    [Senate Hearing 114-321]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-321

       DEPARTMENT OF DEFENSE PERSONNEL REFORM AND STRENGTHENING THE ALL-
                                VOLUNTEER FORCE

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

                                    HEARING

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                DECEMBER 2, 2015

                                   __________

             Printed for the use of the Committee on Armed Services

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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

                                       ______

                             U.S. GOVERNMENT PUBLISHING OFFICE

    20-957 PDF                     WASHINGTON : 2016
    -----------------------------------------------------------------------
      For sale by the Superintendent of Documents, U.S. Government Publishing
      Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
             DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
                              Washington, DC 20402-0001

                          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

                                   __________

                                december 2, 2015

                                                                       Page

    Department of Defense Personnel Reform and Strengthening the All-
      Volunteer Force................................................     1

    Chu, Hon. David S.C., President and Chief Executive Officer,
      Institute for Defense Analysis.................................     5
    Rostker, Hon. Bernard, Senior Fellow, Rand Corporation...........    11
    Hale, Hon. Robert F., Fellow, Booz Allen Hamilton................    19
    Roughead, Admiral Gary, USN [Ret.], Annenberg Distinguished
      Visiting Fellow, Hoover Institution............................    26

                                     (iii)

       DEPARTMENT OF DEFENSE PERSONNEL REFORM AND STRENGTHENING THE ALL-
                                VOLUNTEER FORCE

                                  ----------

                          WEDNESDAY, DECEMBER 2, 2015

                                           U.S. Senate,
                                   Committee on Armed Services,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 9:29 a.m. in Room
    SD-G50, Dirksen Senate Office Building, Senator John McCain
    (chairman) presiding.
        Committee members present: Senators McCain, Inhofe, Ayotte,
    Fischer, Cotton, Rounds, Ernst, Tillis, Sullivan, Lee, Reed,
    McCaskill, Manchin, Shaheen, Gillibrand, Donnelly, Hirono,
    Kaine, and King.

           OPENING STATEMENT OF SENATOR JOHN McCAIN, CHAIRMAN

        Chairman McCain. Good morning. The committee meets this
    morning to continue our series of hearings focused on defense
    reform. Today, we will focus on military and civilian personnel
    reform and how to strengthen the All-Volunteer Force in the
    21st century.
        We're fortunate to have a distinguished group of witnesses
    joining us today: The Honorable David Chu, President and CEO
    [Chief Executive Officer] of the Institute for Defense Analysis
    and former Under Secretary of Defense for Personnel and
    Readiness.
        David, we have a long a relationship, and we appreciate all
    the great work that you have done.
        The Honorable Bernard Rostker, who is a RAND Corporation
    Senior Fellow, also a former Under Secretary of Defense for
    Personnel and Readiness. The Honorable Robert Hale, Booz Allen
    Hamilton Fellow and former Under Secretary of Department of
    Defense Comptroller. And Admiral Gary Roughead, USN [United
    States Navy] [Retired], Annenberg Distinguished Visiting Fellow
    at the Hoover Institution and former Chief of Naval Operation.
        Put simply, our All-Volunteer Force is the greatest
    fighting force in human history. Any consideration of personnel
    reform must begin from that basis. And all of us, the Congress
    and the Department of Defense, must take great care as we
    consider what changes are needed to ensure that our force can
    respond to the needs of a new generation of warfighters and
    meet our future challenges. Our efforts must proceed from
    rigorous factfinding and analysis. We must always ask what
    problems we are trying to solve. We must always measure any
    reform against the military's unique mission of combat
    effectiveness. And we must always remember that what works for
    the private sector or society at large may not always work best
    for our military.
        We've all heard the stories of the many excellent
    servicemembers who are choosing, or being forced, to leave the
    military for ridiculous personnel reasons. This is a real
    problem. But, it's made more complicated by the fact that so
    many talented officers and enlisted continue to fill the ranks
    of our force. All of us meet them every day across the country
    and around the world.
        The question is whether our military is able to recruit and
    retain so many excellent Americans because of its personnel
    system or in spite of it. I'm concerned that all too often it
    is the latter, as in the acquisition system and other parts of
    our defense organization. Too often, our military is losing and
    misusing talent because of an archaic military personnel
    system. Promotions are handed out according to predictable
    schedules with only secondary consideration of merit. That's
    why, even after more than a decade of service, there is
    necessarily no difference in rank among officers of the same
    age. Is it really because they all perform the same or deserve
    the same rank? Jobs in the military are assigned rather than
    chosen. To some extent, that is necessary. After all, the
    mission must always come first. But, we should ask whether we
    can better support this mission by giving servicemembers more
    of a say in their assignments.
        At the Reagan Defense Forum last month, for example, the
    Chief of Staff of the Army, General Milley, described how he
    had met a soldier who spoke six languages but had been assigned
    as a truck driver. We need truck drivers, of course, but we
    also need first-rate linguists and intelligence analysts, and
    we need a personnel system that can manage our people's talent
    accordingly. We should ask whether we should give commanders
    greater discretion to build a staff with the specialists and
    experts they need in the right positions. Commanders are better
    able to assess their needs than bureaucrats in the personnel
    system.
        Our military has always had an entrepreneurial culture that
    encourages individuals to innovate, but the military personnel
    system undermines that spirit when it mistakes upholding
    professionalism with enforcing conformity. And when high
    standards give way to a zero-defect mentality in performance
    evaluations, this discourages risk taking, truth-telling, and
    cultivation of entrepreneurial leaders.
        To strengthen the All-Volunteer Force, we must also review
    the promotion system, especially the requirements of the
    Defense Officers Personnel Management Act and the Goldwater-
    Nichols reforms. Previous witnesses have expressed concern that
    the joint duty requirements that a military officer must meet
    have contributed to the growth in headquarters staff that we
    have seen in recent decades as the personnel system seeks to
    check a series of boxes that may be of little value for actual
    career development. We need to review whether this requirement
    is meaningfully enhancing the joint capabilities of the force,
    and how it can be better tailored for our 21st century force.
    The personnel system cannot be and end in itself. Similarly, we
    must ensure that our civilian personnel system is equally
    capable of recruiting and retaining the best leaders.
        Unfortunately, there is much work to do. The USAJob system,
    for example, is an abysmal failure. We are repeatedly told by
    managers that they can't hire the employees they need to fill
    mission-critical roles because they cannot hire qualified
    individuals through the USAJob system or because they cannot
    make job offers in a reasonable timeframe. The Department of
    Defense needs to devote more energy to resolving these hiring
    stalemates, not developing more--many bureaucracies that have
    so often failed before.
        Finally, a key pillar of personnel reform will continue to
    pertain to compensation. This committee has made great strides
    this year with the most sweeping reforms of our military
    retirement system in seven decades. We must bring the same
    rigorous bipartisan approach to the task of reforming the
    military health system next year. If we do nothing, the
    Congressional Budget Office projects that defense healthcare
    costs will devour about 11 percent of the defense budget in
    2028. This is staggering. Every dollar that the Department of
    Defense spends on healthcare is a dollar that can't be spent on
    training and equipping our warfighters.
        While we need to slow the growth of defense health
    spending, the primary focus of our reform efforts must be to
    create a better healthcare system for servicemembers, military
    families, and retirees by improving access to care, quality of
    care, and health outcomes. We must identify and eliminate waste
    in the military healthcare system and evaluate the
    organizational structure of the services' medical departments,
    with an eye toward making them flatter, more efficient, and
    more responsive. In some cases, we may need to eliminate some
    organizations where infrastructure--while ensuring that we
    maintain and improve medical readiness.
        With these and other reforms, we can make the military
    health system perform better for beneficiaries and more
    sustainable for the Department of Defense. It's often said that
    America's greatest military advantage is its people. That is
    not a talking point, it's a reality. We will consider input
    from all sides throughout this process, starting with our
    witnesses today.
        I thank you for your willingness to appear before the
    committee, and I look forward to your testimony.
        Senator Reed.

                     STATEMENT OF SENATOR JACK REED

        Senator Reed. Well, thank you very much, Mr. Chairman.
        Let me join you in thanking the witnesses for being here
    today, but, more importantly, for your extraordinary service to
    the Nation. You have come with great expertise and insights to
    address a very important topic.
        The committee has held a series of hearings to review the
    organizational structure of the Department. Experts have
    testified the importance of streamlining our defense
    acquisition process, reevaluating the roles and missions of the
    services, ensuring effective management of the Department, and
    in the formulation of our defense strategy and future force
    structure. But, I believe today's hearing may be among the most
    important this committee will convene during our review.
        The men and women who make up the All-Volunteer Force
    remain this committee's top concern. Any changes we recommend
    to the processes, structure, and organization of the Department
    of Defense, or to the benefits structure, will not matter if we
    don't provide the Nation with a sufficiently sized, trained,
    and equipped military of the necessary quality, of the
    character and talent to meet national defense requirements.
        To that end, Congress has, for several years, considered
    various proposals for changes in compensation and healthcare to
    slow the growth of personnel costs so that those savings could
    be redirected to buy back readiness and modernization
    shortfalls. The Department has consistently, over the past
    several decades, proposed a budget in which military personnel
    costs comprise roughly 33 percent, or a third, of that budget.
    In 1980, this third devoted to military personnel bought an
    Active Duty strength of over 2.1 million. Today, with the total
    DOD [Department of Defense] budget that is hundreds of billions
    of dollars higher, that third only buys 1.2 million Active Duty
    members. And that figure continues to fall, and will likely
    drop further if rising personnel costs are not constrained.
        In my view, hard choices will need to be made, especially
    in the budget environment we find ourselves. We made some
    difficult choices this year, as the Chairman pointed out,
    through his bipartisan leadership. They included the enactment
    of a retirement benefit for tomorrow's force. But, we need to
    do more. I am concerned, frankly, that we are pricing ourselves
    out of a military that is sufficiently sized and trained to
    accomplish national defense objectives. I look forward to any
    recommendations the witnesses may have for addressing the
    increasing personnel costs.
        With regard to the management of military personnel, it is
    time to reevaluate whether the Defense Officer Personnel
    Management System, commonly referred to as DOPMA, continues to
    meet the needs of our military services. The ``up or out''
    promotion system is 70 years old, and, in many respects, it has
    worked, and continues to work, well. It ensures promotion
    opportunity for talented young servicemembers as they progress
    in their careers. But, it also has its weaknesses. In some
    circumstances, it requires divestiture of talent at its peak.
    It may not be the right system for highly technical
    occupations, such as cyberexperts, pilots, doctors, or special
    operators in whom we may have invested millions of dollars in
    training. It relies on a cohort- based system that may be
    outdated. Joint professional education requirements, a
    signature element of the Goldwater-Nichols legislation, may, in
    some cases, be so substantial that servicemembers have
    difficulty fitting in all the required training, joint
    assignments, and command assignments needed for professional
    development. I hope that our witnesses can, first and foremost,
    identify what problems exist within the military personnel
    management system and compensation system, and offer proposed
    solutions to these problems that Congress and the Department of
    Defense should consider to bring our military personnel up to
    date.
        I thank you all for your time, your expertise, and, most
    importantly, your great service to the Nation.
        Thank you, Mr. Chairman.
        Chairman McCain. Welcome, Dr. Chu. Thank you for appearing
    again before the committee.

    STATEMENT OF HON. DAVID S.C. CHU, PRESIDENT AND CHIEF EXECUTIVE
                OFFICER, INSTITUTE FOR DEFENSE ANALYSIS

        Dr. Chu. Mr. Chairman, thank you. It is a privilege,
    indeed, to be part of the panel this morning.
        I do have a prepared statement that I hope can be made part
    of the record.
        Chairman McCain. All prepared statements will be made part
    of the record.
        Dr. Chu. Thank you, Mr. Chairman.
        I should emphasize that the comments I make are entirely my
    own views, not necessarily the position of the institution that
    I currently serve.
        It's my belief that decisions about the issues that you and
    Senator Reed have outlined and the committee is confronting
    ultimately should be rooted in a set of choices about the kind
    of military force we want for the future 5, 10, 15, 20 years
    from now. And the characteristics of that force will
    ultimately, in my estimation, determine what kinds of personnel
    we need and how we should prepare those personnel for their
    responsibilities.
        In my estimation, one of the high-payoff, high-leverage
    opportunities lies, from both a performance and a cost
    perspective, in the decision about the mix of personnel types
    for the future. To what degree do we want to rely on Active
    Duty military personnel? What's the role of the Reserve
    components? What should be the proper level of Federal civilian
    staffing? And to what extent do we want to use civilians
    engaged through contractor arrangements of one sort or another?
    I might emphasize that those arrangements exhibit a great
    variety of characteristics, and, in some ways, we might
    usefully experiment with additional varieties of contractor
    arrangements, going forward.
        The Department today, institutionally, does not make this
    decision in a holistic manner. It decides each of--it decides
    how much of each community it desires separately. So, military
    end strength is considered at one point, civilians are a
    decentralized hiring decision left largely to the field, and so
    on and so forth. So, it does not examine the trade-offs among
    these personnel, which I think present extraordinary
    opportunities for the country.
        Looking at the likely effect of budget constraints, it's
    my--that the Department will probably choose to rely more
    heavily on Reserve components of one fashion or another, and
    perhaps look at a different role for civilians, especially
    Federal civilians.
        In managing these communities, it would be my plea that we
    move away from the implicit premise of the current systems,
    which is one-size-fits-all, as you pointed out in your opening
    statement. It's particularly true of other officer management
    system, DOPMA. My urging would be to encourage experimentation
    within the waiver authority the Department already possess
    under a declaration of national emergency and 2 years
    thereafter, although Congress could grant an additional waiver
    authority, if it so chose, and encourage its actual use. In
    fact, the Department could begin with experiments on the
    enlisted force side, because most of the enlisted force rules
    are a product of policy, not a product of statute.
        Now, as you look at the civilian management issue, in my
    estimation--and you pointed out this issue, Mr. Chairman, in
    your statements about USAJobs--most important--one of the most
    important issues is appointing authority. Department does not
    have, under Title 5 of the various Federal Civil Service
    systems, operates the latter two to appoint, and to appoint
    properly, that I think is needed in today's environment.
        In fact, Secretary Carter is fond of pointing out that,
    except for the fact that the office in which he got his first
    DOD job had extraordinary appointing authority, special
    appointing authority, he could not have been hired by the
    Department of Defense as a young academic.
        I also believe that we ought to look at investing more
    energetically in our civilian workforce. It's quite ironic, in
    the Department of Defense, on the military side, we have a
    well-established and much-admired training education system on
    the civilian side. We leave the employees' department largely
    to their own devices.
        I endorse what you underlined, Mr. Chairman, and that
    Secretary Carter has opened the door upon with his Force of the
    Future speech, and that is, a greater us of volunteers in self-
    selection. Give the individual greater voice in his or her
    future assignments, further training, education, et cetera.
        On the compensation front, the Congressional Budget Office
    has long pointed out that the military system puts too much in
    deferred compensation and pays too much in kind. And we know
    that compensation is much more effective if it's in cash and
    it's up front. And the changes made by the Congress this year
    to the retirement system move in that constructive direction.
    In fact, in my estimation, they open the possibility of a much
    wider range of experience targets for the Department by skill
    area that's much more responsive to issues like the need for
    cyber personnel that Senator Reed--to which Senator Reed
    pointed.
        I do think further--a further look should be taken at how
    we treat single personnel in the military. They make up just
    under half the force. Much of their compensation is really in
    kind, because, at the junior level, especially, about one-third
    of the package is the housing allowance, and they must
    surrender that housing allowance in order to live in the
    barracks. Because we tell them to live in the barracks, we know
    from similar results that living in the barracks is not one of
    the great attractions of military service.
        On the civilian front, in compensation, I plead for a
    return to the use of pay bands to give the Department greater
    flexibility in civilian compensation so that in areas of high
    cost, high demand for certain skills, it can pay more
    competitively; in areas where there isn't the same situation,
    it could be more austere in its compensation choices.
        Whatever compensation system we select, I would urge that
    we set and honor the expectations that's established. I'm very
    concerned about the actions of the last several years in which,
    often, changes the compensation have a flavor of being
    arbitrary and driven by budget considerations. And I think it's
    important that we set a standard and keep to that standard so
    that the young people who join the American military
    establishment understand the future that they have selected,
    and are enthusiastic about that choice.
        I thank you, Mr. Chairman. I look forward to your
    questions.
        [The prepared statement of Dr. Chu follows:]

