what you are saying in terms of the BRAC
    process itself, but I am saying something a little bit
    different. I think for us to have reports like the European
    consolidation review as you are coming to us to say this is
    what we want to do is really helpful. Last year we heard we
    were going to get that before you came back with another budget
    request. We still do not have it. We have beaten this dead
    horse, I think, already. But I am just trying to convey my
    frustration about not having the information that I think is
    helpful in making a decision.
        Ms. Hammack. But one of the things to understand that you
    are authorizing in the BRAC process is you are authorizing the
    analysis. You have to vote on the recommendations. You are
    authorizing the analysis.
        Senator Shaheen. Right.
        Ms. Hammack. One of the things in section 2687 that Mr.
    Conger talked about is that any bases closed under 2687 would
    be submitted as part of a budget. You did not see any as part
    of the 2015 fiscal year budget, but if we do not get
    authorizations for a BRAC 2017, you might see some bases listed
    in the budget request for 2016 because at this point in time, I
    do not have the money to run the bases the way they should be
    run, and it is not appropriate due diligence on my part to
    continue in this manner. If I cannot run the buildings
    appropriately, if I cannot appropriately support soldiers, then
    I am going to have to do something to ensure that I am not
    spreading an ever-thin budget across a base that I cannot
    afford.
        Senator Shaheen. Listen, I get that. I have been opposed to
    the cuts from sequestration that are putting additional
    pressure on DOD. But as long as we have GAO coming back with
    reports that raise questions about how the BRAC rounds are
    being done, I think they need to be answered.
        Ms. Hammack. But I would just say look at the prior year
    rounds. Look at all the prior efficiency BRACs that were duly
    noted as efficiency BRACs that are returning the investments
    stated, that did not exceed the budgets. Anytime any BRAC
    project exceeded budget, we came back to Congress and said this
    project is going to increase in cost because of the following
    reasons and got approval from Congress for that incremental
    cost. Everything was done in an open and transparent manner.
    All prior BRAC rounds are delivering the expected savings. For
    the Army, the efficiency savings expected from this BRAC round
    in 2005 are delivering savings, and those measures that were
    not expected to deliver savings are not.
        Mr. Conger. If I could strike a conciliatory note. Your
    staff has asked us a series of questions about the BRAC 2005
    round, and we have done our best to get that information. I
    think we still have a couple extra things to provide. We will
    continue to provide that information.
        We actually have a fairly good story here. There is a good
    justification, even inside of the 2005 efficiency actions that
    we have identified, to justify the fact that a future round can
    be done with a mind to efficiency and can be done with minimal
    cost increases. We think we can manage this process and we
    think there are a lot of good examples that demonstrate that.
        Senator Shaheen. We look forward to getting that
    information.
        Senator Kaine, do you have any more questions?
        Senator Kaine. No, thank you.
        Senator Shaheen. I want to go to energy, something we can
    all agree on hopefully. I think one of the best stories that is
    untold is the work that is being done in the military to save
    energy and to produce new research that is going to benefit
    everybody in the private sector, as well in terms of energy
    savings. I wonder if we could explore that issue a little bit
    more.
        I have a specific question because my understanding is that
    there was some confusion around questions at the full hearing
    and the renewable energy projects that are valued at $7 billion
    a year as part of the President's performance contracting
    challenge. Secretary Hammack, can you explain what the
    contractual agreement is on that direct funding? Because my
    understanding is that people, when the topic was raised,
    assumed that that $7 billion was money that was going to be
    paid through DOD's budget, and my understanding is it is
    actually an agreement with the private sector. Can you explain
    that further?
        Ms. Hammack. Absolutely. Thank you, Senator Shaheen.
        The multiple award task order contracts (MATOC) for $7
    billion is what is generating questions, and that is solely
    focused on renewable energy. It is not an energy efficiency or
    performance contracting.
        Awards were made under MATOC to a total of 48 companies, of
    which 20 are small businesses. The award recipients are
    qualified through this process to compete for future task
    orders. They did not get a contract that we are going to commit
    to buy anything. This was a prequalification. It is like
    developing a short list of contractors. We are going to issue
    task orders to bid for power purchase arrangements, and the
    power purchase arrangements are anywhere from 20- to 30-year
    contracts to buy the energy generated from renewable energy.
        If you look at the next 30 years, the Army's bill for
    facility energy is projected to be $40 billion. Our objective
    and our mandate from Congress is 25 percent of our energy to
    come from renewable energy. If you take 25 percent of $40
    billion, that gets you about $10 billion. We put a contract
    ceiling in for $7 billion. When we contract to buy energy from
    someone, it might be a 30-year contract to buy energy at this
    price with this acceleration for this time period, and that is
    considered the value of that power purchase agreement.
        I understand that it is confusing, and I hope I have been
    able to clarify it, that it is not money that we are coming to
    you to ask for. It is money paid out of our utilities account
    to buy electricity.
        Senator Shaheen. Good.
        Mr. Conger, do you want to clarify that more?
        Mr. Conger. Could I amplify one point in there that is very
    important? As people hear about us buying renewable energy,
    when we do these arrangements with third party entities to
    develop renewable energy and bring a utility function onto our
    base, generally we are paying either the same amount or less,
    and more often than not, it is less than we would normally pay
    for our electric bill. In essence, what you are looking at
    represents a reduction in costs over the life of these
    projects.
        Senator Shaheen. Ms. Ferguson, one of the things you talked
    about was the 10 percent savings, I think I understood you
    correctly, to fuel use that you were hoping to achieve in
    actual usage. I assume mostly for flying planes. I do not know
    to what extent you are sharing or there is collaboration
    between the Air Force and the Department of the Navy in terms
    of the energy work that is being done by the Navy. But my
    understanding is that most of the development in fuel savings
    on the Navy side was to develop drop-in fuels that did not
    require any changes in engines. Is that right, Secretary
    McGinn?
        Mr. McGinn. Yes, it is.
        Senator Shaheen. Is that what you are looking at? Because I
    understood you to say something a little different.
        Ms. Ferguson. We are actually looking at how we operate the
    aircraft and how we can do that more efficiently. One of the
    things we are looking at is how many tons of cargo we can move
    per gallon of fuel. Right now, we are doing 9.5 percent more
    cargo tons moved at 8.6 percent less fuel. We are doing this in
    a variety of ways.
        One of the things we have done is updating the KC-135
    landing weight restriction. We have an energy analysis task
    force that is made up of reservists across the United States
    and in the area of responsibility, and they are looking for
    opportunities to save money with operational efficiencies. We
    save $1.2 million annually through decreased fuel dumping. In
    the past, the aircraft had to have a certain amount of fuel
    left in their bowels before they could land, and they would
    dump the fuel if they had too much. Now we have adjusted that
    so they are able to save that and not dump that fuel. That is
    one of the things that we are looking at to save.
        Senator Shaheen. To what extent are you collaborating with
    what the Navy is doing as you are looking at these efforts?
        Ms. Ferguson. All the Services collaborate together on
    energy initiatives under Ms. Burke's leadership through the
    Defense Operational Energy Review Board. We are collaborating.
    The three deputy assistant secretaries for energy meet together
    quite frequently, and so all this information is shared across
    all the Services.
        Mr. McGinn. We look for good ideas wherever we can find
    them, including with the Air Force. [Laughter.]
        We similarly are looking at this forward thinking about key
    performance parameters to buy things that have better military
    capability but operate with less energy.
        But importantly, because our force structure that we own is
    where we could really make and save a lot of money on energy,
    it is how we use them. For example, Ms. Ferguson mentioned
    load-outs of aircraft and policies that relate to how much fuel
    you need to have to land. We are doing similar things. We are
    trying to look at eliminating what we call hot refueling, where
    a jet that lands goes through to the flight line and shuts down
    right away, and then we will bring a truck in which is better
    than sitting in fuel skids or fuel pits where the engines are
    running and you are filling it up with fuel.
        We are looking at the right balance of actual flight time
    and simulators to maintain the same levels of training and
    readiness, to do it without as much expenditure of fuel, but
    always with the idea that combat readiness comes first and
    energy comes later. But we are making great strides. We have an
    air energy conservation program that we are launching in 10
    days that is similar to what we have done with our surface
    ships over the past year.
        Senator Shaheen. Secretary Burke, are we on track to reach
    the fuel savings targets that we are hoping to reach? How are
    those spread out across each branch of the military? How do you
    determine what those targets should be?
        Ms. Burke. Senator, each of the Services have their own
    targets. At a departmental level, we have not set targets, and
    here is the reason why. This is really about operational
    effectiveness, and we have wanted to get that metric right. If
    you say, for example, that at a departmental level, we are just
    going to reduce our consumption by 10 percent but then we have
