    [Senate Hearing 114-315]
    [From the U.S. Government Publishing Office]

                                                          S. Hrg. 114-315

                          THE FUTURE OF DEFENSE REFORM

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                OCTOBER 21, 2015

                                   __________

             Printed for the use of the Committee on Armed Services

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

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                          COMMITTEE ON ARMED SERVICES

                         JOHN McCAIN, Arizona, Chairman

    JAMES M. INHOFE, Oklahoma            JACK REED, Rhode Island
    JEFF SESSIONS, Alabama               BILL NELSON, Florida
    ROGER F. WICKER, Mississippi         CLAIRE McCASKILL, Missouri
    KELLY AYOTTE, New Hampshire          JOE MANCHIN III, West Virginia
    DEB FISCHER, Nebraska                JEANNE SHAHEEN, New Hampshire
    TOM COTTON, Arkansas                 KIRSTEN E. GILLIBRAND, New York
    MIKE ROUNDS, South Dakota            RICHARD BLUMENTHAL, Connecticut
    JONI ERNST, Iowa                     JOE DONNELLY, Indiana
    THOM TILLIS, North Carolina          MAZIE K. HIRONO, Hawaii
    DAN SULLIVAN, Alaska                 TIM KAINE, Virginia
    MIKE LEE, Utah                       ANGUS S. KING, JR., Maine
    LINDSEY GRAHAM, South Carolina       MARTIN HEINRICH, New Mexico
    TED CRUZ, Texas

                       Christian D. Brose, Staff Director

                   Elizabeth L. King, Minority Staff Director

                                      (ii)

                                C O N T E N T S

                                   __________

                                october 21, 2015

                                                                       Page

    The Future of Defense Reform.....................................     1

    Gates, Hon. Robert M., Former Secretary of Defense...............    12

                                     (iii)

                          THE FUTURE OF DEFENSE REFORM

                                  ----------

                          WEDNESDAY, OCTOBER 21, 2015

                                            U.S. Senate
                                    Committee on Armed Services
                                                        Washington, DC.
        The committee met, pursuant to notice, at 9:30 a.m. in Room
    SH 09216, Hart Senate Office Building, Senator John McCain
    (chairman) of the committee, presiding.
        Committee members present: Senators McCain, Inhofe,
    Sessions, Wicker, Ayotte, Fischer, Cotton, Rounds, Ernst,
    Tillis, Sullivan, Lee, Cruz, Reed, Nelson, Manchin, Shaheen,
    Gillibrand, Blumenthal, Donnelly, Hirono, Kaine, King, and
    Heinrich.

           OPENING STATEMENT OF SENATOR JOHN McCAIN, CHAIRMAN

        Senator McCain. Good morning. The Senate Armed Services
    Committee meets today to begin a major oversight initiative on
    the future of defense reform.
        This will be the first in a series of dozen hearings that
    will proceed from a consideration of the strategic context and
    global challenging--challenges facing the United States, to
    alternative defense strategies in the future of warfare, to the
    civilian and military organizations of the Department of
    Defense, as well as its acquisition, personnel, and management
    systems, much of which is the legacy of the Goldwater-Nichols
    reforms that were enacted in 1986.
        There is no one, in my view, in America that is better to
    help us begin this effort than our distinguished witness, the
    former Secretary of Defense, Robert Gates. We welcome him back
    for his first testimony to Congress since leaving the
    Department.
        Dr. Gates, we know that you have eagerly awaited this day
    with all of the anticipation of a root canal.
        [Laughter.]
        Senator McCain. Few defense--in my view, none--defense
    leaders can match Dr. Gates' record as a reformer. He directed
    more than $100 billion in internal efficiencies in the
    Department of Defense. He eliminated dozens of failing or
    unnecessary acquisition programs. He held people accountable.
    He even fired a few. And yet, by his own account, Dr. Gates
    left, overwhelmed by the scope and scale of the problems at the
    Defense Department.
        This is the purpose of the oversight effort we are
    beginning today, to define these problems clearly and
    rigorously, and only then to consider what reforms may be
    necessary. There is profound urgency to this effort. The
    worldwide threats confronting our Nation's--Nation now and in
    the future have never been more complex, uncertain, and
    daunting. America will not succeed in the 21st century with
    anything less than the most innovative, agile, and efficient
    and effective defense organization. I have not met a senior
    civilian or military leader who thinks we have that today. In
    no way is this a criticism of the many patriotic mission-
    focused public servants, both in and out of uniform, who
    sacrifice every day here at home and around the world to keep
    us safe. To the contrary, it's because we have such outstanding
    people that we must strive to remove impediments in our defense
    organizations that would squander the talents of our troops and
    civilian--and civil servants.
        Now some would argue that the main problems facing the
    Department of Defense come from the White House, the National
    Security Council staff, the interagency, and, yes, the
    Congress. You will find no argument here, especially about the
    dysfunction of Congress. We must be mindful of these bigger
    problems, but addressing many of them is outside this
    committee's jurisdiction.
        Americans hold our military in the highest regard, as we
    should. At the same time, our witness will explain, the
    problems that he encountered at the Defense Department are real
    and serious. Just consider chart 1, here. In constant dollars,
    our Nation is spending almost the same amount on defense as we
    were 30 years ago, but, for this money today, we are getting 35
    percent fewer combat brigades, 53 percent fewer ships, 63
    percent fewer combat air squadrons, and significantly more
    overhead. How much is difficult to establish, because the
    Department of Defense does not even have complete and reliable
    data, as GAO has repeatedly found.
        Of course, our Armed Forces are more capable now than 30
    years ago, but our adversaries are also more capable, some
    exponentially so. At the same time, many of the weapons in our
    arsenal today--our aircraft, ships, tanks, and fighting
    vehicles, rifles and missiles, and strategic forces--are the
    products of the military modernization of the 1980s.
        And, no matter how much more capable our troops and weapons
    are today, they are not capable of being in two places at once.
    Our declining combat capacity cannot be divorced from the
    problems in our defense acquisition system, which one high-
    level study summed up as follows, quote, ``The defense
    acquisition system has basic problems that must be corrected.
    These problems are deeply entrenched and have developed over
    several decades from an increasingly bureaucratic and over-
    regulated process. As a result, all too many of our weapon
    systems cost too much, take too long to develop, and, by the
    time they are fielded, incorporate obsolete technology.''
    Sounds right. But, that was the Packard Commission, written in
    1986.
        And, since then, since 1986, as this chart shows, cost
    overruns and schedule delays on major defense acquisitions have
    only gotten worse. Defense programs are now nearly 50 percent
    over-budget and, on average, over 2 years delayed. It's telling
    that perhaps the most significant defense procurement success
    story, the MRAP, which Dr. Gates himself led, was produced by
    going around the acquisition system, not through it.
        The rising cost of our defense personnel system is also
    part of the problem. As chart 3 shows, over the past 30 years
    the average fully-burdened cost per service member, all of the
    pays and lifetime benefits that military service now entails,
    has increased 270 percent. And yet, all too often, the
    Department of Defense has sought to control these personnel
    costs by cutting operating forces while civilian and military
    headquarters staff have not changed, and even grown. Indeed,
    since 1985, the end strength of the joint force has decreased
    by 38 percent, but the percentage of four-star officers in that
    force has increased by 65 percent.
        These reductions in combat power have occurred while the
    Department's overhead elements, especially its contractor
    workforce, have exploded. Nearly 1.1 million personnel now
    perform overhead activities in the defense agencies, the
    military departments, and service staffs in Washington
    headquarters services. An analysis by McKinsey & Company found
    that less than one-quarter of Active Duty troops were in combat
    roles, and with a majority instead performing overhead
    activities. Recent studies by the Defense Business Board and
    others confirmed that little has changed in this regard. The
    United States tooth-to-tail ratio is well below the global
    average, including such countries as Russia, India, and Brazil.
        For years, decades in some cases, GAO has identified some
    of the major management and administrative functions of the
    Department of Defense as being at high risk of waste, fraud,
    abuse, and duplication of effort. Perhaps none of this should
    be surprising when you consider the judgment of Jim Locher, the
    lead staffer on this committee during the defense
    reorganization efforts, three decades ago, quote, ``The
    remedies applied by Goldwater-Nichols to defense management and
    administration have largely been ineffective. They were never a
    priority for the Act's drafters, and troubling trends remain.
    The Pentagon is choking on bureaucracy.'' He wrote that 14
    years ago, and the problem has only gotten worse.
        Ultimately, we must ask whether the Defense Department is
    succeeding in its development and execution of strategy,
    policy, and plans. The Office of the Secretary of Defense, the
    service secretaries and service staffs, the joint staff, and
    the combatant commands are all bigger than ever. But, is the
    quality of civilian oversight and control of the military
    better? Has the quality of military advice to civilian leaders
    improved? Are the joint duty assignments that our military
    officers must perform producing a more unified fighting force?
    In short, is the Department of Defense more successful at
    planning for war, waging war, and winning war?
        Goldwater-Nichols was perhaps the most consequential
    defense reform since the creation of the Department of Defense.
    And, while the world has changed profoundly since 1986, the
    basic organization of the Department of Defense, as well as the
    roles and missions of its major civilian and military actors,
    has not changed all that much since Goldwater-Nichols. It must
    be asked, Is a 30-year-old defense organization equal to our
    present and future national security challenges?
        I want to be clear. This is a forward-looking effort. Our
    task is to determine whether the Department of Defense and our
    Armed Forces are set up to be maximally successful in our
    current and future national security challenges. We will be
    guided in this effort by the same principles that inspired past
    defense reform efforts, including Goldwater-Nichols, enhancing
    civilian control of the military, improving military advice,
    operational effectiveness, and joint officer management, and
    providing for a better use of defense resources, among others.
        This oversight initiative is not a set of solutions in
    search of problems. We will neither jump to conclusions nor
    tilt at the symptoms of problems. We will take the time to look
    deeply for the incentive and root causes that drive behavior,
    and we will always, always be guided by that all- important
    principle: First do no harm.
        Finally, this must and will be a bipartisan endeavor.
    Defense reform is not a Republican or Democratic issue, and we
    will keep it that way. These are vital national security
    issues, and we must seek to build a consensus about how to
    improve the organization and operation of the Department of
    Defense that can and will be advanced by whomever wins next
    year's elections. That is in keeping with the best traditions
    of this committee, and it is how Dr. Gates has always
    approached this important work across administrations of both
    parties.
        We thank Dr. Gates for his decades of service to our
    Nation, for generously offering us the benefit of your insights
    and experiences today.
        And I'd like to apologize for the long statement, Dr.
    Gates, but I take--I believe that this hearing must set the
    predicate for a number of future hearings that we will be
    having in order to carry out--achieve the objectives that I
    just outlined.
        [The information referred to follows:]

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        Senator McCain. Senator Reed.

                     STATEMENT OF SENATOR JACK REED

        Senator Reed. Well, thank you very much, Mr. Chairman.
        And, Dr. Gates, welcome back to the Senate Armed Services
    Committee. And let me join the Chairman in thanking you for
    your willingness to testify today, and also underscore how
    thoughtful and how appropriate the Chairman's remarks are with
    respect to the need for a careful bipartisan review of policy
    in the Defense Department, and change in the Defense
    Department.
        I must also apologize. As I've told you before, I have 200
    or so Rhode Island business leaders that I must inform all day
    long today, so I won't be here for the whole hearing. And I
    apologize to the Chairman, also.
        It's no accident that the Chairman has asked you, Dr.
    Gates, to testify today on--as the first witness in a major
    effort to look at the Department of Defense. You have more than
    1,500 days as Secretary of Defense, decades serving the United
    States Government in roles that range from the National
    Security Council to the Central Intelligence Agency, and then,
    of course, the Department of Defense. And your vast experience
    with DOD and the interagency process, especially in a post-
    September 11th context, will be important to the committee's
    study of these issues as we go forward.
        And, while you were Secretary of Defense, you were an
    outspoken critic of your own Department and its ability to
    manage critical competing priorities, such as funding military
    modernization and ensuring that the requirements of deployed
    forces are being supported appropriately.
        In a speech before the American Enterprise Institute, you
    said the Department is, in your words, ``a semi-feudal system,
    the amalgam of fiefdoms without centralized mechanisms to
    allocate resources, track expenditures, and measure results,
    relative to the Department's overall priorities.'' As a
    policymaker in the legislative branch, this kind of assessment
    from the most senior official in the Department is deeply
    concerning, but also very helpful, in terms of giving us a
    direction. I look forward to hearing your ideas and thinking
    of--about the changes you recommend to us for addressing these
    issues.
        Congress has tried to help address some of these problems,
    as you have rightly noted, in creating the Deputy Chief
    Management Officer. But, one person is not enough to create or
    compel systemic change in the largest organization on Earth.
    And during your tenure, you created two ad hoc entities in the
    Department, the Chairman mentioned, to address rapidly
    dangerous issues to our troops: the Mine- Resistant Ambush
    Protector, or MRAP, Task Force, and the Intelligence,
    Surveillance, and Reconnaissance, or ISR, Task Force. And both
    of these endeavors were very successful, but they are just an
    indication of the kind of more holistic and comprehensive
    change that we need to undertake in the Department of Defense.
        Also in your American Enterprise Institute speech, you made
    a critical point. Since 2001, we have seen a near doubling of
    the Pentagon's modernization accounts that has resulted in
    relatively modest gains in actual military capability. And this
    should be of a concern to all of us. And we'd welcome your
    recommendations on how to bring changes necessary to ensure
    that we're getting what we're paying for; in fact, getting
    more, we hope, bang for our buck.
        You've also spoken about the need for defense spending to
    be stable and predictable, and the importance of the role of
    Congress in ensuring that such stability is provided. And
    former DOD Comptroller Bob Hale, who served with you at the
    Pentagon, wrote recently about the budgetary turmoil he
    experienced during his tenure, including sequestration, a
    government shutdown, and continuing resolutions. Specifically,
    he wrote, ``This budget turmoil imposed a high price in DOD
    and, therefore, the Nation it serves. The price was not
    measured in dollars, since DOD certainly didn't get any extra
    funding to pay the cost of the turmoil. Rather, the price took
    the form of harm to the efficiency and effectiveness of the
    Department's mission, and we are still confronting those issues
    today.''
        Finally, during your tenure, Dr. Gates, you were a strong
    advocate not only for our military, but also the funding the
    soft-power tools of statecraft: our diplomacy, developmental
    efforts, and our ability to communicate our goals and values to
    the rest of the world. As we consider steps to making DOD more
    effective, I'd also be interested in your thoughts on the
    importance of our national security in enhancing our civilian
    elements of national power, and also the impact that
    sequestration has on these elements.
        Again, thank you, Dr. Gates, for your service. I look
    forward to your testimony.
        Senator McCain. Dr. Gates.