                 The Prepared Statement by Dr. David S. C. Chu
       creating 21st century personnel and compensation systems for the
                             department of defense
                                  introduction
        Mr. Chairman and Members of the Committee: It is a privilege to
    participate in this morning's panel. The views I express are entirely
    my own, and should not be interpreted as reflecting any position on the
    part of the Institute for Defense Analyses.
        In my judgment, ``human capital''--people, their skills and
    esprit--lie at the heart of any successful military endeavor. Deciding
    whom you want to serve in your military establishment, how you wish to
    develop their ``capital'', and how you expect them to perform, are
    essential elements in meeting the nation's security needs. The answers
    to these questions, in turn, should derive from the future military at
    which you wish to aim, the capabilities you wish it to possess, and the
    challenges you believe it must be ready to confront.
        Those answers include basic decisions about how many actually wear
    a uniform (and are therefore governed by the laws of war), how many
    will be civilian employees of the national military establishment
    (therefore performing with the authority of the government), and how
    the private sector might provide key services on which both military
    and civilian functions depend, perhaps in a partnership arrangement.
    For each community, you will want to specify the characteristics of the
    personnel you wish to recruit, the preparation and ongoing education
    and training they should receive, and the service trajectory you expect
    them to follow.
        Grounding the human capital debate in the force you desire also
    implies it is the force characteristics that should drive personnel
    policies, not the other way around. This is especially true as today's
    evolving technology and international security environments alter US
    needs. It is the responsibility of the compensation system, broadly
    defined, to produce these desired force characteristics. A key element
    is the competitiveness of compensation, both military and civilian,
    with non-government opportunities. And from the enterprise perspective,
    there is an appropriate concern with costs.
        The ultimate cost issue, of course, is not military compensation
    alone, but what is required overall to operate the Department.
    Operating costs dominate the Department's budget requirements. They are
    driven by military equipment decisions (including the reliability of
    that equipment); by business practices (including, for example, the
    statutory floor for government depot work, and the impediments to A-76
    competitions); and by choices on the mix of active military, Reserve
    Component military, federal civilian, and contractor personnel.
                                choosing the mix
        On the last set of issues (the staffing mix), Secretary Carter
    recently called for more ``permeability''--if I understand correctly,
    to attract a wider variety of experience and backgrounds in both
    military and federal civilian personnel. He announced a series of
    initiatives to address this issue. Some of those confront what his
    Acting Under Secretary of Defense for Personnel and Readiness has
    identified, the difficulties created by the federal civilian personnel
    system, including those involving appointing authority.
        The Department faces two obstacles in considering the optimal mix
    of personnel, one a planning challenge, one institutional. The planning
    challenge is defining the structure--the nature--of the force of the
    future. The Department has struggled to meet this challenge since the
    end of the Cold War, with its initial responses a scaled-down version
    of its prior choices (Base Force, Bottom-Up Review). Besides the growth
    of Intelligence, Surveillance and Reconnaissance force elements
    (including cyber), that remains, as a generalization, the case today.
    Much of the structure is aimed at high-end, state-on-state conflict,
    for which we must be prepared, but with little devoted to the
    challenges we face immediately. The structure emphasizes the ability to
    destroy targets, not necessarily the ability to secure the political or
    political-military outcomes we desire. Securing a broader range of
    capabilities within likely budget limits may require accepting hedges
    vice full-up solutions, perhaps involving greater use of Reserve
    Component authorities (conceivably new authorities), and of civilians.
        The second obstacle is institutional. The Department's planning
    processes, as long constituted, do not adequately consider the ``total
    force'' solution space in arriving at the mix. Military personnel are
    decided and budgeted for in terms of a central account (end strength),
    and once the strength level is established, military personnel are
    ``free'' to the using elements of DOD. (Conversely, they cannot easily
    trade military personnel for federal civilians or contractors.) In this
    situation, it is not surprising that in most Military Departments the
    demand for military personnel, as substantiated in various manning
    documents, exceeds the planned supply, especially for active duty
    forces.
        At the other extreme sit federal civilians. Their numbers are
    decided on a largely decentralized basis, but often restrained to
    produce budgetary savings through ceilings (notwithstanding the
    statutory provision barring such a practice outside of management
    headquarters). That leaves contracted services as the safety valve, as
    organizations strive to meet their needs with the funds available.
        Repeated analyses demonstrate that there are significant gains
    possible from a more systematic approach to deciding on the total force
    mix.
        It would be easy to paint too discouraging a picture about the
    tradeoff process, and only fair to note some of the exceptions. One
    interesting development is the Air Force's pursuit of composite units,
    staffed with a mix of active, National Guard and Reserve personnel,
    benefitting from the differing levels of service that can reasonably be
    expected from each community. Another is the long-standing Inherently
    Governmental/Commercial Activity database maintained by DOD, which
    allows you to examine military-civil tradeoffs (and whose results have
    long argued DOD could make greater use of civilians). Particular
    Secretaries of Defense have taken an interest in this issue, whether
    Secretary Rumsfeld in military-civilian trades (to conserve military
    personnel for the Long War) and in competitive sourcing (an initiative
    of the George W. Bush administration), or the in-sourcing initiative
    launched by Secretary Gates. The last two, of course, are now
    restricted by statutory restraints.
        Staffing mix issues extend beyond broad categories of personnel to
    include structural issues within each community. For example, the Army
    has long solved the conundrum of ``up or out'' in the context of a
    pilot force (high training costs, substantial payoff to experience,
    implying long cockpit tours) by staffing extensively with warrant
    officers, reserving just a few billets for (classically) commissioned
    officers who are groomed for leadership positions. Presumably, as the
    military becomes more highly technical this mechanism--or its analog,
    the Navy's Limited Duty Officer--could be used more extensively.
    Mechanisms like these might be used to strengthen the cyber force, and
    other areas such as intelligence, language and cultural expertise,
    science and technology, and acquisition.
        Indeed, as one opens the aperture on personnel types it's quite
    possible that some duties that are now thought to require officers
    could be performed by enlisted personnel, given the high aptitude and
    performance standards of the All-Volunteer Force. The current Air Force
    Chief of Staff, as you know, has speculated about their possible
    utilization to meet some piloting needs. Indeed, the Army, Navy and
    Marine Corps already use enlisted personnel to operate Unmanned Aerial
    Vehicles.
                                managing the mix
        The Committee has expressed its interest in possibly reconsidering
    provisions of the Defense Officer Personnel Management Act (DOPMA), or
    the Act in its entirety. I would urge that we first focus on the
    different results that are desired, and analyze the degree to which it
    is the statutory provisions that make it difficult to achieve those
    results, versus the manner in which the Act is implemented. If
    alternate regimes appear attractive, the Department might experiment
    with those regimes (through existing or new waiver authority, or pilot
    programs), to understand their possible unintended consequences, before
    making them permanent.
        While key elements of enlisted management parallel that for
    officers, the rules are largely driven by policy, not statute. Enlisted
    personnel, of course, constitute the vast majority of the force.
    Perhaps the management paradigm for this element should receive our
    attention first.
        The challenges of the last fifteen years have demonstrated the
    value of agility--agility at the individual level, and agility on the
    part of defense institutions. American military personnel, starting
    with the Battle of Bunker Hill, have been known for their agility.
    Could we do even better, whether via the standards we set for
    recruiting, or the manner in which we prepare the force?
        In thinking about managing the mix in a more agile fashion, the
    Department should be willing to consider hybrid vehicles--vehicles that
    embrace the strengths of the different personnel communities. Secretary
    Carter points in this direction with his emphasis on Intergovernmental
    Personnel Act appointments, but more ambitious models might also be
    considered. These include the British notion of sponsored reserves
    (contractor operations in which all personnel hold Reserve Component
    appointments, and can be shifted to a military status as theater
    circumstances require), and Government Sponsored Enterprises, where the
    government retains control but creates an entity that can operate like
    a private sector actor (the Saint Lawrence Seaway is viewed as one of
    the more successful examples, I believe).
        One issue that has not received the attention it deserves is
    strengthening the skills of existing federal civilians over the course
    of their careers. The contrast in DOD could not be more striking:
    Significant investments in further education and training for military
    personnel, very limited opportunities for civilians. Some of this
    result derives from the strictures of civil service rules, some from
    the lack of budgetary allocations to support the necessary costs.
    Greater investment in federal civilian ``human capital'' should pay
    handsome dividends in long-term performance, and in the ability to
    recruit and retain the talent that Secretary Carter is properly
    seeking.
                        military and civil compensation
        Economic principles and actual experience highlight six
    characteristics of an effective compensation system:

        --Cash compensation is more attractive than compensation in kind
        --Compensation now is more attractive than compensation later
        --Incentives for special situations (e.g., certain skills, or hard-
    to-till positions) are more efficient than across-the-board solutions--
    especially if implemented through a flexible versus a ``hard-wired''
    system
        --Clarity about the incentives you're offering (and the
    compensation system as a whole) is critical
        --Expectations about future compensation importantly drive current
    results
        --Recognizing individual preferences (``volunteerism'') can produce
    a much more satisfied team, and lower long-run compensation costs

        As the Congressional Budget Office has pointed out, the military
    compensation system does not score well on these criteria. The civilian
    compensation system may be better--but not much, in my judgment.
        The current military pay system does offer the Department some
    flexibility, thanks to the considerable leeway Title 10 gives the
    Department in deciding the amounts and application of various special
    and incentive pays. But the same is not as true for federal civilians,
    because of the reliance on the General Schedule structure.
        It is also important to acknowledge that compensation includes
    more--sometimes much more--than pecuniary rewards. One of the most
    important, of course, is pride and satisfaction in serving the country.
    Recognition of such service is critical--and it is also critical to
    keep in mind the effect of all conditions of service on the willingness
    to join, the willingness to continue serving, and the enthusiasm with
    which that service is rendered. ``Conditions of service'' embraces a
    wide range of personnel and non-personnel decisions, ranging from how
    assignments are made, to the frequency of change and the length of less
    desirable or more difficult assignments, to education and training
    opportunities, to the quality (and quantity) of equipment provided, and
    to the excellence of leadership.
        An important condition of service is the individual's ability to
    influence his or her future--to choose, rather than be ``assigned''.
    Civilians enjoy considerable latitude in this regard (even if civil
    service realities can make it difficult), military personnel less so.
    The Navy's administration of
        Assignment Incentive Pay is a notable exception to this
    generalization, as are some long-standing de facto processes of the
    Reserve Components. Secretary Carter points the way to increased
    reliance on the volunteer spirit, endorsing the concept pioneered by
    the Army with its ``Green Pages'' experiment.
        For military personnel, one of the most important conditions of
    service involves the post-service transition. In our system, the
    principal responsibility for that transition lies with the Department
    of Veterans Affairs; thus its substantial resources (over $160 billion
    in fiscal year 2015) and their most effective employment should not be
    ignored in any reform agenda. (The Dole-Shalala Commission, for
    example, urged major changes that the Congress declined to adopt.)
    Within the Department of Defense's set of responsibilities, the recent
    decision to strengthen the Transition Assistance Program is worth
    noting--encouraging uniformed personnel to start thinking about their
    post-service interests early in the military career. Such early
    reflection presumably will help guide their education and training
    choices.
        The ``force of the future'' may look different from today's,
    reflecting both changing needs (think cyber), and the changing nature
    of our society (think opportunities for women, and changing views of
    what constitutes a career). As we contemplate change, however, it is
    worth reiterating that the current system sustained a successful all-
    volunteer force in the concluding stage of the Cold War, in its
    immediate aftermath (including the First Persian Gulf War), and in the
    long period of armed conflict that followed the attacks of 9/11. There
    are clearly elements that have worked well, or that have adapted
    effectively.
        Perhaps the most important success was recognizing that the
    compensation ''package'' must remain competitive. Since we anticipate
    that real compensation in the private sector will grow over time, so
    will federal compensation. Those joining need to know that the
    political system will act consistently with that reality (e.g., for
    military compensation, sustaining the competitive standards set out by
    the Ninth Quadrennial Review of Military Compensation), and forbear
    from making what appear to be arbitrary changes to the trajectory of
    compensation as a source of near-term budget savings.
        A focus on the competitive status of compensation also implies that
    adjustments to military and federal civil pay packages (e.g., the pay
    tables) will not necessarily be identical. That is in sharp contrast to
    the practice of recent and earlier years, in which across-the-board
    adjustments are matched.
        Competitive compensation will not be the same for all skill areas.
    The American military system confronts this reality using its bonus
    authority. While there are bonus authorities for civilians, they are
    not widely employed by most federal agencies, and may not provide the
    same flexibility of response. Hence proposals to replace the General
    Schedule with broad pay bands for federal civilians, allowing civilian
    compensation to adjust for local and skill realities.
        Much recent attention has focused on the cost of military
    personnel. The reform of military retirement you've just adopted moves
    more of the reward ``up front'', creating not only a more efficient
    program (with some cost savings), but one that allows the Department to
    vary career length by skill area, as operational needs argue should be
    the case. The prior system encouraged a ``one size fits all''
    mentality, with the result that some skill areas had a more senior
    force than might be optimal, while others suffered from a lack of
    needed experience, despite the Department's efforts to rebalance
    through the use of retention incentives.
        The Military Compensation and Retirement Modernization Commission,
    whose recommendations Congress considered in making its changes, also
    proposed a revised military medical benefit. While the proposed change
    would give military households more choice, and promised some
    potentially substantial savings, it would also move modestly more
    compensation to immediate cash (in the health expenditure accounts
    created), whereas the current benefit is paid entirely in kind--a
    compensation mechanism we know is less efficient.
        One issue the Commission did not address is the disparity between
    the compensation for single personnel, versus those with dependents--
    perhaps five to ten percent for junior personnel, measured by Regular
    Military Compensation (RMC). Moreover, RMC imputes the ``value'' of
    living in the barracks as equal to the housing allowance foregone
    (about one third of the total); we know from survey results that
    required living in barracks housing is actually a detriment to military
    recruiting. Would overall costs increase if single personnel were paid
    at the same rate as those with dependents? Not necessarily, since there
    would be offsetting cost reductions in other elements of compensation
    (e.g., health care). Indeed, over the long run it might well reduce
    costs. Such equilibration, coupled with a revised barracks residency
    policy, amounts to a targeted (i.e., more efficient) pay change, likely
    to ease the Army's current recruiting difficulty.
                                  conclusions
        The time is long past for a fundamental re-examination of the
    appropriate mix of personnel types in the military establishment, as a
    prelude to deciding what personnel management reforms may be needed for
    the future military establishment. It is the nature of the future
    military establishment that should be the starting point, guiding the
    discussion on personnel types. Perhaps this debate could unfold in the
    context of whatever national security transition plan a new
    administration adopts, particularly as it conducts its Quadrennial
    Defense Review.
        With the caveat that those choices have not been made, it may be
    useful to advance some hypotheses that could be explored in the interim
    as a basis for any immediate decisions the Committee wishes to
    consider. On the mix issue:

            It is likely that more Reserve Component and federal
    civilians will be desired, the latter requiring more flexible
    appointing and pay authorities.
            It is possible that more use of ``intermediate''
    personnel--i.e., senior enlisted, warrants, LDOs [Limited Duty
    Officer]--will be attractive in staffing certain military needs,
    creating a viable approach to ``up or stay'' while preserving the best
    features of ``up or out'' for those being considered for senior
    leadership positions.
            It is conceivable that hybrid staffing arrangements
    will be sometimes be attractive, e.g., composite units, or Government
    Sponsored Enterprises (e.g, for the DOD overseas Kindergarten-12 school
    system).

        On compensation:

            Moving more military compensation to cash vice in kind
    should improve recruiting and retention. Likewise making more cash
    available earlier in a career would be meritorious, as the retirement
    reform just enacted permits the Department to do.
            Harnessing individual preferences to the needs of the
    organization, consistent with the spirit of Secretary Carter's
    demarche, will help restrain long-term compensation costs.
            Creating greater flexibility in setting civilian pay
    levels would allow DOD to respond better to local market conditions
    (with savings in some areas financing increases in others).
            Stabilizing expectations by adopting and honoring a
    long-run compensation strategy for both military and civilian personnel
    should help recruiting and retention--and morale.

        As these hypotheses imply, much of what's needed lies in the
    province of the Executive Branch of our government, above all to
    organize the institutional mechanisms within which good decisions can
    be made, including recommendations for statutory action where needed.
    There is no more important set of decisions, if the United States is to
    enjoy in the future as fine a military as defends us today.

        Chairman McCain. Thank you.
        Mr. Rostker.

        STATEMENT OF HON. BERNARD ROSTKER, SENIOR FELLOW, RAND
                              CORPORATION

        Dr. Rostker. Thank you, Chairman McCain and Ranking Member
    Reed and members of this distinguished committee.
        It's my pleasure and honor to be asked to testify today on
    this very important issue. As you know, I've spent my whole
    professional life working in this area, and have often written
    about our need to reform the system, so I welcome this
    opportunity to further discuss this today.
        In many ways, the need for reform has been obscured
    because, by and large, the system we have today has produced a
    superb professional military. The problem as I see it is that
    we could have done it better, perhaps at less cost, but
    certainly, in terms of meeting the needs of our servicemembers
    and their families. Moreover, as the threat and our needed
    capabilities evolve, the only way to--of doing business in the
    future is likely to be less effective as we move--as it has
    been in the past. The trick here is to understand the current
    system, how it operates, what needs to be changed. To use an
    old cliche, we must not throw the baby out with the bath water.
        Rethinking the kind of military we want, and how to achieve
    that what some have called ``the force of the future'' is
    needed, and your hearing today is very timely.
        I've prepared a longer statement, but I want to highlight
    for you here six points that I think are critical as you move
    forward.
        The first imperative is that you look at changing the
    system. You ask what will be the impact of the experience
    profile of the force 10 and 20 years in the future. For the
    vast majority of our military workforce, the people we recruit
    today will be the journeymen we need 10 years from now and the
    leaders we need 20 years from now. While in some specific
    areas, new programs of lateral entry may provide added
    flexibility, the vast majority of military skills will still be
    in at the bottom and up through the rank.
        Second, the plain fact is that the military we build today
    must be capable of winning wars in the future. But, we don't
    know when that might be. In the aggregate, the year of service
    profile is the best indicator of the readiness of the force to
    go to war at any point of time in the future. Maintaining the
    appropriate experience profile is critical.
        Third, the key to achieving the needed experience profile
    over time is maintaining an adequate flow of people into and
    through the force over time. We have done this with the so-
    called ``up or out'' promotion system. While there are many
    ways such a system can be managed, there must be a way of
    ensuring sufficient turnover to constantly revitalize the
    force. The flow out of the force should not be just at the end
    of a career. Our enlisted and officer personnel need to
    progress or leave. They must not be allowed to stagnate in
    place.
        Fourth, the one thing that distinguishes the military
    personnel system from our private sector or our government
    civilian personnel system is we have the tools needed to
    maintain the required personnel profile over time. Some have
    argued that we should institute a system that allows people to
    stay in place as long as they adequately perform in their jobs.
    The ultimate example of such a system is our current civilian
    personnel system, but I don't know anyone who thinks that that
    system has been so successful it should be the model for the
    military. For our military, if servicemembers do not advance,
    they must be sent home to make room for the next generation,
    because it is the next generation and the one that comes after
    that that will carry the fight in the future.
        Fifth, many of today's critics warn of a brain drain,
    projecting that some may claim--and they--some claim many
    bright young people will leave the military frustrated because
    of the service are not making the appropriate use of their
    talents. However, the more significant issue is the larger
    drain that is the systematic expulsion of talented officers
    who, regardless of experience and skills, who are forced out at
    30 years of service or those who leave earlier than 30 years of
    service, anticipating that they will be forced out at 30--at
    the 30-year mark, which generally equates to a chronicle--
    chronological age at about 52 or in the early 50s. I've written
    extensively about this problem and, even when I was Under
    Secretary of Defense for Personnel and Readiness, tried to
    address this, but to no avail.
        Sixth, and lastly, it might seem strange to you for me to
    be arguing that we must maintain the flow of personnel through
    the military just as I'm saying that in select areas we should
    extend careers. But, I assure you that there is nothing
    contradictory in what I am proposing. Today, DOPMA gives us a
    one-size-fits-all personnel system for officers. While we can
    manage different occupational groups separately in what is
    called ``competitive categories,'' the career structure for
    each category is the same. To me, that makes no sense. Without
    arguing the merits of longer careers for the combat arms, I am
    certain that our specialty corps, such as intelligence,
    medical, chaplain, acquisition, and many more, including, in
    the future, cyber, do not need to adhere to the standard DOPMA
    structure of promotion timing, opportunity, and tenure, which
    reflects our thinking about youth and vigor in the 1940s.
        To summarize this quick overview of reforming the military
    personnel system, here are a few points that I think this
    committee should keep in mind: keep your eye on the future,
    particularly what changes will do to the experience profile of
    the force; maintain the desired experience profile over time;
    ensure adequate flow of personnel; maintain the basic concept
    of ``up or out"; be as flexible and permissive as possible to
    allow the services to better manage the assignment of people;
    and then lengthen careers beyond 30 years of service,
    particularly for specialty corps.
        Thank you for allowing me to testify before you today, and
    I look forward to your questions.
        [The prepared statement of Mr. Rostker follows:]