    to go somewhere, your target is going to become irrelevant. We
    have been working very hard with all the people here and lots
    of others in the operational community to develop logistics
    supportability metrics. In other words, what you need to be
    able to do, what is the planning scenario or the operational
    plan, do you have the energy you need, and do you have the
    logistics you need to support that plan? If not, it helps us
    put a value on the innovation or the changes in doctrine that
    you need to make in order to support the plan. That is the
    metric that we are aiming for that will measure military
    effectiveness.
        As for whether we are hitting the targets, yes and no. Our
    top line goal is to make sure that our forces have what they
    need, wherever they are for whatever purpose.
        As we look at the future, one of the ways we know we have
    to get there is by improving our efficiency. We are very much
    in tune with your own priorities. We have to improve our
    performance and we have to get that volume of fuel off the
    battlefield.
        Our analysis suggests that right now we are on track to
    increase our overall fuel consumption by 2025 by about 10
    percent. If we continue with all the initiatives----
        Senator Shaheen. To increase or reduce?
        Ms. Burke. Increase. Because of all the new systems coming
    in that have been in the pipeline for some time, they are
    fabulous capabilities, they consume more fuel, generally
    speaking. If all the initiatives that the people here at the
    table have been championing go in, we will cut that by 6
    percent, but it is still an increase.
        This again points back to our need to get into the planning
    process and make sure that we are putting a value on what this
    means for us when we actually have to go to war to have this
    kind of energy demand. That is where we are really putting the
    effort. We should see that pay off over time, but right now, we
    have a lot of things in the pipeline. We are not where we want
    to be, but we are heading in the right direction and we are
    developing the kinds of measurements that will be meaningful in
    this space.
        Senator Shaheen. I think it was you, Secretary McGinn, who
    talked about changing the culture in terms of energy use. I
    wonder if you could speak to that, and perhaps you could also,
    Secretary Burke, talk about how we are trying to change the
    culture of energy use within the military.
        Mr. McGinn. To illustrate what I am talking about, Senator,
    all of our fleet commanders have changed the expression ``save
    energy when you can'' to ``save energy unless you cannot'' to
    drive home that message that energy equals warfighting
    readiness.
        I was in Norfolk last week working with Admiral Gortney and
    his team of operators on our energy education and awareness
    annual event. I was out in San Diego in February doing the same
    thing with Admiral Harris from Pacific Fleet. We had divisions
    in air, surface, subsurface, infrastructure, and installation
    support where they are doing nothing but swapping best
    practices. We are measuring a lot better than we ever have in
    the past in terms of individual performance. We are trying to
    introduce more and more competition, which is something that
    has done great things in all of the military Services, into
    this idea of getting the same or better combat readiness out of
    every gallon of liquid fuel or kilowatt hour of electricity.
        Senator Shaheen. I have had the opportunity to tour the
    Portsmouth Naval Shipyard and see the energy savings there, and
    it is really very impressive, and to be part of one of your
    award ceremonies where you recognized various units for their
    savings.
        Mr. McGinn. We are very proud of Portsmouth. In fact, we
    want to do more. That is a case where the culture has already
    changed and folks are looking for even more ways to save
    energy.
        Ms. Burke. Senator, to also field the question, I would say
    it is two things from the Secretary of Defense's point of view.
    It is not so much to change the culture, but to find the parts
    of the culture that you can harness and where it makes sense
    for people. I will tell you a story that I think illustrates
    what I mean by that.
        The Marine Corps, when they were first putting some of
    their experimental forward operating bases into play where they
    were introducing some of these new energy efficiency and
    renewable energy measures, were bringing it to Twentynine Palms
    to marines who were in training. The marine in charge at the
    time of this went to these guys and he said: you have solar
    panels on the outside of your tent and geothermal heat exchange
    in the floor. You have more efficient lights, more efficient
    tents, and a more efficient generator. If you stay below that
    red line on this meter, you will not turn on your generator. Do
    what you have to do for your lights and your computers. If you
    go above the red line, that is fine, but the generator will
    come on. You will hear it, you will smell it, and you will also
    have to get resupplied. But if you stay below that red line,
    you will not have to get resupplied. These marines said they
    got it, and they stayed below the line.
        They had all been deployed, or most of them had, and they
    know what it means when they are in a forward base where they
    do not have to have the noise and the fumes of a generator
    right next to their tent. They also do not have to put a person
    on it to refuel it, and they are also lowering the risk to
    their fellow marines or to our partners in the private sector
    who have to bring them the fuel through a battlefield. If you
    tell them what it is for and what it gets them in warfighting
    terms, and then you give them the tools, it is in their culture
    to understand that.
        The challenge is really to us. Where I think as an
    official, I see the most need for a culture change, though, is
    back in DOD in the way that we run our business processes. It
    is really the same challenge. The burden is on all of us to
    explain why this is beneficial for the mission. Once we do
    that, we are finding that people do incorporate these changes,
    but it is hard. As I said, there are no shortcuts on that.
    Sometimes, it is a one person at a time conversion. But we are
    all working hard on that.
        Senator Shaheen. I did a hearing in Norfolk a couple of
    years ago with demonstrations of various technologies that were
    being implemented out in the field in Afghanistan. I remember
    very clearly when I asked the Marine Corps colonel how people
    had responded to the technology. He said their immediate
    reaction was that it was a piece of crap, but then they
    realized how much it improved their mission, and then they
    embraced it. I think it is a great lesson.
        To what extent are we anticipating maintaining the
    technology and the improvements that we made and integrating
    that into the continued operation so that it is sustainable? Is
    that part of what we are planning for as well?
        Ms. Burke. Absolutely. I think both the Marine Corps and
    the Army have made great strides in incorporating some of the
    improvements they have put into play in Afghanistan into
    programs of record. That is a great step forward. But we are
    also all putting a lot of effort on capturing the lessons
    learned and making sure that we not just document them and have
    a report, but that we are translating it into changes and into
    actual change requests. That is a really important effort for
    us now. But we have also already seen the Services
    incorporating these changes.
        I think the Army in particular has done some things in
    Afghanistan with an effort called Operation Dynamo. At these
    little outposts where it is hardest to deliver fuel, they have
    returned 40 to 60 percent fuel savings at times. Those are
    things that they are incorporating into their program of
    record. So the next time someone orders that kind of base, it
    is already incorporated.
        Senator Shaheen. Great.
        Someone mentioned, it may have been you, Secretary Hammack,
    energy service companies (ESCO) and the use of ESCOs. I wonder,
    Secretary Burke, if maybe you can speak to all of the branches,
    whether we are incorporating those opportunities to use
    performance contracts in what we are doing and whether there
    are any impediments to doing that.
        Mr. Conger. It is more of a facilities thing. We are. The
    President has an initiative that is emphasizing performance
    contracts across the Federal enterprise. He had a goal of
    achieving $2 billion over the past 2 years of ESPCs. We in DOD
    have more than half of that goal.
        Let me actually take the opportunity to brag on the Army a
    little bit. They have been particularly aggressive,
    particularly efficient, and I will let Secretary Hammack talk
    to it in particular, but they have an innovative way that they
    are pursuing these.
        Senator Shaheen. Can I also ask you, before we go to
    Secretary Hammack, to what extent have you had challenges with
    the accounting of how we deal with the costs of those
    performance contracts? The reason I ask is because this has
    been an issue with Federal agencies because of the way the
    Congressional Budget Office (CBO) scores the ESCOs. Has that
    been an issue for all of you and how have you gotten around
    that?
        Mr. Conger. Let me defer to Secretary Hammack to start.
        Ms. Hammack. We have not found that to be an issue to us.
    Right now, as Mr. Conger mentioned, we are doing about 25
    percent of the ESPCs in the Federal Government. It is something
    that we have had a very focused effort on and a focused team.
    But we do realize that there are upper limits to what you can
    do with an ESCO because it is paid for out of your utility
    budget. Your utility budget is something you pay every year. It
    is like your mortgage. If we all had cash, we would buy our
    house, and we know that your long-term 30-year price point is
    lower if you bought it all upfront yourself. But an ESPC brings
    in those experts to bring in the technologies and the
    strategies. There is a measurement and verification process to
    ensure that you are achieving those savings and you pay them
    back out of the savings.
        Senator Shaheen. Is there an outline for what you are
    allowed to use within DOD? I am trying to figure out how CBO
    does not have a problem with you all using them, but they have
    a problem when the Department of Energy is using them or the
    Department of Homeland Security or somebody else.
        Mr. Conger. To best answer your question, we will probably
    want to take it for the record and find out what the specific
    issue is.
        [The information referred to follows:]