     STATEMENT OF HON. ROBERT M. GATES, FORMER SECRETARY OF DEFENSE

        Dr. Gates. Chairman McCain, Senator Reed, probably the
    least sincere sentence in the English language is: Mr.
    Chairman, it's a pleasure to be here with you today.
        [Laughter.]
        Dr. Gates. Frankly, short of a subpoena, I never expected
    to be in a congressional hearing again. And, given some of the
    things that I wrote in my book, I'm rather surprised to be
    invited back.
        [Laughter.]
        Dr. Gates. So, thank you for kind introductory remarks and
    for the invitation to address the important topic of defense
    reform.
        I also commend you, Mr. Chairman, for attempting to
    transcend the daily headlines and crises of the moment to focus
    this committee, and hopefully the rest of the Congress, on
    institutional challenges facing the defense establishment.
    While I've stayed in touch with my successors periodically and
    have followed developments from afar--very afar--my testimony
    today is based predominantly on my experience as Defense
    Secretary between December 2006 and July 2011, and being
    engaged in two wars every single day during that period. So, my
    comments this morning may not necessarily account for all of
    the changes that have taken place over the last 4 years.
        I joined the CIA to do my bit in the defense of our country
    50 years ago next year. I've served eight Presidents. With the
    advantage of that half-century perspective, I'd like to open
    with two broad points:
        First, while it is tempting and conventional wisdom to
    assert that the challenges facing the United States
    internationally have never been more numerous or complex, the
    reality is that turbulent, unstable, and unpredictable times
    have recurred to challenge United States leaders regularly
    since World War II: the immediate postwar period that saw the
    Soviets tighten their grip on eastern Europe and surprised
    Western leaders and intelligence agencies by detonating their
    first atomic device; the frequent crises during the '50s,
    including the Korean War; regular confrontations with China
    over Taiwan; pressures from the Joint Chiefs of Staff to help
    France by using nuclear weapons in Indochina; war in the Middle
    East; uprisings in eastern Europe; and a revolution in Cuba.
    During the 1960s, a war in Vietnam, another Arab-Israeli war,
    and confrontations with the Soviets from Berlin to Cuba. In the
    1970s, Soviet assertiveness in Africa, an invasion of
    Afghanistan, and yet another Arab-Israeli war and oil
    embargoes. The 1980s brought a number of surrogate conflicts in
    places like Afghanistan and an attack on Libya, crises in
    Lebanon, and the intervention in Panama. And in the 1990s, we
    had the first Gulf War, military action in the Balkans,
    Somalia, Haiti, missile attacks on Iraq, and the first al-Qaeda
    attacks on the United States.
        The point of recounting these historical examples is that
    Americans, including all too often our leaders, regard
    international crises and military conflict as aberrations,
    when, in fact, and sad to say, they are the norm. Convinced,
    time and again, that a new era of tranquility is at hand,
    especially after major conflicts, Presidents and Congresses
    tend to believe they have a choice when it comes to the
    priority given national security, and, correspondingly,
    significantly reduce the resources provided to Defense, the
    State Department, and CIA. In the short term, at least, until
    the next crisis arrives, they do have a choice, and the budget
    cutters and deficit hawks have their way. But, in the longer
    term, there really is no choice. While we may not be interested
    in aggressors, terrorists, revanchists, and expansionists half
    a world away, they ultimately are always interested in us or in
    our interests or our allies and friends, and we always discover
    then that we went too far in cutting, and need to rearm, that
    the cost in treasure and in the blood of our young men and
    women is always far higher than if we had remained strong and
    prepared all along.
        The primary question right now before the Congress and the
    President is the priority you give to defense, which, at
    roughly 15 percent of Federal expenditures, is the lowest
    percentage of the Federal budget since World--before World War
    II. Without proper and predictable funding, no amount of reform
    or clever reorganization will provide America with a military
    capable of accomplishing the missions assigned to it.
        The second and related point I think highly germane to your
    deliberations is that our record in--since Vietnam in
    predicting where we will use military force next, even a few
    months out, is perfect. We have never once gotten it right.
    Just think about it: Granada, Lebanon, Libya twice, Iraq now
    three times, Afghanistan, the Balkans, Panama, Somalia, Haiti,
    and most recently West Africa to combat ebola. Because we
    cannot predict the place or the nature of future military
    engagement, we must provide a premium on acquiring equipment
    and providing training that give our forces the most versatile
    possible capabilities across the broadest possible spectrum of
    conflict.
        These two lessons on funding and flexibility must underpin
    any defense reform effort, whether the focus is on bureaucratic
    organization, command structures, acquisition, or budgets. All
    that said, it is completely legitimate to ask whether our
    defense structures and processes are giving us the best
    possible return on taxpayer dollars spent on our military. The
    answer in too many cases is no. In this context, the questions
    the committee are considering are, in my view, the correct
    ones, namely whether our country's institutions of national
    defense are organized, manned, equipped, and managed in ways
    that can deal with the security challenges of the 21st century
    and that efficiently and effectively spend defense dollars.
        Mr. Chairman, over the next 15 minutes or so, I'll make
    observations about Goldwater-Nichols, acquisition policy, the
    interagency process, and the budget. And we can then delve into
    these and other matters, as the committee sees fit.
        First, Goldwater-Nichols, at 30 years, and the question
    whether the ambition of the original legislation has been
    fulfilled, or is additional legislation of similar magnitude
    needed, in light of all the changes that have taken place over
    the last three decades? My perspectives on the current
    structure of the Defense Department is shaped primarily by my
    experience as Secretary overseeing a military fighting two
    wars. I discovered early on that I led a Department designed to
    plan for war, but not to wage war, at least for the long term.
        The swift victory of the 1991 Persian Gulf conflict seemed
    to validate all the post-Vietnam changes to our military,
    including the landmark 1986 legislation. But, the Pentagon
    clearly was not organized to deal with protracted conflicts
    like Iraq and Afghanistan, which, contrary to the wishes of
    most Americans, most assuredly will not be the last sustained
    ground campaigns waged by our military.
        In this respect, Goldwater-Nichols succeeded all too well
    by turning the services into force and equipment providers
    walled off from operational responsibilities now the exclusive
    domain of combatant commanders. This became especially
    problematic in unconventional conflicts requiring capabilities,
    usually immediately, that were significantly different from
    what was in the prewar procurement pipeline.
        Just one illustrative example. While there was, and is, a
    joint process to deal with the ongoing needs of battlefield
    commanders, it was left up to the designated military service
    to reprioritize its budget to find the funding for those needs.
    It will come as no surprise to you that, with some regularity,
    the designated service decided that urgent battlefield need did
    not have as high a priority for funding as its long-term
    programs of record. These were mostly advanced weapon systems
    designed for future conflicts, and had near sacrosanct status
    within the military services, making it difficult to generate
    much enthusiasm for other near-term initiatives that might
    compete for funds.
        I soon learned that the only way I could get significant
    new or additional equipment to commanders in the field in weeks
    or months, not years, was to take control of the problem myself
    through special task forces and ad hoc processes. This would be
    the case with the MRAP vehicles, additional intelligence,
    surveillance, and reconnaissance capabilities, shortened
    medevac times, counter-IED equipment, and even the care of
    wounded warriors. I learned that if the Secretary made it a
    personal priority, set tight deadlines, and held people
    accountable, it was actually possible to get a lot done, even--
    quickly, even in a massive bureaucracy like the Pentagon.
        But, satisfying critical operational and battlefield needs
    cannot depend solely on the intense personal involvement of the
    Secretary. That is not sustainable. The challenge is how to
    institutionalize a culture and an incentive structure that
    encourages wartime urgency simultaneous with long-term planning
    and acquisition as a matter of course.
        A final thought relative to defense organizations and
    authorities. Through my tenure, I was privileged to work with
    two superb Chairmen of the Joint Chiefs of Staff, Pete Pace and
    Mike Mullen, who were true partners while providing
    independent, occasionally dissenting, professional military
    advice. The Chairman, along with the Vice Chairman, is the one
    senior military officer with a stake in both current needs and
    future requirements. One of the great achievements of
    Goldwater-Nichols was strengthening the position of the
    operational commanders and the Chairman relative to the service
    chiefs. I believe that, as a general principle, this must be
    sustained.
        Service chiefs have a tenure of 4 years. Combatant
    commanders, nominally, 3 years. Yet the Chairman and Vice
    Chairman of the Joint Chiefs of Staff have 2-year renewable
    terms. I believe their positions vis-a-vis both service chiefs
    and combatant commanders would be strengthened by also giving
    them 4-year terms. This would not diminish in the least their
    accountability to the President, the Defense Secretary, and the
    Congress.
        Second, a subject that has, for years, been a focus of this
    committee, the acquisition process. Not only has Goldwater-
    Nichols hit the 30-year mark, so too has the Office of the
    Secretary of Defense for Acquisition, Technology, and
    Logistics. AT&L was established because a service-driven
    acquisition system was yielding too many over-designed, over-
    budget, and over-scheduled programs. The theory was that, by
    giving acquisition responsibility for major programs to a
    senior OSD official removed from parochial service interests,
    wiser and more disciplined decisions would ensue.
        So, what can we say, 30 years on? We've succeeded in
    building a new layer of bureaucracy with thousands of more
    employees and new processes to feed it. But, when it comes to
    output, the results have been quite mixed. As Secretary, I
    found that, despite all of the OSD and joint oversight
    mechanisms, far too many major weapons and equipment programs
    were ridiculously overdue, over-cost, or no longer relevant to
    the highest-priority defense needs. To the chagrin of many
    inside the Pentagon, and probably even more here on the Hill, I
    canceled or capped more than 30 major programs in 2009 that, if
    built out fully, would have cost the taxpayers $330 billion.
        So, where does that leave us today as Congress considers
    reforms for the future? Problems with the services running
    acquisitions led to greater centralization and oversight
    through AT&L. But, that led to another set of problems in the
    form of sizable central bureaucracy that adds delays and
    related costs without discernible benefit. So, now there's
    pressure and legislation to return significantly more
    acquisition authority back to the services.
        My sense is, the right answer lies with finding a better
    balance between centralization and decentralization than we now
    have. But, a strong word of caution: You must not weaken the
    authority of the Secretary of Defense and his ultimate
    decision-making power on acquisition. I cannot imagine a
    service chief or service secretary able to overcome intense
    internal pressures and voluntarily do away with, for example,
    programs like the Army Future Combat System, the airborne
    laser, the Zumwalt destroyer, or dozens of other troubled and
    needlessly exquisite systems that had built up a loyal service
    constituency. The simple fact is that such decisions are not
    just programmatic, but political. And only the Secretary of
    Defense, with the strong support of the President, has the
    clout, the power inside the Pentagon, with industry and here on
    the Hill, to make such decisions, and make them stick.
        A couple of other observations seem obvious as you and the
    Secretary of Defense address this issue. Nothing will work
    without rigorously applied accountability within the services,
    by AT&L, and by the Secretary. And then there is the importance
    of basic blocking and tackling on the acquisitions process. To
    wit, high-level rigorous control of requirements and limiting
    changes beyond a certain point, competitive prototyping,
    wherever possible, before program initiation, more realistic
    cost estimates, and revising contract incentives to better
    reward success and penalize failure.
        Also promising are your legislative efforts, Mr. Chairman,
    and those of Chairman Thornberry in the House, to streamline
    acquisition processes, eliminate counterproductive regulations,
    encourage more use of commercial products and pricing, and
    attract more nontraditional vendors to defense markets.
        That said, at the end of the day, redrawing the
    organization chart or enacting new acquisition laws and rules
    will matter less than leaders skilled enough to make--to
    execute programs effectively, willing to take tough, usually
    unpopular choices, and establish strong measures of
    accountability, and willing to get rid of those not performing
    well, whether people or programs.
        In terms of being better stewards of taxpayer dollars more
    broadly, the effort I began in 2010 to reduce overhead costs,
    and continued by my successors, must be renewed and sustained.
    It was telling that, in just 4 months, in 2010, we found some
    $180 billion over a multiyear period we could cut in overhead.
    There is, as Deputy Secretary Gordon England liked to say, a
    river of money flowing under the Pentagon, primarily funded
    through catchall operations and maintenance accounts. Now,
    there's no line item in the Defense budget called ``waste,'' so
    getting at unnecessary overhead spending without harming
    important functions is extremely hard work. It's kind of like a
    huge Easter egg hunt. But, it can and must be done.
        A brief word here on resisting the usual approach of
    reducing budgets with across-the-board cuts. I have seen
    countless Washington reform efforts over the years result in
    mindless salami-slicing of programs and organizations. That is
    not reform, it is managerial and political cowardice. True
    reform requires making trades and choices and tough decisions,
    recognizing that some activities are more important than
    others. It's hard to do, but essential if you're to reshape any
    organization into a more effective and efficient enterprise.
        Further, the Congress must contain its own bad behavior,
    such as insisting on continuing unneeded programs because of
    parochial interests, preventing the closure of roughly one-
    quarter of all defense facilities deemed excess, burdening the
    Department with excessive and frequently expensive rules and
    reporting requirements, and more.
        My third broad point with regard to the interagency
    process. From time to time, the idea arises to reorganize the
    U.S. national security apparatus put together in 1947 to better
    integrate defense, diplomacy, and development, a Goldwater-
    Nichols for the interagency, if you will. Goldwater-Nichols has
    mostly worked at the Defense Department because, when push
    comes to shove, as it often does there, everyone in and out of
    uniform ultimately works for one person: the Secretary of
    Defense. And he or she has the last word and can tell everyone
    to get in line. When multiple Cabinet departments are involved,
    however, there is only one person with that kind of authority:
    the President. The National Security Council and its staff were
    created to provide the President with an organizational
    mechanism to coordinate and integrate their efforts. How well
    that works depends entirely on the personal relationships among
    the principals and the talents and skills of the National
    Security Advisor. Even this structure, headquartered just down
    the hall from the Oval Office, works poorly if the Secretary of
    State and the Secretary of Defense can't stand one another, as
    was the case for a good part of my time in government, or if
    the National Security Advisor isn't an honest broker. How well
    the planning, activities, and efforts of State, Defense, and
    others are coordinated and integrated is the responsibility of
    one person: the President. And there is nothing anybody else,
    including the Congress, can do about it.
        I'll conclude with three other reasons the Nation is paying
    more for defense in real dollars today than 30 years ago, and
    getting less, and getting less. One is that men and women in
    uniform today drive, fly, or sail platforms which are vastly
    more capable and technologically advanced than a generation
    ago. That technology and capability comes with a hefty price
    tag. A second reason for the higher cost is the exploding
    personnel costs of the Department, a very real problem on which
    I know this committee and others are at least beginning to make
    some inroads after years of futility.
        But, the third factor contributing to increased costs, and
    one of immense importance, is the role of Congress itself.
    Here, I am talking about the years-long budgetary impasse on
    the Hill and between the Congress and the President. The
    Department of Defense has had an enacted appropriations bill to
    start the fiscal year only twice in the last 10 years. The last
    7 years all began under a continuing resolution. During the
    first 6 full fiscal years of the Obama administration, the
    Defense Department has operated under continuing resolutions
    for a third of the time, a cumulative total of 2 years.
    Department leaders also have had to deal with the threat--and,
    in one year, the imposition--of sequestration, a completely
    mindless and cowardly mechanism for budget-cutting. Because of
    the inability of the Congress and the President to find a
    budget compromise, in 2013 defense spending was reduced midyear
    by $37 billion. All of those cuts applied equally, in
    percentage terms, to 2500 line items of the defense budget and
    requiring precise management of each cut to comply with the
    Antideficiency Act with its criminal penalties for violations.
    Sequestration effectively cut about 30 percent of day-to-day
    operating funds in the second half of fiscal year 2013.
        But, then add to this mess the fact that the Department,
    probably the largest organization on the planet, in recent
    years has had to plan for five different potential government
    shutdowns. In the fall of 2013, with sequestration still
    ongoing, the Pentagon actually had to implement one of those
    shutdowns for 16 days, affecting 640,000 employees or 85
    percent of the civilian workforce.
        It is hard to quantify the cost of the budgetary turmoil of
    the past 5 years: the cuts, the continuing resolutions,
    sequestration, gimmicks, furloughs, shutdowns,
    unpredictability, and more. During continuing resolutions, in
    particular, the inability to execute programs on schedule,
    limits on being able to ramp up production or start new
    programs or to take full advantage of savings offered by
    multiyear purchases, the time-consuming and unpredictable
    process of reprogramming even small amounts of money to higher-
    priority projects, all these impose tremendous costs on the
    Defense Department and the taxpayer. And this doesn't even
    begin to account for the costs involved in hundreds of
    thousands of man hours required to try and cope with this
    externally imposed leadership and managerial nightmare.
    Moreover, reimposition of full-scale sequestration looms in
    January, absent a bipartisan budget agreement.
        Given the harm all this politically driven madness inflicts
    on the U.S. military, the rhetoric coming from Members of
    Congress about looking out for our men and women in uniform
    rings very hollow to me. Further, this legislative dysfunction
    is embarrassing us in the eyes of the world at a time when
    allies and friends are looking to us for leadership and
    reassurance. All the smart defense reforms you can come up with
    will be of little use if the military is unable to plan, to set
    priorities, and to manage its resources in a sensible and
    strategic way.
        The failure of the Congress in recent years, because of the
    partisan divide, to pass timely and predictable defense
    budgets, and its continuing parochialism when it comes to
    failing programs and unneeded facilities, has not only greatly
    increased the cost of defense, it has contributed to weakening
    our military capabilities, and it has broken faith with our men
    and women in uniform. This committee with its counterpart in
    the House has long supported, on a bipartisan basis, a strong
    defense and protecting those in uniform. As you consider needed
    reforms in the Pentagon, I fervently hope you will also urge
    your colleagues in Congress to break with the recent past and
    place the national interests and our national security ahead of
    ideological purity or achieving partisan advantage, because, as
    you know as well I, our system of government, as designed by
    the founders who wrote and negotiated the provisions of the
    Constitution, is dependent on compromise to function. To do so
    is not selling out. It is called governing.
        Thank you.
        [The prepared statement of Dr. Gates follows:]