                The Prepared Statement by Bernard D. Rostker \1\
    ---------------------------------------------------------------------------
        \1\ The opinions and conclusions expressed in this testimony are
    the author's alone and should not be interpreted as representing those
    of RAND or any of the sponsors of its research. This product is part of
    the RAND Corporation testimony series. RAND testimonies record
    testimony presented by RAND associates to federal, state, or local
    legislative committees; government-appointed commissions and panels;
    and private review and oversight bodies. The RAND Corporation is a
    nonprofit research organization providing objective analysis and
    effective solutions that address the challenges facing the public and
    private sectors around the world. RAND's publications do not
    necessarily reflect the opinions of its research clients and sponsors.
    ---------------------------------------------------------------------------
          reforming the american military officer personnel system \2\
    ---------------------------------------------------------------------------
        \2\ This testimony is available for free download at http://
    www.rand.org/pubs/testimonies/CT446.html.
    ---------------------------------------------------------------------------
        The military personnel system in place today is fundamentally the
    same one put into place after World War II, with minor modifications
    for officers provided by the passage of the Defense Officer Personnel
    Management Act of 1980, or DOPMA. Many, including myself, have argued
    that this system is outdated--reflecting industrial-age thinking in the
    information age--and point to what they see as a drain of talent. The
    fundamental problem that most can agree on is that a one-size-fits-all
    system cannot provide the range of competencies that will be needed in
    the future. However, what a new system might look like is far from
    settled.
        Recent books and magazine articles include critiques of the current
    system that call for a new regime. These publications are replete with
    stories of frustrated bright young people leaving the military because
    the services both force them into assignments that they do not think
    make appropriate use of their talents and require them to adhere to a
    rigid path of advancement that is inflexible. The favorite villain in
    this story is the so-called up-or-out promotion system. While these
    stories are individually compelling and collectively paint a bleak
    picture of the future of the American military, they generally come up
    short in describing how an alternative system might operate or how
    eliminating up-or-out might produce the desired force of the future--
    or, for that matter, what the desired force of the future should even
    look like. What is needed is an understanding of the current system,
    how it operates, and what needs to be changed. To use an old cliche, we
    must not throw the baby out with the bath water.
        It is important to recognize that there are at least two places
    where talented individuals are leaving the military: There is the oft-
    cited exodus of junior officers (although many talented individuals
    choose to stay), but there is also the less-cited systematic exodus of
    officers--not only those who are forced out at 30 years of commissioned
    service regardless of experience and skills, but also those who leave
    before that, anticipating that they will be forced out at 30 years of
    service. Given the way officers are commissioned through the military
    academies or through ROTC [Reserve Officer Training Corps], this
    generally equates to forcing out officers who are in their early
    fifties. It is important to note that the way we lose junior officers
    is largely because of the way the assignment system is managed, but the
    way we lose talented senior officers largely has to do with the way the
    personnel system is designed. The ability to address the retention
    problem among junior officers is largely in the hands of the services
    and the way they manage assignment; addressing the retention of senior
    officers means Congress would have to consider whether it would change
    the way careers are structured.
                  procedural changes in the assignment system
        Today's critics charge that the services' central personnel
    assignment system is a failure because it neither adequately recognizes
    the special attributes an individual can bring to a job nor takes
    individual preferences into account; further, it does not provide all
    candidates an equal chance of being assigned to the positions most
    important to advancement. Critics maintain that a decentralized system
    where each candidate could self-nominate for any job and is eligible
    for all jobs would better foster the principles of talent management.
    Let's look at these claims in some detail.
                             knowing what's needed
        The military's human resource management system is actually made up
    of two complementary systems most often managed by two different
    organizations: one that focuses on job or billet requirements (most
    often referred to as the manpower system), and another that focuses on
    providing qualified people who meet the specifications laid out by the
    manpower system (most often referred to as the personnel system). The
    assignment system is the bridge between the two as it tries to put the
    right face in the right space. Any special attributes possessed by an
    individual service member--often referred to as his/her knowledge,
    skills, and abilities (KSA) or competencies--may make little difference
    in his/her assignment unless these attributes are recognized in the job
    or billet description. In a small number of cases, information about a
    service member that is not on the record but is known to senior
    personnel may be taken into account, but for the vast majority of
    officers, the match is made based upon the stated job description.
    Therefore, the first requirement for better matching the unique
    qualities of young officers is for the services to expand the range and
    improve the specificity of attributes that are included as part of a
    job description.
        Expanding job descriptions, however, is problematic, with the
    Army's recent Green-Pages proof-of-concept pilot test serving as a
    clear example. The pilot tested a largely decentralized assignment
    system, where individuals presented themselves for reassignment and
    units advertised their opening to improve matches. That was the way it
    was supposed to operate, at least. In actuality, the pilot test showed
    that units required ``a great deal of follow-up encouragement,'' and
    even with all the encouragement that resulted from this being a pilot
    test, half of the officers who participated thought that the job
    information was ``too sparse.'' There are many reasons that units fail
    to differentiate jobs adequately, but little progress can be made until
    the services better articulate what is required and what skills will be
    needed in the future. Two examples may illustrate this point. A former
    Air Force personnel chief recently recounted how he was told that the
    Air Force needed more officers with STEM (Science, Technology,
    Engineering and Math) backgrounds, at a time when there were more STEM
    qualified officers then there were billets to which they could be
    assigned. Assuming that that Air Force did, in fact, need more officers
    with STEM backgrounds, this need must be reflected in the descriptions
    of Air Force jobs to have any validity for recruiting new personnel.
    Similarly, the Army's senior commander in Europe recently discussed his
    need for more soldiers who could speak Russian and other eastern
    European languages. The system can only respond, however, if such a
    need is translated into job requirements.
                      accommodating individual preferences
        Meeting the assignment preferences of individual service members
    can be challenging, and all too often, the process appears to force
    people into assignments that they don't want. One often hears that
    there are less-desirable jobs that must be filled and the assignment
    systems must fair-share them among the entire force. But this fair-
    sharing approach doesn't take service member preferences into account.
    The Navy, for example, has found a way to compensate volunteers for
    such jobs by allowing qualified sailors to bid for these jobs, with the
    winning bidder being the one willing to take the smallest cash bonus to
    fill the position. Recent research at RAND \3\ has shown that a similar
    auction system could be used to induce members to extend in place in
    overseas assignments. Nevertheless, the services have been slow in
    taking up such incentives and ideas to help them sort out the
    assignment system and gain the potential to satisfy assignment
    requirements while making service members better off by aligning
    assignments with preferences. More can be done.
    ---------------------------------------------------------------------------
        \3\ Craig A. Bond, Jennifer Lamping Lewis, Henry Leonard, Julia
    Pollak, Christopher Guo and Bernard Rostker, Tour Lengths, Permanent
    Changes of Station, and Alternatives for Savings and Improved
    Stability, Santa Monica, Calif.: RAND Corporation, RR-1034-OSD, 2015.
    ---------------------------------------------------------------------------
                        opening up assignments for all?
        Another often-heard complaint is that the current system does not
    consider all qualified service members for all jobs, including the most
    critical and career-enhancing jobs. But one can challenge whether the
    assignment system should do this. While I am sure there are ways to
    improve the visibility of the talents of all members of the force, the
    plain fact is there are fewer positions at the top than there are at
    the bottom. Moreover, in order to ensure that future leaders gain the
    experience they will need later in their careers, the services must
    assign critical jobs to those judged to have the best chance for
    advancement. This is done today in both a formal and informal way.
        Formally, there are critical gateway selection boards for schools,
    or for qualifying for certain positions, such as command of a ship.
    More important, however, is an informal system of mentorships where
    senior leaders (generally from a particular occupational group or
    community) ``sponsor'' junior officers, who then are given specific
    assignments to help shape their careers for advancement. I am most
    familiar with the way it works in the Navy, where leaders identify
    those young members considered among the most promising and guide their
    careers so they gain experience that will facilitate their performance
    if and when they become senior leaders. The system works well for those
    who find a sponsor, but some will be left behind. Getting into this
    group usually requires impressing a senior officer so that he will work
    the system to give his protege the best assignments, but falling out of
    this group is easy if a junior officer fails to perform as expected.
        The Army, on the other hand, traditionally has been more
    egalitarian in managing assignments. Some have argued that this better
    allows the talent to rise to the top, and is fairer about giving
    everyone a chance at critical assignments. However, research going back
    to the 1960s suggests that some very talented people leave under such a
    system because they cannot see a clear path for advancement and do not
    want to leave their careers to chance. They believe they are special
    and expect to have their careers managed accordingly.
              structural changes in the design of military careers
        For a long time, I have argued and written about the need to reform
    the career military structure by increasing the maximum years of
    service an officer might serve to 40, for the reasons I will discuss
    here. That said, I first want to sound a cautionary note by endorsing
    the fundamental principle of the up-or-out system and explaining why
    such a system is critical to ensuring the vitality and viability of our
    military personnel system for the future.
                 the thirty-years-of-service career limitation
        A key feature of the officer military personnel system as laid out
    in law under the DOPMA is the 30-years-of-service cap for all officers
    who are not promoted to General or Flag rank, O-7. I am aware that
    under DOPMA, the service Secretaries can establish special continuation
    boards to extend the service of O-5 and O-6 officers beyond mandatory
    retirement for up to five years or until age 62, but this is almost
    never done. For all intents and purposes, we operate under a career cap
    of 30 years of commissioned service.
        Given that most officers come from the service academies or ROTC,
    entering college at 18 years of age and commissioned at 22 years of
    age, this means that, with the exception of those promoted to O-7, most
    career officers have left the service before age 52. This is true
    regardless of an officer's specialty because DOPMA is a one-size-fits-
    all personnel system for officers. While DOPMA allows for the promotion
    of different occupational groups separately in what are called
    ``competitive categories,'' the career structure for each category is
    the same. To me, this makes no sense. Without arguing the merits of
    longer careers for the combat arms, I am certain that our specialty
    corps--such as intelligence, medical, chaplains, acquisition, and many
    more, including any future cyber corps--would benefit if they were not
    compelled to adhere to the standard DOPMA structure of promotion
    timing, opportunity, and tenure. The case of intelligence corps,
    described here, illustrates why the 30-year limitation should be
    changed.
        Aside from the needs of specific occupational groups where
    experience is particularly important, a general case can be made that
    limiting careers to 30 years of commissioned service is out of line
    with efforts to broaden the experiences of officers as they progress
    through their careers. In 1987, Congress passed the Goldwater-Nicholas
    Act, which recognized the expeditionary and inherently joint nature of
    how military forces operate and established the requirement that
    officers complete the requisite joint professional military education
    and joint assignments before they could be considered for promotion to
    general or flag rank. Accordingly, officers start to be ``jointed''
    after their tenth year of service, when they are promoted to O-4, and
    usually try to complete this over the next ten to 12 years. These are
    also the years that officers destined for leadership positions have
    their command assignments. In effect, the Goldwater-Nicholas Act added
    between four and five years of additional must-have assignments to an
    already full career and squeezed out the time officers would have spent
    on their service staffs learning how to manage the enterprise. I am
    particularly sensitive to this unexpected cost of Goldwater-Nicholas,
    having served for many years at a senior level in the Navy and Army
    secretariats. While we may have made better joint warriors, it came at
    the cost of having less-experienced uniformed managers of the services.
    This was a cost that could have been avoided if career length had been
    extended commensurate with the expanded career content resulting from
    Goldwater-Nicholas.
        This situation I describe is only going to get worse with the new
    programs recently announced by the Secretary of Defense designed to
    increase the opportunities for assignments with industry and expanded
    opportunities for advanced education. We need to ask, ``What sense does
    it make to broaden the experiences of our officer corps and then
    provide little opportunity to reap the benefits of that broadening by
    truncating careers at 30 years of commissioned service?'' In my
    judgment, it is imperative to lengthen careers to accommodate all these
    career-broadening opportunities.
        I note that the issue of career length is not new, as the following
    review of the legislative history on this issue will show. The 30-year
    career has been in place since 1947, but even back then, members of
    Congress were not comfortable with limiting careers to 30 years of
    commissioned service. Finally, knowing the Committee's concern about
    the cost of personnel, I would like to review how extending the career
    length limit might have a positive impact on reducing the overall cost
    of personnel.
         a historical view of the thirty-years-of-service career limit
        As the Senate considered the passage of the Military Personnel Act
    of 1947, some in Congress expressed concern that the new system would
    ``force the retirement of officers at the height of their usefulness,''
    and would be ``very detrimental to the best interests of the country.''
    Sen. Guy Cordon, R-Texas, did the math and figured that ``the
    retirement of colonels after they have completed five years of service
    . . . or 30 years of service, whichever is the later . . . would mean
    that the average officer, figuring that he received his commission at
    age 22, would be forced to retire at 52 years of age.'' The record
    shows that Sen. Wayne Morse, R-Ore., concluded that he could ``not vote
    for the bill unless those objections are taken care of,'' and Sen.
    Harry Flood Byrd, D-Va., commented that this ``seems to me mighty early
    to retire a man, at 52.'' The Army countered the concerns of the three
    senators by arguing that Sen. Cordon had gotten the math wrong because

            The statement that the average officer receives his commission
            at 22 and would be retired at 52 is in error. The average age
            at appointment of Army officers is 25. For years to come, the
            average officer will not reach the grade of colonel before he
            has had 28 years of service . . . Therefore, the average age of
            colonels will be 58 . . . The question of proper retirement
            ages must be a compromise between the desires of the
            individuals for longer service and the needs of the Nation for
            a vital Army . . . Without a flow of promotions, there must be
            stagnation. There cannot be a flow of promotions without forced
            attrition at the top. \4\
    ---------------------------------------------------------------------------
        \4\ Dwight Eisenhower, et al., ``Officer Personnel Act of 1947,''
    testimony before Senate Armed Services Committee, 1947.