        The authority for Federal agencies to enter into Energy Savings
    Performance Contracts (ESPC) is established by 42 U.S.C. section 8287.
    Further guidance for Department of Defense is provided by 10 U.S.C.
    section 2913. All Federal agencies are authorized to use ESPCs to
    finance energy saving measures. If a Federal agency uses the ESPC
    authority to include renewable energy which requires a power purchase
    agreement (e.g. larger than rooftop solar), the term in which the
    Federal agency can purchase the energy produced is for up to 10 years.

        Senator Shaheen. I will be happy to see that.
        Mr. McGinn. Senator, I would just like to add that we have
    implemented an energy return on investment model that we are
    working with the ESCOs. We are saying here are the criteria
    that we are using to decide the terms and conditions of an
    ESPC. We are educating them so that they can aim at meeting
    those criteria when they make proposals. But also we are asking
    them what is wrong about this model. Are there other things
    that we should be considering that you have learned from your
    business case analysis in private sector transactions similar
    with a university, municipality, or a light industrial park
    where they have brought their considerable technological and
    financial wherewithal to bear to reduce those energy costs? We
    are finding that this dialogue with the ESCOs is absolutely
    essential to meeting those goals and really exceeding them.
        Senator Shaheen. I am a big proponent, having seen it work
    as Governor when we did buildings in New Hampshire. I think it
    is a great way to provide savings and something that I think we
    ought to be doing across the Federal Government and trying to
    figure out why CBO is viewing this in a different way when it
    comes to other Federal agencies.
        In terms of performance incentives, it is my understanding,
    Secretary McGinn, that you have presented an award to some
    folks for actual savings and that that helps to incentivize
    crews. For example, I was given the example of the USS Peleliu
    that saved $5.3 million in fuel compared to ships in the same
    class. Can you talk about how incentivizing that comparison is
    helpful?
        Mr. McGinn. I mentioned earlier that I had been in Norfolk
    last week and I was in San Diego in February with the fleet
    commanders and their chains of command to present awards like
    the one to the Peleliu. We actually recognized a whole variety
    of different types of ships, the absolute best performers with
    cash awards. The only stipulation is that cash has to be used
    for increasing their energy savings and energy efficiency. We
    also recognized individual commanding officers and senior
    enlisted folks with certificates to illustrate the point that
    we really value the kinds of practices that these ships have
    used to achieve those energy savings. We do this in a formal
    way on an annual basis for all of our fleet concentration
    areas, but it is an ongoing process with the fleets to make
    sure that everybody gets it and they are availing themselves of
    the lessons learned.
        Senator Shaheen. How do we codify the goals for energy
    savings in a way that means that they continue, if leadership
    changes or if there are other issues that come up, so that we
    can continue to produce these kinds of savings?
        Mr. McGinn. At the highest levels in our precepts that are
    assigned for selection for various promotion boards, Secretary
    Mabus has put in energy and energy awareness, energy savings as
    one of the criteria that should be considered by the promotion
    board. It is discussed in fitness reports and evaluations. In
    every way possible, we are emphasizing this idea that we are
    all about warfighting readiness. There is a bright connection,
    inextricable connection, between warfighting readiness and
    energy. Therefore, if you want to be a warfighter, you have to
    be an energy warfighter as well.
        Senator Shaheen. Are the Army and Air Force doing similar
    kinds of efforts to codify the goals into what you are doing in
    the future?
        Ms. Hammack. Yes. The Army just updated our officer
    evaluation reports and we have a similar metrics in it.
        But one of the things we have also done is every month we
    issue a report and it shows who the largest energy consumers
    are and the percent change. We have found that showing where
    you stack up on the chart is one method of promoting
    efficiencies, and you do not want to be the one who is the
    biggest consumer with the highest growth rate.
        Ms. Ferguson. I would say the Air Force does this a lot
    through our Air Force governance process for energy, and that
    is overseen by the Vice Chief of Staff of the Air Force and the
    Under Secretary of the Air Force, so at the highest levels.
    Each one of the major commands sits on that, and we track each
    one of the metrics, whether it is the industrial energy,
    facilities energy, or operational energy.
        To get back to the earlier question, we also do provide
    some financial awards, particularly Air Mobility Command, to
    both individuals and to units for saving fuel, operational
    fuel.
        To brag just a little bit on the Air Force, we have won 21
    Federal energy management level awards since 2010. A lot of Air
    Force folks have been recognized at a national level for the
    good work they have done in energy initiatives.
        Senator Shaheen. What have you found to be most effective
    in terms of encouraging energy savings? Has it been the cash
    awards? Has it been the comparison to how you stack up against
    other units or other operations? What is the most effective?
        Ms. Ferguson. I do not know if I could say what the most
    effective is, but I think all of them have great benefits. I
    think the folks like to get recognized for the great work that
    they are doing, no matter how we do it.
        Mr. McGinn. I would say probably competition, that
    professional pride in your unit and your individual performance
    that is a real driver. The cash awards are nice, but they are
    not as important as that professional pride and competition.
        Ms. Hammack. I will echo the competition. The competition
    seems to be one of the biggest drivers. You want to be a
    winner, and so highlighting those who are winners and showing
    where you rack and stack can help motivate individuals.
        Senator Shaheen. Thank you all very much. I have no further
    questions.
        We will leave the record open until close of business on
    Friday.
        The hearing is adjourned.
        [Whereupon, at 11:39 a.m., the subcommittee adjourned.]

        [Questions for the record with answers supplied follow:]
                 Questions Submitted by Senator Jeanne Shaheen
                         funding for army laboratories
        1. Senator Shaheen. Ms. Hammack, it appears that the fiscal year
    2015 military construction (MILCON) request does not include funding
    for U.S. Army laboratories. While I understand that current budget
    pressures have forced significant cuts to the MILCON account, I am
    concerned that the underfunding of laboratory facilities has been a
    long-term trend that has resulted in degraded capabilities, putting
    them at a significant disadvantage relative to private sector
    facilities. Do you share this concern?
        Ms. Hammack. Yes, I share your concern with the state of our
    laboratory infrastructure. While we have not requested MILCON funding
    for laboratories in this year's request, the laboratories have been
    able to use recent authorities granted to them by Congress to maintain
    their capabilities.

        2. Senator Shaheen. Ms. Hammack, is there any relief programmed in
    the Future Years Defense Program (FYDP)?
        Ms. Hammack. While the Army is committed to laboratory
    revitalization, there are no MILCON projects for laboratories in the
    current FYDP.

                                  cost sharing
        3. Senator Shaheen. Ms. Hammack, would there be value in developing
    usable mechanisms by which the Army can share in the costs of building
    and maintaining new research infrastructure with other Services, other
    Federal or State/local agencies or the private sector?
        Ms. Hammack. Yes. Having clearly defined and usable mechanisms to
    share the capital and maintenance costs would benefit the Army.
    Currently, mechanisms exist to share in the costs of building and
    maintenance of new research infrastructure with other military
    Services. For example, projects can be conjunctively funded by two
    MILCON appropriations (two Services or a Service and a Defense-wide
    appropriation). However, this process is cumbersome and requires
    considerable congressional engagement. To avoid over-complication, the
    two appropriation owners will generally coordinate to determine the
    best Service to execute the entire project and then coordinate with the
    Office of the Secretary of Defense (OSD) to transfer funding across
    appropriations to fund the project.
                                     ______

                    Questions Submitted by Senator Tim Kaine
               naval facilities security and unauthorized access
        4. Senator Kaine. Secretary McGinn, I want to offer my condolences
    to the Navy on the loss of a sailor, Petty Officer 2nd Class Mark A.
    Mayo, at Naval Station Norfolk last week on March 24. I know the Navy
    is conducting an investigation into the incident, but I am pleased to
    hear that the Navy is now conducting additional screening measures at
    installations. Along with the steps the Navy has already taken to
    address the concerns of facility security and unauthorized access at
    installations as well as planned actions, was the Transportation Worker
    Identification Credential (TWIC) card for the perpetrator issued before
    or after he was convicted with the manslaughter charge?
        Mr. McGinn. The TWIC is administered by the Transportation Security
    Administration (TSA) not the Department of the Navy. Inquiries
    regarding TSA vetting procedures, protocols, or details regarding any
    individual card holder should be provided to the Department of Homeland
    Security (DHS) or TSA.

        5. Senator Kaine. Secretary McGinn, if the conviction came before
    issuance of the TWIC card, why was the credential still issued to the
    individual and how can such cases be prevented in the future?
        Mr. McGinn. The safety of our people and resources are our highest
    priorities. The TWIC is administered by the TSA not the Department of
    the Navy. Inquiries regarding TSA vetting procedures, protocols, or
    details regarding any individual card holder should be provided to DHS
    or TSA.

        6. Senator Kaine. Secretary McGinn, if the conviction came after
    issuance of the TWIC card, what measures can be put in place to cross-
    check such individuals who are later involved in serious crimes?
        Mr. McGinn. The safety of our people and resources are our highest
    priorities. The TWIC is administered by the TSA not the Department of
    the Navy. Inquiries regarding TSA vetting procedures, protocols, or
    details regarding any individual card holder should be provided to DHS
    or TSA.
                                     ______

                  Questions Submitted by Senator Kelly Ayotte
                      delayed projects at public shipyards
        7. Senator Ayotte. Secretary McGinn, could you please give me a
    list of delayed projects at our four public shipyards?
        Mr. McGinn. There are two MILCON projects for naval shipyards that
    were programmed in our 2014 budget request for fiscal year 2015, but
    are now delayed to later in our FYDP. These projects are:

        1.  P285 Addition to Building 373 Barracks at Portsmouth Naval
    Shipyard.
        2.  P401 Regional Ship Maintenance Support Facility to support
    depot-level work performed by Puget Sound Naval Shipyard.