                   Prepared Statement by Dr. Robert M. Gates
    Chairman McCain, Senator Reed:
        Probably the least sincere sentence in the English language is:
    ``Mr. Chairman, it's a pleasure to be here today.'' Frankly, short of a
    subpoena I never expected to be in a Congressional hearing room again.
    And, given some of the things I wrote in my book I'm rather surprised
    to be invited back to Capitol Hill. So, thank you for your kind
    introductory remarks and for the invitation to address the important
    topic of defense reform.
        I also commend you, Mr. Chairman, for attempting to transcend the
    daily headlines and crises of the moment to focus this committee, and
    hopefully the rest of the Congress, on the institutional challenges
    facing America's defense establishment. While I have stayed in touch
    with my successors periodically and have followed developments from
    afar--very afar, my testimony today is based predominantly on my
    experience as Defense Secretary between December 2006 and July 2011 and
    being engaged in two wars every single day during that period. So my
    comments this morning do not necessarily account for all the changes
    that have taken place over the last four years.
        I joined CIA to do my bit in the defense of our country fifty years
    ago next year. With the advantage of that half-century perspective, I'd
    like to open with two broad points.
        First, while it is tempting--and conventional wisdom--to assert
    that the challenges facing the United States internationally have never
    been more numerous or complex, the reality is that turbulent, unstable,
    and unpredictable times have recurred to challenge United States
    leaders regularly since World War II--the immediate post-war period
    that saw the Soviets tighten their grip on eastern Europe and surprise
    western leaders and intelligence agencies by detonating their first
    atomic device; the frequent crises during the 1950s including the
    Korean War, regular confrontations with China over Taiwan, pressures
    from the Joint Chiefs of Staff to help France by using nuclear weapons
    in Indochina, war in the Middle East, uprisings in eastern Europe and a
    revolution in Cuba; during the 1960s the war in Vietnam, another Arab-
    Israeli war and confrontations with the Soviets from Berlin to Cuba; in
    the 1970s, Soviet assertiveness in Africa and their invasion of
    Afghanistan, yet another Arab-Israeli war, and oil embargoes; the 1980s
    brought a number of surrogate conflicts in places like Afghanistan, an
    attack on Libya, crises in Lebanon and the intervention in Panama; and
    the 1990s the first Gulf War, military action in the Balkans, Somalia,
    Haiti, missile attacks on Iraq, and the first al-Qaeda attacks on us.
        The point of recounting these historical examples is that
    Americans, including all too often our leaders, regard international
    crises and military conflict as aberrations when, in fact and sad to
    say, they are the norm.
        Convinced time and again that a new era of tranquility is at hand,
    especially after major conflicts, presidents and congresses tend to
    believe they have a choice when it comes to the priority given to
    national security and, correspondingly, significantly reduce the
    resources provided to Defense, the State Department, and CIA. In the
    short term, at least until the next crisis arrives, they do have a
    choice, and the budget cutters and deficit hawks have their way.
        But in the longer term, there really is no choice. While we may not
    be interested in aggressors, terrorists, revanchists and expansionists
    half a world away, they ultimately are always interested in us--or our
    interests or our allies and friends. And we always discover then that
    we went too far in cutting and need to rearm. But the cost in treasure
    and in the blood of our young men and women is always far higher than
    if we had remained strong and prepared all along.
        The primary question right now before the Congress--and The
    President--is the priority you give to defense which, at roughly 15% of
    federal expenditures, is the lowest percentage of the budget since
    before World War II. Without proper and predictable funding, no amount
    of reform or clever reorganization will provide America with a military
    capable of accomplishing the missions assigned to it.
        The second and related point I think highly germane to your
    deliberations is that our record since Vietnam in predicting where and
    how we will be engaged militarily next--even a few months out--is
    perfect: We have never once gotten it right. We never expected to be
    engaged militarily in Grenada, Lebanon, Libya (twice), Iraq (now three
    times), Afghanistan, The Balkans, Panama, Somalia, Haiti and, most
    recently, West Africa to combat Ebola.
        Because we cannot predict the place or nature of future military
    engagement, we must place a premium on acquiring equipment and
    providing training that give our forces the most versatile possible
    capabilities across the broadest possible spectrum of conflict.
        These two lessons--on funding and flexibility--must underpin any
    defense reform effort--whether the focus is on bureaucratic
    organization, command structures, acquisition or budgets.
        All that said, it is completely legitimate to ask whether our
    defense structures and processes are giving us the best possible return
    on taxpayer dollars spent on our military. The answer in too many cases
    is no. In this context, the questions this committee is considering
    are, in my view, the correct ones: namely, whether our nation's
    institutions of national defense are organized, manned, equipped, and
    managed in ways that can deal with the security challenges of the 21st
    century and that efficiently and effectively spend defense dollars.
        Mr. Chairman, over the next fifteen minutes or so, I will make some
    observations about Goldwater-Nichols, Acquisition Policy, the
    interagency process, and the budget. We can then delve into these and
    other matters in more depth as the committee wishes.
        First, Goldwater-Nichols at 30 years, and the question whether the
    ambition of the original legislation has been fulfilled or is
    additional legislation of a similar magnitude needed in light of the
    all the changes that have taken place over the past three decades.
        My perspective on the current structure of the Defense Department
    is shaped primarily by my experience as a Secretary overseeing a
    military fighting two wars. I discovered early on that I led a
    department designed to plan for war but not to wage war--at least for
    the long term. The swift victory of the 1991 Persian Gulf Conflict
    seemed to validate all the post-Vietnam changes to our military
    including the landmark 1986 legislation. But the Pentagon was clearly
    not organized to deal with protracted conflicts like Iraq and
    Afghanistan which, contrary to the wishes of most Americans, most
    assuredly will not be the last sustained ground campaigns waged by our
    military.
        In this respect, Goldwater-Nichols succeeded all too well by
    turning the services into force and equipment providers walled off from
    operational responsibilities, now the exclusive domain of combatant
    commanders. This became especially problematic in unconventional
    conflicts requiring capabilities--usually immediately--that were
    significantly different from what was in the pre-war procurement
    pipeline
        Just one illustrative example: while there was--and is--a joint
    process to deal with the on-going needs of battlefield commanders, it
    was left up to the designated military service to reprioritize its
    budget to find the funding for those needs. It will come as no surprise
    to you that with some regularity, the service decided the urgent
    battlefield need did not have as high a priority for funding as its
    long-term programs of record. These were mostly advanced weapons
    systems designed for future conflicts and had near-sacrosanct status
    within the military services, making it difficult to generate much
    enthusiasm for other, nearer-term initiatives that might compete for
    funds.
        I soon learned that the only way I could get significant new or
    additional equipment to commanders in the field in weeks or months--not
    years--was to take control of the problem myself through special task
    forces and AD-HOC processes. This would be the case with the mine-
    resistant-ambushed protected (MRAP) vehicles; additional intelligence,
    surveillance and reconnaissance capabilities; shortened MEDEVAC Times,
    counter-IED equipment and even care of wounded warriors.
        I learned that if the Secretary made it a personal priority, set
    tight deadlines, and held people accountable, it was actually possible
    to get a lot done, often quickly, even in a massive bureaucracy like
    the Penatagon. But satisfying critical operational and battlefield
    needs cannot depend solely on the intense personal involvement of the
    Secretary. That is not a sustainable approach. The challenge is how to
    institutionalize a culture and incentive structure that encourages
    wartime urgency simultaneous with longterm planning and acquisition as
    a matter of course.
        A final thought relative to defense organizations and authorities.
    Through my tenure I was privileged to work with two superb Chairmen of
    the Joint Chiefs of Staff--Pete Pace and Mike Mullen--who were true
    partners while still providing independent, occasionally dissenting,
    professional military advice. The Chairman, along with the Vice
    Chairman, is the one senior military officer with a stake in both
    current needs and future requirements. One of the great achievements of
    Goldwater-Nichols was strengthening the position of Operational
    Commanders and the Chairman relative to the Service Chiefs. I believe
    that as a general principle this must be sustained. Service Chiefs have
    a tenure of four years, combatant commanders nominally three years. Yet
    the Chairman and Vice Chairman of the Joint Chiefs of Staff have two
    year, renewable terms. I believe their positions vis-a AE2-vis both the
    Service Chiefs and Combatant Commanders would be strengthened by also
    giving them four-year terms. This would not diminish in the least their
    accountability to the president, the Defense Secretary and the Congress
    throughout their term.
        Second, a subject that has for years been a focus of this
    committee--the acquisition process. Not only has Goldwater-Nichols hit
    the 30 year mark, so too has the Office of the Secretary of Defense for
    Acquisition, Technology and Logistics. AT&L was established because a
    service-driven acquisition system was yielding too many over-designed,
    over-budget and over-schedule programs. The theory was that by giving
    acquisitions responsibility for major programs to a Senior OSD Official
    removed from parochial service interests, wiser and more disciplined
    decisions would ensue.
        So what can we say 30 years on? We have succeeded in building a new
    layer of bureaucracy--with thousands more employees--and new processes
    to feed it. But when it comes to output, the results have been mixed.
    As Secretary I found that, despite all the OSD and Joint Oversight
    Mechanisms, too many major weapons and equipment programs were
    ridiculously over-due, over-cost or no longer relevant to the highest
    priority defense needs. To the chagrin of many inside the Pentagon and
    even more here on the Hill, I canceled or capped more than 30 programs
    in 2009 that, if built out fully, would have cost taxpayers some $330
    billion.
        So where does that leave us today as this Congress considers
    reforms for the future? Problems with the services running acquisitions
    led to greater centralization and oversight through AT&L. But that led
    to another set of problems in the form of a sizeable central
    bureaucracy that adds delays and related costs without discernable
    benefit. So now there is pressure--and legislation--to return
    significantly more acquisition authority back to the services. My sense
    is the right answer lies with finding a better balance between
    centralization and de-centralization than we now have.
        But a strong word of caution. You must not weaken the authority of
    the Secretary of Defense and his ultimate decision-making power on
    acquisition. I cannot imagine a Service Chief or Service Secretary able
    to overcome intense internal pressures and voluntarily do away with,
    for example, programs like the Army Future Combat System, the Airborne
    Laser, the Zumwalt Destroyer or dozens of other troubled or needlessly
    exquisite systems that had built up a loyal service constituency. The
    simple fact is that such decisions are not just programmatic but highly
    political. And only the Secretary of Defense, with the strong support
    of the President, has the clout--the power--inside the Pentagon, with
    industry and here on the Hill to make such decisions and make them
    stick.
        A couple of other observations seem obvious as you and the
    Secretary of Defense address this issue. Nothing will work without
    rigorously applied accountability, within the services, by AT&L and by
    the Secretary. Then there is the importance of basic blocking and
    tackling in acquisitions processes: to wit, high level, rigorous
    control of requirements and limiting changes beyond a certain point to
    avoid the ``Gold Plating'' phenomenon; competitive prototyping where
    possible before program initiation; more realistic cost estimating; and
    revising contract incentives to better reward success and penalize
    failure. Also promising are your legislative efforts, Mr. Chairman, and
    those of Chairman Thornberry in the House, to streamline acquisitions
    processes, eliminate counterproductive regulations, encourage more use
    of commercial products and pricing, and attract more non-traditional
    vendors to the defense markets.
        All that said, at the end of the day, re-drawing the organization
    chart or enacting new acquisitions laws and rules will matter less than
    leaders skilled enough to execute programs effectively, willing to make
    tough, usually unpopular choices, and establish strong measures of
    accountability. And willing to get rid of those not performing well--
    whether people or programs.
        In terms of being better stewards of taxpayer dollars more broadly,
    the effort I began in 2010 to reduce overhead costs--and continued by
    my successors--must be renewed and sustained. It was telling that in
    just four months, we found some $180 billion over a multi-year period
    we could cut in overhead. There is, as Deputy Secretary Gordon England
    liked to say, a river of money flowing under the Pentagon, primarily
    funded through catch-all operations and maintenance accounts. As you
    know, there is no line item in the defense budget called ``Waste.'' So
    getting at unnecessary overhead spending without harming important
    functions is extremely hard work--like a huge Easter egg hunt, but it
    can and must be done.
        A brief word here on resisting the usual approach of reducing
    budgets with across the board cuts. I have seen countless Washington
    reform efforts over the years result in mindless salami slicing of
    programs and organizations. That is not reform. It is managerial and
    political cowardice. True reform requires making trades and choices and
    tough decisions, recognizing that some activities are more important
    than others. It is hard to do, but essential if you are to re-shape any
    organization into a more effective and efficient enterprise.
        Further, the Congress must contain its own bad behavior--such as
    insisting on continuing unneeded programs because of parochial
    interests, preventing the closure of the roughly one quarter of all of
    defense facilities deemed excess, burdening the department with
    excessive--and frequently expensive--rules and reporting requirements,
    and more.
        Third, with regard to the interagency process, from time to time
    the idea arises to re-organize the U.S. National Security Apparatus--
    put together in 1947--to better integrate defense, diplomacy and
    development--a ``Goldwater-Nichols for the interagency'' if you will.
    Goldwater-Nichols has mostly worked at the defense department because,
    when push comes to shove'' as it often does there--everyone in and out
    of uniform works for one person: the Secretary of Defense. And he or
    she has the last word and can tell everyone to get in line. When
    multiple cabinet departments are involved, however, there is only one
    person with that kind of authority--the President.
        The National Security Council and its staff were created to provide
    the President with an organizational mechanism to coordinate and
    integrate their efforts. How well that works depends entirely on the
    personal relationships among principals and the talents and skills of
    the National Security Advisor. Even this structure, headquartered just
    down the hall from the Oval Office, works poorly if the Secretaries of
    State and defense can't stand one another, as was the case for a good
    part of my time in government; or, if the national security advisor is
    not an honest broker. how well the planning, activities and efforts of
    state, defense and others are coordinated and integrated is the
    responsibility of one person--the president. And there is nothing
    anybody else--including Congress--can do about it.
        I will conclude with three other reasons the nation is paying more
    for defense in real dollars today than thirty years ago and getting
    less. One is that men and women in uniform today drive, fly or sail
    platforms which are vastly more capable and technologically advanced
    than a generation ago. That technology and capability comes with a
    hefty price tag. A second reason for the higher cost is the exploding
    personnel costs of the department, a very real problem on which I know
    you are at least beginning to make some inroads after years of
    futility.
        But the third factor contributing to increased costs, and one of
    immense importance, is the role of Congress itself. Here I am talking
    about the years-long budgetary impasse on the Hill and between Congress
    and the President. The Department of Defense has had an enacted
    appropriations bill to start the fiscal year only twice in the last
    decade--the last seven years all began under a continuing resolution.
    During the first six full fiscal years of the Obama Administration, the
    Defense Department has operated under continuing resolutions for a
    third of the time--a cumulative total of two years. Department leaders
    also had to deal with the threat, and in one year, the imposition, of
    sequestration--a completely mindless and cowardly mechanism for budget
    cutting. Because of the inability of the Congress and the President to
    find a budget compromise, in 2013 defense spending was reduced mid-year
    by $37 billion--all of those cuts applied equally in percentage terms
    to some 2,500 line items of the Defense Budget, and requiring precise
    management of each cut to comply with the Anti-Deficiency Act with its
    criminal penalties for violations. Sequestration effectively cut about
    30 percent of day-to-day operating funds in the second half of fiscal
    year 2013.
        But then add to this mess the fact that the department--probably
    the largest organization on the planet--in recent years has had to plan
    for five different potential government shutdowns. In the fall of 2013,
    with sequestration still ongoing, the Pentagon actually had to
    implement one of those shutdowns for 16 days, affecting 640,000
    employees or 85 percent of the civilian work force.
        It is hard to quantify the cost of the budgetary turmoil of the
    past five years--the cuts, the continuing resolutions, sequestration,
    furloughs and shut-downs, the unpredictability and more. During
    continuing resolutions in particular, the inability to execute programs
    on schedule, limits on being able to ramp up production or start new
    programs, or to take full advantage of savings offered by multi-year
    purchases, the time-consuming and unpredictable process of re-
    programming even small amounts of money to higher priority projects all
    impose tremendous costs on the Defense Department--and the taxpayer.
    And this doesn't even begin to account for the costs involved in
    hundreds of thousands of man-hours required to try to cope with this
    externally imposed leadership and managerial nightmare. Moreover, re-
    imposition of full-scale sequestration looms in January absent a
    bipartisan budget agreement.
        Given the harm all this politically driven madness inflicts on the
    U.S. military, the rhetoric coming from members of Congress about
    looking out for our men and women in uniform rings very hollow to me.
    Further, this legislative dysfunction is embarrassing us in the eyes of
    the world at a time when allies and friends are looking to us for
    leadership and reassurance.
        All the smart defense reforms you can come up with will be of
    little use if the military is unable to plan, set priorities and manage
    its resources in a sensible and strategic way.
        The failure of congress in recent years because of the partisan
    divide to pass timely and predictable defesne budgets--and its
    continuing parochialism when it comes to failing programs and unneeded
    facilities--has not only greatly increased the cost of defense, it has
    contributed to weakening our military capabilities, and it has broken
    faith with our men and women in uniform.
        This committee, with its counterpart in the house, has long
    supported--on a bipartisan basis--a strong defense and protected those
    in uniform. As you consider needed reforms in the Pentagon, I fervently
    hope you also will urge your colleagues in Congress to break with the
    recent past and place the national interest--and our national
    security--ahead of ideological purity or achieving partisan advantage.
    Because, as you know as well as I, our system of government--as
    designed by the founders who wrote and negotiated the provisions of the
    Constitution--is dependent on compromise to function. To do so is not
    ``selling out''--it's called governing. Thank you.