        Of course, it was the Army that got it wrong, but how wrong did not
    become clear until the system was in operation for some time and it
    became obvious that it was the rare officer who waited until 30 years
    of service to retire. The incentive in the new system was to take
    advantage of the reduced pension that paid immediately for voluntary
    retirements after 20 years of service and move on to start a second
    career before it was too late to do so.
        In 1954, the question of early voluntary retirements so alarmed
    Congress that an amendment to the Defense Appropriations Act of that
    year, the so-called Van Zandt amendment, limited voluntary retirements.
    It was repealed when the Officer Grade Limitation Act was passed, but
    only after Congress received assurances from the military services that
    ``the privilege of voluntary retirement after completion of 20 or more
    years of service will be exercised little'' because ``the services have
    long accepted 30 years of faithful service as being the normal tour of
    duty.'' \5\ The force reductions after the Korean War saw extensive use
    of the 20-year option to draw down the force. By 1980, when DOPMA
    passed Congress, the 20-year volunteer retirement had become so common
    that it was no longer considered to be at the discretion of the
    Secretary of the Military Department, but had become a ``right'' and
    was so reflected in the new legislation.
    ---------------------------------------------------------------------------
        \5\ ``Officer Grade Limitation Act of 1954 (H.R. 7103),'' Senate
    Committee on Armed Services hearing transcript, Washington, D.C.:
    Government Printing Office, 1954, p. 8.
    ---------------------------------------------------------------------------
             the need for longer careers for intelligence officers
        The career area of military intelligence is a prime example of how
    today's one-size-fit-all system is not serving us well. The
    requirements for intelligence professionals, particularly the
    intelligence officers who serve in the National Intelligence Program,
    are well articulated by the Army in its description of the ``unique
    functions'' performed by the Strategic Intelligence Functional Area
    officers, attached at the end of my statement.
        Our study of the current state of military intelligence shows that
    today's military personnel system is ill-suited to produce the kind and
    number of officers needed by the intelligence community. \6\
    ---------------------------------------------------------------------------
        \6\ Charles Nemfakos, Bernard D. Rostker, Raymond E. Conley,
    Stephanie Young, William A. Williams, Jeffrey Engstrom, Barbara
    Bicksler, Sara Beth Elson, Joseph Jenkins, Lianne Kennedy-Boudali, and
    Donald Temple, Workforce Planning in the Intelligence Community, Santa
    Monica, Calif.: RAND Corporation, RR-114-ODNI, 2013, pp.51-73.
    ---------------------------------------------------------------------------
        Today's system is built on the paradigm of youth and vigor. It is
    not designed to produce the personnel with the kind of training and
    experiences that are required of today's intelligence professionals.
    The grade table that drives the system reflects the needs of combat
    units, not the needs of the interagency intelligence community. The
    DOPMA tenure and retirement rules truncate and terminate military
    careers just when intelligence officers have gained the experience
    necessary to make them truly productive. The best that can be said is
    that many former intelligence personnel continue to serve as government
    employees and contractors. Changing this system will require statutory
    relief to allow the services to retain personnel with demonstrated
    professional intelligence expertise and experience beyond current
    mandatory retirement dates. The best way to address this problem is to
    build a career profile based on the paradigm of ``experience and
    performance.'' Given the general structure of DOPMA and working within
    the constructs of a competitive category, this could be accomplished by
    providing grade relief, ceiling relief, and end-strength relief. Grade
    relief would allow the services to better match the service member with
    the positions that need to be filled; ceiling relief would allow
    officers who are not promoted to the grade of O-7 to serve longer than
    the current limit of 30 years of service; and end-strength relief would
    mean that if the overall requirements for intelligence officers
    exceeded those authorized today, there would be no need to reduce the
    number of officers serving in other occupations to accommodate any
    increase in the number of intelligence officers serving. All this,
    however, must be done within (and adhering to) the basic concept of up-
    or-out.
               the importance of maintaining the up-or-out system
        The first imperative when considering changes to today's personnel
    system is to examine the impact on the experience profile of the force
    ten and 20 years in the future. For the vast majority of our military
    workforce, the people we recruit today will be the journeymen we need
    ten years from now and the leaders we have 20 years from now. In some
    specialty areas, new programs of lateral entry may provide added
    flexibilities, but the vast majority of military skills will still be
    acquired along the path of in-at-the-bottom-up-through-the ranks.
        The plain fact is that the military we build today must be capable
    of winning wars in the future, but we don't know when those wars might
    come. In the aggregate, the year-of-service profile is the best
    indicator of the readiness of the force to go to war at any point in
    the future. Maintaining the appropriate experience profile is critical.
        The key to achieving the desired experience profile is maintaining
    an adequate flow of people into and through the force over time. We
    have done this with the so-called up-or-out promotion system. While
    there are many ways that such a system can be managed, there must be a
    way of ensuring sufficient turnover to constantly revitalize the force.
    The flow out of the force should not be just at the end of a career.
    Our officers need to progress or leave. They must not be allowed to
    stagnate in place.
        The one thing that distinguishes a military personnel system from
    our private sector or our government civilian personnel system is we
    have had the tools and use them to maintain the required experience
    profile over time. Some have argued that we should institute a system
    that allows people to stay in place as long as they perform their job
    adequately. In fact, we have done this in the past, specifically during
    the drawdown during the early 1990s, and the result was that when we
    went to war in Afghanistan and Iraq, there were shortages of critical
    midgrade personnel; the same personnel we failed to recruit a decade
    earlier. I appreciate how hard it is to tell a young service member who
    is doing a good job today and wants nothing more than to be left alone
    to continue doing that job that he or she must advance or leave the
    service, but that is exactly what we must do to ensure that our force
    is always ready. If service members do not advance, they must be sent
    home to make room for the next generation because it is the next
    generation, and the ones that come after it, that will carry the fight
    in the future.
        Some might think it strange for me to be arguing that we must
    maintain the flow of personnel through the military just as I am
    arguing that in selected areas we should extend careers, but I assure
    you that there is nothing contradictory in what I am proposing.
    Extending careers does not negate the need to move people along in
    their careers; it means having different points in time when people
    move up or out. It means more time for people to learn their craft,
    less turnover, longer tour assignments and more ability to take
    advantage of career-broadening opportunities, including those gained
    from joint assignments, as well as outside of the military at school
    and in assignments with industry.
                   controlling the cost of military personnel
        Finally, I would like to comment on the cost of military personnel.
    Military personnel cost more today than in the past because we are
    paying them better--and by the way, they have fewer complaints. I don't
    believe that we think our military personnel are being underpaid today,
    which was a concern when I last served at the Pentagon. In my judgment,
    the best way to reduce overall personnel cost in general is to increase
    the average years of service we get out of every new recruit or
    officer, even as we maintain the appropriate years-of-service
    experience profile. I do recognize that, as always, the devil is in the
    details and the general argument may not hold for all occupations. It
    depends on the costs of accession and training, and on the structure of
    pay. In general, however, selectively extending the length of careers
    to 40 years of service is likely to be cost-effective. Remember, while
    we might pay individual officers more in current military compensation,
    there are relatively few of them. Also, as was true when Congress voted
    to increase the pay of senior enlisted personnel in 2002, there is a
    very positive message sent through the force and we would expect to see
    increased retention as service members look forward to the
    possibilities of serving for a full career.
                                  summarizing
        To summarize this quick overview of reforming the military
    personnel system, here are a few points to that I think this committee
    should keep in mind:

          Keep your eye on the future, particularly what any change
    will do to the experience profile of the force in the future.
          Maintain the desired experience profile over time.
          Ensure adequate flow of personnel; i.e., maintain the
    basic up-or-out concept.
          Be as flexible and permissive as possible in allowing the
    services to manage the assignment of personnel.
          Lengthen careers beyond 30 years of service, particularly
    for the specialty corps.
        [END OF TESTIMONY]
        [NEXT IS A DESCRIPTION OF ARMY STRATEGIC INTELLIGENCE]
                        army strategic intelligence \7\
    ---------------------------------------------------------------------------
        \7\ Department of the Army, Commissioned Officer Professional
    Development and Career Management, Washington, D.C., Department of the
    Army Pamphlet 600-3, 2007. P. 251.
    ---------------------------------------------------------------------------
            Strategic Intelligence functional area provides a focused,
            trained corps of strategic intelligence professionals to Army
            organizations, combatant commands, DOD, the Joint Staff, and
            interagency communities with tailored intelligence required for
            the development of national security policy and theater
            strategic plans and operations. The Strategic Intelligence
            officer acts as the premier expert on strategic and global
            intelligence activities that accomplish U.S. strategic
            objectives developed through unique training, education, and
            recurring assignments at theater, national, Joint, DOD, and
            interagency communities. The Strategic Intelligence officer
            translates national security strategy into intelligence
            strategies. Providing premier intelligence in a strategic
            context, the Strategic Intelligence officer enables
            decisionmakers and warfighters to dominate the battlespace. The
            Strategic Intelligence officer represents Army interests at the
            Joint and interagency communities. Strategic Intelligence
            officers work primarily at echelons above corps worldwide.
            [They fill positions] in intelligence units, headquarters,
            national agencies, and unified commands. Strategic Intelligence
            officers . . . participate in all phases of the intelligence
            cycle. The Strategic Intelligence officer is an agile,
            national- and theater-level and interagency expert--who leads,
            plans, and directs all-source analysis, intelligence systems,
            and intelligence policy and programs--supporting key
            decisionmakers, policymakers, and warfighters in an
            interagency, joint, coalition, and combined environment.
            Exercising broad responsibility and authority, the Strategic
            Intelligence officer is capable of integrating interagency
            activities and interacting with the foreign intelligence
            services to produce predictive strategic intelligence to advise
            policymakers and combatant commanders to deliver overwhelming
            advantage to our warfighters, defense planners, and national
            security policymakers.

        Chairman McCain. Thank you.
        Mr. Hale.

     STATEMENT OF HON. ROBERT F. HALE, FELLOW, BOOZ ALLEN HAMILTON

        Dr. Hale. Well, thank you, Mr. Chairman, Senator Reed,
    members of the committee.
        I'll focus today on two broad issues: military
    compensation, or slowing its growth as free money for
    readiness, and also some selected personnel issues.
        Let me just say, I appear here as a former Comptroller and
    as an individual, not necessarily representing my current
    organization.
        Let me turn first to compensation. As a share of the total
    DOD budget, military compensation has stayed roughly constant
    since 2000. It's up a couple of percentage points, but not
    much. But, those constant percentages mask important shifts. As
    the DOD budget grew sharply after 9/11, compensation costs grew
    with it, fueled by increases in healthcare costs and also pay
    raises. As the budgets then turned down in 2010, the Department
    sought to slow the growth in military compensation. It made
    this decision not to alter, not to shoot for any particular
    percentage, but, rather, to free up funds to sustain readiness
    and modernization, but particularly readiness. And the proposed
    compensation reforms also sought to modernize the compensation
    system and make it more effective.
        Now, conventional wisdom holds that the Congress turned the
    Department down almost all of its--with regard to almost all of
    its requests. In fact, Congress approved a number of DOD
    proposals, including initiatives to slow growth and payments to
    healthcare providers, to raise care--TRICARE fees modestly, to
    reform pharmaceutical copays, and others. Congress even took
    the lead on some issues, principally military retirement
    reform.
        Taken together, these changes reduced DOD costs by about $6
    billion a year, freeing up substantial funds to help the
    Department return toward full-spectrum readiness. I think the
    Congress deserves more credit than it gets, and principal
    credit--or significant credit certainly goes to this committee.
        But, the job's not done. Further efforts to reform
    compensation and slow the growth to free up funds need to take
    into account the recruiting and retention climate, which
    obviously is tightened. But, the key candidate for future
    reform is the military healthcare system, as the Chairman said
    in his opening remarks. The current system often requires
    copays that are zero, or nearly so, which can lead to overuse
    of care. And the system's costly to administer. And also,
    despite some overuse of care, there's substantial
    underutilization in military healthcare facilities, which
    results in wasteful spending. And finally, there are access and
    quality issues.
        Congress has before it two proposals, a DOD proposal for
    several years, and then the one from the Military Compensation
    and Retirement Modernization Commission. The DOD proposal would
    certainly be the easiest to implement. It would result in some
    modernization and savings. And, I might add, more than three-
    quarters of the savings in DOD proposals--in the DOD proposal
    comes not from the pockets of the beneficiaries, but from more
    selective use of care and from the reductions in the cost to
    administer the system.
        The Commission version offers beneficiaries a choice, and
    that is certainly a substantial advantage and, I think,
    warrants a careful look, but it isn't clear, at least to me,
    how the system--how the Commission proposal would maintain the
    system of military treatment facilities, which must remain in
    place, in some degree, to train future healthcare providers for
    war. And so, I think significant further work would be needed
    before you could enact the Commission proposal.
        In sum, the military personnel system has received
    substantial attention in recent years, and needs continued
    attention, but I am more concerned about the system that DOD
    manage--uses to manage its career civilian employees. Listening
    to debates over civilians, I sometimes feel like critics
    believe that the 775,000 DOD civilians mostly work at the
    Pentagon, maybe making PowerPoint slides or testimony. In fact,
    about 80 percent of them work outside
        the Washington, D.C., area, they perform many necessary
    support functions, they fix some DOD weapons, they teach
    military kids, they provide military healthcare, they manage
    bases.
        The system that recruits, retains, and manages these
    civilians has major problems. I'm not in a position to offer a
    comprehensive assessment or reforms, but let me use my
    experience in DOD to offer a couple of ideas:
        First, it takes too long to hire civilians. The Chairman
    mentioned this in his opening remarks. This committee made a
    start by granting expedited hiring authority for acquisition
    professionals. You might want to consider expanding that. One
    group that would come to my mind is professionals with
    expertise in the--and experience in the audit of financial
    statements.
        Poor performers are another issue. DOD has a small
    proportion of career civilian employees who do not perform
    well. Executives working for me spent way too long disciplining
    and, when needed, attempting to terminate members of this
    relatively small group. Most recent authorization legislation
    makes a start here, allowing performance to be considered in
    RIF [Reduction in Force] actions and expanding the probationary
    employment to 2 year--period of employment to 2 years. It is a
    good start. But, DOD and Congress might consider establishing
    review points throughout a career when poor performance can
    lead to termination. Some safeguards would be needed, but they
    have to be more streamlined than the onerous safeguards and
    lengthy proceedings that are required today.
        Let me also briefly address the requirements for civilians.
    Civilian personnel needs, in my experience, tend to be
    established job by job, making it hard to debate what numbers
    and types of civilian employees are needed in the aggregate as
    warfighting and support needs change. We have much better
    information to debate the numbers needed of the military.
        Even in the--so, I think Congress should challenge DOD to
    provide a better basis for determining, in the aggregate, the
    number and types of civilians that are needed to meet
    warfighting requirements--but, even in the absence of improved
    requirement tools, it's clear that DOD needs to reduce the size
    of its civilian workforce, but it needs to do so in a way that
    allows it to continue to meet support needs. Some key steps
    that would permit that require congressional support, including
    contentious ones, like permission to close unneeded military
    facilities where a lot of civilians work, and to downsize or
    close some military treatment facilities.
        Finally, in my view, we employ too many sticks and not
    enough carrots in dealing with our career civilians. In recent
    years, we've furloughed civilians twice, we've frozen their pay
    three times. Some in Congress criticize career civilians,
    seemingly treating them not as valued employees, but, rather,
    as symbols of a government that they believe is too large.
        DOD and Congress need to provide more rewards for good
    performance--a few more carrots, if you will. Let me suggest a
    couple of actions:
        Today, many career civil servants who are selected as
    members of the Senior Executive Service [SES] receive little or
    no increase in salary, even though their responsibilities grow
    sharply. And I might add, in my experience, it discourages good
    people from considering taking SES roles.
        Press support or reports suggest the administration is
    considering trying to increase SES pay, at least to the minimum
    level of GS-15 [General Schedule]. That would be an incremental
    step, but one I like better as an incremental step would be for
    DOD and Congress to expand the proportion of SES performers who
    are eligible for presidential rank awards, perhaps focusing on
    the awards at the meritorious level. These rank awards are made
    competitively through board selections. They offer both
    prestige and some substantial financial rewards. And what I
    like about them is that they direct the rewards to the SES
    members who are performing exceptionally well.
        Finally, DOD and Congress need to harness the power of
    praise as a way to recognize the importance of DOD's career
    civilian employees. We're very good at recognizing the
    accomplishments of the military. And that should continue.
        While I served as Comptroller, I always tried to thank the
    men and women in uniform and the civilians who support them. I
    hope more senior leaders will do that regularly. And DOD, along
    with this committee and others in Congress, could help by
    seeking opportunities to recognize the successes of civilian
    employees. Greater recognition would acknowledge the important
    role that DOD civilians play in maintaining our Nation's
    security, and it would help civilians feel that they are,
    indeed, valued employees.
        Throughout my government career, I have been privileged to
    serve with many highly capable DOD personnel, civilian and
    military. I hope the thoughts I've offered today can play a
    small role in helping these men and women who do so much to
    support our national security.
        With that, I'll stop, Mr. Chairman, and join in questions
    at the right time.
        [The prepared statement of Mr. Hale follows:]

                 The Prepared Statement by Hon. Robert F. Hale
        I appreciate the opportunity to testify on Department of Defense
    (DOD) personnel issues. DOD is one of the largest employers in the
    United States, and the military compensation system is one of the most
    complex. Given this size and complexity, I cannot address all of the
    issues related to DOD personnel. Instead I will focus on two issues:
    efforts to reform and slow growth in the costs of military compensation
    and selected civilian personnel issues.
         reforming and slowing growth in costs of military compensation
        As a share of the total DOD budget, military compensation costs
    have remained roughly constant since 2000. But the constant percentages
    mask important shifts. As DOD budgets grew sharply after 9/11,
    compensation costs also grew sharply. Health care costs, especially for
    the new TRICARE for Life program, caused much of this growth. But
    substantial increases in basic pay, along with increases in basic
    allowance for housing to eliminate out-of-pocket costs, also fueled
    growth.
        Past Success in Reform and Slowing Growth. After 2010 total defense
    budgets began to decline, and DOD faced legal limits on its total
    funding put in place in 2011. In response, the Department sought to
    slow the growth in the costs of military compensation. It made that
    decision, not to alter the percentage of funding devoted to
    compensation, but rather to maintain recruiting and retention while
    freeing up funds to sustain modernization and, importantly, readiness.
    As the military ended most of its large-scale combat operations in Iraq
    and Afghanistan, regaining full-spectrum readiness required added
    funds. Proposed compensation reforms sought to help meet readiness
    needs while also modernizing the compensation system and making it more
    effective.
        Conventional wisdom holds that Congress refused most of DOD's
    requests for changes in laws needed to alter the military compensation
    system. While Congress did turn down some DOD requests, it approved a
    number of them and even took the lead on key issues. Examples of key
    enacted changes over the past five years include:
        [Questions for the record with answers supplied follow:]

          Health care changes. The Administration permitted DOD to
    use the federal ceiling price for pharmaceuticals, which substantially
    reduced DOD costs. Congress permitted DOD to use Medicare rates to
    reimburse for outpatient care and care at small hospitals. It also
    agreed to modest increases in fees for retirees who use TRICARE.
    Finally, Congress permitted DOD to restructure and increase
    pharmaceutical co-pays in ways that steered beneficiaries toward more
    cost effective approaches such as generics and mail order delivery.
    Congress even went beyond DOD requests and mandated use of mail-order
    delivery for follow-on pharmaceuticals.
          Pay raise limits. For the past three years the President
    has exercised his existing authority to limit military basic pay raises
    below the levels that would have been mandated by the private-sector
    formula. Because basic pay makes up a large share of compensation,
    these limits contributed significantly to freeing up funding for
    rediness and, to date, have permitted the military to recruit and
    retain needed personnel.
          Military retirement. This year Congress took the lead in
    reforming the military retirement system to provide military members
    with a new 401(k)-like fund that includes matching government
    contributions while also reducing the size of pensions for future
    retirees who serve 20 or more years. The changes will reduce DOD
    accrual costs for military retirement.