                                 kc-46 beddown
        8. Senator Ayotte. Ms. Ferguson, this year's budget prioritizes Air
    Force investments in the KC-46A, both development as well as the
    beddown. On May 22, 2013, the Air Force selected the first three bases
    that will host the KC-46A tanker. Across the FYDP, would you please
    review the MILCON funding amounts and timelines that the Department of
    Defense (DOD) is requesting for the KC-46A beddown at McConnell, Pease,
    and Altus?
        Ms. Ferguson. The Air Force has completed the Environmental Impact
    Statement (EIS) for the KC-46A Formal Training Unit (FTU) and Main
    Operating Base (MOB) 1, and a final decision on the beddown locations
    was made and announced as Altus for the FTU and McConnell for the first
    MOB on April 22, 2014.
        The final basing decision for MOB 2, the first Air National Guard
    (ANG) location is expected early summer. Please see the tentative KC-
    46A delivery schedule below for FTU, MOB 1, and MOB 2.
        Note: Depot planning is geared towards making sure everything is in
    place to support aircraft C-checks that are scheduled to begin in
    fiscal year 2018.

        Please also see the attached spreadsheet for information on
    proposed MILCON projects pending Air Force final decisions.

        9. Senator Ayotte. Ms. Ferguson, are there any outstanding issues
    that this subcommittee needs to be aware of regarding the beddown of
    the KC-46A at this time?
        Ms. Ferguson. MILCON in support of the KC-46A FTU and first MOB is
    on track to be awarded in June 2014. Further, the Air Force is on
    schedule to announce the final basing decision for the second MOB this
    summer. Pending support for MILCON in the fiscal year 2015 President's
    budget request, and resolution of fair market valuation and a plan by
    the City of Oklahoma City for the acquisition of real estate adjacent
    to Tinker Air Force Base, OK (in support of KC-46A depot beddown),
    there are no outstanding issues regarding KC-46A beddown the
    subcommittee should be aware of.

                        east coast missile defense site
        10. Senator Ayotte. Mr. Conger, section 239 of the National Defense
    Authorization Act (NDAA) for Fiscal Year 2014 requires the Secretary of
    Defense to provide the congressional defense committees with a detailed
    briefing on the current status of efforts and plans for an East Coast
    Missile Defense site not later than 180 days after the completion of
    the site evaluation study. In January of this year, DOD announced four
    sites to include an EIS for potential missile defense sites. What is
    the current status of the EIS at each of the four announced sites?
        Mr. Conger. The Missile Defense Agency (MDA) initiated the EIS for
    the Continental United States Interceptor Site (CIS) (i.e. East Coast
    Missile Defense Site) in January 2014. The EIS is expected to take
    approximately 24 months. MDA conducted initial meetings with each of
    the announced installation's environmental staff and State and Federal
    regulators. Additionally, MDA is in the final stages of planning/
    coordinating the necessary environmental surveys required for each
    specific installation. MDA plans to submit the notice of intent in
    June/July and conduct public scoping meetings in the July/August
    timeframe.

        11. Senator Ayotte. Mr. Conger, are there any issues that this
    subcommittee needs to be aware of that would impact meeting timelines
    directed by law?
        Mr. Conger. No, there are no issues that would impact meeting
    timelines directed by law. As required by the NDAA for Fiscal Year
    2014, section 239, Vice Admiral Syring will update the congressional
    professional staff members in July/August 2014.

                 base realignment and closure costs and savings
        12. Senator Ayotte. Mr. Conger, Secretary Burke, Secretary Hammack,
    Secretary McGinn, and Ms. Ferguson, are each of the Services still
    paying environmental cleanup expenses from past Base Realignment and
    Closure (BRAC) rounds?
        Mr. Conger and Ms. Burke. Yes, each military Service is still
    paying environmental cleanup expenses from past BRAC rounds. Through
    the end of fiscal year 2013, the military Services have completed
    cleanup at 83 percent of BRAC sites and they are on track to exceed
    DOD's goal to complete cleanup at 90 percent and 95 percent of sites by
    the end of fiscal year 2018 and fiscal year 2021, respectively. Most of
    the remaining expenses are for operating cleanup systems and conducting
    long-term management (e.g., environmental monitoring, review of site
    conditions) to ensure continued protection of human health and the
    environment, once active cleanup is complete.
        Ms. Hammack. Yes, the Army continues to pay for environmental
    cleanup expenses from past BRAC rounds.
        Mr. McGinn. Yes, the Navy is still paying environmental cleanup
    expenses from past BRAC rounds.
        Ms. Ferguson. Yes, there are ongoing environmental cleanup expenses
    from all five BRAC rounds.

        13. Senator Ayotte. Mr. Conger, Secretary Burke, Secretary Hammack,
    Secretary McGinn, and Ms. Ferguson, how much in fiscal year 2015 do
    each of the Services propose spending on previous BRAC rounds?
        Mr. Conger and Ms. Burke. DOD is planning to spend $355 million in
    fiscal year 2015 at BRAC installations: $93 million at Army BRAC
    installations, $154 million at Navy BRAC installations, $106 million at
    Air Force BRAC installations, and $2 million at Defense-wide
    installations.
        Ms. Hammack. The Army has requested $84.4 million in fiscal year
    2015 for environmental and caretaker activities for the following
    previous BRAC rounds: BRAC 1988 $12.4 million; BRAC 1991 $4.3 million;
    BRAC 1993 $1.8 million; BRAC 1995 $21.1 million; and BRAC 2005 $44.8
    million.
        In addition to the expenditures programmed in the fiscal year 2015
    budget request, the Army is taking advantage of the flexibility
    provided by the consolidation of the BRAC accounts to accelerate
    environmental cleanup. The Army plans to expend unobligated prior-year
    balances during execution of its fiscal years 2014 and 2015 BRAC
    program which will bring the total combined fiscal years 2014 and 2015
    obligations to approximately $680 million. These projected obligations
    will help to significantly reduce the remaining BRAC environmental
    cleanup liability currently estimated at $1.2 billion.
        Mr. McGinn. The Navy's BRAC fiscal year 2015 $138 million budget
    request will be spent on BRAC rounds II through V.
        Ms. Ferguson. The Air Force's fiscal year 2015 President's budget
    request, including environmental and operation and maintenance, is in
    the amount of $92 million.

        14. Senator Ayotte. Mr. Conger, Secretary Burke, Secretary Hammack,
    Secretary McGinn, and Ms. Ferguson, what are the earliest BRAC rounds
    from which each of the Services are still incurring expenses?
        Mr. Conger and Ms. Burke. 1988 is the earliest BRAC round from
    which the military Services are incurring expenses. The military
    Services are making good progress completing cleanup at BRAC sites, and
    they are on track to exceed DOD's goal to complete cleanup at 90
    percent and 95 percent of sites by the end of fiscal year 2018 and
    fiscal year 2021, respectively.
        Ms. Hammack. The earliest BRAC round for which the Army is still
    incurring expenses is BRAC 1988.
        Mr. McGinn. The Navy still has environmental liabilities for one
    base from BRAC round I; however, all BRAC round I property has been
    transferred.
        Ms. Ferguson. The Air Force is still incurring expenses from round
    1 (BRAC 88) at the following former installations: Chanute Air Force
    Base, IL; George Air Force Base, CA; and Norton Air Force Base, CA.

        15. Senator Ayotte. Mr. Conger, Secretary Burke, Secretary Hammack,
    Secretary McGinn, and Ms. Ferguson, how much would the proposed BRAC
    round in 2017 cost?
        Mr. Conger and Ms. Burke. A 2017 BRAC round should be similar to
    the 1993 and 1995 rounds. Based on a notional 4 to 5 percent reduction
    in plant replacement value and using the average of actual costs and
    savings from previous rounds (BRAC 1993/1995 data) as the basis, DOD
    estimates that over the 6-year implementation (2018-2023) period,
    cumulative costs would be $5.8 billion, slightly more than the
    cumulative savings of $5.7 billion, therefore it would be a wash during
    the timeframe. Our projection is that we can achieve recurring savings
    (after implementation) on the order of $2 billion/year with another
    round.
        Ms. Hammack. The Department proposes a fiscal year 2017 BRAC round
    to accomplish reductions in civilian workforce levels and garner future
    multiyear savings. This proposal results in a budget of $1.6 billion
    through fiscal year 2019, but generates multiyear savings starting in
    fiscal year 2020.
        Mr. McGinn. OSD anticipates a 2017 BRAC round would be similar to
    the 1993 and 1995 rounds. Based on a notional 4 to 5 percent reduction
    in plant replacement value and using the average of actual costs and
    savings from previous rounds (BRAC 1993/1995 data) as the basis, DOD
    estimates that over the 6-year implementation (2018-2023) period,
    cumulative costs would be $5.8 billion, slightly more than the
    cumulative savings of $5.7 billion, therefore it would pay for itself
    during the implementation period. The Department of the Navy welcomes
    the opportunity to conduct the analysis and determine what savings we
    may achieve through an additional round of BRAC.
        Ms. Ferguson. The Air Force's portion of the overall cost for a
    BRAC round in 2017 would depend on OSD criteria for evaluation and the
    resulting recommendations. The Air Force has not done any analysis to
    date to calculate costs.

