[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.
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    \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.
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    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.
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    \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).
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    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.
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    \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).
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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.
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    \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.
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         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.
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    \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).
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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.
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    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.
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    \12\ GAO-13-98.
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    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.
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    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.
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    \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).
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    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.
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    \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.
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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.
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    \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).
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    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.
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    \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.
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    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 [email protected]. 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.