        Senator McCain. Well, thank you, Mr. Secretary--Dr. Gates,
    thank you. Those are very strong words, and I wish that all 535
    Members of Congress could hear the--your closing remarks. I
    will quote them quite often and quite liberally. And it is,
    frankly, a damning but accurate indictment about our failure to
    the men and women in the military, the 300 million Americans,
    and the security of our Nation.
        We are also looking at a debt-limit showdown, Mr.
    Secretary. And we all know that debt limits have to be raised
    because of spending practices, yet we now have a substantial
    number of Members of Congress that, ``By God, we're not going
    to vote to increase the debt limit, and anybody that does is,
    of course, a traitor and doesn't care about fiscal
    responsibility.'' The rhetoric has been very interesting.
        So, we're now looking at sequestration, and we are also
    looking at the debt limit, and we're also looking at a
    President and Secretary of Defense--with the Secretary of
    Defense's support of vetoing a bill that is not a money bill;
    it's a policy bill. That's what defense authorization is all
    about. So, the President's threatening to veto because of the
    issue of not increasing nondefense spending, when there is
    nothing that this committee nor the authorizing process can do
    to change that. I'm sorry to say that members of this committee
    will be voting to sustain a presidential veto on an issue that
    we have nothing that we can change.
        Well, could I just ask, again, on sequestration--I also
    would ask a specific question. In your remarks, it was
    interesting to me that you didn't make a single comment about
    the service secretaries and their role. Do you think we ought
    to do away with the service secretaries, Dr. Gates?
        Dr. Gates. I've thought about that, thanks to your staff
    providing me with some of the issues that you all might want to
    discuss today. And I think that--I think I would say no to that
    question. And I would say it primarily because I think that
    having a civilian service secretary does strengthen the
    civilian leadership and the civilian dominance of our military.
    If there is--and they are able to do so on a day-to-day basis
    in decision making that a single person, like the Secretary of
    Defense, could not do. I mean, I couldn't--the Secretary can
    sort of reiterate that, and make it clear in his actions, that
    civilian control is important, but I think that the symbolism,
    to members of the services, that there is a civilian at the
    head of their own service who is responsible for them, and
    accountable for them, I think, is important.
        Senator McCain. Let me go back over this relationship
    between AT&L, the uniformed service chiefs, the Secretary of
    Defense--and you cited a couple of cases where, by going around
    the entire process as in MRAP, you've mentioned, and other
    cases--where is--go over, for the benefit of the committee,
    the--where is the balance? We're trying to, in this
    legislation, give some more authority and responsibility to the
    service chiefs, who, right now, as I understand it, have none,
    and yet, at the same time, as you said, not return too much to
    the service chiefs because of their advocacy, their view of
    sacrosanct, long-term programs that they believed were
    important to their services. I don't quite get that balance
    there.
        Dr. Gates. Well, and I wish I could give you a precise and
    very specific answer. It seems to me that--I mean, the irony is
    that--for example, when it came to the MRAPs, although I made
    the decisions, it was, in fact, AT&L and the leadership of AT&L
    that executed those programs and that signed the contracts, and
    they were actually implemented, then, by the--the Marine Corps
    actually had the responsibility, because they had originated
    the--the MRAPs were originally their idea, and it was their
    success in Anbar that led me to expand it. But, the problem
    that I ran into in the Defense Department is that any problem,
    whether it's an acquisition or anything else, affects multiple
    parts of the Department, none of which can tell the other what
    to do. So, if the comptroller has a problem, he can't tell AT&L
    what to do. If Cost Assessment and Program Evaluation has a
    problem, they can't tell AT&L or anybody else what to do. They
    only report to me or to the Secretary. And so, the reason I
    found myself chairing these meetings was because there were
    enough different parts of the Department who were involved in
    almost any decision that no one below the Secretary could
    actually get everybody in the room and say, ``This is what you
    have to do.''
        So, how you fix that, institutionally--and I will tell you,
    when Ash Carter was AT&L, was the Under Secretary, and
    particularly in my last 6 or 8 months, Ash and I talked all the
    time, ``Ash, how do we institutionalize this? How do we
    institutionalize meeting these urgent needs along with the
    long-range kind of planning and acquisition that we have?''
    And, frankly, when I left, we hadn't solved that problem.
        But, it has to--the services do have authority, they do
    have procurement or acquisition authority, and they do have
    senior people in those positions. And, frankly, my sense is
    that there are--a couple that I dealt with seemed to me to be
    quite capable. But, how you realign the roles of AT&L and the
    service procurement or acquisition officers, I don't have an
    easy solution for you. All I can suggest is that there be a
    dialogue between this committee and Secretary Carter and the
    services and AT&L, in terms of how you adjust the balance.
        It is clear to me that the balance has shifted too far to
    AT&L. And therefore, there needs to be some strengthening of
    the role of the services. But, central to that will be forcing
    the service leaders, the Chief of Staff and the Secretary, to
    hold people accountable, and to hold those two people
    accountable for the service. I know Mark Milley was up here
    testifying and said, you know, ``Give me the authority, and, if
    I don't do it right, fire me.'' Well, that's kind of extreme.
    But, at a certain point, accountability is a big piece of this,
    and I just--I don't have for you a line drawing or even a
    paragraph where I could tell you, ``Here's where you redraw the
    balance,'' because I'm not sure right where that line goes.
        Senator McCain. Thank you.
        Senator Reed.
        Senator Reed. Thank you very much, Mr. Chairman.
        Thank you, Dr. Gates, for extraordinarily insightful
    testimony and not only giving us advice but also sort of
    pointing out the questions which you're still trying to
    carefully think through. It'll help us immensely.
        One point you made is that we plan very well for the
    initial phase 1, phase 2, phase 3 operations with our
    equipment, with our personnel. It's the--usually the phase 4 of
    how we sort of conduct protracted war that you predicted would
    be the likely face of conflict in the future. So much of that
    depends upon capacity-building in the local nations, and so
    much of that depends upon non-DOD elements--State Department,
    police trainers, public health systems. I think we've seen that
    so many times, in Iraq and Afghanistan. And this comes back to
    the point I think you've also made about, you know, if these
    agencies are not properly funded or not properly integrated,
    then we could succeed in the initial phase of the battle, but
    fail, ultimately. Is that a fair assessment? And----
        Dr. Gates. Well, I can only remind this committee how many
    times you heard from our commanding generals in both Iraq and
    Afghanistan about the desperate need for more civilians, both
    in Iraq and Afghanistan, and the value that they brought.
    Secretary Rice used to chide me occasionally, reminding me that
    we had more people in military bands than she had in the entire
    Foreign Service.
        I'll give you another example, though, and it's an action
    that--frankly, where the--both the executive branch and the
    Congress are responsible. When I left government in 1993, the
    Agency for International Development had 16,000 employees. They
    were dedicated professionals. They were accustomed to working
    in dangerous and difficult circumstances in developing
    countries, and they brought extraordinary, not only skill, but
    passion. When I returned to government, 13 years later, in
    2006, AID was down to 3,000 employees, and they were mostly
    contractors. And that is a measure of what's happening in the
    development part of our broader strategy. And I would say that,
    you know, for those of us of a certain age who can remember
    USIA in its heyday, what we have in the way of strategic
    communications in our government today is a very pale
    reflection of that.
        So, those--that whole civilian side has been neglected for
    a very long time.
        Senator Reed. And that neglect will be exacerbated by
    sequestration, and they will not--these agencies don't have a
    way to provide at least short-term funding, as DOD does through
    the overseas contingency accounts. They're just stuck. And
    because they don't function well--and I think that's the
    conclusion you draw--our overall national security, our overall
    response in this, is impaired dramatically. Is that fair?
        Dr. Gates. I believe so, yes.
        Senator Reed. And it raises the issue, too, and--because
    this is the subject of a lot of our discussions, is--we have
    tried to find the money for Department of Defense, and the
    account that's bearing the bulk of the differences, both
    budgetary and political, is the overseas contingency account.
    As a means of funding defense on a long-term basis, in your
    view, is that an adequate approach, or should we raise the
    regular budget caps and do it as we thought we used to do it?
        Dr. Gates. Well, first of all, my approach when I was
    Secretary was to take every dollar I could get, wherever I
    could get it.
        Senator Reed. Yeah, I know. That's a----
        Dr. Gates. It's a terrible way to budget. I mean, it is a
    gimmick. It does provide the resources, but I think it's hard
    to disagree with--I mean, the way the things ought to operate
    is that if there is a sense on the Hill, a majority view, that
    the budget needs to be cut to reduce the deficit, you go
    through regular order of business, and you--like I did when I
    was Secretary of Defense, you make tough decisions. What are
    you going to fund? What are you not going to fund? But, you
    make choices. That's what leadership and political life is all
    about, it seems to me. And then you vote a budget, and the
    money flows, whether there's more or less of it. You know, in
    the current paralyzed state, maybe there's no alternative right
    now to getting the money this way, but it is--as the saying
    used to go, it's a helluva way to run a railroad.
        Senator Reed. Well, thank you very much, Dr. Gates, for
    your extraordinary service to the Nation.
        Thank you.
        Senator McCain. Senator Sessions.
        Senator Sessions. Thank you, Dr. Gates, and thank you for
    your service. And I would add my compliments to those of my
    predecessors--prior speakers, that I believe you represent one
    of the best Defense Secretaries the Nation has ever had.
        Dr. Gates. Thank you.
        Senator Sessions. And I know you've served with dedication,
    put the Nation's interests first, you put the Defense
    Department first. Some of your former Cabinet colleagues put
    Secretary of Health first, and education first, and roads
    first. And so, we got pleas from every department and agency,
    and we don't have as much money as we'd like. So, the crisis
    we've entered on the budget process is essentially that the
    President of the United States has said, ``You Republicans care
    about defense. You're not getting any more money for defense
    unless I get more money for nondefense.'' And that's a big
    conflict. And so, the process we moved forward met the Defense
    Department's request and the President's request for defense,
    but it has not met the nondefense increases, all of which, on
    defense and nondefense, are borrowed, because we're already in
    debt. So, anytime we spend more, we borrow the extra money. So,
    it's a difficult time, and----
        But, you are correct, history teaches us that conflicts
    just don't go away. They keep coming back, and we don't know
    what it will be like, and we need a strong national defense.
    And I thank you for your real good advice.
        Briefly, do you believe that, with regard to the extremism
    we're seeing in the Middle East, that we, as a Nation, and our
    allies in Europe, NATO, and other places, should seek to
    develop a strategy--bipartisan in the United States or
    worldwide--to deal sophisticatedly with that threat over
    decades to come? And can we do that?
        Dr. Gates. Senator, I think that--I think we face a
    generation of conflict in the Middle East. I think we have
    four--at last four conflicts going on simultaneously: Shiite
    Islam, led by Iran, versus Sunni Islam, led by Saudi Arabia;
    reformers versus authoritarians; Islamists versus secularists.
    And then the question of whether these artificially created
    countries--Iraq, Afghanistan, Syria--comprised of historically
    adversarial ethnic and religious groups can hold together at
    all. I used to say ``without repression.'' Now the question is
    whether they can hang together at all. Syria has become, if you
    will, the epicenter of all of that.
        Some of you may have read Dr. Kissinger's long essay the
    other day in the Wall Street Journal. My concern is that I
    don't see an overreaching--or an overriding strategy on the
    part of the United States to how we intend to deal with this
    complex challenge for the next 20 or 30 years. And one of the
    benefits of containment--and there were lots of disagreements
    about how to apply it and how--and the wars we fought under it,
    and so on--but, I will always believe that critical to our
    success in the Cold War was that we had a broad strategy,
    called containment, that was practiced by nine successive
    administrations of both political parties. It had bipartisan
    support, the general notion of how to deal with this. We don't
    have anything like that with respect to the Middle East. And I
    think that as long--and so, we're kind of dealing with each of
    these crises individually rather than backing up and saying,
    ``What's our long-range game plan, here? And who are going to
    be our allies? Who are going to be our friends? Where do we
    contain? Where do we let it burn itself out?'' We just really
    haven't addressed those long-term questions. It seems to me
    we're thinking strictly in sort of month-to-month terms.
        Senator Sessions. Well, thank you. I think that's very good
    advice for us.
        I believe--I've been around here a good while--I believe
    there's a possibility of a real bipartisan support for that
    kind of long-term vision. We've got big disagreements on
    spending and some other issues that--hard to bridge, but I
    think this one we could bridge. And I appreciate your thoughts
    on that.
        I met with the--some German group yesterday in a very fine
    meeting, and raised the need for Europeans to contribute more
    to their defense and our mutual defense. And the leader of the
    group pointed out it was unacceptable that NATO is funded 70
    percent by the United States. He acknowledged that. You've
    spoken on that in the past very clearly. Do you have any
    further ideas about what we might do to have our allies carry a
    bit more of the load?
        Dr. Gates. Well, this is one area where one might hope, in
    the long term, that Mr. Putin has done us a favor by reminding
    the Europeans that, actually, the world has not gone on to
    broad, sunny uplands where there is peace and tranquility all
    the time. The reality is, many years ago NATO countries all
    committed to spend at least 2 percent of GDP on defense. When I
    left office, there were five countries out of 28 that met that
    threshold, and two of them were Greece and Croatia. So, it
    gives you a measure of where the others need to pull up their
    socks. And, as you say, I spoke very bluntly about this,
    including in Brussels in my last speech in Europe. Probably
    never be welcome in Europe again, either.
        [Laughter.]
        Dr. Gates. But, the--but, no, I--and I think the more
    that--particularly, the more that Members of Congress from both
    parties talk to their counterparts in Parliaments in Europe,
    that can only help, in my view.
        Senator Sessions. Thank you.
        Senator McCain. Senator Heinrich.
        Senator Heinrich. Dr. Gates, in your speech on budget
    austerity at the Eisenhower Library, you said that, quote,
    ``Eisenhower was wary of seeing his beloved republic turn into
    a musclebound garrison state, militarily strong but
    economically stagnant and strategically insolvent,'' unquote.
        As you've heard, we've got a lot of digit--very difficult
    appropriations challenges coming up in the next few months, and
    I wanted to ask you if you have any opinions as to what
    Eisenhower might think of the proposal to use the overseas
    contingency operations fund--i.e., the war fund--to cover base-
    level DOD budget items, or whether you might have some thoughts
    on that.
        Dr. Gates. Well, I think I expressed my view that these
    kinds of ad hoc arrangements are never at all as satisfying or
    as cost effective as regular-order business in which choices
    are made and decisions are made based on those choices, and
    dollars allocated. And there may be more dollars, there may be
    fewer dollars, but at least people have some predictability. I
    would also tell you that having some predictability year-on-
    year would be helpful. And so, I think that, obviously,
    regular-order business, in terms of managing these budgets--
    that's really what I was talking about in a good part of my
    remarks--having regular appropriated defense budgets that