        16. Senator Ayotte. Mr. Conger, Secretary Burke, Secretary Hammack,
    Secretary McGinn, and Ms. Ferguson, the Government Accountability
    Office (GAO) found in 2012 that BRAC 2005 implementation costs grew to
    about $35 billion--exceeding the initial 2005 estimate of 67 percent.
    Given this discrepancy between the original cost estimates and the
    actual costs from the 2005 BRAC round, how confident can we be
    regarding cost estimates for a new BRAC round?
        Mr. Conger and Ms. Burke. As we have indicated previously, GAO's
    2012 report found that most of the cost increase could be tied to only
    14 of the 182 recommendations. Those increases were largely due to
    deliberate and subsequent decisions to expand the originally-envisioned
    scope of construction and recapitalization to address deficiencies in
    our enduring facilities or to expand the capabilities they provide as
    opposed to issues of accuracy. Second, BRAC 2005 occurred during a time
    of growth (both personnel and resources) and as such, contributed to
    scope increases. Third, we will incorporate our own lessons learned and
    the findings of GAO to improve our cost estimating, particularly for
    areas such as information technology.
        Ms. Hammack. There are good reasons to be confident that a future
    BRAC round would not experience similar cost growth analyzed in GAO's
    2012 report. GAO found that most of the cost increase (72 percent) tied
    to only 14 of the 182 recommendations. The Army was the main lead on 6
    of those 14. The cost increases were largely due to deliberate and
    subsequent decisions to expand the originally-envisioned scope of
    construction and recapitalization to address deficiencies in enduring
    facilities and/or expand the capabilities provided as opposed to issues
    of accuracy.
        Another reason I am confident: BRAC 2005 was an anomaly in several
    important ways. There were four major factors that drove most of the
    Army's cost increases, all of which would be absent in a future BRAC
    round.
        Factor #1: BRAC 2005 was a transformational BRAC conducted while
    fighting two wars. This was an anomaly because prior BRAC rounds
    occurred as the Cold War ended. The Army used the BRAC 2005 process to
    transform how we train and organize our modular Brigade Combat Teams.
    For example, we created a Maneuver Center of Excellence at Fort Benning
    that combined the Armor and Infantry Schools, creating new and better
    capability. Similarly, at Fort Lee, VA, we created a Combat Service
    Support Center of Excellence. Those were two of the six Army-led BRAC
    recommendations that generated much of the cost increase evaluated by
    GAO. The Senate Armed Services Committee reviewed every project during
    its annual budget oversight and authorization process.
        Factor #2: BRAC 2005 was implemented while Army end strength and
    force structure were increasing. This was an anomaly because all prior
    BRAC rounds occurred while end strength and force structure were
    decreasing. A future BRAC round would similarly occur while end
    strength and force structure are decreasing.
        Factor #3: BRAC 2005 accommodated the return of tens of thousands
    of soldiers from overseas, back to the United States. This was an
    anomaly because a future BRAC round would have no expectation that
    large numbers of forces stationed in Europe would return to the United
    States. The Army had existing facilities in Europe and Korea, but
    needed to construct new facilities here at home.
        Factor #4: The BRAC 2005 process produced two types of
    recommendations--efficiency and transformation. The Army saves $1
    billion a year in annual recurring savings from the BRAC 2005 process
    and began realizing those savings when the BRAC process concluded in
    September 2011. For the Army, BRAC 2005 efficiency recommendations cost
    about $2 billion to implement and save about $575 million each year. A
    future BRAC would be an efficiency BRAC round, which would likely yield
    similar returns on investment.
        Mr. McGinn. GAO's 2012 report found that most of the cost increase
    could be tied to only 14 of the total 182 DOD recommendations. Those
    increases were largely due to deliberate and subsequent decisions to
    expand the originally-envisioned scope of construction and
    recapitalization to address deficiencies in enduring facilities or to
    expand the capabilities they provide. Second, BRAC 2005 occurred during
    a time of growth (both personnel and resources) and as such contributed
    to scope increases. Finally, lessons learned and the findings of GAO
    will inform our analysis and cost estimating processes in a future
    round of BRAC.
        Ms. Ferguson. The Air Force cannot speculate on how accurate future
    estimates may be; however, it is important to note that the Air Force
    completed all of its BRAC 2005 actions on schedule and within the
    estimated total costs and achieved savings, both during the 6-year
    implementation period and annually thereafter.

        17. Senator Ayotte. Mr. Conger, when do you expect to reach the
    aggregate break-even point for the 2005 BRAC round? In other words,
    when will the aggregate savings exceed the costs?
        Mr. Conger. Accumulated savings will exceed one-time implementation
    costs in 2018.

     military construction and sustainment funding for the national guard
                                  and reserve
        18. Senator Ayotte. Secretary Hammack, a major concern for the
    subcommittee has been the underfunding of the infrastructure needs of
    our National Guard and Reserve components. Over 46 percent of Army
    Guard Readiness Centers are 50-years-old and older, and many are not
    suitable to put soldiers in. The decrease in facility investment will
    lead to lasting negative impacts on the National Guard's ability to
    effectively serve the Nation and its communities during crises. How
    would you assess the overall infrastructure readiness of the Army
    National Guard and Reserve units?
        Ms. Hammack. The Army has concerns regarding all Army facilities
    including those of the Army National Guard (ARNG) and Army Reserve.
    Projected funding levels present challenges to adequately support a
    modern force with modern equipment.
        In the short term, in order to meet the mission, the Army will rely
    more on sustainment, restoration and modernization funding to balance
    the lower MILCON levels. The Army will also closely monitor potential
    life/health/safety issues caused by facility degradation and utilize
    mitigation strategies.
        To ensure the Reserve components are being funded at appropriate
    levels with limited resources, the Army implemented an integrated
    Facility Investment Strategy (FIS) for MILCON funding distribution
    between the components. This distribution is based on models of record
    that provide facility condition and requirement data using business
    rules that are replicable and transparent. In addition, the Army has
    recognized readiness centers and vehicle maintenance shops as focus
    areas in its facility investment strategy.
        The ARNG is in the final phase of developing its Readiness Center
    Transformation Master Plan (RCTMP), which will provide a comprehensive
    capital investment strategy for both MILCON and restoration and
    modernization for every State. The Army anticipates the study will
    identify many opportunities for consolidation and divesture dependent
    upon the mission, demographics, and facility condition.

        19. Senator Ayotte. Secretary Hammack, how does the Army prioritize
    its MILCON and facility sustainment funding across the Active, National
    Guard, and Reserve Forces?
        Ms. Hammack. As we shape the Army of 2020 and beyond through a
    series of strategic choices, the Army Senior Leadership implements an
    integrated FIS in support of Total Army priorities and requirements
    across all components. The Army FIS uses MILCON funding to focus on the
    highest need to replace failing facilities and build out critical
    facility shortages. As a result, MILCON funding is spread across the
    Active, National Guard, and Army Reserve appropriations according to a
    parity formula that is based on facility requirements and condition.
    Prioritization of MILCON is also based on facility requirements in
    support of Army Senior Leader Initiatives required for equipment
    fielding, force structure updates, and readiness. Examples of these
    needs include the activation of the 13th Combat Aviation Brigade,
    establishment of the Army Cyber Command, elimination of inadequate
    training barracks, and new facilities for the Gray Eagle Unmanned
    Aerial System in the United States (the system was initially fielded
    directly to combat). MILCON prioritization across all components is
    additionally focused on the extent to which a project addresses
    obsolete, failed, or failing facilities, alleviates critical space
    deficits on an installation or site, eliminates leased facilities, and
    provides for demolition of older facilities balanced with new
    construction.
        Sustainment funding level is equally distributed across the Active,
    National Guard, and Army Reserve in accordance with the OSD Facilities
    Sustainment Model (FSM). It is the Army's intent to fund sustainment at
    the same percentage across the components. Although our goal is 90
    percent of FSM requirements, the Army and all Services have taken risk
    and resourced sustainment at lower levels due to budget reductions in
    support of our Nation's deficit reduction goal. Components target the
    allocated sustainment in support of life, health, and safety projects
    to protect the quality of life of our soldiers, then focus funding
    towards the sustainment projects with the highest return on investment
    based on facility requirements, conditions, and mission need.