        Taken together, these changes reduced the DOD costs for military
    compensation by more than $6 billion a year. These savings, which will
    continue in perpetuity unless they have to be reversed to meet
    recruiting and retention needs, did not come close to offsetting the
    large reductions in DOD funding mandated by the Budget Control Act of
    2011 and other decisions. However, the compensation changes made
    available significant funds for readiness and achieved some needed
    modernization, especially for the military retirement system.
    Importantly, even after slowing growth in compensation, DOD has so far
    been able to recruit and retain needed personnel--the key goal for the
    military compensation system.
        Job Not Done. Despite these notable successes, further efforts to
    reform compensation and slow the growth of costs should be undertaken.
    DOD and Congress must proceed carefully to ensure that, in the face of
    improvements in the economy, the Department can still recruit and
    retain needed personnel. So long as that goal is met, further reform
    efforts can lead to a more effective compensation system and free up
    funds to support readiness and modernization.
        As part of these efforts, continued limits on the size of basic pay
    raises may be appropriate if the recruiting and retention climate
    permits. Limits on basic pay raises free up substantial funds, some of
    which could be used to offset the costs the compensation proposals that
    may result from the next version of the Force of the Future
    initiatives. Media reports suggest that, as part of the next tranche of
    initiatives, DOD is considering changes in the basic pay table to
    increase incentives for retention of mid-grade officers and for persons
    with specialized skills. These types of flexibility almost always make
    the military pay system more effective and should be given careful
    consideration. Changes in out-of-pocket costs for basic allowance for
    housing and reduction in the commissary subsidy may also be
    appropriate.
        The key candidate for future reform is the military health care
    system. The current system often imposes co-pays that are zero or
    nearly zero, which tends to lead to overuse of care. The system is also
    costly to administer. In the TRICARE portion of the system, the share
    of costs borne by beneficiaries has fallen well below the levels
    Congress mandated when TRICARE was established. Nor are benefit issues
    the only problem. Despite some overuse of care, there is substantial
    underutilization in military health care facilities, which results in
    wasteful spending.
        For the past several years, DOD has proposed revisions that would
    modernize the TRICARE system and make it more effective. Changes
    including combining the three major TRICARE plans into one plan and
    imposing modest co-pays when retirees and active-duty dependents seek
    treatment (care for active-duty personnel would remain free). The co-
    pays are designed to reduce overuse of health care and to provide more
    incentives for use of military treatment facilities in order to improve
    utilization. Once fully implemented, the reforms proposed by DOD would
    save roughly a billion dollars a year. More than three quarters of
    these savings would result, not from greater payments by beneficiaries,
    but rather from reductions in administrative costs and more selective
    use of health care. Imposing fees for new entrants into the TRICARE for
    Life plan, along with additional changes in pharmaceutical co pays
    designed in part to steer beneficiaries toward generic medicines, would
    generate substantial additional savings.
        In its 2015 report, the Military Compensation and Retirement
    Modernization Commission recommended a much different approach to
    reform of the military health care system. The Commission approach
    would provide military personnel with an allowance for health care that
    beneficiaries could use to select from a menu of health care plans. The
    Commission's proposal offers beneficiaries a choice of health care
    plans, a significant advantage. Also, in part because the Commission
    proposed that retirees pay substantially more for health care, the
    Commission proposal saves a large amount of money--more than $6 billion
    a year once it is fully implemented, according to estimates in the
    Commission report.
        While the Commission proposal offers substantial advantages, it is
    not clear how the system of military treatment facilities, which must
    remain in place to train health care professionals for war, would be
    maintained. Significant further work is needed, perhaps along with a
    carefully designed pilot program, before the Commission plan could be
    implemented.
        In addition to some version of these reforms, Congress needs to
    permit the military services to downsize or close underutilized
    military treatment facilities so long as reasonable patient care can be
    maintained and training needs met. For their part, the military
    services need to propose appropriate downsizing as part of the overall
    effort to maintain quality health care while holding down costs.
    Finally, as it reviews the health care system, Congress needs to
    address other issues such as access to care.
        In sum, DOD and Congress have made important progress in reforming
    military compensation. This progress has freed up substantial funds
    that have been used to maintain readiness and modernization in the
    military while still allowing the services to meet recruiting and
    retention needs. Further reforms are needed, including consideration of
    changes proposed by the Force of the Future Initiatives and--
    importantly--reform of the military health care system.
                       selected civilian personnel issues
        The military personnel system needs continued attention. But I am
    more concerned about problems in the system DOD uses to manage its
    career civilian employees. DOD employs about 775,000 civilians who
    provide support that is critical to the Department's ability to
    maintain national security. Listening to debates over civilians, I
    sometimes feel that critics believe that most DOD civilians work at the
    Pentagon. In fact about 80 percent of DOD civilians work outside of the
    Washington DC area. They fix some DOD weapons, run the Department's
    training ranges, and manage DOD bases. They provide health care for
    military personnel and teach their children. They also perform many
    other necessary support functions.
        The system that recruits, retains, and manages these civilian
    employees has major problems. However, compared to the military system,
    it gets much less attention in DOD and Congress. This relative
    inattention occurs in part because career civilians work in agencies
    throughout government. DOD tends to defer to the Office of Personnel
    Management and other government-wide organizations when civilian issues
    arise. DOD, however, employs about half of all career civilians in the
    federal government. Because of their numbers and their importance in
    maintaining an effective warfighting force, I believe that the
    Department needs to take a leading role in improving the civil service
    system, as does this Committee and other defense committees.
        I have neither the time nor the expertise to provide a
    comprehensive assessment of DOD's civilian personnel system and its
    problems. However, during my 12 years of service as a senior DOD
    leader, I supervised many DOD civilian employees. Based on that
    experience, several problems stand out:

          Hiring problems. It takes too long to hire career
    civilian employees. Organizations that I oversaw as DOD comptroller
    (including the Defense Contract Audit Agency and the Defense Finance
    and Accounting Service) hired numerous civilian employees--many of whom
    were just beginning their careers. These organizations lost qualified
    candidates because private-sector firms could hire much more quickly.
          Problems handling poor performers. DOD has a small
    proportion of career civilian employees who do not perform well.
    Executives working for me spent too much time disciplining and, when
    needed, attempting to terminate members of this relatively small group.
          Lack of tools to set requirements and manage pay. We have
    reasonable tools to help determine the numbers and types of military
    personnel needed to meet warfighting needs, or at least to generate
    information needed for an informed debate. We also have good tools to
    ascertain how military personnel will react to changes in compensation.
    Civilian personnel needs, however, tend to be established job by job,
    making it hard to debate what numbers and types of civilian employees
    are needed in the aggregate as warfighting and support requirements
    change. Also, we have almost no tools that permit us to judge how
    civilians will react to compensation changes.
          Too many sticks, too few carrots. In recent years we have
    furloughed civilian employees twice and frozen their pay three times.
    Some in Congress criticize career civilians, seemingly treating them
    not as valued employees but rather as symbols of a government they feel
    is too large. We also often fail to recognize the contributions that
    civilians make to meeting DOD's warfighting needs. In contrast, we
    regularly recognize the accomplishments of our military personnel.

        Because of these various problems, morale has fallen sharply among
    career civilians. Each year the Partnership for Public Service creates
    a morale index for career civilians using questions administered by the
    Office of Personnel Management during an annual survey. Between 2010
    and 2014, the index suggests that morale for the government's civilian
    employees declined by about 12 percent, even while recent improvements
    in the economy led to morale improvements among all U.S. workers.
        Employees perform best when they believe that their employer values
    their services and will treat them fairly. Today, unfortunately, I
    believe that many career civilians in DOD, and probably in other
    federal agencies, wonder whether their employer really values their
    services.
        I am not able to offer a comprehensive package of solutions to
    these and other problems affecting DOD's career civilian employees (and
    in many cases, civilian employees throughout government). I am hopeful
    that in future releases, Secretary Carter's Force of the Future
    Initiatives will include recommendations for improvements in the
    civilian personnel system. I trust that any proposals that are
    submitted to Congress will receive careful consideration.
        While I can't offer comprehensive reform, I have found during my
    government service that progress often has to occur in increments. So I
    will conclude my statement by proposing some incremental improvements
    that seem practical to me and should help improve the civilian
    personnel system.
        Congress should challenge DOD to provide a better basis for
    determining, in the aggregate, the number and types of civilians needed
    to support warfighting requirements. Requiring a one-year study by
    DOD's personnel experts, perhaps coupled with an analytic organization
    within DOD, seems to me a good place to start. In return for better
    tools, Congress should stop requiring cuts in civilian personnel that
    are proportional to military reductions. Proportional cuts rarely
    permit DOD to meet its support needs.
        Even in the absence of better tools to establish requirements, it
    is clear that DOD needs to take steps to reduce the size of its
    civilian workforce while continuing to meet support needs. Some key
    steps require Congressional support. Permitting DOD to close unneeded
    military bases, and to downsize or close some military medical
    facilities, would help DOD begin to achieve needed civilian personnel
    reductions without harming needed support activities.
        It is also clear that DOD needs to hire more younger employees.
    Today DOD civilian employees under age 35 represent less than one-fifth
    of the Department's career civilian workforce. Media and other reports
    suggest that future Force of the Future Initiatives will include
    specific initiatives to attract more millennials into the Department. I
    hope that is true and that the Department (and other agencies) can move
    in that direction. In this year's National Defense Authorization Act,
    Congress also sought to help by providing expedited hiring authority
    for civilian acquisition professionals. As I mentioned earlier, slow
    hiring is a key problem in meeting civilian personnel needs. Making
    this expedited authority available for other skilled personnel--for
    example, for those with skills and experience in the audit of financial
    statements--makes sense to me.
        Congress and DOD need to work together to help the Department deal
    with the relatively small number of poor performing civilians. The most
    recent authorization legislation, which permits DOD to take into
    account performance during employment cutbacks resulting from
    reduction-in-force (RIF) actions, represents a start. Extending the
    probationary period for new employees to two years also helps. But
    broader authority is needed. DOD and Congress might consider
    establishing periodic review points during a career when poor
    performance can lead to termination. Some safeguards would of course be
    needed to avoid politically motivated or inappropriate separations, but
    the safeguards must be sufficiently streamlined to permit terminations
    without the impossibly lengthy proceedings that are required today. I
    recognize the difficulty of making this change, but I also know it is
    needed.
        DOD and Congress also need to provide more rewards for good
    performance--a few more carrots, if you will. Let me suggest a couple
    of actions. Today many career civil servants who are selected as
    members of the Senior Executive Service (SES) receive little or no
    increase in salary, even though their responsibilities grow sharply.
    Comprehensive civilian pay reform, including pay increases for senior
    civil servants, would provide the best solution to this problem of pay
    compression. But comprehensive pay changes for senior civilians seem
    highly unlikely in the current budgetary and political climate. Press
    reports suggest that the President is considering an executive order
    that would urge increases in SES pay within existing limits. That
    action could represent an incremental step toward fixing pay
    compression. As another incremental step, DOD and Congress could expand
    the proportion of SES performers who are eligible for Presidential rank
    awards, perhaps focusing on awards at the meritorious level. These rank
    awards, which are made competitively through a process of board
    reviews, offer both prestige and substantial financial rewards to SES
    members who perform exceptionally well. The expansion should apply to
    all federal agencies, not just to DOD.
        Along with expansion, the Administration should be strongly
    encouraged to remove recent limits on the number of SES members who are
    eligible for Presidential rank awards. The Administration imposed these
    limits because of concerns about providing awards in tight budget
    times, but the limits have the unfortunate effect of reducing
    recognition and compensation for the most capable SES members.
        Finally, DOD and Congress need to harness the power of praise as a
    way to recognize the importance of DOD's career civilian employees. DOD
    and Congress are both very good at recognizing the contributions of
    military personnel at all ranks, but less good for career civilians.
    While I served as DOD Comptroller, I always tried to thank the men and
    women in the military, and the civilians who support them. I hope more
    senior leaders will do that regularly. DOD, along with this Committee
    and others in Congress, could help by seeking opportunities to
    recognize the successes of career civilian employees. Greater
    recognition would acknowledge the important role that DOD civilians
    play in maintaining our nation's security, and it would help civilians
    feel that they are valued employees.
        Throughout my government career, I have been privileged to serve
    with many highly capable DOD personnel--both civilian and military. I
    hope the thoughts I have offered today can play a small role in helping
    these men and women who do so much to support our national security.

        Chairman McCain. Thank you.
        Admiral Roughead.

       STATEMENT OF ADMIRAL GARY ROUGHEAD, USN [RET.], ANNENBERG
           DISTINGUISHED VISITING FELLOW, HOOVER INSTITUTION

        Admiral Roughead. Mr. Chairman, Senator Reed, members of
    the committee, thank you for the opportunity to share my
    thoughts on what I consider to be the most important issue that
    needs to be confronted going into the future, and that's
    designing the total force and putting in place the policies
    that enable us to attract, recruit, and retain the talent
    that's going to be so important.
        My perspectives are based on command at sea, commanding
    both the Atlantic and the Pacific Fleets, serving as a Service
    Chief and a member of the Joint Chiefs of Staff, serving on
    combatant commander staffs and on service staffs, commanding a
    NATO striking force in the Atlantic, which is a multinational
    joint task force, and commanding a joint task force in the
    Pacific.
        Nothing that I say should be construed as criticism of the
    great young men and women who serve in our Nation's defense in
    uniform and in civilian clothes. But, I think that we're at a
    different time, when many of the policies and rules that we
    administer of this force, they were derived at a different
    time, and the times have changed, and it's time to relook at
    what those changes should be, because I believe that we're
    rapidly approaching the point of an unsustainable mix of cost,
    force balance, and lethality. And that will only get worse as
    we continue to feed the personnel costs that have been
    described by my colleagues here.
        I think it's safe to assume that significant top-line
    relief is not going to bail this out. And so, we have to look
    at what are the ways what we can adjust that. And because many
    of these policies have been implemented over time and they have
    interwoven with one another, layered on top of one another, it
    has to be looked at in its totality. Pull one lever, and you
    might get second- and third-order effects that are unintended.
        I think the real issues that I see is that, as we try to
    adjust the size of those who serve in the broad Department of
    Defense, the solution is always to go to the Active Force and
    reduce that. We, as has been mentioned, have a compensation
    system for the All-Volunteer Force that is really not tuned to
    that force. And I thank the committee for the work that they've
    done, particularly this year, to crack the door and begin the
    reform process there.
        We have a uniform promotion paradigm that tends to bleed
    expertise away from the force to fill a hierarchical promotion
    model that has been in place for decades. We are bound to a
    well-intentioned Goldwater-Nichols legislation that achieved
    the joint imperative, but has caused a bloating of our joint
    headquarters staffs in Washington and around the world. We have
    a government employee and civilian contractor ratio that is
    significantly out of balance with the fighting force that we
    field today. And our civilian personnel system values longevity
    over merit. And we have become extraordinarily disposed to
    filling our service headquarters with contractors without a
    means of really determining the number of contractors that we
    have working at any given time in these headquarters
    facilities, and whether or not that's the optimum solution.
        So, I think, as I look at it, some of the things, as we
    debate the size of the force, I believe the going-in position
    should be to hold constant the number of Active- Duty
    personnel, and work the other variables first of civilian
    employees, Guard, Reserve, and contractors.
        We should reform DOPMA and tune it in a way that we can
    adjust the time-and-service requirements and the time-and-
    grade-promotion requirements for the force, but I think it has
    to be tuned in such a way that give the services, and even
    specialties within each service, the latitude to be able to
    make the decisions to best incentivize the people that we want
    to keep. And clearly, we have to change the ``up or out''
    policy, particularly in some of the technical areas that are
    going to only increase in competitiveness in future years. And
    the one that has been mentioned and most frequently comes to
    mind is cyber. But, if we do that, I think we'll have to put in
    place some longevity pay raises so that we can keep that
    talent, and they'll still be able to take care of their
    personal obligations that they have.
        With respect to Goldwater-Nichols, I really do believe that
    we have to maintain a legislative hammer on the Department of
    Defense with that joint forcing function, because if we don't,
    the services will likely retreat back into more tribal
    behavior. But, clearly, we have to adjust Goldwater-Nichols so
    that we cannot use it as a personnel management system, but
    really what it was intended for, and that's to improve the
    jointness of the force.
        And I do think, when we get to the general and flag officer
    ranks, we should maintain the current requirements, but I do
    believe that we can lift some of the mandated requirements on
    some of the more junior ranks within the services.
        I also believe, and jumping more to the organizational
    construct, that as we look at the role of joint commanders and
    command--and I know it's been discussed before the committee,
    the idea of the Chairman being moved from an advisory to a more
    command position--I really do believe that civilian control of
    the military is fundamental to who we are, and I maintain that
    the best approach to that is to maintain the advisory role of
    the Chairman. Nor do I believe that we should move to a general
    staff, because it is important that we have current
    operational, technical, and geopolitical experience moving in
    and out of the headquarters so that we can make better
    decisions.
        With regard to DOD civilian personnel management, returning
    to a scheme similar to the NSPS, or National Security Personnel
    System, I think is very important. I had the opportunity, when
    it was in effect, when NSPS was in effect, to implement it in
    several commands, and, within months, you could see the change:
    young people enthused, eager; where merit mattered, and not
    longevity; where they didn't have the concern about, ``If I'm
    the last one to be hired, I'm going to be the first one to
    leave, should there be any force cutbacks.'' I think that we
    really need to look at putting that back in place.
        And we have to get our arms around the contractor numbers
    within our headquarters. Right now, we can't do that. If we do
    get a number, it's normally time late. And it's a very
    amorphous thing to work with. Similar to what we have with
    headquarters authorizations for uniformed personnel, for old-
    time equivalent for government civilians, I think we should set
    numbers of contractors for the headquarters, and not let that
    float, because if we go after headquarters numbers, and we drop
    uniformed government civilians, the headquarters, in my view,
    will not change in size; we'll just add more contractors into
    the mix. And the problem with that is, when a headquarters gets
    big, it makes more work for other people and for themselves,
    and it justifies its existence that way.
        So, those are some thoughts, and I look forward to your
    questions.
        [The prepared statement of Admiral Roughead follows:]