    actually begin on the--at the beginning of the fiscal year is
    the way things ought to work, and they have not worked that way
    up here for at least 10 years. That needs to be fixed.
        By the same token, as I said, when I was the Secretary, if
    I were confronted with the situation that I face now, my sense
    would be to take the money, because what's my alternative, and
    what kinds of programs am I going to have to have to cut in
    order to accommodate certain defense needs?
        Let me give you an example of a place where I made a big
    mistake. In 2010, this committee and others were very unhappy
    about supplementals, and talking about moving away from
    supplementals. And I knew that, when the wars were over, those
    supplementals, or now the OCOs, would go away. A lot of the
    funding that we had for military families and for families of
    wounded warriors, and wounded warriors, were being funded
    through the supplementals. I moved all those programs, or as
    many of those programs as I could, into the base budget, in the
    belief we would need those programs for years and years and
    years to come. Well, guess what? All of those programs are now
    being hit by sequestration and by continuing resolutions and
    everything else. So, what I thought would protect those
    programs ended up making them vulnerable; whereas, if I'd have
    left them on the OCOs, they'd still be fully funded. So, those
    are the perverse consequences of not having regular
    appropriations bills.
        I would make one other observation about Eisenhower and his
    military industrial complex speech. It gets quoted a lot. But,
    there's one factoid that people don't usually include. When
    Eisenhower made that speech in 1961, the defense budget
    accounted for 51 percent of Federal spending. Today, it's 15
    percent.
        Senator Heinrich. Shifting gears a little bit with the rest
    of my time. Do you have general thoughts on how you build sort
    of a culture of incentives and values that really value off-
    the-shelf solutions, where they're appropriate, within the
    acquisition process and the procurement process, rather than
    sort of having this inherent bias towards exquisite new
    programs and products?
        Dr. Gates. I think that there are obviously areas in which
    you ought to buy off-the-shelf capabilities. And, frankly, one
    of the great cultural shifts in the national security arena
    actually occurred in the early 1980s, when we, in the
    intelligence arena that had always led the way in developing
    data processing, data storage, data management, were
    discovering that the private sector was far outstripping us in
    terms of their capabilities. And so, beginning in the mid-'80s,
    we began buying off-the-shelf software; and hardware, for that
    matter. So, there are areas like that, where I think that, in
    fact, the private sector is way ahead of the government and
    where we can buy off-the-shelf capabilities that will actually
    improve our capabilities. There will be some areas--and these
    are always the areas that are contentious, but--that have to do
    with some specific military capabilities where you are in the
    realm of completely new technology, and those are the places
    where you're going to have to take risk and you're going to
    have to realize that there probably are going to be cost
    overruns. Most of the highly advanced--technologically advanced
    programs defense has had for the last 30 or 40 years have all,
    in their initial years, had cost overruns. And partly it's
    because we're dealing with, and trying to do, things that have
    never been done before.
        Senator Heinrich. Dr. Gates, I want to thank you for
    subjecting yourself to this today. We appreciate it.
        [Laughter.]
        Senator McCain. Senator Inhofe.
        Senator Inhofe. Thank you, Mr. Chairman.
        And, Dr. Gates, I agree with the statement that was made by
    our Chairman, that there's no one better suited for the reform
    that we're looking at, and we're hoping for and we're
    anticipating, than you. And I also want to say that, during the
    various incarnations you've had, I've always enjoyed personally
    working with you. You've gone out of your way to have dinners
    with individuals and really tried to work with us more than
    anyone else has. So, I thank you for that.
        You know, you observed that in 1961 it was 51 percent of
    the budget, and it's now 15 percent. And that's a problem. It's
    the lowest percentage since World War II, I guess. But, that
    isn't the problem we're addressing today. That is a problem,
    but what we're talking about is the tooth and the tail.
        Now, both you and Secretary Hagel sought to shrink the
    inflated headquarters and major combat commands' tasks during
    the--your respective times as Secretary of Defense. Secretary
    Carter initiated a targeted 20-percent reduction in the staff
    during his deputy time--Deputy Secretary. And in August of this
    year, Deputy of Defense Secretary Robert Work sent all services
    a memo entitled ``Cost Reduction Targets for Major
    Headquarters,'' ordering preparation for a 25-percent cut in
    appropriations from 2017 to 2020. I think that's great, and we
    supported it. In fact, our defense authorization bill has a lot
    of language in there that says this is what we're going to--we
    need to do. And it's a major problem.
        Let me just ask you to think about something that hasn't
    been brought up yet. It's an observation that I've made a long
    time ago. And that is the problem you have with bureaucracies
    in general. Bureaucracies don't want to get smaller, they want
    to grow. It was Reagan who said, ``There is nothing closer to
    life eternal on the face of this Earth than a government agency
    once formed.'' We both remember that. I--and so, every time it
    seems that there is a bureaucracy that is asked to reduce its
    overhead--and that's what we're talking about today, the
    headquarters, its overhead--they will pick out--cherry pick
    something that they do that the public is so concerned about.
        Let me give you an example. I've introduced legislation--in
    fact, I passed legislation that addresses the FAA and their
    treatment of general aviation. I have a second bill called the
    Bill of Rights II. I had problems with reams and reams of
    bureaucrats from that Department out lobbying, knowing they had
    a lot of people out there on their staff. If you look at the
    FAA--in 1990, their--the total number of pilots that they
    regulated, which is primarily what they were doing in the year
    2000, was 625 pilots. Today it's 593 pilots. So, the workload
    is actually reduced. And yet, in the year 2000, their budget
    was $9.9 billion. Today, it grew from $9.9 billion to $16.6
    billion. So, that's an increase of $67 billion. Now, what did
    they do--every time there is some kind of an effort by me, on
    the radio, or something else, talking about how it is an
    inflated bureaucracy that doesn't have the workload they had 5
    years ago, that their budget is 67 percent more. Every time
    they do that, they would say, ``All right, we'll go ahead and
    start reducing.'' What did they reduce? They reduced things
    that scare people. They reduce thing--the controllers--the
    number of controllers that are out there. And I could give you
    a lot of examples, but I don't have to, because I know that you
    know this.
        So, is there a way to handle this? I think that should be
    considered in this whole discussion. And, even though I had to
    leave to another committee hearing, I don't--I suspect that
    part wasn't brought up. What are your thoughts here?
        Dr. Gates. It just so happens, Senator, that, in January, I
    have a new book coming out----
        [Laughter.]
        Dr. Gates.--that specifically addresses--the subtitle is
    ``Lessons on Change and Reform from 50 Years of Public
    Service,'' and it's how you lead and change big bureaucracies,
    and how you bring about change. And one of the elements in that
    book, for example, is how to use a period of budget stringency
    to change the way an organization does its business. It creates
    an opportunity for a leader who's determined to change things
    and make them better, because you don't have enough money to do
    all the things that you've been doing, and, therefore, you have
    to think about how you'd do it differently.
        I had--we had a lot of programs that--as we referred to
    earlier--in a 4-month period, we came up with $180 billion in
    overhead cuts in the Defense Department over a multiyear
    period. This was in 2010. Now, some of those cuts created a
    strong reaction, including here on the Hill. Senator Kaine will
    recall the reaction when we--when I shuttered Joint Forces
    Command in Norfolk. And I had the entire Virginia delegation on
    my doorstep. Actually, in my office. And----
        [Laughter.]
        Senator McCain. And the then-Governor.
        Dr. Gates. And the then-Governor.
        [Laughter.]
        Senator McCain. Who was the worst.
        [Laughter.]
        Dr. Gates. The point I'm trying to make is, first of all,
    we cut $80 billion out of the Defense Department, generally,
    but what I assigned the services to do was to find $100 billion
    in cuts on their own, just in the services. But, what I did,
    with the approval of the President, was to tell them, ``If you
    find $100 billion--if you find the cut, if you meet the target
    that I've given you, and then you show me new military
    capabilities or expanded military capabilities that are
    actually tooth, I'll give you the money back to invest in
    those.'' So, they were incentivized. It wasn't a zero-sum game
    for them, where anything they identified, they were going to
    lose. But, it forced them to address this tail-and-tooth issue
    and created both penalties if they didn't achieve the goals,
    but an incentive for them to find and be successful in the
    effort.
        One of those things--and it goes to one of the questions
    that the committee is addressing--the number of general
    officers. As part of that exercise, we took an initial swipe at
    senior leadership in the Department, and our objective--and I--
    this is one of those things you start and you never know
    whether it came out--but, we proposed cutting 50 four-star
    positions--or 50 general-officer positions and, I think, twice
    that number of senior civilian positions.
        You can do this. But, the thing that it requires, whether
    it's the FAA or the Defense Department or anyplace else--it
    requires the person in charge to monitor it almost daily and to
    make sure that people are doing what they said--what they
    signed up to do or the assignment that they were given. In
    effect, you have to regularly grade their homework. You can't
    tell somebody--you can't tell a service secretary, ``I want you
    to cut $25 billion in overhead over the next 5 years,'' and
    then, a year later, ask him how he's doing. What you need is to
    ask him in 2 weeks, ``What's your plan?'' And in a week after
    that, or 2 weeks after that, ``How are you doing on
    implementation?"
        So, you can do these things, Senators. You can make these
    bureaucracies work. And that's kind of the thesis of the book,
    but it's kind of, How do you do that? Because it clearly is not
    done very often. And one of the things that I did, and for
    which this committee expressed a great deal of appreciation at
    the time, was actually holding people accountable. You know,
    people get fired in Washington all the time for scandals and
    doing things wrong and that kind of stuff. Hardly anybody ever
    gets fired in this city for just not doing their job well
    enough.
        Senator Inhofe. Yeah. Good for you.
        Dr. Gates. I mean, that's what was rare, was somebody
    getting fired because they didn't do their job well enough. You
    need a little bit more of that in this city.
        Senator Inhofe. Yeah. Well, my time is expired, but that's
    a great answer to that question, and I appreciate it. And, by
    the way, I'll swap you books. I have a chapter in mine on this,
    too.
        [Laughter.]
        Senator Inhofe. Thank you, Mr. Chairman.
        Senator McCain. I hope they're available on audio.
        [Laughter.]
        Senator McCain. Senator Hirono.
        Senator Hirono. Thank you, Mr. Chairman.
        Dr. Gates, thank you very much for your very strong
    statement about Congress's responsibility to govern through
    compromise. And we have been wrestling with the very negative
    impacts of sequester on both a defense and nondefense side, so
    my hope is that there will be a compromise that will achieve
    sequester relief for both sides, both segments, because
    national security is more than just defense. I'm not trying to
    lecture you or anything, because I certainly respect your
    views.
        You mentioned, during the Cold War, that we had a broad
    strategy of containment. And with all of the conflicts that
    continue to arise in the Middle East--and I think you did note
    that we're in an environment now where some of these conflicts,
    or maybe many of these conflicts, are unpredictable, that we
    don't have a strategy, like strategy in the Middle East. Now, I
    think, after our experience--decade-long experience in Iraq and
    Afghanistan, that there is a desire that boots on the ground in
    the Middle East should not be United States boots. So, from
    that flows a number of possibly what I would consider strategic
    kinds of decisions. And so, that may be one of the reasons--our
    unwillingness at this point to put our own boots on the ground
    in the Middle East may be one of the--would you consider that
    a--perhaps not a strategic decision, but one that really--from
    which flows a lot of the--our response to what goes on in the
    Middle East?
        Dr. Gates. Well, first of all, I think, when it comes to
    something that specific, it would be a mistake to have, in
    essence, a one-size-fits-all that basically says, from Pakistan
    to Morocco, the United States will have no boots on the ground.
    The truth is, we have--just as one example, we have 600 sets of
    boots on the ground in Sinai as part of a peacekeeping
    operation that's been there since the 1973 war. Are we going to
    pull those guys out because that's boots on the ground? We
    have----
        Senator Hirono. No, but--well, we're talking about in
    combat----
        Dr. Gates. Well----
        Senator Hirono.--and in long-term.
        Dr. Gates. But, my point is, then you're beginning to make
    some distinctions. So, you could have boots on the ground as
    long as they're not in combat. So, does that allow advisory
    work? Does that allow them to be spotters for airplanes?
        So, I guess my feeling is that the first thing about a
    strategy is identifying what are our interests, what are we
    trying to--what are we trying to protect? What are we trying to
    prevent from happening? And then you work back from those
    answers into the techniques, the tactics by which you try to
    accomplish those broader objectives or that broader strategy.
    And I think that the solutions, particularly where the
    situations are so complex in the Middle East, where you have
    multiple different kinds of conflicts going on, the solution
    for each country or each part of the problem may be different.
    But, you do need an overarching strategy that at least tells
    you: What am I trying to achieve out here?--and that also--I
    mean, if I had to put a negative in there of what we think
    we've learned, it is to be very modest about our ability to
    shape events in that part of the world. That doesn't mean we
    should stay out. It doesn't mean we should do nothing. But, we
    also ought to make sure that our strategy doesn't include
    grandiose objectives that are fundamentally unachievable.
        Senator Hirono. I agree with you there. Perhaps one of the
    areas of the world where we do have what I would consider a
    strategy is in the Asia-Pacific area with the Indo-Asia-Pacific
    rebalance. Would you agree that that is a strategy?
        Dr. Gates. Yeah. And I think, you know, despite--you know,
    going back several Presidents, we've had several Presidents,
    during their campaigns, take one position toward China, which,
    when they became President, they adjusted. And so, I think,
    while we don't have, if you will, an explicit bipartisan
    agreement on strategy in Asia, I think there is a pretty broad
    agreement across both parties, the leaders of both parties, in
    terms of how we--except for maybe one or two presidential
    candidates--about how you deal with China, how we--how--what
    our strategy ought to be in Asia. So, I--I guess I'm
    fundamentally agreeing. I think, in Asia it's more implicit
    than explicit, but I think there is a pretty broad bipartisan
    agreement on the role we ought to play in Asia.
        Senator Hirono. Thank you very much.
        Senator McCain. Senator Ernst.
        Senator Ernst. Thank you, Mr. Chair.
        Thank you, Secretary, very much for being here. I
    appreciate your service to the Nation in your many, many
    capacities. So, thank you.
        Secretary, you were successful in getting MRAPs, body
    armor, and drones to the field to support our warfighters. And
    to do that, even while we were undergoing sustained ground
    combat, you really had to fight the bureaucracy at the Pentagon
    to achieve that. So, we're glad that you did that and you took
    that step to make sure our warfighters were protected. But, I
    am afraid that, after you left, it has reverted back to the
    same old, same old. I'd like to see some more pushback out
    there.
        But, just for example, the Army has spent 10 years trying
    to figure out how to by a new handgun. Ten years on how to buy
    a new handgun, an end item with a total cost of just a few
    hundred dollars per item. Ten and a half years, or half a dozen
    industry days later, the Army produces a 351-page request for
    proposal--351 pages--for a handgun. And whatever is in these
    pages, it isn't a lean or streamlined acquisition process
    responsive to the needs of our warfighters. And, because of the