        20. Senator Ayotte. Ms. Ferguson, how is the Air Force handling the
    underfunding of the infrastructure needs of our National Guard and
    Reserve Forces and installations?
        Ms. Ferguson. In our fiscal year 2015 President's budget request,
    the Air Force--both Active and Reserve components--attempted to strike
    the delicate balance of a ready force today and a modern force
    tomorrow, while also recovering from the impacts of sequestration and
    adjusting to budget reductions.
        To help achieve that ready and modern force balance, the Air Force
    elected to accept risk in installation support, MILCON, and facilities
    sustainment. Major commands, the National Guard Bureau, and Air Force
    Reserve Command played a significant role in determining the amount of
    risk we could assume. Ultimately, the Air Force funded facilities
    sustainment at 65 percent of the OSD's FSM; reduced restoration and
    modernization account by 33 percent, and MILCON by 28 percent, from the
    fiscal year 2014 President's budget. The decrease in MILCON defers
    current mission infrastructure recapitalization requirements while
    supporting higher priority new mission MILCON, including combatant
    commander requirements, weapon system beddowns, and capabilities to
    execute the Defense Strategic Guidance. In the future, as new weapon
    system requirements are fielded across the total force, MILCON
    recapitalizing current infrastructure will continue to be difficult to
    resource. We acknowledge near-term facilities sustainment, restoration
    and modernization, and MILCON program reductions will have long-term
    effects on the health of infrastructure. To overcome the underfunding
    of infrastructure, we will continue to employ centralized asset
    management principles to target our severely limited resources against
    mission-critical, worst-first requirements. However, in the MILCON
    account, the Reserve component received at, or above, their fair-share
    of available funding.

         national guard bureau's readiness center transformation study
        21. Senator Ayotte. Mr. Conger, I understand that the National
    Guard Bureau is conducting a Readiness Center Transformation Study for
    all States, territories, and the District of Columbia, to determine the
    costs of replacing, modernizing, or restoring aging infrastructure,
    while closing unacceptable facilities, as needed. In December 2013, the
    National Guard Bureau submitted an interim report to DOD for review.
    When will this report be delivered to Congress?
        Mr. Conger. The Army National Guard is on track to deliver the
    final report of the RCTMP in December 2014.

        22. Senator Ayotte. Mr. Conger, Secretary Burke, Secretary Hammack,
    and Ms. Ferguson, will DOD use this study to address infrastructure
    shortfalls in the National Guard and Reserve Forces?
        Mr. Conger and Ms. Burke. DOD will use the report to help inform
    Reserve center investment decisions. However, as in most investment
    decisions, there are many factors that must be considered as we build
    our long-term facility recapitalization priorities.
        Ms. Hammack. Yes, DOD will use the RCTMP to inform investment
    decisions for the ARNG infrastructure in a myriad of scenarios
    including BRAC. The study only addresses National Guard Readiness
    Centers, not Army Reserve facilities.
        In August 2010, Senate Report 111-201 requested a study be
    conducted on ARNG readiness centers followed by a report on findings.
    In response to the study, the ARNG is now in the final phase of
    developing a RCTMP as a part of its final report. This plan will
    provide a comprehensive capital investment strategy for both MILCON and
    restoration and modernization for every State. The study is identifying
    many opportunities for consolidation and divesture where it makes sense
    for the mission, demographics, and facility condition. The investment
    strategy is prioritized to ensure optimal mission and response
    effectiveness. The final report is scheduled for completion in December
    2014.
        The RCTMP can be used to inform facility condition of Guard
    readiness centers. The initial trends from the study indicate an
    average facility condition slipping from amber to red, and a 40 percent
    space shortfall. It also indicates roughly 32 percent of the readiness
    centers are located in areas not supported by demographics or mission
    requirements.
        The RCTMP will provide a valuable investment plan for both MILCON
    and facilities sustainment restoration and modernization, because it
    utilizes a risk-based prioritized strategy developed from robust
    methodology, consistent criteria, and creditable data.
        Ms. Ferguson. Senate Report 111-201, accompanying the NDAA for
    Fiscal Year 2011, directs the Secretary of the Army to report to the
    Senate Armed Services Committee no later than February 1, 2011, on the
    results and recommendations of an independent study which shall review:

        (1)  Standards for facility size, configuration, and equipment for
    the range of missions and training supported by readiness centers;
        (2)  An assessment of each readiness center to objectively measure
    and determine the current facility condition and capability to support
    authorized manpower, unit training, and operations;
        (3)  An assessment of supporting facilities and functions to
    include equipment storage, classrooms, force protection, utilities,
    maintenance, administration, and proximity of support and training
    facilities;
        (4)  Recommendations for the placement of new readiness centers,
    the relocation of existing readiness centers, or a change in the
    mission of units assigned to readiness centers to ideally position the
    ARNG in current or projected population centers;
        (5)  Recommendations for enhanced use of readiness centers to
    facilitate ARNG family support programs during deployments;
        (6)  An analysis of the feasibility, potential costs, and benefits
    of shared use of ARNG readiness centers with other local, State, or
    Federal agencies to improve response to local emergencies as well as
    the community support provided by readiness centers; and
        (7)  An investment strategy and proposed funding amounts in a
    prioritized project list to correct the most critical facility
    shortfalls across the inventory of ARNG readiness centers.

        The study was directed to the Secretary of the Army, and conducted
    by the ARNG to address ARNG readiness center requirements; the Air
    Force has thus not used it to assess or address ANG or Air Force
    Reserve missions or facility requirements.

                                payment-in-kind
        23. Senator Ayotte. Mr. Conger, the NDAA for Fiscal Year 2014
    contained language that requires all future MILCON projects funded
    using in-kind payments pursuant to a bilateral agreement with partner
    nations be submitted to Congress for prior authorization. This language
    was included in the bill due to concerns about how DOD selects and
    prioritizes host nation funded construction projects. In your written
    statement, you said you disagreed with the provision because it was
    overly restrictive. However, this subcommittee's review of certain
    costs associated with U.S. military presence in Germany and the Asia-
    Pacific region identified a number of concerns regarding the spending
    and oversight of foreign government payments, particularly in-kind
    payments used for MILCON projects. What actions has DOD taken to comply
    with the new restrictions and to improve oversight?
        Mr. Conger. DOD adheres to the relevant statutes pertaining to in-
    kind payments. To implement changes in the NDAA for Fiscal Year 2014
    regarding in-kind payments, we are drafting policy that will clarify
    the definition of in-kind payments, and the processes the military
    departments and combatant commands will follow to recommend projects
    that will use the in-kind payments, to include required notifications
    to Congress. In order to improve the existing oversight and
    transparency of this program, we intend on providing Congress with an
    annual report that provides a list of construction projects provided by
    a host nation as compensation for the residual value of U.S. funded
    improvements returned to that host nation (i.e., in-kind payments) and
    host nation support provided in the form of direct construction rather
    than a cash contribution for the explicit purpose of defraying some, or
    all, of DOD's costs to station, maintain, and train military forces in
    their country (i.e., Japan and Korea). Additionally, my staff has
    expanded its review of the documentation supporting both the in-kind
    payments and voluntary contributions by host nations and will begin
    conducting scheduled program management reviews and establishing
    consistent investment policies.