      The Prepared Statement by Admiral Gary Roughead, U.S. Navy (Retired)
        Chairman McCain, Ranking Member Reed, members of the Committee
    thank you for the opportunity to offer my thoughts on Department of
    Defense (DOD) personnel reform and strengthening the All Volunteer
    Force. I applaud and welcome the more strategic view this Committee has
    taken in assessing global security challenges and the efficacy of our
    Armed Forces today and in the future. Nothing is more important to our
    nation's security strategy than getting the force design right and
    optimizing the total personnel strategy to that design.
        In addition to command at sea I have had the privilege of being a
    Service Chief and a member of the Joint Chiefs, serving on Combatant
    Command (COCOM) and Service staffs, and commanding a NATO Striking
    Force in the Atlantic and a Joint Task Force in the Pacific. But I
    spent my life in the U.S. Navy because of the extraordinary young men
    and women who serve in it. It was my pleasure, every day, to sail and
    serve with them and there was no higher honor than to have been
    afforded the opportunity to lead them. Any comments and recommendations
    I make are not criticisms of their dedication, commitment and
    contribution to the hard and important work they do around the world.
        The fundamental question I inferred from your letter of invitation
    was: is the total DOD force optimally organized, sized and compensated
    for the security demands of today and those we will likely face in the
    future? The answer is--no. The organization and processes under which
    we operate, fight and manage the force were derived in different times.
    The world has changed. We have not and do not lack for recommended
    solutions. Numerous studies over the years have examined organization
    and processes. Many recommendations have been implemented, many have
    not. The solutions are organizationally and mechanically simple, but
    the personal impact on those who serve and have served is largely
    distasteful and the political will, in the information environment in
    which we live, more doubtful. The work you are doing at this time is
    critical because we are at a point where the current force is
    approaching an unsustainable mix of cost, force balance and lethality.
    We continue to sacrifice procurement and the necessary maintenance and
    training funds of a shrinking fighting force to feed the current
    personnel structure. One credible estimate projects that with personnel
    and operation and maintenance costs growing, as they have been at four
    and two percent respectively, those two accounts will consume 86
    percent of the allowed DOD budget by 2021 and all of it by 2024, the
    last year of the second term of the next president. As much as we all
    desire, significant topline relief is not likely. Piecemeal solutions
    will not work. A total examination and comprehensive revision of the
    manpower organization and governing personnel legislation and policies
    of the DOD is required.
        We continue to attempt to reduce manpower costs by cutting the
    number of those who are on point--active duty uniformed personnel. We
    have an all volunteer force with a compensation and benefit system that
    is not tuned to that force and a uniformed promotion paradigm that
    bleeds needed technical expertise to fulfill a one size fits all
    hierarchical promotion model. We are bound to well-intentioned and
    needed joint forcing legislation (Goldwater-Nichols) that has achieved
    the joint imperative but has ballooned headquarters' overhead. We have
    a uniformed, government service civilian and service contractor ratio
    conspicuously out of balance to our fighting force. We attempt to
    attract and retain quality new generations of government civilian
    employees with a civilian personnel system that values longevity over
    merit. We have become exceedingly disposed to headquarters service
    contractor support without knowing how many service contractors we are
    paying for and whether they are the optimum solution.
        Sizing the Force.  The number of active duty uniformed personnel
    has fluctuated since 9/11. Ground force numbers appropriately increased
    during the high demand years in Iraq in Afghanistan. Active duty Navy
    and Air Force personnel declined, but in the aggregate the total number
    of active duty personnel has not increased that much. The civilian
    workforce, after early post 9/11 growth, has remained illogically
    stable with some growth occurring within the acquisition community at a
    time when we are buying less. Reserve and Guard numbers are rarely in
    question; and, while public debates rage over reductions in active
    uniformed personnel, there is relative silence regarding the other
    components of the force. Further force reductions should begin with
    holding active uniformed numbers constant and reducing the other
    components, primarily civilian numbers.
        Compensation and Officer Promotion.  The changes to compensation
    begun by this Committee are positive and relevant to new generations
    who will serve in our military. Regarding officer promotion and
    retention, it is time to reform the Defense Officer Personnel
    Management Act (DOPMA). Time in service and time in grade promotion
    milestones should be tuned to the needs of each Service and to
    specialties within each Service. This will be key to incentivizing
    service and can make a difference in retaining quality and skill.
    Similarly, the `up or out of DOPMA' should be eliminated in skill areas
    determined by the Services. This will be particularly important in
    areas such as cyber where broad competition for talent will be intense.
    Retaining experience and skill in a niche area will be more important
    than promotion opportunity. This change will require a longevity and
    skill pay scale for those who do not promote but are committed for the
    long haul to their area of technical expertise.
        Goldwater-Nichols Legislative Reform.  Without the forcing function
    of the Goldwater-Nichols DOD Reorganization Act of 1986 we would not be
    the unmatched fighting force we are today. The joint imperative must be
    sustained; however, adherence to Goldwater-Nichols today is more
    synonymous with promotion requirements than war-fighting skill and
    experience. Those promotion requirements have caused the size of joint
    staffs (COCOM and JCS Staff) to increase in size based on assignment
    throughput rather than necessary and appropriate work. Concomitantly,
    it has reduced the attractiveness of Service staff assignments where
    expertise, experience in and the responsibility for manning, training
    and equipping of our forces reside. Joint promotion requirements for
    Flag and General officers should be retained, and Services should
    manage joint assignment strategies and incentive strategies to support
    senior leader requirements. Mandated numbers and promotion ratios
    between Service and the Joint Staff should be relaxed to best spread
    skill, talent and relevant experience among Joint and Service staffs.
    This more limited approach is consistent with addressing and tailoring
    to that which Service and joint organizations need rather than
    incentivizing all.
        Recent testimony before this committee addressed the
    responsibilities of Combatant Commanders, the Chairman of the Joint
    Chiefs of Staff and the nature of their staffs. In the case of the
    former, the trend to Joint Task Forces leading the fight has called
    into question the role of the Combatant Commander. That is a behavioral
    not an organizational problem because senior headquarters and leaders
    tend to bypass the chain of command. Combatant Commanders must command
    and be accountable for operations across the spectrum of operations,
    including combat. Their authority and accountability must be seen in
    their respective region or function as absolute and continuous. Joint
    Task Forces will remain the optimum organization for focused operations
    but the COCOM must be accountable for effects and outcomes. The tasks
    and functions of COCOM staffs should not replicate those of subordinate
    Joint Task Force or functional staffs and COCOM staffs must be sized
    for oversight not redundancy.
        Nothing speaks more to our nation's principle of civilian control
    of the military than the advisory role of our most senior uniformed
    leaders, particularly the Chairman, Joint Chiefs of Staff--that should
    not change. With regard to recent musings and proposals regarding
    creating a `General Staff,' this could potentially create an elite
    military entity that could generate outsize influence while limiting
    the infusion of recent operational, war-fighting, and technical
    experience into joint staffs in our rapidly evolving world.
        DOD Civilian Personnel Management.  Our nation is fortunate indeed
    to have dedicated men and women who are drawn to and take great pride
    in public service. As previously mentioned, the number of civilian
    personnel in the DOD must be rationalized with the number serving in
    uniform. Additionally, the management of that force should value merit
    over longevity. It was my duty and pleasure to have implemented the
    National Security Personnel System in several commands when it was in
    effect in a previous administration. The effects were quickly
    apparent--increased interest in government service, greater optimism
    regarding being rewarded more rapidly for hard work and innovation, and
    less concern for being the first to be let go if the last to come
    aboard--quality and hard work mattered.
        Staff Size and Service Contractor Accounting.  The number of people
    in an organization should be a function of work to be performed. We
    account for and control uniformed personnel and government civilian
    personnel through end strength and Full Time Equivalent (FTE)
    authorization. There is no method to account for service contractors on
    staffs; accordingly, staff size can float based on money available
    rather than work to be performed. Any count of contractors on a staff
    is vague and time late, and staffs can grow with limited control and
    awareness. Without more disciplined control in this area right-sizing
    organizations and staffs will be a mirage. While not perfect, creating
    a contractor personnel authorization at the service and joint staff
    level, i.e. CPN [contractor personnel Navy] (in the case of Navy) or
    CPA [contractor personnel Army] (Army), etc. is a way to stabilize,
    monitor and control the size of headquarters. Once stabilized and
    controlled the work of debating and defining the appropriate roles and
    mix of government civilian versus contractor can take place. Absent
    that we will continue to attempt to design an optimal total force using
    nebulous variables.

        Personnel management, especially reforming compensation and right-
    sizing overhead, is hard, complex and politically challenging. My
    comments and recommendations touch on what I consider to be the major
    areas of needed reform. I am hopeful they are helpful, and I look
    forward to your questions.