    bureaucracy and a lack of responsiveness to anyone who isn't
    engaged in the Special Operations arena, our soldiers have
    handguns that are over 30 years old; and, in recent surveys,
    they have stated that they absolutely hate those small arms.
    What should Congress do to get the Army to fix this mess for
    small arms and for all items, really, that our soldiers need on
    the ground in a time of war?
        Dr. Gates. Well, it seems to me that--I mean, my friends in
    the Army are not going to like my answer, but----
        Senator Ernst. That's okay.
        Dr. Gates.--but, I think--you know, what it is about is
    calling the Secretary of the Army and the Chief of Staff of the
    Army and the Chief of Acquisitions to sit at this table and ask
    that question, ``Why has it taken you guys 10 years?'' This is
    absurd. And, ``Why is it a 350-page RFP?'' It's a handgun, for
    God's sake.
        And, you know, again, I always come back to the same theme.
    Most bureaucracies have a stifling effect. It's just in the
    culture. It's in the DNA. And what is required are disruptors.
    And if you have people in senior positions who are not
    disruptors, you need to make them into disruptors. And the way
    you do that is by holding them personally accountable.
        Senator Ernst. I appreciate that, thank you. And I like
    that answer, so I don't know why they wouldn't. But, I think
    you're right on, there.
        I would like to talk a little bit about the Middle East, as
    well. In the past, you've called for a safe haven to help end
    the humanitarian disaster in Syria. And I'd like to direct my
    attention to Iraq, because we do have a humanitarian disaster
    in Iraq, as well. I believe we have a safe haven there, which
    is Iraqi Kurdistan. They have taken in nearly 1.6 million
    refugees. Many of them are Christians. And our KRG friends who
    are providing that safe haven, they are really unequipped to
    provide for the influx of all those folks. The Peshmerga are
    also fighting, with limited resources, against an enemy which
    seems to have an endless supply of weapons and other types of
    equipment, to include many weapons procured through various
    processes from the United States, whether that's simply picking
    items up off the ground that have been left behind via other
    security forces. So, how important, in your opinion, has the
    United States relationship with the Iraqi Kurds been for our
    country and for the DOD over the past quarter of a century?
        Dr. Gates. Well, I think it's--I think it's a very
    important relationship. I think it's worth noting that I think
    the Chairman of the Joint Chiefs is either there right now or
    has just been there.
        I mean, my view is that one of the things we ought to be--I
    said this in an interview, and I probably was a little more
    blunt than I should have been, but I think that the idea of
    training indigenous fighters outside of a country, and then
    reinfiltrating them, was probably never going to work. I think
    one of the things that could work is to identify groups,
    particularly tribes and ethnic groups, that have shown they are
    prepared to defend their own territory against ISIS, and
    provide weapons to those tribes and those religious groups.
    They may not fight in Iraq or outside of their own turf against
    ISIS, but they may well fight to the death to protect their own
    homeland, their own villages, and so on. And so, finding those
    groups and arming them at least begins to contain ISIS and
    presents them with a diverse number of enemies that make it
    difficult for them to further expand their activities. And I
    would include, above all among those groups, the Kurds.
        Senator Ernst. Thank you very much. I appreciate your
    answer, Secretary.
        Thank you, Mr. Chair.
        Senator McCain. That was what the Anbar Awakening was all
    about, right, Mr. Secretary? My crack staff tells me that, in
    this RFP, the Army specified everything the handgun needed to
    do, including comply with the current boar brush, but they
    didn't specific what caliber the weapon should----
        [Laughter.]
        Senator McCain. Governor Kaine.
        Senator Kaine. Thank you, Senator and--McCain--Mr. Chair.
        And thank you to you, Dr. Gates, for your service. And we
    have a special affection for you because of your service to
    your alma mater, William & Mary.
        I want to really focus on the last bit of your testimony,
    which is what Congress can do better, and, in particular--we
    have a hearing right now in the Budget Committee about Federal
    budget reform. You testified that, I think, only 2 years during
    the years that you were the Secretary of Defense (SECDEF) were
    you dealing with a full appropriations bill on the first day of
    the fiscal year. Otherwise, you were dealing with CRs. You and
    your colleagues in the Secretary of Defense dealt with CRs, you
    dealt with sequestration, you dealt with furloughs, you dealt
    with threats of all of the above, you dealt with brinksmanship
    over debt ceiling limitations, you dealt with a high degree of
    uncertainty as you're planning, you know, ``Do I--what scenario
    do I run, in terms of the resources that I'll have? Will I have
    it--are we going to have to absorb the full sequester, be it
    the budget caps? Will there be some relief?"
        Talk a little bit about the strategic challenge that it
    presents to the entire defense mission of the United States
    when you're dealing with the degree of congressional budgetary
    uncertainty that we've seen in the Nation in the past number of
    years.
        Dr. Gates. Well, it--as I said in my comments, we have had
    a--an appropriations bill at the beginning of the fiscal year
    twice in the last 10 years. And, believe me, it was, I think,
    probably the 9th and 10th year ago. I submitted, through the
    President, five budgets to the Congress as Secretary, and never
    once had an appropriation at the beginning of the fiscal year.
        The problem is, you then have to straight-line your
    spending, you have to adjust all of your spending, because you
    can't spend--you can't start anything new, you can't spend
    anything more on anything. And then you get several months into
    the fiscal year, and all of a sudden you've got money. So,
    instead of disbursing the money over a 12-month period in a
    rational and planned way, you have to hurry up at the end of
    the fiscal year. When you get a cut of 30 percent in the
    operations budget halfway through the fiscal year, which is
    what happened in 2013 because of sequestration, that's when you
    ended up with a third of the Air Force Active Duty fighter
    wings grounded. That's when you didn't have the money to deploy
    the Harry S. Truman to the Persian Gulf. Those are the very
    real consequences.
        And this uncertainty ripples down to every level. And so,
    what you have are commanders at lower levels not wanting to get
    caught short, so they're very conservative in the way they
    spend their money, because they don't know what's going to
    happen. And so, you have less training, less exercises, less
    maintenance. I mean, these are all the things that can be put
    off, and they are being put off. And the backlog of maintenance
    in the Navy, for example, is becoming huge, but it's because of
    this uncertainty of when we're going to get something.
        I mentioned, in my prepared statement, often in the--in a
    program--in a development of a program, you--when you move from
    one year to the next, you create the opportunity to
    significantly ramp up production. And when you ramp up the
    numbers, the costs go down. You lose those opportunities if you
    don't have the money to ramp up because you don't know whether
    you're going to have the resources to do that, or even the
    authority, if you've got a continuing resolution.
        So, it has--you know, I mean, it has a huge ripple effect--
    even a continuing resolution--a huge ripple effect throughout
    this entire giant organization, and you just--you know, I used
    to say--I used to say, when testifying up here, I'd say, ``You
    guys expect me--I've got the biggest supertanker in the world,
    and you expect me to run it like a skiff.'' And that's just
    impossible.
        Senator Kaine. Let me compare uncertainty, because, at the
    start of your testimony, you talked about there can be a
    conventional wisdom that you challenge that, ``Oh, the world is
    more uncertain now than it's been--more dangerous than it's
    been,'' but you sort of walked through from World War II to
    today, and you pointed out, decade by decade, the challenges.
    And, while we may not be able to predict the next challenge,
    that there will be challenges is actually fairly easy to
    predict, based on past history. You've testified that you don't
    think the Overseas Contingency Operations (OCO) account is
    particularly smart, in terms of budgeting. And you would try to
    put stuff in the base account. But, it seems to me that the
    mission of national defense is probably, in real terms, kind of
    more threatened by uncertainty here than uncertainty in the
    world. Bad things are going to happen in the world, and we know
    it. And we're not necessarily going to be able to stop that. We
    can predict that they will, even if we can't predict the
    particular one. The uncertainty that we can fix here is the
    uncertainty of our own budgetary dysfunction.
        Dr. Gates. I sometimes say--when I'm talking to groups and
    at universities, I get asked, ``What's the biggest national
    security threat to the United States?'' And I say, ``Well,
    fundamentally, and I'm not kidding, it can be found within the
    two square miles that encompass the Capitol building and the
    White House,'' because if we can't solve these problems, if we
    can't get through and begin to address some of the tough
    problems facing this country, there is no single foreign threat
    that is more dangerous to the future of the United States than
    that.
        Senator Kaine. Thank you, Dr. Gates.
        Senator McCain. When you have the CRs and the sequestration
    that you mentioned, and the uncertainty that it breeds, doesn't
    it, over time, have a significant effect on morale and
    retention?
        Dr. Gates. Absolutely. And I think, you know, if Bob Hale,
    who was referenced earlier, who was the comptroller while I was
    Secretary--Bob wrote an article about the consequences for
    morale of all of these changes and all this uncertainty and so
    on. People just get discouraged. I mean, they do all this
    planning, and they do--and then it all comes to naught. And,
    you know--and I told General Odierno and General Amos, before I
    left--I said, ``My biggest worry is how you--as these wars ramp
    down--is how--you have given these young officers and NCOs
    amazing independence and opportunity to be entrepreneurial,
    innovative, thoughtful, and out there on their own doing
    amazing things"--these are really the captains and the NCOs'
    wars--I said, ``And if you bring them back to the Pentagon and
    put them in a cubicle, you're going to lose them, you're going
    to lose the best of these young people.''
        I believe that this continuing uncertainty about the
    future--I mean, pilots join the Air Force to fly. People join
    the Army to drive tanks and other equipment. People join the
    Navy to go to sea. And when you tell them you're not going to
    train as much as you thought you were, you're not going to fly,
    you're not going to sail, you're not going to drive as much as
    you thought you were, I think there's a very real risk that
    these uncertainties are going to lead to a bleeding out of some
    of the most innovative and desirable young people we have in
    the military who just, frankly, get fed up.
        Senator McCain. Senator Ayotte.
        Senator Ayotte. Thank you, Chairman.
        I want to thank you, Dr. Gates, for your incredible record
    of service to our country.
        And I certainly hope, as you have rightly said to us today,
    that we can come together to address sequester with a budget
    agreement that is going to make sure that you have that
    certainty and that our men and women in uniform have that,
    given the challenges we are facing around the world, so that
    they can plan and make the right decisions that need to be made
    to make sure that the Nation is safe.
        I want to shift gears a little bit and ask on a topic,
    first of all, that I noticed, in an op-ed that you and
    Secretary--former Secretary of State Condoleezza Rice wrote
    recently on the situation with Russia and the engagement that
    Russia is taking in Syria to keep Assad in power, in
    cooperation with the Iranians. And wanted to ask your thought
    process about, as we look at what Russia is doing right now,
    what you think that their goals are, and also what you think we
    should be taking as steps.
        We recently had testimony before this committee from
    General Keane and General Jones, both very distinguished
    retired generals, and one thing they said really struck me,
    that they believe that if we continue the current course with
    our interactions with Russia, they believe it could be the end
    of NATO if NATO doesn't further step up, also, to help address
    not only this--we think about what's happening in Syria, but
    also the situation with Ukraine and what is happening in that
    region.
        So, I wanted to get your thoughts on Russia and where you
    think we should be stepping up.
        Dr. Gates. Well, I had a number of opportunities to
    interact with Mr. Putin when I was Secretary. We actually had
    an interesting relationship because of our respective
    backgrounds in intelligence. I would sometimes remind him that
    I was Deputy Director of the Central Intelligence Agency (CIA)
    when he was a lieutenant colonel serving in southern East
    Germany, but----
        [Laughter.]
        Dr. Gates. What Putin has been most impacted by, in my
    view, was the collapse of, not just the Soviet Union, but the
    Russian Empire. Russia's borders today are roughly what they
    were when Catherine the Great was Empress. Ukraine has been
    part of the Russian Empire for a very long time.
        Putin is all about lost power, lost glory, lost empire. And
    he is not crazy. He is very much an opportunist. But, what--I
    think he has two basic strategic objectives. The first is to
    restore Russia to great-power status so that no problem in the
    world can be addressed without Russia's involvement and without
    Russia's agreement. And the second is as old as the Russian
    Empire itself, and that is to create a buffer of states
    friendly to Russia on the periphery of Russia. And if he can't
    create friendly states, then frozen states, where the West can
    no longer expand its influence, and Russia can hold--have at
    least a barrier. And that's what happened, if you will, in
    eastern Ukraine.
        So, I think those are his objectives, and I think that he
    will be very opportunistic in pressing those objectives. But,
    at the same time, he is not a madman. And I think if he runs--
    if he encounters resistance, he will hesitate, he will pull
    back.
        And so, I think that he has seen an opportunity to cement
    Russia's position in the Middle East through helping Assad. I
    don't think--as I--as Condi and I said in the op-ed, he's not
    particularly sentimental. When the time comes for Assad to go,
    Putin will be happy to throw him overboard whenever that's
    convenient, as long as Russia has another person coming in who
    will be attentive to their interests and allow them to keep the
    naval base at Tartus and their position--their military
    position in Syria.
        So, the question then is, What do you do about this? And I
    think that--oh, and I guess one other thing I would add is--
    also in the back of Putin's head: as he sees opportunities, if
    he also has the opportunity to poke the United States in the
    eye, he will never miss that opportunity.
        So, the question is, How do you--where do you resist him?
    Where do you push? And frankly, in Ukraine, Putin has
    escalation control. He has a lot more forces on the Ukrainian
    border than we or North Atlantic Treaty Organization (NATO) can
    put on the opposite side, or are willing to put. We also happen
    to have a pretty dysfunctional government in Kiev, which makes
    our trying to help them even more difficult.
        So, the question is, then, Where do you have the chance to
    establish some limits? And it seems to me one of those places
    where he is at the end of a long supply line, and we have some
    real assets, is in the Middle East. And I think that there is
    an opportunity to draw some lines in Syria that--let me frame
    it another way.
        I think we should decide what we want to do in Syria,
    whether it's a safe haven or anything else, and basically say--
    just tell the Russians, ``This is what we're going to do. Stay
    out of the way.'' And if it's a safe haven, and it's in an area
    that doesn't threaten Assad's hold on power, then it seems to
    me that the chances of them challenging us are significantly
    reduced.
        But, at a certain point, first of all, I think we need to
    stop talking about whether these actions make them look weak,
    or he doesn't know what he's doing, or whatever. I think he
    knows exactly what he's doing. And at least in the short-to-
    medium term, he's being successful at it.
        Senator Ayotte. Thank you.
        Senator McCain. Fortunately, he's in a quagmire.
        Governor King.
        Senator King. Thank you, Mr. Chairman.
        Dr. Gates, welcome. It's a delight. Your testimony has been
    provocative in many ways.
        In fact, one of the--my first comment is, you talked about
    the USIA. And we abolished the USIA in 1998, and now its
    successor agencies have, according to my quick calculations,
    about half the budget that it had, and yet, one of the reasons
    we're having such a problem with ISIS is, we're losing the war
    of public opinion, particularly in the Middle East. That was
    a--in retrospect, a strategic error, in terms of our ability to