                    rebasing of marines from okinawa to guam
        24. Senator Ayotte. Mr. Conger and Secretary McGinn, one of the
    most significant rebasing actions DOD is undertaking is the relocation
    of thousands of marines from Okinawa to Guam, Australia, Iwakuni,
    Hawaii, and the continental United States. This movement is a key part
    of our combat capability in the Asia-Pacific region. What are the
    current dates each of the movements should be complete?
        Mr. Conger. Guam: With congressional support and subject to several
    assumptions, our current projection is to have the first Marine Corps
    units start moving to Guam in 2021, establish an initial Marine Air
    Ground Task Force (MAGTF) capability by 2022/2023, and relocate the
    final Marine Corps units from Okinawa to Guam by 2026.
        Hawaii: The Marine Corps plans to increase its presence in Hawaii
    by approximately 900 personnel (not including dependents) to
    accommodate numerous changes to the Marine Corps Aviation Plan by
    fiscal year 2018. The relocation of approximately 2,700 marines from
    Okinawa to Hawaii--planned to arrive beginning in 2027--is currently in
    the very early stages of planning.
        Australia: In April 2014, the Marine Corps began the execution of
    the first Phase 2 deployment, an infantry battalion supported by a CH-
    53E detachment of four aircraft and a small logistics detachment, as
    part of Marine Rotational Force-Darwin. The prerequisites to move
    through phases are: (1) Bilateral approval; (2) Facilities
    availability; and (3) Marine Corps unit and equipment sourcing
    solution. Phase 3 (a Battalion Landing Team with aviation and logistics
    elements) is in the early stages of planning and discussions, and will
    build capability over time, progressing to the Phase 4, 2,500-personnel
    MAGTF.
        Iwakuni: The Marine Corps recently held the grand opening of new
    aircraft hangars and facilities at MCAS Iwakuni in support of the VMGR-
    152 (KC-130 aircraft) move from MCAS Futenma this summer, as part of
    the ongoing construction focused on rebuilding 77 percent of the
    station under the Defense Policy Review Initiative.
        Okinawa: The Okinawa Consolidation Plan was unveiled on April 5,
    2013, and contained projected completion dates for land returns. The
    Government of Japan (GoJ) derived these dates from joint timelines for
    construction and development and reflect a GoJ assessment of their own
    legal requirements and construction capabilities. The dates represent
    an optimistic best-case scenario and ministers welcomed the progress on
    land returns in the October 2013 U.S.-Japan Security Consultative
    Committee, also referred to as the 2+2 talks. To date, the Marine Corps
    has completed agreements that are over a year ahead of schedule. Per
    bilateral agreement, the Marine Corps must complete unilateral Okinawa
    consolidation master plans by December 2015 and obtain bilateral
    agreement prior to April 2016.
        The April 2012 Security Consultative Committee Joint Statement
    states that the Marine Corps will not turn over MCAS Futenma until the
    air facility at Camp Schwab is complete and operative; the completion
    of which is a primary driver for the closure of MCAS Futenma. Following
    the December 27, 2013, approval of the landfill permit at Henoko Bay,
    the GoJ continued their commitment with the recent Ministry of Defense
    announcement of the awarding of eight contracts totaling $14.4 million
    using JFY 2013 funds for survey and design work for the landfill.
    Internal analysis indicates that the Marine Corps Air Facility at Camp
    Schwab will be operational in 10 years. The GoJ is looking into ways to
    shorten the timeline.
        Mr. McGinn. Guam: In accordance with section 102(2)(c) of the
    National Environmental Policy Act (NEPA), the Department of the Navy is
    preparing a ``Supplemental Environmental Impact Statement (SEIS) for
    the Guam and Commonwealth of the Northern Mariana Islands Military
    Relocation (2012 Roadmap Adjustments).'' The SEIS evaluates potential
    alternatives for construction and operation of a main cantonment area,
    including family housing, and a Live-Fire Training Range Complex
    (LFTRC) to support the relocation of a substantially reduced number of
    marines than previously analyzed in the 2010 EIS. Construction projects
    at the main cantonment and the LFTRC cannot commence until after the
    Record of Decision for the SEIS is executed in 2015; however, the
    Marine Corps is authorized by exception to move forward on projects
    that support current and future training and are unencumbered by the
    SEIS (specifically; Andersen Air Force Base North Ramp, Andersen South
    and Apra Harbor locations). With congressional support and subject to
    several assumptions, our current projection is to have the first Marine
    Corps units start moving to Guam in 2021, establish an initial MAGTF
    capability by 2022/2023, and relocate the final Marine Corps units from
    Okinawa to Guam by 2026.
        Hawaii: The Marine Corps plans to increase its presence in Hawaii
    by approximately 900 personnel (not including dependents) to
    accommodate numerous changes to the Marine Corps Aviation Plan by
    fiscal year 2018. To accommodate the training, readiness, and quality
    of life requirements for these additional units, the Marine Corps has
    so far received nearly $300 million in MILCON funding from Congress in
    fiscal year 2013/2014 and has requested $53 million in fiscal year
    2015. Additional projects are currently being developed and reviewed.
    The relocation of approximately 2,700 marines from Okinawa to Hawaii--
    planned to arrive beginning in 2027--is currently in the very early
    stages of planning. Several initial studies have been completed; these
    will inform future NEPA analysis and are essential before accurate and
    budget-quality cost estimates and a master plan for the relocation to
    Hawaii can be completed. The environmental review process is currently
    planned to begin in 2019 and will identify and address issues of local
    concern, such as compatible land uses, off-base infrastructure
    improvements, traffic impacts, natural and cultural resources impacts,
    and necessary school upgrades. Final basing decisions and construction
    cannot occur until after an EIS and Record of Decision have been
    completed.
        Australia: In April 2014, the Marine Corps began the execution of
    the first Phase 2 deployment, an infantry battalion supported by a CH-
    53E detachment of four aircraft and a small logistics detachment, as
    part of Marine Rotational Force-Darwin. The prerequisites to move
    through phases are: (1) Bilateral approval; (2) Facilities
    availability; and (3) Marine Corps unit and equipment sourcing
    solution. Phase 3 (a Battalion Landing Team with aviation and logistics
    elements) is in early stages of planning and discussions, and will
    build capability over time, progressing to the Phase 4, 2,500-personnel
    MAGTF.
        Iwakuni: The Marine Corps recently held the grand opening of new
    aircraft hangars and facilities at MCAS Iwakuni in support of the VMGR-
    152 (KC-130 aircraft) move from MCAS Futenma this summer, as part of
    the ongoing construction focused on rebuilding 77 percent of the
    station under the Defense Policy Review Initiative.
        Okinawa: The Okinawa Consolidation Plan was unveiled on April 5,
    2013, and contained projected completion dates for land returns. The
    GoJ derived these dates from joint timelines for construction and
    development and reflect a GoJ assessment of their own legal
    requirements and construction capabilities. The dates represent an
    optimistic best-case scenario and ministers welcomed the progress on
    land returns in the October 2013 U.S.-Japan Security Consultative
    Committee, also referred to as the 2+2 talks. To date, the Marine Corps
    has completed joint committee agreements on four areas eligible for
    immediate return: (1) Camp Kinser North Access Road has been
    transferred to Urasoe City; (2) West Futenma Housing Area of Camp
    Foster is in the process of being returned; (3) A bilateral referral is
    being executed for a portion of the warehouse area within the Camp
    Foster Facilities Engineering Compound; and (4) Camp Kinser area near
    gate 5 is in the process of being returned. All of these agreements are
    over a year ahead of schedule. The Shirahi River area has also been
    identified as an additional area available for immediate return and is
    under coordination. Per bilateral agreement, the Marine Corps must
    complete unilateral Okinawa consolidation master plans by December 2015
    and obtain bilateral agreement prior to April 2016.
        The April 2012 Security Consultative Committee Joint Statement
    states that the Marine Corps will not turn over MCAS Futenma until the
    air facility at Camp Schwab is complete and operative; the completion
    of which is a primary driver for the closure of MCAS Futenma. Following
    the December 27, 2013, approval of the landfill permit at Henoko Bay,
    the GoJ continued their commitment with the recent Ministry of Defense
    announcement of the awarding of eight contracts totaling $14.4 million
    using JFY 2013 funds for survey and design work for the landfill.
    Although the Governor of Okinawa requested that flight operations at
    MCAS Futenma cease in 5 years, the current U.S. Marine Corps and U.S.
    Forces-Japan internal analysis indicates that the Marine Corps Air
    Facility at Camp Schwab will be operational in 10 years. The GoJ is
    looking into ways to shorten the timeline.

        25. Senator Ayotte. Mr. Conger and Secretary McGinn, what are the
    final estimated force sizes at each of these locations?
        Mr. Conger. The Marine Corps' Distributed Laydown is a key part of
    the rebalance strategy for the Asia-Pacific region and provides U.S.
    Pacific Command (PACOM) with agile and responsive MAGTFs in four
    geographical regions across the Pacific: Japan, Guam, Hawaii, and
    Australia, and supports the Secretary of Defense's requirement for
    22,500 marines to remain west of the International Date Line.
        Japan: While our presence on Okinawa will gradually be reduced to
    approximately 10,000 personnel, Okinawa will continue to be the
    mainstay of our forward deployed Marine Corps forces in the Asia-
    Pacific region. It is a cornerstone of our Distributed Laydown. In
    addition to Okinawa, there will be approximately 3,500 marines in
    Iwakuni. Per the terms of our mutual defense treaty, Japan will
    continue to provide facilities on Okinawa and mainland Japan for our
    use.
        Guam: The approximately 5,000 person 3rd Marine Expeditionary
    Brigade will consist of its Command Element, a Ground Combat Element
    comprised of the 4th Marine Regiment (headquarters, two infantry
    battalions, and combat support attachments), a robust Air Combat
    Element, and a Combat Service Support Element tailored to its needs.
    This Marine Expeditionary Brigade-sized MAGTF will be able to support
    the PACOM commander's needs from engagement to crisis response.
        Australia: In April 2014, the Marine Corps began the execution of
    the first Phase 2 deployment, an infantry battalion supported by a CH-
    53E detachment of four aircraft and a small logistics detachment, as
    part of Marine Rotational Force-Darwin. The intent in the coming years
    is to establish a rotational presence of up to a 2,500 person MAGTF in
    the Northern Territory.
        Hawaii: The relocation of approximately 2,700 marines from Okinawa
    to Hawaii--planned to arrive beginning in 2027--will bring the total
    forces in Hawaii to approximately 8,800.
        Mr. McGinn. The Marine Corps' Distributed Laydown is a key part of
    the rebalance strategy for the Asia-Pacific region and provides PACOM
    with agile and responsive MAGTFs in four geographical regions across
    the Pacific; Japan, Guam, Hawaii, and Australia, and supports the
    Secretary of Defense's requirement for 22,500 marines to remain west of
    the International Date Line.
        Japan: While our presence on Okinawa will gradually be reduced to
    approximately 10,000 personnel, Okinawa will continue to be the
    mainstay of our forward deployed Marine Corps forces in the Asia-
    Pacific region, and a cornerstone of our Distributed Laydown, which in
    addition to Okinawa, there will be approximately 3,500 in Iwakuni. Per
    the terms of our mutual defense treaty with Japan, they will continue
    to provide facilities on Okinawa and mainland Japan for our use.
        Guam: Once the realignment of forces in Okinawa is complete, the
    approximately 5,000 personnel 3rd Marine Expeditionary Brigade will
    consist of its Command Element, a Ground Combat Element comprised of
    the 4th Marine Regiment (headquarters, two infantry battalions, and
    combat support attachments), a robust Air Combat Element, and a Combat
    Service Support Element tailored to its needs. This Marine
    Expeditionary Brigade-sized MAGTF will be able to support the PACOM
    commander's needs from engagement to crisis response.
        Australia: In April 2014, the Marine Corps began the execution of
    the first Phase 2 deployment, an infantry battalion supported by a CH-
    53E detachment of four aircraft and a small logistics detachment, as
    part of Marine Rotational Force-Darwin. The intent in the coming years
    is to establish a rotational presence of up to a 2,500 person MAGTF in
    the Northern Territory.
        Hawaii: The relocation of approximately 2,700 marines from Okinawa
    to Hawaii--planned to arrive beginning in 2027--will bring the total
    forces in Hawaii to approximately 8,800.