        Chairman McCain. Well, thank you, Admiral.
        And, Admiral, I was just--not long ago, read a wonderful
    book called ``The Admirals'' about five-star admirals in the
    Navy in World War II. And I noticed with some interest that
    Admiral Nimitz, at one point in command, ran a ship aground. Do
    you think that's possible today?
        Admiral Roughead. Senator, I think we have some recent
    cases where we've done that, but I will tell you that the
    fitness report that was written on Admiral Nimitz after he ran
    a ship aground was on the door of my office as I walked out
    every night. And to me, I think it's important that we still
    give people the latitude to make mistakes and move on.
        Chairman McCain. Do you think that's the case?
        Admiral Roughead. I know that we have, in recent years,
    allowed some people who have made some significant mistakes or
    errors in judgment to move on.
        Chairman McCain. Dr. Rostker, you bring up a really
    fascinating--there's many aspects of this issue. I mean, it's
    really a--this is a aspect where there are many different
    facets of it, but you're advocating a--changing the current 30-
    year retirement in--to 40 years, which, I think, given
    longevity and capabilities and experience and knowledge, is
    something that ought to be considered. But, what about the fact
    that there are specialties that put a premium on physical
    strength and fitness? How does this work? And I'd be interested
    in the other witnesses' view of this. This would be a huge
    change.
        Dr. Rostker. And I--I agree with you, and I think that we
    have to address the needs for each. In my state--in my oral
    statement, I made the point about not taking on the issue of
    youth and vigor in the combat arms, but I would also point out
    that all of the storied admirals of World War II would not have
    been around, they would all have been retired under our current
    personnel system.
        The issue becomes how we manage the specialty force. And
    we've heard here about Goldwater-Nichols. Goldwater- Nichols
    has, basically, added 5 years of career content to an already
    jammed career. And it has deprived the services of the talents
    of many officers who are being jointed at the time in previous
    years they would have learned how to manage the corporate
    entity. We send people to school. The Secretary is out, talking
    about new initiatives for time with industry. And yet, we're
    going to send people home when they're 52 years old in the
    acquisition corps and planning and things that don't require
    youth and vigor? Can you imagine being a corporation and saying
    to the majority of your acquisition executives, ``You've
    reached 52. Go home''? That's when they've learned their craft.
    We do that with FAOs [foreign area officers], we do that with
    the intelligence community. The hardest fill jobs in cyber are
    not the hackers, but the people who are managing hackers. But,
    we'll send them home when they reach 52--52, of course, being
    30 years from the time of commission.
        So, I think we have to break the one-size-fits-all
    paradigm, and address your concern for youth and vigor, and
    address my concern for the specialty corps as we build career
    structures that make sense for the individual skills that are
    needed for the future.
        Chairman McCain. Sometimes that could be as short--early
    age as 48----
        Dr. Rostker. It could be.
        Chairman McCain.--in some cases.
        Dr. Chu.
        Dr. Chu. I couldn't agree more with the notion that we
    ought to look at variable career lengths. And I think the
    retirement reform you enacted this last--in this current
    authorization act opens the door for the Department to begin
    moving that direction.
        DOPMA's current 30-year ceiling is an issue. There is some
    latitude in the statute to extend in order to recall people
    from retired status. But, that's not really a panacea as an
    option. Congress, in the last decade, moved to loosen some of
    the age restrictions, which is another problem. Some people
    join the military late, and so they might be the 60-year-old
    acquisition executive, and we'd still like to keep them. And I
    think those--that greater latitude is very helpful.
        But, I think, fundamentally, it--it's not about a
    particular constraint, it's about--the paradigm the Department
    follows, that everybody should look--as you said--more or less
    the same. And I think that Admiral Roughead touched on this in
    his remarks, that we're grooming all officers to be Chief of
    Staff. That's not true. Most officers are not going to be Chief
    of Staff, as is obvious from an arithmetic perspective. Many
    are wanting a fulfilling career, where they move to a middle
    management or a middle level of expertise, and they continue to
    serve in that level for a longer period of time.
        And so, my play would be to encourage variability. First,
    the Department needs to be focused on what experience mix it
    wants, by skill area, both officer and enlisted, as a guide to
    what that variability should look like. So, in some areas,
    where youth and vigor is essential, you might actually want
    somewhat shorter careers. You already have a problem with some
    people hanging on, so to speak, as we all know, as they get to
    15, 16, 17 years? service. Congress honors that with a
    sanctuary. Eighteen years of service, you get there, you have
    to really commit a crime not to get to 20 years. That's a
    mistake. The new retirement system allows you to say, ``It's
    time to leave.'' And you can take a significant prize home with
    you. But, some other people ought to stay for much longer
    periods of time, as Dr. Rostker argued. It--senior command,
    senior experience in various specialized fields--medicine is an
    example of that career track, as well. And we ought to retain
    people for longer periods of time. So, I think it's the issue
    of variability in career length that ought to receive
    attention, not necessarily just extending everyone.
        Chairman McCain. Mr. Hale, your view.
        Dr. Hale. I think it's a good idea to look carefully at
    this. I mean, it would be a far-reaching change, and it could
    have significant effects on costs and other things. But, the
    longevity trends, and, as Dr. Rostker pointed out, the idea of
    sending home experienced acquisition or financial professionals
    or others, at that matter, at ages 52 doesn't make much sense.
    And so, I think it is definitely worth looking at.
        Chairman McCain. Senator Reed.
        Senator Reed. Well, thank you very much, Mr. Chairman.
        And, gentlemen, thank you for your testimony.
        It strikes me--and it is a point Dr. Rostker made, but I
    think everyone echoed it--is that anything we do will have an
    effect about 20 years from now, when you work through the
    system, which begs the question, What will the military look
    like 20 years from now?--which leads another question, Who's
    going to tell us what it should look like? And how do we get
    that information from the Department of Defense.
        Then, to go Dr. Chu's point, this is right now very much
    fragmented and culturally distinct. You know, the Army employed
    copious numbers of warrant officers to fly helicopters in
    Vietnam because they needed them. Today, we have drone
    operations, but they have to be Air Force culture, qualified
    pilots and in the career path to move up in command squadrons
    of F-16s, et cetera. So, I think this just--I want--we'll start
    with Dr. Chu and go down--comments about, How do we, the
    Congress, get the Department to focus on the force 20 years
    from now in a coherent way across all the different services
    and components of the services?
        And, Dr. Chu?
        Dr. Chu. My suggestion would be to ask the Department, in
    its annual presentation of the President's budget request, to
    speak to why they chose the personnel mix and their cultural
    norms that are embodied in that document. So, I would start the
    conversation with, Where are you today? And why did you make
    those choices? And do you think those--and, to the Department,
    the challenge would be, Why do you think those choices are good
    for the--what the force is going to mature to look like in 5
    years, 10 years, 15 years, 20 years, et cetera? I would
    acknowledge, no one can foresee exactly what the force
    characteristics are going to be 20 years from now. And, in
    fact, I think where that conversation leads is encouragement,
    particularly under current circumstances. So, it's not like the
    Cold War, where you had known opponent and a view of how a
    conflict might unfold. We don't know. And therefore, I think
    the real issue in looking forward is, Have--Has the Department
    offered for the Congress' consideration, a reasonably rich set
    of hedging choices so that if we're wrong, as we're likely to
    be, as Secretary Gates has testified repeatedly, we have some
    backup plan, some foundation, particularly from a personnel
    perspective, which we can build?
        But, I'd start by challenging the Department to explain,
    How did you get this Active Duty figure? How did you decide the
    Reserve-component number? Is it something other than just
    history of what you did last year? What about Federal
    civilians? All right? That will set up a scramble in the
    Department, because civilian manning is largely a decentralized
    decision. There'll be some preparation time needed for people
    to give you a reasonable answer. And what about the contractor
    force, which I think, as my colleagues this morning have
    testified, is largely a safety valve for the Department. So,
    you constrain Active Duty, you constrain Reserve numbers, you
    constrain Federal civilians. What pops out, as long as people
    have money, is they hire contractors instead.
        Senator Reed. Dr. Rostker, please.
        Dr. Rostker. Well, I'd like to invoke the great American
    philosopher Yogi Berra. Yogi said, ``The future ain't want it
    used to be.'' And I think that's right.
        First, we need to put the ``p'' of planning back into PPP
    [Program Protection Plan]. We're not doing that. We're just
    programming.
        We have a good idea of what our capabilities will be, to a
    fair amount of the force, the majority of the force, because
    it's tied up in our capital stock. So, the first thing we need
    to be able to do is man our squadrons and our aircraft carriers
    and our bomber force that we're building. We know the mechanic
    needs, the pilot needs. Those projections are fairly
    straightforward. And when I talk about the experience profile,
    I'm talking about that.
        The unknown is the flexibility for dealing with ISIS
    [Islamic State of Iraq and Syria], the growth in Special Ops
    [Operations], and their flexibility is the most important
    thing. I once did a paper for the Guggenheim Institute about
    thinking about the last--the next war. And I--and everybody
    else who did papers had very specific notions about the next
    war. And I used the Yogi Berra quote.
        The thing that distinguishes the Defense Department is that
    we bet on a lot of horses. We didn't close down the cavalry
    until we knew that tanks were--we have a long history in the
    Navy of battleships and aircraft carriers fighting it out until
    we knew what was going on. And that redundancy in our services
    and within our service has proven to give us the flexibility to
    be able to adjust to the future. And flexibility is the key.
        Senator Reed. I have very little, if no, time, Dr.--Mr.
    Hale and Admiral Roughead. Any comments?
        Dr. Hale. No, I don't have anything.
        Chairman McCain. Admiral?
        Admiral Roughead. I would take a little different tack. I
    think that the ability for the Department to reform itself--I
    question that. The most significant change that's taken place
    in the U.S. military in the last 50-60 years was the creation
    of the All-Volunteer Force. It's not the technology or
    anything. It's All-Volunteer Force. That was produced by the
    Gates Commission. Thomas Gates was an opponent of the All-
    Volunteer Force. He was the chairman of it. But, yet, it
    created the military we have today, which I submit is one heck
    of a military. And so, I think what we really need to do is to
    bring the same flavor of people together to really look at this
    in its totality. And there's going to have to be some china
    broken, and that normally does not happen within a bureaucracy.
        Senator Reed. Thank you very much, Admiral.
        Thank you, gentlemen.
        Chairman McCain. Senator Fischer.
        Senator Fischer. Thank you, Mr. Chairman.
        As we're looking ahead 10, 15, 20 years, and trying to do
    this planning, and comparing it to where we were when
    Goldwater-Nichols reforms were put into place, how can we--
    carry on with this conversation--how can we achieve the
    flexibility without throwing out a lot of the reforms that were
    made under Goldwater-Nichols? If we look at joint duty, for
    example, and if that is needed in the future, if it's
    appropriate in the future, or does it just add on to more
    headquarters staff? How--do we form the commission, Admiral, to
    get into the weeds on every reform that's in there, and then
    figure out a way to be flexible?
        You had mentioned we need to change that ``up and out''
    policy. And, Dr. Rostker, you had mentioned that the force must
    not be allowed to stagnate in place. But, yet, I think we're
    going to need people to remain in place longer to achieve the
    skills that they need to give them the flexibility for the
    challenges that we face in the future. You know, you can look
    at cyber. A few of you mentioned that. That's going to take
    experts, it's going to take people who can respond quickly to
    change as that environment changes.
        So, I would just ask your opinions on that, if we could
    start with you, Admiral.
        Admiral Roughead. Yes, ma'am. And I would say that, one, I
    don't think a commission similar to the Gates Commission gets
    into the aegis. I think that they can generate the design of
    the total force that will be required going into the future.
    I--but, I also believe that--particularly in Goldwater-Nichols,
    that we've constrained ourselves with some of the requirements
    that are there. By forcing the joint requirement down onto the
    major, lieutenant, commander level, what we have done is, we
    have basically said--sent the signal that staff duty is more
    important than honing your warfighting craft.
        We have also, by putting in the requirement that the
    service staffs can't promote at a rate higher than the joint
    staff, we've disincentivized people from serving on service
    staffs, where we man, train, and equip, and where most of the
    money of the Department is spent. And so, we've lost that
    talent pool and experience and expertise.
        So, I think that, in Goldwater-Nichols, we can float that
    requirement higher. But, it also, as I said, has to be done in
    conjunction with some of the other policies. The fact that we
    have may have a good cyberwarrior who is not a qualified joint
    officer, and allow that person to stay in the Navy longer, or
    in the military longer, that's okay. So, I think we have to
    look at how all of these things work together. But, I think
    that we've forced the joint requirement down too low, and we
    have disincentivized some of other priorities that I think are
    going to be important for a fighting force of the future.
        Senator Fischer. Thank you.
        Mr. Hale?
        Dr. Hale. So, I'd like to ask that you broaden your
    thoughts on Goldwater-Nichols and think about whether we need
    something analogous to that for our civilian workforce. We are
    at the other extreme with regard to the civilians. That is,
    there's not a lot of, often, moving around, especially at the
    senior levels. And I wonder if, as we think about Goldwater-
    Nichols, and fixing it for the military, we want to think about
    how we engender some more rotational experience among those who
    will ultimately be our civilian leaders. Maybe, as I say, we
    need some version of Goldwater-Nichols for civilians.
        Senator Fischer. Thank you.
        Dr.----
        Dr. Rostker. The first would be to extend the career, so we
    can accommodate requirements like Goldwater-Nichols within the
    career structure. But, the notion of stagnation in place is not
    to imply that everyone needs to--that people need to advance.
    And in certain technical areas, that might be fine to stay in
    relatively the same job, but it tends to be in a particular
    technical area. We are often told of the young officer who
    says, ``I'm a great captain, and leave me to be a captain.''
    Well, he may be a great captain when he's 30. I'm not sure
    he'll be a great captain when he's 40. Again, youth and vigor
    comes. So, he needs to either advance in his profession or
    leave. It's very hard to say to somebody who's doing well,
    ``You have to go home, because we're worried about the next
    generation.'' We can't do that in the civilian world. We don't
    do that in the private sector. We must do that in the military.
        Senator Fischer. Dr. Chu.
        Dr. Chu. I'd urge we think about how we get the same
    outcomes that we like of our Goldwater-Nichols, but at a lower
    price, in terms of career content. The current--because I--as
    your question, I think, implied, there are some good points to
    what has been produced from Goldwater- Nichols. More joint
    orientation by the senior officer corps, specifically. But, our
    mechanism, as we all know, is an input-oriented one, ``You will
    take this course, you will have this assignment for a certain
    length of time, and such is the way to get there,'' which, of
    course, adds to the career content issue Dr. Rostker has
    raised.
        And so, just as a personal example, in my judgment, one of
    the most joint-oriented Army officers I encountered in my
    career in the Department was Jack Keane. General Keane would
    not qualify, under the rules. Until he was Deputy Commander of
    Joint Forces Command, he had never had a joint assignment. Of
    course, the issue is, you can't look inside the person's mind
    easily. But, I do think, if I may be presumptuous, that the
    confirmation power of the Senate is one tool to use. In other
    words, part of the examination really ought to be, what is the
    outlook of this officer on joint matters, and how has he or she
    achieved that outlook? As opposed to prescribing so much how
    the person gets there. I recognize there's the risk of
    confirmation conversion, as people have unkindly labeled some
    people's stance over the years, but I do think that might be
    one small step to try to move away from the prescriptive
    approach we use now, that you will take certain courses, you
    will have certain experiences in order to achieve this
    orientation, and to ask, in some fashion, that both the
    Department and the Congress look at people more holistically.
        Senator Fischer. Thank you.
        Thank you, Mr. Chairman.
        Chairman McCain. Senator Manchin.
        Senator Manchin. Thank you, Mr. Chairman.
        And thank all of you. I appreciate very being here.
        It's--someone coming from the civilian ranks and not being
    blessed enough to be in the military service, but now sitting
    back and watching this and trying to make sense of it, how we
    run the operations, is unbelievable. And it doesn't make any
    sense that we talk about--now we've got sequestration, we've
    had budget caps, all the different things. And you would think
    that the system, the Department of Defense being our largest
    Department in Federal Government, would be able to make
    adjustments and changes. But, it doesn't seem to come unless
    there's congressional mandates for that to happen.
        I can't get a handle on the contractors. I've tried. I've
    been here for 5 years, and I'm trying to get a handle on the
    strength of contract. The contracting forces, which we should
    look at, because I know the reduction of force. And every time
    we run into budget problems, it's always a reduction of the
    people that we depend to defend the country. And I know the
    size of the staff doesn't seem to change proportionally, when
    we should be changing. Staff seems to be constant, if not
    growing. But, contractors is just an absolutely misnomer, here.
    We've had as high--I mean, our report--I know this is not
    accurate, but in 2014 it was showing 641,000 full-time-
    equivalent contractors at a cost of $131 billion. I can never
    get--I can't get that answer. I don't know why it's so hard for
    the Department of Defense to be able to tell us how many
    contractors we're paying and kind of filling slots and
    substituting and playing a kind of a movement game, here.
        And maybe--Admiral Roughead, I know you've been on the
    front line of this thing, but give me some insight on this.
        Admiral Roughead. Well, thank you, Senator. And my
    observations are exactly the same as yours, because there's no
    structure that defines the particular work, position, person
    that applies to a contractor. We have that with our uniformed
    and our government civilians. And I think that, as we look at
    our headquarters structures, that there should be an
    apportionment by billet, if you will, to use military speak,
    for those contractor positions that get done. Otherwise, what
    you find is that the money buys as many contractors as it can
    afford. And so, I think we need to do that.
        I would also say that all contractors are not created
    equal. I mean, we have some----
        Senator Manchin. Sure.
        Admiral Roughead.--contractors that are maintaining
    airplanes, and we've made the decision that that approach is
    best.
        Senator Manchin. Why can't that scenario be accomplished?
    Does it have to be a direction from Congress, legislated? Or
    can Department of Defense do that? The accountability of
    contractors.
        Admiral Roughead. I would leave whether Department of
    Defense can do that to some of my colleagues who have been in
    the Department, but----
        Senator Manchin. Okay.
        Admiral Roughead.--but, I really do think that that would
    be one way to get our arms around that.
        Senator Manchin. Dr. Rostker, if you could comment on that.
    And, Mr. Hale, I'll come right back to you.
        Dr. Rostker. The reason we have the contractors is because
    we don't account for them. We buy service. It's in the O&M
    [Operations and Maintenance] budget. It's just dollars. And it
    purely comes back to the Comptroller's shop, in terms of
    controlling those contracts that are used to purchase the
    services of people.
        The Congress, it--has said we want to have a limit on the
    size of headquarters. We want to have a limit on the number of
    civilians.
        Senator Manchin. Yeah.
        Dr. Rostker. And then, the headquarters go out and hire
    contractors, and they sit behind the same desk that a civilian
    sat behind. I would suggest they have loyalties that are not
    necessarily in line with those of the government, like
    maintaining the contract. And so, we can go to the American
    people--you can go to the American people and say, ``We're
    controlling government. We've limited the number of
    civilians.''
        Senator Manchin. Yeah.
        Dr. Rostker. But----
        Senator Manchin. Mr. Hale.
        Dr. Rostker.--we haven't.
        Dr. Hale. So, it's harder than it--than you'll think to
    count contractors. If you do a firm fixed-price contract--many
    of them are now--there is no responsibility on the part of the
    contractor to tell you how many people are doing it. They just
    have a job, they get the job done.
        In response to congressional requirements, DOD is inserting
    clauses in many of its contracts, directing the contractor to
    estimate the number of full-time-equivalent people. But, it
    takes time, and that's why you're not seeing this data.
        The way to control it, in my view, is, you control military
    and Federal civilians by billets or by FTEs [Full-time
    Equivalents]. You control the contractors by limits on the
    operation-and- maintenance funding. And that allows the
    Department the flexibility to use firm fixed-price contracts,
    when they make sense and we want to have that.
        Senator Manchin. The hardest thing that I had--and I'll
    finish up with this--the hardest that I had is that, basically,
    we had contractors of--fighting, basically, on the front lines.
    I know that people said that didn't happen, but we--I know that
    happens. And I know that they're hired, and they go in to
    force. They seem like--at 10 years, they come out of the
    military, they retire from the military and take a pay three to
    four times higher. That didn't make any sense to me. You can't
    justify that. You can't sell it back home. And we keep talking
    about reduction of forces, and we're coming back, paying three
    to four times more for the same person that we reduced--or
    reducted, and put them back into the private sector and on a
    contract. How do we stop--is there any way to stop that from
    happening?
        Dr. Chu?
        Dr. Chu. I think, ultimately, as my colleagues have
    implied, the contracts are a safety valve. And the real issue
    is what you're asking the Department to do. So, let's take the
    headquarters issue. Without in any way being cheeky here, the
    office I formerly held, a major activity was answering
    congressional correspondence. Many of these letters were--
    required a significant research project. Someone had to do that
    work. If you place a limit on how many Federal civilians can be
    employed, the solution, as Dr. Rostker says, is the office uses
    the funds at its disposal to hire contractors to help with that
    task.
        So, I think the ultimate break on excessive contractor
    employment, to the extent it is, indeed, excessive, is the
    issue of what the Department's being asked to--what function
    it's being asked to perform and perhaps the too- tight limits
    on the resource inputs it might more usefully employ for that
    purpose--Active Duty personnel, I think, in the case in point
    that you were citing. You're--you are going to get situations
    where people who leave the military will have a skill set
    that's very valuable in the private sector, perhaps serving the
    Department of Defense. But, to me, that's--that's just a signal
    that there's an excess demand for that skill and that we've
    suppressed meeting that demand with Federal civilians and
    Active Duty or Reserve-com personnel, and it pops out in a
    contract. The contractor, eager to--service, as Mr. Hale said,
    offers a very significant salary to the--so, it's the safety-
    valve issue and the question of the burdens of the Department
    and its business practice, I think, that is ultimately the
    break on the situation that you are--that--with which you are
    concerned.
        Senator Manchin. Thank you very much.
        I'm sorry.
        Dr. Hale. Can I just add, very briefly, one of the wartime
    problems that you raised occurs because we place limits on the
    number of troops that can be in--and that causes the Department
    to turn to contractors.
        Senator Manchin. That doesn't make any sense all, but I
    appreciate your answers.
        Chairman McCain. Senator Ernst.
        Senator Ernst. Thank you, Mr. Chair.
        And thank you, gentlemen, for being here today.
        Mr.--or, Dr. Rostker, if we could start with you, I know
    that you are well aware of the heavy deployment schedule that
    we have had over the past 14 years or so. Many members have
    mobilized, they have deployed, time after time after time, and
    we still continue to do that with a number of our SOCOM
    [Special Operations Command] units, as well. What can we do for
    those that are in more of the--well, I've met a lot of Active
    Duty soldiers. Many of them have deployed over and over again.
    But, then we also have that group that seems to be in the type
    of unit that is maybe a training environment. They have spent a
    career in those types of positions where they haven't deployed.
    How can we make sure that we are offering the same
    opportunities for everyone across the board? Because, of
    course, when you look at promotions and advancements, we want
    to make sure that everybody has opportunity for that, even
    broadening and strategic-type assignments. What can we do about
    that to even the playing field?
        Dr. Rostker. Well, there is a--deployments are by units,
    obviously, but also by skill sets. And so, there are certain
    skill sets that will not deploy. Generally, it has been to the
    advantage of servicemembers to deploy, because those
    considerations come into promotion boards and through the so-
    called ``up or out'' system. There are rewards. But, it will
    not necessarily fall evenly, depending upon the particular
    occupations that people have.
        I think the broad question is also, what do we do for the
    servicemembers and their families for those who are deploying
    quite often? And this is really a unique and new problem for
    the Department of Defense.
        Senator Ernst. Yes.
        Dr. Rostker. We've never fought a war with this kind of
    rotation. And, as you say, the 14 years is the longest in our
    history. And we really do need to come to grips with what our
    services are, not only to the servicemember, but particularly
    to the family.
        Senator Ernst. We have such a heavy rotation of deployments
    with certain types of MOSs [Military Occupational Specialties]
    or occupational skills, and maybe not others, but we need to
    make sure that there is plenty of opportunity for everyone to
    take advantage of those types of positions.
        Admiral, of course, as we look at opportunities, there are
    a lot of different thoughts in this area, but I am a little bit
    concerned that the Department is really trying to mold our
    officers and even some of our senior NCOs [Non-Commissioned
    Offices] to aspire to be an intern at Facebook or Google. And
    those are great organizations, but with these types of
    assignments, they're lucrative, but we would rather see them
    being a platoon leader or a company commander or a first
    sergeant. And what impact will the Department's efforts to
    place a greater emphasis or priority on these nontraditional
    broadening assignments--what impact will that have, then, to
    our force readiness, to actually win that next war?
        Admiral Roughead. Yes, ma'am. Thank you for the question.
        Before I get to it, I'd like to just comment on the
    deployment piece. As----
        Senator Ernst. Thank you. Please.
        Admiral Roughead. As you know, the Navy has been deploying
    for centuries. And I think it's important that, as we look to
    the future employment of the force, that the model that's used
    take into account the types of deployments. And not everyone
    will be going, because--as Dr. Rostker said, because of
    specialties and other considerations. But, I think that the--
    that, you know, it took the Navy awhile to define the
    deployment and readiness models. And I think we have to look at
    that in that particular service.
        With regard to some of the fellowship opportunities that
    have been announced recently, my sense is that those are in
    very small numbers. And I do think that there may be some value
    in certain areas where people can go off, see how things are
    done differently than within the Department of Defense, and
    then come back in. But, again, I--you know, is this something
    that will stack on top of the joint requirement, the
    operational requirement, the educational requirement? And so,
    my sense would be, you know, would that be something that you
    would consider as a joint credit and then someone who would
    come back in?
        Senator Ernst. And definitely something that we should keep
    an eye on. So----
        Admiral Roughead. In limited numbers.
        Senator Ernst. In limited numbers, that's absolutely
    correct. Thank you, Admiral.
        Thank you, Mr. Chair.
        Chairman McCain. Senator McCaskill.
        Senator McCaskill. Thank you, Mr. Chairman.
        Just to underline some of the concerns of my colleagues.
    Senator Manchin, on contractors. I have obviously spent a lot
    of time, as Mr. Hale knows, on this subject in the time I've
    been here. And one of the most surreal experiences was when I
    discovered, one day, that the person testifying in front of me
    about contracting had hired a contractor to prepare them for
    the hearing. And that's when I realized, okay, this has gotten
    a little out of control.
        It's not that contractors are bad. It's not that
    contractors aren't needed. As you indicated, Admiral Roughead,
    there are many places that we're using contractors that it's
    saving us money. They're performing functions well at a lower
    cost. But, the problem is, there's so little transparency that
    oversight is nearly impossible unless you have the tenacity of
    a bulldog that's very, very rabid. And--because you can't find
    them. You can't--it's amorphous. You can't figure out whether
    the contracting activity is justified or whether it's a safety
    valve. I mean, I think Dr. Chu just admitted they hired
    contractors to answer congressional letters. You know, I'm not
    sure that--we need to know this. We need to understand when
    contractors are being utilized. So, I think your idea for an
    authorization level on contractors is a valid one, and I would
    like to see any response that any of you have for the record on
    that, going forward.
        [The information referred to follows:]

        Dr. Robert Hale. It is reasonable to consider a cap on contractors
    in the authorization legislation. The cap should be in dollar terms
    since some contracts, especially fixed-price contracts, do not specify
    the number of contractors. Importantly, before establishing a cap, the
    Committee should discuss with the Department of Defense what data can
    be made available. A cap would only be meaningful if the Department can
    supply data that are consistent and accurate, both for use in setting
    the cap and in measuring compliance.
        More broadly, the Committee should consider changes that would
    reduce the use of contractors in cases where government employees
    (especially civilian employees) should be used. Contractors are
    sometimes employed because they can be put in place more quickly than
    government civilians. OPM is working to speed up hiring, an effort that
    the Committee should support and monitor. Contractors are also
    sometimes used because, compared with a government civilian employee, a
    contractor can be terminated much more quickly. As I indicated in my
    testimony, DOD needs authority to terminate poorly performing
    government civilians more quickly while still preserving protections
    against misuse of the civil service.