    combat the idea, which is a very important part of this
    conflict. Would you agree?
        Dr. Gates. Totally. You know, I would run into people from
    Pakistan to Morocco and elsewhere, and they would say they
    learned to speak English in a USIA library. We had a--USIA
    libraries in virtually every major city in the world. And these
    guys would go there as kids. They would say, ``We went there
    because it was the only building in town that was air-
    conditioned.''
        [Laughter.]
        Dr. Gates. But--they learned to speak English, but they
    also learned something about America. And these libraries and
    these activities were very important.
        And then, obviously, during the Cold War, we had all these
    capabilities. And it wasn't just USIA. CIA had a huge covert
    propaganda operation going on. We infiltrated millions of
    miniaturized copies of the Gulag Archipelago into the Soviet
    Union over the years, and magazines and stuff like that.
        So, it was both an overt--a complementary overt and covert
    policy that extended the reach of the message that the United
    States wanted to communicate to other countries,
    extraordinarily--and we--what we have now is a pale reflection
    of all of that.
        Senator King. And yet, that's an essential element of the
    war that we're in now.
        Dr. Gates. Absolutely.
        Senator King. Second point. You talked about how to fix the
    bureaucracy. And I kept thinking, as you were talking, what you
    were really talking about is leadership, that organizational
    structure, you can mess around with, you can change. And then,
    when you talked about the budget process here, we could change
    things, have a biennial budget or a different kind of budget.
    But, the--we have a budget process: pass authorization bills
    and then pass appropriations bills. We don't do it. Wouldn't
    you agree? It's really a failure of leadership. It's not a
    failure of structure or good intentions.
        Dr. Gates. It is a failure of politicians to do politics.
    Politics is about leadership, but also about making choices and
    making decisions.
        You know, one of my favorite Churchill quotes is, ``Having
    one's ear to the ground is a very awkward position from which
    to lead.''
        [Laughter.]
        Senator King. My favorite--I'll trade Churchill quotes--my
    favorite is, ``Success consists of going from failure to
    failure without a loss of enthusiasm.''
        [Laughter.]
        Senator King. We had a very interesting hearing last week
    on the aircraft carrier and overruns. And as we got into the
    subject, it became apparent that one of the problems was trying
    to cram a lot of new technology into a--an asset that's going
    to have to last 40 or 50 years. You could say the same about
    the F 0935 or other new weapon systems. How do we deal with the
    problem of new technology, which involves risk, which involves
    time, which involves mistakes and rework, and yet we can't
    afford to be building obsolete weapon systems? Do you see the
    challenge?
        Dr. Gates. Well, I think that--let me use a--an example
    from when I was Secretary. I stopped one new bomber program,
    because I thought it was headed down the wrong path. And I
    ultimately, before I left, approved the next- generation bomber
    that the Air Force is bringing before you all. But, I told them
    that they had to design it with a couple of things in mind.
    First of all, they needed to be--we didn't want to repeat the B
    091--or the B 092 bomber, where, because we kept reducing the
    buy, we ended up with 20 of them, and so they ended up costing
    $2 billion apiece. So, when we lost one on Guam, that's 5
    percent of our bomber force, and it's $2 billion. So, I said,
    ``You've got to build it--you've got to design it so that you
    can buy at least 100. And you have to keep the cost--you have
    to start with technology that you understand.''
        So, your colleague was talking about off-the-shelf
    hardware. I think that, you know, if you look at the B 0952--I
    was born and grew up in Wichita; they built the B 0952 when I
    was in elementary school and middle school. And they're still
    flying. Now, there's not much original left in the B 092. But,
    the point is, those planes were built in such a way that we
    have been able to enhance their capabilities as new technology
    has come along, for decades. That's what we need to do with the
    next-generation bomber. It needs to be something that we know
    we can get off the ground for a reasonable price, and then, as
    new technologies become available, integrate them into that
    system.
        Whether you can do that with an aircraft carrier--I got
    into a huge amount of trouble with the Navy League several
    years ago, when I made the mistake of telling them, at their
    meeting, ``We ought to think long and hard about the long-term
    missions of aircraft carriers,'' and particularly as China was
    working on their anti-access area-denial capabilities.
        But, I think that--I mean, we need to think about these
    systems more in terms of how we can get the best technology we
    can, that we have available, that we know works; build it, and
    then enhance it as we go along. That may not get you the most
    tremendously advanced capability, but you'll have a larger
    number.
        I mean, one of the reasons the number of Navy ships is down
    so far is because each ship has become so incredibly expensive.
    And, you know, the old line is, ``Well, we have a lot of
    quality.'' I mean, there's a lot of technological capability in
    these things. Another one of my favorite quotes from an
    unlikely source is Josef Stalin, who once said, ``At a certain
    point, quantity has a quality all of its own.''
        [Laughter.]
        Dr. Gates. And it goes to the Chairman's point, you can't
    have the same aircraft carrier in the Persian Gulf and the
    South China Sea at the same time. So, we've got to figure out a
    way--you know, having the most advanced technological whatever
    in the world doesn't help you much if you can only afford to
    build 20 of them. So, better to have something that has
    somewhat less capability, where you might be able to build
    hundreds----
        Senator King. And modular----
        Dr. Gates.--and then upgrade them.
        Senator King. And modularize it in some way so that you can
    upgrade. I think that's an important concept.
        Thank you. Appreciate it.
        Thank you, Mr. Chairman.
        Senator McCain. In the defense bill, we do require studies
    on other platforms. Maybe not do away with the carrier, but
    certainly the dependency on one company building it is part
    of--I think, contributes to the overrun problem. I think you
    would agree, Dr. Gates.
        Dr. Gates. The absence of competition is never good.
        Senator McCain. Senator Cotton.
        Senator Cotton. Secretary Gates, thank you very much for
    your lifetime of service to our country and its national
    security interests; in particular, your 4 and a half years as a
    wartime Secretary of Defense, when your actions saved hundreds,
    if not thousands, of lives of troops in Iraq and Afghanistan.
        Dr. Gates. Thank you.
        Senator Cotton. Appreciate it.
        In those many years as a leader in America's national
    security establishment, can you recall a time when our
    strategic interests were as threatened as they are today across
    the Eurasian supercontinent?
        Dr. Gates. Well, I think, you know, we have--as I mentioned
    at the very beginning of my remarks, every decade has had a
    variety of challenges. I think it's probably fair to say that
    we've not had as many challenges in as many and widespread
    parts of the world as we do today, that the occasions that that
    has happened have been pretty rare, I think.
        Senator Cotton. The one country that spans across the
    entire continent and has a global interest, you might say, like
    the United States, is Russia. Given some of Russia's recent
    provocations, not just in Europe, but in the Middle East, do
    you think that, as part of defense reform, we should relook at
    our basing structures in Europe, to include the possibility of
    moving permanently stationed troops to the front lines of NATO,
    the Baltics, if not Poland?
        Dr. Gates. I think that we need to increase--well, first of
    all, let me say, I agree with the steps that have been taken to
    increase the presence of NATO and United States forces in
    eastern Europe, particularly in Poland and in the Baltic
    states. I think the idea of having equipment sets, as the
    Pentagon is thinking about, has a lot of merit, in terms of
    having the equipment already pre-positioned in Europe. I think
    I would work very closely with our NATO partners, in terms of
    the wisdom of having permanent United States bases in Poland or
    in the Baltic states. There is always the risk of taking a step
    too far and creating a consequence that you were trying to
    prevent in the first place. And as in the case of eastern
    Ukraine, the Russians have a lot more capability and a lot
    shorter supply lines in that area than we do, but I think
    enhancing the defensive patrolling out of the--air patrolling
    out of the Baltic states, challenging Russian aircraft when
    they come up and go beyond where they should go, and having
    regular exercises in eastern Europe--the truth is, Putin has
    provoked all of this. Our allies, when I was Secretary, back in
    2008 092009, when we would propose--when the United States
    would propose having an exercise in Poland or in the Baltic
    states, our NATO counterparts wanted no part of it. So, one of
    the things Putin has achieved is to create enough alarm in
    Europe that our allies are now willing to participate with us
    in those kinds of forward operations.
        So, I'm--I guess what I'm saying is, I totally support
    advanced kit being over there. I totally support the rotational
    presence and increased presence of our forces and other NATO
    forces on a rotational basis. I think whether you want to go to
    permanent bases is a tougher question.
        Senator Cotton. Okay. Another thing that Vladimir Putin has
    done, especially in the last month, is display some of his
    advances in missile technology to go along with the boasts he's
    made. The United States, in recent years, has accused Russia of
    developing a nuclear ground-launched cruise missile, in
    violation of the Intermediate-Range Nuclear Forces Treaty.
    Given that Vladimir Putin already has nuclear weapons that hold
    all of Europe at risk, why do you think he would be considering
    developing such a missile? What does that tell us about the way
    he conceives his nuclear strategy as part of his overall
    security strategy?
        Dr. Gates. The Russian Defense Minister, as early as 2007,
    approached me about doing away with the INF Treaty. And he
    said, ``The irony is, the United States and Russia are the only
    countries that cannot have intermediate-range missiles.'' And
    then he said, ``Now, of course, if we do away with it, we would
    not put those missiles in the West, we'll put them in the south
    and in the east,'' meaning Iran and China. I wasn't sure I
    believed that at the time, but--so, they've been interested in
    getting out of this treaty for several years. And just as we
    unilaterally walked away from the ABM Treaty early in the
    second Bush administration, it would not surprise me in the
    least to see Russia walk away from the INF Treaty and have the
    opportunity to deploy more of these missiles.
        Senator Cotton. And should we, (a) consider their offer and
    abrogate the INF Treaty, and (b) regardless, should we consider
    to begin the development of new nuclear warheads that would be
    smaller, more versatile, to counter the threat that Vladimir
    Putin is beginning to pose?
        Dr. Gates. Well, theoretically, my answer would be yes, but
    I would tell you, practically speaking, I spent virtually the
    entire 4 and a half years that I was Secretary of Defense
    trying to get the executive--first, the executive branch and
    then the Congress to figure out a way to modernize the nuclear
    weapons we already have. That effort was a signal failure. So,
    until--if I have to have a priority on developing nuclear
    weapons, it would be to modernize the ones we already have to
    make them safer and more reliable, rather than building new
    ones.
        Senator Cotton. Thank you.
        Senator McCain. Senator Donnelly.
        Senator Donnelly. Thank you, Mr. Chairman.
        And, Doctor, thank you so much.
        As with some of our B 0952 crews recently, they enjoy
    flying them as much as ever. And we want to thank you also
    because you are also a member of the Indiana University family,
    and we are very, very proud of that fact.
        I wanted to talk to you for a second about some of the
    aftereffects of so many of the battles we have been in, and
    that is the Veterans Administration and the work together with
    the Department of Defense. And we've had glitches, things like
    sharing health records, aligning the drug formularies when the
    handoff comes, matching up disability ratings. And I was
    wondering if, in your time, you have any--that you've learned
    any recommendations you have for us that can help make that
    transition better, that can help make DOD and VA work together
    better, any glitches you saw that you think, ``Look, this still
    exists.'' How do we remove this, how do we take care of this?
        Dr. Gates. I saw a lot of glitches. And, as I've said, if
    there's one bureaucracy in Washington that may be even more
    intractable than DOD, it's VA. And I would find repeatedly--and
    I worked with two Secretaries of VA that I thought were of very
    high caliber people, and they were very intent on helping
    veterans. The problem was that, when we would meet, we and our
    deputies would meet, and we would agree to do things, it would
    all fall apart the second he and I weren't on top of it. And
    I--this was one case where I think I was better able, in the
    Defense Department, to make sure things got done, but in VA,
    and particularly under Secretary Shinseki, I just had the
    feeling that he was sort of on the bridge of the ship, and he
    had the big wheel in his hands, but all the cables below the
    wheel had been cut off to every other part of the organization,
    and he was just spinning the wheel.
        We worked on electronic records. And, frankly, a lot has
    been accomplished. Not nearly as much as could have been. But,
    I've just--I had the feeling--first of all, these bureaucracies
    were at each other's throats over whose computer program they
    were going to use--VA's or DOD's; and we would go back and
    forth on this, and we'd get briefings, and so on and so forth.
        And so, I think that--the bottom-line answer is to reaffirm
    what everybody knows. That is, there are huge problems in
    dealing with these veterans issues. My objective had been--I
    wanted the transition to--for, let's say, a soldier--to be
    seamless, that he almost didn't know when he passed from DOD
    into VA hands, because it was all done electronically, and so
    on. And, unfortunately, we're just not there. I mean, my own
    view on these issues--and I'm not an expert on veterans
    affairs--but, I think the idea of--if you can't get an
    appointment at a VA hospital within a reasonable period of
    time, then you're automatically granted a voucher to get help
    from a--from somebody in the private sector so that you
    actually can get treated quickly.
        But, VA was as unprepared for long, protracted wars as the
    Department of Defense was. They were dealing with, basically--
    their youngest people they were dealing with mostly were
    Vietnam-era people, so people the Chairman's and my age. And
    all of a sudden, they had this gigantic influx of young men,
    mainly, who were grievously wounded and would need
    rehabilitation for years and years, and they were totally
    unprepared to deal with that.
        Senator Donnelly. Let me ask you one other area that you
    dealt extensively with, and that is trying to reduce suicides
    in the Active Duty military. One of the areas that we're
    pushing on, as well, is to try to move decision making down to
    platoon leaders and others who deal every day with the soldier.
    Do you have any additional recommendations that you think could
    make a difference in reducing the suicide rate?
        Dr. Gates. One of the things that we discovered--and my
    guess is, it hasn't improved much since I left--as we went out
    to hire a significant number of mental health professionals to
    work in our hospitals, to work with Wounded Warrior Units,
    Warrior Transition Units, and so on, there basically weren't
    enough of those professionals to be able to--for us to access
    to be able to make as big a dent in the problem as we wanted.
        One of the ideas that I had, that, frankly, I never got the
    chance to push, was that, just as--just as there is legislation
    that--if a young man or woman goes to medical school and is
    willing to commit to some years of service in the military, the
    military will pay for their medical education. One thing you
    all might look at is whether that could be extended to mental
    health professionals, as well. And it would be a twofer for the
    country. First of all, it would give the military more of these
    assets that we need, and so we could have people at almost
    every base and post, but, when they leave the military, they'll
    fill a very real need in American society as a whole.
        Senator Donnelly. Thank you.
        Thank you, Mr. Chairman.
        Senator McCain. We'll take that suggestion on board, Mr.
    Secretary.
        Senator Lee.
        Senator Lee. Thank you, Mr. Chairman.
        Thank you, Dr. Gates, for being with us. You--I think
    you're somewhat uniquely qualified, based on your experience as
    Secretary of Defense, to testify and to give us advice on
    issues related to reform within the Pentagon. We appreciate
    your service and your willingness to come back today, even