        26. Senator Ayotte. Mr. Conger and Secretary McGinn, do we have a
    final estimated cost to the U.S. Government for this overall
    relocation?
        Mr. Conger. No. The Department of the Navy is using a $12.1 billion
    cost estimate as a planning figure to cover MILCON, major categories
    including family housing, equipment, furnishings, environmental
    mitigation, and non-military infrastructure. With the exception of a
    limited number of near-term projects for which we have budget level
    detail, the current estimate is conservative and programmatic.
        As the Department of the Navy proceeds with preparation of the SEIS
    for Guam, we will continue to refine the cost estimate and remain
    committed to providing Congress with comprehensive costing and detailed
    planning information. The current Distributed Laydown plan envisions
    that the Hawaii relocation will commence after the Guam build out, and
    therefore the plans for the scope and costs for Hawaii have less
    fidelity than that for Guam.
        Mr. McGinn. I am confident in the reliability of the current $12.1
    billion cost estimate as a planning figure and that the Marine Corps
    employed the appropriate approach and methodology for determining the
    estimate for the Distributed Laydown. We are using the $12.1 billion
    cost estimate as a planning figure to cover MILCON, family housing,
    equipment, furnishings, environmental mitigation, and non-military
    infrastructure. With the exception of a limited number of near-term
    projects for which we have budget level detail, the current estimate is
    conservative and programmatic. The estimate also does not include any
    potential costs for strategic lift or for the relocation of marines to
    Australia. Cost-share negotiations with the Government of Australia are
    currently ongoing. The State Department, with DOD in support, is
    currently leading negotiations with the Australian Government for an
    access agreement. These negotiations--which will address cost sharing
    principles--are in the initial stages.
        As we proceed with preparation of the SEIS for Guam, we will
    continue to refine the cost estimate and remain committed to providing
    Congress with comprehensive costing and detailed planning information
    as it becomes available. The current Distributed Laydown plan envisions
    that the Hawaii relocation will commence after the Guam build out, and
    therefore the plans for the scope and costs for Hawaii have less
    fidelity than that for Guam.

        27. Senator Ayotte. Mr. Conger and Secretary McGinn, are there any
    issues this subcommittee needs to be aware of at this time?
        Mr. Conger. The realignment of marines to Guam is a priority for
    DOD and a central element of the administration's rebalance to the
    Asia-Pacific region. The establishment of a LFTRC is essential to
    maintaining training and readiness of Marine Corps personnel relocating
    to Guam. The Department of the Navy and the Fish and Wildlife Service
    recently identified a legal obstacle under the National Wildlife Refuge
    System Administration Act as it pertains to the LFTRC's surface danger
    zone which would overlay a portion of the Ritidian Unit of the Guam
    National Wildlife Refuge. The surface danger zone is necessary to
    operate the LFTRC.
        Congresswoman Bordallo has proposed legislation that would support
    the establishment of a LFTRC at Andersen Air Force Base-Northwest
    Field, which is our preferred alternative for the LFTRC in the recently
    released Draft SEIS. This legislation resolves the legal issue and is
    essential to enabling and ensuring agreement between the Navy and the
    Fish and Wildlife Service.
        Mr. McGinn. Yes, Congresswoman Bordallo has proposed legislation
    that would support the establishment of a LFTRC at Andersen Air Force
    Base-Northwest Field, which is our preferred alternative for the LFTRC
    in the recently released Draft SEIS. The bill is H.R. 4402, ``The Guam
    Military Readiness and Training Act of 2014.'' Establishment of the
    LFTRC is essential to maintaining training and readiness of Marine
    Corps personnel on Guam as required by section 5063, title 10, U.S.C.
    We continue to work with the Fish and Wildlife Service to resolve the
    legal issues under the National Wildlife Refuge System Administration
    Act which the bill seeks to address.

                                overseas basing
        28. Senator Ayotte. Mr. Conger, what is the current status of the
    Secretary of Defense's directed review of our European infrastructure?
        Mr. Conger. We plan to have completed our analyses and have
    recommendations ready for the Secretary of Defense's review in late
    spring. We have provided briefs to your staffs in a classified forum on
    our progress to date.

        29. Senator Ayotte. Mr. Conger, is that review taking into account
    recent developments with respect to Russia and Ukraine?
        Mr. Conger. Our review is based on a defined force structure
    provided by the Joint Staff and does not involve any changes to that
    force structure or associated capabilities. However, operational and
    policy military considerations and inputs are informed by current
    events. In fact, the results of our efforts will enhance our presence
    in Europe by more efficiently supporting our existing force structure.

        30. Senator Ayotte. Mr. Conger, what is included in the analyses of
    basing requirements?
        Mr. Conger. We are comprehensively evaluating our infrastructure
    relative to the requirements of a defined force structure while
    emphasizing military value, joint utilization, elimination of excess
    capacity, and obligations to our allies.

        31. Senator Ayotte. Mr. Conger, is DOD assessing all combatant
    command areas of responsibility?
        Mr. Conger. Over the course of this past year, DOD has conducted
    analysis that included the elimination, consolidation, and realignment
    of combatant commands. DOD determined that based on the current global
    security environment, the current structure of six geographic commands
    and three functional commands remains the most effective construct.
    However, DOD continues to look for opportunities to cut costs--
    including modifications in our organization constructs--that will not
    also risk attaining our national security objectives.

                  facilities sustainment and recapitalization
        32. Senator Ayotte. Mr. Conger, you stated in your testimony that
    ``sustainment represents the Department's single most important
    investment in the conditions of its facilities . . . Proper sustainment
    retards deterioration, maintains safety, and preserves performance over
    the life of a facility, and helps improve the productivity and quality
    of life of our personnel.'' But I understand that we funded sustainment
    of our facilities at 65 percent of the requirement in fiscal year 2013,
    74 percent in fiscal year 2014, and are planning to fund sustainment at
    65 percent in fiscal year 2015. How much more risk--more delays and
    cuts--can the infrastructure absorb?
        Mr. Conger. We don't really know, because many factors can impact
    risk and produce negative outcomes. Until the Budget Control Act
    impacts are normalized, DOD will continue to take risks in its
    infrastructure. DOD will continue to monitor key indicators of failure
    and prioritize funding to preclude the most detrimental outcomes.
    However, lesser impacts to quality of life and operational efficiency
    will accumulate that will degrade morale, increase operational costs,
    and eventually impact mission effectiveness. Given that most facilities
    have long service lives and degrade at a relatively slow pace, it can
    take years for the degradation to manifest into mission impacts. This
    is not the optimal means to manage such a large facility inventory, but
    until the DOD budget stabilizes, we will continue to see small(er)
    facility investments.

        33. Senator Ayotte. Mr. Conger, what are the signs of a failing
    infrastructure and are we starting to see some of those signs?
        Mr. Conger. DOD is seeing signs of failing facilities. In 2007, DOD
    adopted the Federal Real Property Council's, ``Guidance for Real
    Property Inventory Reporting,'' which uses a Facility Condition Index
    to measure an asset's health. The Facility Condition Index is a ratio
    of repair needs to plant replacement value; results are presented as a
    percentage where higher values mean better conditions. As of September
    2013, there were 30,000 assets rated in a failed status, 8 percent of
    the inventory. We anticipate this will grow over time at current
    sustainment and restoration and modernization funding levels.

        34. Senator Ayotte. Mr. Conger, what is the plan to dig us out of
    the hole we are putting ourselves into?
        Mr. Conger. DOD is putting in place policy and guidance that will
    help better track the condition of our immense facility inventory so we
    can invest in the facilities that have the most impact on our missions.
    In order to reverse the impact of declining facility budgets, DOD's
    plan is to eliminate the unneeded infrastructure through a new BRAC
    round, which we requested in this year's budget request. Keeping only
    those facilities that are needed to support mission requirements will
    reduce the requirement to sustain and recapitalize infrastructure. We
    need Congress' support in achieving that part of our plan. Second, DOD
    contends that Congress could also assist in reversing the decline in
    infrastructure investment by permanently fixing the impact of
    sequestration. While the Bipartisan Budget Agreement helped in
    restoring some of the training and maintenance shortfalls, the out-year
    budget levels under sequestration will continue to put considerable
    stress on our infrastructure spending. Until a more stable level of
    funding is available, DOD will continue to prioritize available funding
    that preserves a safe living and working environment for our personnel
    and families.