    though, as you note in your book, it's not exactly your
    favorite thing to do, to testify in these hearings. And I can't
    blame you.
        A lot of military analysts have lamented at some length the
    growth, over the past two or three decades, of what they
    sometimes refer to as the military bureaucracy, referring, of
    course, to support staff and headquarters staff, whether they
    be uniformed, civilian, contractors, or a combination of the--
    all of the above, and that a lot of this occurs--this growth
    occurs at the expense of the military's core operational
    forces. And so, in other words, we get a lot of growth, a lot
    of movement, but not necessarily a lot of forward progress,
    because we're not necessarily growing the part of the military
    that actually does things, that actually goes in and does the
    work that the military is there to do. How much of this growth
    in headquarters and support services occurred as the United
    States became involved in the wars in Afghanistan and in Iraq?
        Dr. Gates. Well, as your question implies, it began before
    those wars, but I think that the amount of money that began to
    flow to the Department of Defense after 9/11 really removed any
    constraints for hiring additional people. And so, you know, one
    of the things that--as you're probably aware, a couple of our
    commanders got into a lot of trouble by giving interviews to
    various press outlets that got them into trouble with the
    President. Well, what I discovered was that several of these
    commands had gone out and hired contractors to provide them
    with public relations advice. This was not something that it
    seemed to me that a combatant commander needed, but I think----
        Senator Lee. At least not for the purpose of fighting wars.
        Dr. Gates. Well, at least not for the purpose of why they
    were there. So, I--when I--in 2010, we put some very severe
    constraints on--in fact, we froze contractor--the number of
    contractors, and then put some restrictions in place that would
    require the different parts of the Department to begin reducing
    the number of contractors. We also tried, as part of the
    overhead effort in 19---in 2010, when we found $180 billion in
    savings in overhead--the measures that we were taking included
    a number of cutbacks, in terms of headquarters staffing. I
    mentioned earlier, we had a--as part of that plan, cutting 50
    general officer slots. One of the things we discovered had been
    a grade creep so that, where you might have a three- star
    commander of the air forces in Europe at one time, you now had
    a four-star. So, how do you push that back down? Because they
    all have--you know, if you go from three to four stars, you get
    more staff, and so on and so forth. So, I think we have kind of
    an--we have a pretty good idea of how we can go after those
    kinds of--that kind of overhead, but it requires--as I
    suggested earlier, it requires a continuing pressure on the
    institution, and accountability of--you know, ``You said you
    were going to cut X number. Have you done it? And if not, why
    not?"
        Senator Lee. How about the--how are these issues, meaning
    the relationship between the size of the DOD bureaucracy--how
    is the size of the DOD bureaucracy related to the scope of the
    missions that we become involved in around the world? In other
    words, if the United States were to take either a more involved
    or a less involved role in addressing various crises around the
    world, what effect might that have on the size of the
    headquarters and support structures for the military services
    and combatant commands?
        Dr. Gates. I think, particularly when it comes to
    headquarters, whichever way you went, you could cut the
    numbers.
        Senator Lee. You could cut them, either way, whether you're
    taking a more involved role or a less involved role.
        Dr. Gates. Yes.
        Senator Lee. So, it need not necessarily follow, from a
    decision to get involved in a particular conflict, that we have
    to grow the Pentagon, that we have to grow the support staff or
    the military bureaucracy to a corresponding degree.
        Dr. Gates. That's my belief.
        Senator Lee. Okay. I see my time's expired. Thank you very
    much, Secretary Gates.
        Thank you, Mr. Chairman.
        Senator Cotton [presiding]. Senator Blumenthal.
        Senator Blumenthal. Thanks, Mr. Chairman.
        Welcome, Secretary Gates, and thank you for your service to
    our Nation, and your continuing service now.
        I wonder if you could talk a little bit about the
    connectivity between the Department of Defense and the VA. And
    I know this was an issue very much on your mind when you were
    Secretary. From what you've seen, has there been improvement,
    for example, in the transfer of medical records, in the
    services that are provided to our military men and women when
    they are about to leave the military? Could you give us your
    assessment?
        Dr. Gates. Senator, we were beginning to make some headway
    on sharing electronic health records when I left. In all
    honesty, this is an area, in the 4 years since I've been gone,
    where I've--I'm not aware of what's actually been done under my
    successors. And with VA, I would hope the progress has
    continued, but I must say that, just based on what I read in
    the newspapers and what I hear from various veterans as I go
    around the country, I worry that they don't see a lot of
    improvement.
        Senator Blumenthal. I think you worry with good reason,
    from what I know, from what we have been told in these
    settings, in the VA, and other fora. So, I appreciates that you
    do not have the same kind of access or involvement, but I think
    your instinct and your observations are well taken, that, in
    many ways, there has been very little progress in the years
    since you've left. And I think that the institutional barriers
    to progress really have to be broken down and reformed. We're
    here about reform.
        And, as I think you have observed, probably in this very
    room on repeated occasions, nothing more important as a
    resource than the men and women who serve. With all the
    equipment and the organization, at the end of the day, it's
    really the rewards and incentives that we provide to our
    military men and women. And the transition to civilian life is
    part of what we owe them and, afterward, the education and
    skill training and healthcare that they need.
        From your last 4 years in the civilian world, do you have
    any observation about how well our schools are doing in
    accommodating the needs of our veterans?
        Dr. Gates. As in the public schools or higher education?
        Senator Blumenthal. Higher education.
        Dr. Gates. Higher education? I think--so, I have
    affiliations with several universities. I'm the Chancellor of
    the College of William & Mary, I'm--was president of Texas A&M.
    And so, I'd get down there from time to time. We have a
    community college in our local town in Washington State. And
    just taking those three examples, I think that these--I think
    many universities and community colleges over the past few
    years have made extraordinary strides in reaching out to
    veterans. All three of the institutions that I just described
    have space allocated for veterans organizations, a lounge where
    veterans can go and relax together on campus, programs to help
    veterans, ways to get veterans together to give mutual
    reinforcement so that men and women who have been in combat in
    Iraq and Afghanistan have somebody to talk to other than a 18-
    year-old who just graduated from high school. And so, I have
    the sense that--you know, I know--I've read in the papers about
    all the scandals, in terms of misuse of VA funds, and so on.
    But, I think at--in terms of some of the for-profit schools,
    and so on--but, I--my experience and what I've heard
    anecdotally as I go around the country and talk to various--at
    various universities, from the most elite universities to the
    biggest public universities--I have the sense that they're
    totally unlike Vietnam. These campuses are bending over
    backward to make veterans welcome and to help make them
    successful.
        Senator Blumenthal. Thank you.
        My time is expired, but I might just say, your
    observations, I think, also are aligned with mine, anecdotally.
    I don't have numbers or statistics, but peer- to-peer
    relationships and veteran-to-veteran programs, where veterans
    can provide relationships, and crisis intervention, I think,
    are increasingly common, plus the OASIS program that you just
    described, where veterans can go and find other veterans,
    increasingly common, as well. So, I thank you for being here
    today.
        Dr. Gates. Thank you.
        Senator Cotton. Senator Cruz.
        Senator Cruz. Thank you, Mr. Chairman.
        Dr. Gates. Senator.
        Senator Cruz. Secretary Gates, welcome. Thank you for being
    here. Thank you for your many, many decades of distinguished
    service to our Nation and also to my home State of Texas. It's
    very good to see you.
        Dr. Gates. Thank you.
        Senator Cruz. I want to start by talking with you about the
    morale of the military, which is a concern that troubles me
    greatly. The Military Times did a survey in 2009, and they
    asked soldiers whether the overall quality of life is ``good or
    excellent.'' And 2009, 91 percent of soldiers said yes. In
    2014, that number had dropped from 91 percent to 56 percent.
    Likewise, they asked whether senior military leadership had
    their best interests at heart. In 2009, 53 percent of soldiers
    agreed with that statement. In 2014, that number dropped in
    half, to roughly 27 percent.
        Do you share my concerns about declining morale in the
    military? And, if so, what do you see as the cause of these
    challenges?
        Dr. Gates. I don't have any statistics, but I do have the
    sense that there is a morale problem. And I think it is--I
    think it's due to several things. First of all, I think it is
    due to the substantial and growing cutbacks in the number of
    men and women in the military. So, people in the military now
    are less confident that they will be allowed to remain in the
    military, that, in the force reductions, they will be turned
    out--in essence, be fired, and particularly for those who have
    some years in, and probably have families, concerns about what
    they will do if, because of forced downsizing, they end up out
    in the civilian world again. I think that there's a morale
    problem that derives from a lot of the budgetary uncertainty,
    in the sense that, as I suggested earlier, people who joined
    the military to fly airplanes, sail on ships, or drive tanks,
    are finding they don't have the same opportunities to do that
    anymore. That's the stuff that made it ``fun'' and that was one
    of the things that encouraged them to stay.
        So, I think that these and the budgetary uncertainties and
    so on are all part of a challenge for our young men and women
    in uniform.
        And then the final one that I mentioned just a few minutes
    ago, and that is, you go--particularly the ground forces--you
    go from--mostly young men who have been out in Iraq and
    Afghanistan on these deployments, they have this great sense of
    comradery and brotherhood with their fellow soldiers and
    marines. They've given--been given a lot of opportunity to
    operate independently and in an entrepreneurial way, and be
    innovative, and so on, and they're being brought back and put
    in cubicles and asked to do PowerPoints.
        So, I think all those things together probably are having a
    real impact on morale.
        Senator Cruz. You know, in my view, another factor that is
    contributing, in addition to every one you just discussed, is
    having a Commander in Chief that fails to set clear objectives,
    and, in particular, an objective of winning, clearly and
    decisively, military conflicts in which we're engaged. In your
    book, ``Duty,'' you stated that President Obama didn't appear
    to believe that this own strategy for Afghanistan in the Middle
    East would work. Is that still a concern you share?
        Dr. Gates. Well, I--what I wrote about and what concerned
    me was that--my belief that if a Commander in Chief or a
    Secretary of Defense is going to send a young man or a young
    woman into harm's way, they need to be able to explain to that
    young person in uniform why that mission is important, why the
    cause is noble and just, why their sacrifice is worthwhile. And
    that was--I think the easiest way to put it, that was not a
    speech I heard the President give.
        Senator Cruz. No. Sadly, it was not.
        One final question. The budget request that you proposed in
    fiscal year 2012 called for $615 billion in the base budget for
    fiscal year 2016. That was the last Pentagon budget that was
    directly derived from the threats we face. By any measure, the
    world, I believe, has become much more dangerous today than it
    was in 2012. Do you agree with that assessment? And do you view
    that baseline of $615 as a--$615 billion as a reasonable
    baseline, given the growing threats in the world?
        Dr. Gates. I would say--I've been out of this for 4 years,
    but I would say that, certainly, the number of challenges that
    we face in a variety of places in the world are more complex
    and more difficult than when I put together that fiscal year
    2012 budget. I have seen several assessments by analytical
    groups that I respect, that are nonpartisan, that basically say
    that the Congress and the administration should go back to that
    fiscal year 2012 budget as the base for going forward. And I
    respect the views of those who say that, and I, therefore,
    think that that probably would be a good idea.
        Senator Cruz. Thank you very much, Mr. Secretary.
        Senator Cotton. Mr. Secretary, if, as you said at the
    beginning, the least sincere statement in hearing like this is,
    ``Mr. Chairman, I'm ready for your questions,'' perhaps the
    least welcome statement is, ``I have a few more questions.''
    Just two, though.
        When we were talking earlier, you said that, theoretically,
    you think that we would need to modernize our nuclear warheads,
    build new ones, maybe smaller, more versatile. That's a debate
    we can have. But, practically, you had the devil's own time of
    just modernizing the warheads that we had. Why do you think
    that is?
        Dr. Gates. Well, there--to be honest about it, there was a
    great deal of resistance, both within the administration--this
    administration--and here on the Hill, to allocating the funds
    for modernizing our nuclear enterprise. At a time when the--
    sort of, the political aspiration is to get rid of nuclear
    weapons, the--it was seen as the U.S. trying to improve or
    enhance our nuclear capabilities, when, in reality, what we
    were proposing was not any additional nuclear weapons, but
    simply, rather, trying to make the ones that we already have
    more reliable and safer than the very old designs that we have
    deployed today.
        It's a very expensive proposition, but I actually
    allocated, within the defense budget, about $4-and-a-half
    billion that would go to the nuclear enterprise at the
    Department of Energy, but, at the end of the day, it all fell
    apart. But, it was part of the deal, actually, that was made
    with the passage of the most recent strategic arms agreement.
    Part of the deal that was made was that we would modernize a
    good bit of the nuclear enterprise in exchange for support for
    going forward with the newest arms control agreement. The
    trouble is, to the best of my knowledge--and, as I say, I've
    been gone 4 years--but, to the best of my knowledge, there has
    been no forward progress on that modernization effort.
        Senator Cotton. Since you pursued this effort, despite the
    political headwinds, presumably you believe there are few
    things more important than a safe and reliable nuclear
    deterrent for our President to have?
        Dr. Gates. Well, there is nothing more important than that.
        Senator Cotton. Thank you.
        Final question. The Goldwater-Nichols Act reorganized the
    Department of Defense to improve the quality of strategy,
    policy, plans, and military advice for civilian leaders. Do you
    think the organization set up by Goldwater-Nichols provided you
    with the best possible ideas, options, and advice while you
    were Secretary of Defense?
        Dr. Gates. I would say that the policy papers and the
    planning that I received both from the Office--from the Under
    Secretary for Policy under both President Bush and President
    Obama were first-rate. Led--that organization was led, under
    President Bush, by Eric Adelman, by Michele Flournoy under
    President Obama. And I thought I got very high quality work
    from them. I thought that, on the military side, I got very
    good planning and very good advice from the joint staff and
    from the combatant commanders.
        I think that the one place where the gap between resources
    and strategy begins to diverge is, every 4 years, when we do
    the Quadrennial Defense Review. And too often the Quadrennial
    Defense Review, which is kind of what our strategy ought to be
    to implement--what our military approach ought to be to
    implementing the President's national security strategy, gets
    divorced from the budget realities. And therefore, I think that
    reduces the value of the Quadrennial Defense Review. When we
    did the one in 2010, we tried to bring those two back closer
    together, but we didn't entirely succeed.
        Senator Cotton. Thank you.
        Mr. Secretary, thank you, not just from me, but on behalf
    of all of my colleagues and the citizens we serve, but, most
    importantly, the men and women of our Armed Forces, who you led
    for 4 and a half years of war and whose lives you helped save.
        Dr. Gates. Thank you.
        Senator Cotton. This hearing is adjourned.
        [Whereupon, at 11:52 a.m., the hearing was adjourned.]

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