        Admiral Roughead. Just to underline some of the concerns of my
    colleagues, Senator Manchin on contractors. I have obviously spent a
    lot of time as Mr. Hill knows, on the subject from the time I have been
    here. And one of the most surreal experiences was when I discovered one
    day that the person testifying in front of me about contracting had
    hired a contractor to prepare them for the hearing. And that is when I
    realized okay, this has gotten a little out of control. It is not that
    contractors are bad. It is not the contractors aren't needed as you
    indicated Admiral Roughead, they're many places that were using
    contractors that it's saving us money. They are performing functions
    well at a lower cost. But the problem is, there is so little
    transparency that oversight is nearly impossible unless you have the
    tenacity of a bulldog that's very, very rabid. And because you cannot
    find them. You can't--it's amorphous. You cannot figure out whether the
    contracting activity is justified or whether it's a safety valve. I
    mean, Dr. Chu just admitted they hired contractors to answer
    congressional letters. I'm not sure that--we need to know this. We need
    to understand when contractors are being utilized. So I think your idea
    for an authorization level on contractors is a valid one and I would
    like to see any response that any of you have for the record on that
    going forward.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator McCaskill. I want to talk a little bit about what
    we have come to refer in this committee in the last several
    hearings as the deputy deputy dog syndrome. That is, in the
    civilian force, the springing up like mushrooms at a certain
    time of year of a new deputy to the deputy to the deputy. And
    where is that coming from? Why is there this seem-to-be growth
    of people with titles? Is it just the need for titles, in terms
    of, you know, how you're viewed within the civilian force--the
    civilian workforce at the Pentagon? Is there really a need for
    all these many, many layers of personnel that seemingly have
    some kind of authority over someone else? Has this thing gotten
    too layered? I mean, it appears to me it's gotten too layered,
    but I would love your take on that.
        Dr. Rostker?
        Dr. Rostker. We have a whole layer in the Defense
    Department that never existed when I came to town. We had
    Assistant Secretaries reporting to the Secretary of Defense.
    Today, we have Assistant Secretaries reporting to Deputy
    Secretaries to Under Secretaries who report to the Secretary of
    Defense. So, the whole Department has grown at least one layer.
        Senator McCaskill. And why?
        Dr. Rostker. The desire to do coordination. So, in the area
    of personnel, we have an Under Secretary and then we have a
    series of Assistant Secretaries. At one point in time, those
    Assistant Secretaries were all Deputy Assistant Secretaries,
    and the Assistant Secretary have--we've just mushroomed the
    whole--my judgment, the whole Department up one layer. And it
    just grew out of hand.
        Senator McCaskill. How can you--how can we crank that back?
        Do you have any ideas, Mr. Hale? How could we, from--as
    overseers, as--in an oversight capacity, trying to get a handle
    on the way we're using resources, how do we stop that?
        Dr. Hale. Well, let me just start by saying, for the
    record, that the organization I ran, I think, was, by Pentagon
    standards, relatively flat. There were no Assistant Secretaries
    in that Comptroller's shop. But, I understand your concern. I
    mean, you've tried to put limits on headquarters. That makes
    sense to me. I think, in the end, you're going to have to let
    the Department decide how to organize that more limited
    numbers, that what I would appeal to you when you're trying to
    do this, too, is to try to reduce the workload, the sunsetting
    of reports, is an excellent idea. We----
        Senator McCaskill. Right.
        Dr. Rostker.--spent a lot of time preparing reports. But,
    if we're going to reduce the size of the headquarters, at least
    in my experience, people over there were working hard, for the
    most part. There were a few slackers, but, for the most part.
    We've got to reduce the demand on them. Some of that's
    Congress, but some of it is internal, as well.
        In the end, Senator McCaskill, I think you've got to let
    the Department figure out how to organize itself within those
    more limited numbers. Hopefully, the more limited numbers will
    engender some reduction in the concerns that you're
    expressing----
        Senator McCaskill. Okay.
        Dr. Rostker.--about hierarchy.
        Senator McCaskill. Okay.
        I'm out of time. I would, at some point, like to have some
    input from this expertise that's presented here today on
    acquisition force, the notion that the folks that rotate out of
    there every year and a half are really--were being outgunned by
    the people who are buying--who are selling stuff to us. Big
    time, we're being outgunned, because there's not the buildup of
    expertise in acquisitions that you're going to have to have at
    the leadership level. And it's like the special corps you
    talked about, Dr. Rostker. There are certain functions within
    the military that we need not put one-size-fits-all. Because I
    think acquisitions is a great example of where we've wasted a
    lot of money because we didn't have the expertise there we
    needed.
        Thank you, Mr. Chairman.
        Chairman McCain. Isn't it also true that every time there
    is a crisis or a problem, we create another bureaucracy and, in
    some cases, an entire command that--as a solution? And I don't
    think that's necessarily the long- term solution.
        Senator Lee.
        Senator Lee. Thank you, Mr. Chairman.
        And thanks, to all of you, for the insightful testimony
    that you've offered this morning.
        As we've already discussed, there are a lot of benefits to
    our country that come from having an All-Volunteer Force. We
    also know that it's not a perfect system. And I'd like to take
    a few minutes to address some of the criticisms and some of--
    what some have characterized as the unintended consequences of
    having an All-Volunteer Force, and perhaps ask some of our
    witnesses about possible drawbacks to the All-Volunteer Force
    and what can be done to address those.
        Now, some have argued that the All-Volunteer Force creates
    a circumstance in which the burdens--the risks and the real-
    world consequences of war disproportionately affect members of
    the military and their families, while the vast majority of the
    public is largely shielded from the really awful effects of
    war. General Stanley McChrystal has made this point with
    respect to the wars in Iraq and Afghanistan.
        Now, some critics take the argument even a step further
    than this and say that if these burdens were extended more
    evenly across the population, the United States would be far
    more cautious in determining when, whether, and how to engage
    in any type of armed conflict overseas.
        So, Secretary Chu and Secretary Rostker, let's start with
    you. Can you comment on these criticisms and on the long-term
    conflicts, or consequences, rather, of an All- Volunteer Force?
    And then, Admiral Roughead, can you comment on the potential
    negative impacts of having our military actions being initiated
    and executed by roughly 1 percent of the United States
    population, a population that consists of decisionmakers in
    Washington, D.C., and servicemembers, who tend to be stationed
    at our Nation's military bases?
        Dr. Chu. Senator, thank you. It's an important issue.
        I do think that we should keep in mind that the 1 percent,
    the small fraction of the country that serves, is really a
    function of two key elements. First, what's the size of the
    military, Active Duty especially, that we maintain? Much
    smaller now, relative to our population base, than was true 20,
    40, 60, 80 years ago. Second, what's the size of the population
    cohort that would ordinarily be looked at for military service?
        One reason the draft was needed, I would argue, in the
    '50s, is, in fact, the United States, given it was an all--
    essentially an all-male force, needed almost every able- bodied
    young male to serve. It's just a function of the small birth
    cohorts in the 1930s during the Great Depression. So, I would
    observe that it's--for the size military maintained today,
    given the size of our population, it's always going to be true
    that only a small fraction see military service.
        To the question you raise about ``Should the country be
    more involved with that serve as an important element in the
    national discussion of whether we should or should not commit
    forces?''--I'd observe that we did involve the country, in the
    last 15 years, in a significant way, because we mobilized the
    Reserves. The Reserves really are a cross- section of the
    United States, and touch every community in the country, every
    State in the Union. And so, while it's not quite the same as
    the old draft model that some put up, it does involve the
    country in that. And I think it's a great tribute to the people
    who volunteered for the service, that they answered that call.
    The Reserves served with extraordinary performance levels in
    this last long conflict, which continues to this day.
        Senator Lee. And so, for that reason, in the future,
    continuing to rely, or perhaps expanding our reliance, upon
    Guard and Reserve units could have that effect, that--the
    effect of distributing more broadly the people who were
    involved.
        Dr. Chu. In my judgment, yes, sir.
        Senator Lee. Okay.
        Dr. Rostker. I don't know whether you know, Senator, but
    I'm a former Director of the Selective Service System, and have
    dealt with the questions you've asked, literally for decades.
        The fundamental question that led to the reform of
    Selective Service in 1970 is, ``Who serves when not all
    serve?'' And that deals with the issues that Dr. Chu talked
    about, the size of the military and the cohorts that support
    it. The notion that a sizable portion of the country will be
    involved in the military, given the size of the military and
    the technology of the military, is just not realistic.
        The second is the nature of today's military. It's not a
    matter of giving a soldier a rifle and 6 weeks of training, and
    shipping him over--or her--now her--overseas, but a very
    technical force that requires a great deal of schooling and
    skill and knowledge. And we've talked about preserving and
    managing that talent. Are we to turn that talent off and throw
    that talent away just to create the opportunity to bring more
    unskilled people into sharing in the experience of the
    military? I think the use of the Reserves talks to the
    involvement of the community. But, the fundamental issue is the
    size of the population and the size of the military that we
    have today.
        Senator Lee. Admiral?
        Admiral Roughead. Yes, sir. I echo some of what's been said
    here. And I think that what we'll find as we go into the
    future, particularly with the force levels that are deployed
    now, especially on our ground forces, the--that number of Guard
    and Reserve will come down significantly, so we're going to
    lose that connectivity into society.
        I think the other thing that's happening is that we're, in
    a way, moving from an All-Volunteer Force to what I would call
    an All-Professional Force, that the number of people serving in
    the military today who have relatives who have been in the
    military is going up. And so, are we going to end up with a
    military that is more removed from society?
        I--on the broader issue of voluntarism, I'm a proponent of
    a national service, but how do you devise a plan that's
    equitable and that some people get to go in the military and go
    in harm's way, and other people go off and do things in the
    homeland that are perhaps a little more benign? And I don't
    know how you get to that. But, I do think that there's a need
    for a commitment to national service.
        Senator Lee. Thank you very much.
        Thank you, Mr. Chairman.
        Chairman McCain. Senator Hirono.
        Senator Hirono. Thank you, Mr. Chairman.
        I'd like to paraphrase something you said, Admiral, the--
    when you acknowledged that the All-Voluntary---Volunteer Army
    was, I think, the single biggest change to the military. Can
    you think of another change that could have this kind of a
    profound impact on the military? Could it be the number of
    women who are serving in the military, or some other example of
    something coming down the pike that would result in a profound
    change to the military?
        Admiral Roughead. I think that the example that you cited,
    women serving in the military, will transform the military, but
    it will not be the change in the total model that we're using.
    I really do think that there may be an opportunity, however, as
    was mentioned here--How do you fuse and how do you design the
    government civilian force and the military force that can
    better share in responsibilities, particularly in the
    headquarters areas? And I think a redesign in the aggregate may
    approach the monumental change that occurred with the All-
    Volunteer Force. And I think it's time to take a look at that.
        Senator Hirono. Mr. Rostker, you noted that flexibility was
    of--I think you used the words ``the most critical'' or a key
    component to what we ought to be instilling in the military.
    Can you give an example, perhaps, of where you see flexibility
    not existing? And how would we ensure flexibility in a system,
    a department that is massive and is still operating under old
    paradigms in many, if not in most, cases?
        Dr. Rostker. I think the most important issue in
    flexibility is to manage the individual skill sets, the
    careers, in ways that make sense for that career. And I would
    do that by removing the statutory limit of 30 years of
    commissioned service and let that be determined by the needs of
    the individual service. We heard about the acquisition corps.
    And we have the same issues in the intelligence area. We have
    the same issues in the chaplains corps and the like. And that
    would give us the flexibility to use people to the maximum
    extent.
        Senator Hirono. I think this panel has made a really strong
    case for looking at DOPMA and the fact that it really doesn't
    make sense to use a one-size-fits-all and everybody leaves at
    age 52, where--but, actually, people make decisions to leave
    much sooner than at age 52. Don't they make decisions earlier
    and--when they see that, if they're going to have to leave at
    52, they're going to decide at a much earlier age to leave.
        Dr. Rostker. Absolutely. I can remember a young JAG [Judge
    Advocate General] officer who was--came to me at 20 years of
    service. He had a wonderful career. He was looking forward. Was
    in the congressional legislation--legislative office and said
    he was given the opportunity to lead one of the military
    service organizations, but he really wanted to stay in the
    Navy. And I said, ``You can't stay in the Navy. The--we cannot
    offer you more than the possibility of 10 more years of
    service, and then you will not be in your early 40s, you'll be
    in your 50s.'' Chances of making admiral--there are two
    admirals--were not--you couldn't take that to the bank. And so,
    I had to counsel him to leave. He would not have left if he saw
    the full career that he could have aspired to, even if he did
    not make flag.
        Senator Hirono. So, the changes to DOPMA should be made at
    the congressional level? Is that----
        Dr. Rostker. That provision would have to be made at the
    congressional level. There is a provision today that the
    Secretaries in military departments could institute special
    boards and the like. But, I think we need to tell the managers
    of the Department that each of the competitive categories, each
    of these occupational groups, should have a career structure
    that makes sense for that group. We allow them to compete
    against each other in the competitive category, but within the
    limits of the DOPMA career structure. We should open up that
    career structure.
        Senator Hirono. As I said, I think you all have made such a
    strong case for making those kinds of appropriate changes to
    DOPMA that I certainly hope that this committee will follow
    through.
        Thank you very much. I yield back.
        Chairman McCain. Senator Rounds.
        Senator Rounds. Thank you, Mr. Chairman.
        Gentlemen, thank you for your service, and thank you for
    being here with us today.
        Just a real quick down-the-line response, please, on this.
    Do you see Goldwater-Nichols jointness requirements as an aid
    or an obstacle to the system itself right now? And if it's an
    obstacle, how would you make it better?
        Dr. Chu?
        Dr. Chu. I think it is both, unfortunately, so it has a
    very good feature, which is to encourage a joint experience,
    especially for those who aspire to more senior positions. It
    has improved the quality of headquarters staffs. I saw that
    when I served in the Department in the late 1980s and it was
    first instituted. At the same time, as I suggested, it's a bit
    too mechanistic and too much oriented through the inputs that
    we think will provide a joint orientation, and not concerned
    enough with whether the outcomes are the ones that we want.
        And I think I would move to more flexibility about how you
    can decide that someone has achieved the experience level that
    you'd like to see that produces the kind of joint orientation
    we'd like to have.
        Senator Rounds. Dr. Rostker?
        Dr. Rostker. I think Dr. Chu is probably right, but I saw
    the negative sides of Goldwater-Nichols. I spent most of the
    '90s on--in service secretariat as the Assistant Secretary of
    the Navy for 6 years and then as Under Secretary of the Army.
    And I saw officers coming into senior ranks who had never
    served on the service staffs. And the model before that was to,
    in fact, serve on the service staff so that great admirals,
    like Carl Trost or Mike Boorda had served to learn their craft
    of managing the enterprise. And managing the business of the
    Navy is not going to be done in the joint arena, it's going to
    be done in the Navy. And the--that next generation spent their
    time being jointed. And then, when it came back to serve on the
    service staffs, they largely did not have that experience.
        I could adjust that, if you give me that 5 more years of
    career content, so they could do both. But, the impact of
    Goldwater-Nichols, because of its statutory requirements, was
    to force out this very valuable time that was spent on the
    service staffs. They still did their sea time, but they did not
    do their service management time, which was so critical for the
    future.
        Senator Rounds. Mr. Hale?
        Dr. Hale. So, I would not get rid of Goldwater-Nichols or
    the joint requirement. I fear, as Admiral Roughead said, a
    return to the tribal approach. But, more flexibility does sound
    like it is appropriate.
        I'll reiterate what I said earlier. I think the civilian
    system worries me more, and we may need some analog to the
    Goldwater-Nichols approach to demand some more rotational
    experience for those who will be our civilian leaders. Perhaps
    we can learn from the experience of the military and avoid the
    adverse consequences. But, it did change behavior, and I think
    some kind of effort on the civilian side would change behavior,
    also, and it needs to happen.
        Senator Rounds. Admiral?
        Admiral Roughead. Yes, sir. As I've mentioned, I really do
    believe that we have to keep the joint imperative on the force.
    It needs to be reinforced at a more senior level. And by
    lifting some of the mandated requirements in the junior ranks,
    I think that we can rebalance the competencies in the service
    staffs.
        You know, we talk a lot about acquisition reform, but a lot
    of how we enter into the acquisition process deals with setting
    requirements and budget decisions and things like that. And by
    forcing in more people earlier into the joint structure, we're
    not building those repetitive tours that give the people the
    experience and the knowledge to really take on some of the hard
    things of acquisition and man training and equipping.
        And so, I think there are some levers that can be pulled to
    adjust the Goldwater-Nichols requirements, but then it also
    needs to be done in conjunction with DOPMA. Because if you
    don't adjust some of these other constraints that you have in
    DOPMA, then I think you're going to impose some new problems
    that you have.
        So, as this is looked at, my recommendation is: look at
    Goldwater-Nichols, look at DOPMA, look at the civilian force,
    and how do you blend them together to get the design that will
    be good for the next couple of decades. And I would submit,
    after 20 or 30 years, it's probably going to be time to take a
    relook again, because times will change.
        Senator Rounds. Thank you, Mr. Chairman.
        Chairman McCain. Senator King.
        Senator King. Thank you, Mr. Chair.
        I'd like to follow up on that exact point, Admiral, thank
    you. That was a very succinct statement.
        Tour lengths. A mundane question. I had the opportunity to
    interview or to chat with General Dunford as he was leaving
    Afghanistan a couple of years ago, and I was overwhelmed by his
    level of expertise and knowledge. He knew everything about
    Afghanistan, and yet he was leaving after 18 months. And I
    thought, nowhere in the public sector would you do something
    like this, take this amount of expertise and knowledge and say,
    ``Okay, time's up, you've got to go up to Sheboygan.''
        Talk to me, Mr. Rostker, about tour lengths. Could we--and
    how much money could we save if we just made tours 4 years
    instead of 3 years? I mean, the cost of moving people, is it--
    are we--is this a remnant of a prior manner of thinking? Is
    there--are there ways to adjust this, both to save money and
    also to maintain expertise?
        Dr. Rostker. If you made that change, you'd get an
    immediate savings, and it would set back into a steady- state,
    and you really would not get that much savings, because the
    force is still built on some notion of rotation.
        Tour lengths should be handled in the same way that Dr.
    Chu's talked about, as increasing the opportunity for people to
    volunteer. We just finished a study for the Defense Department
    in which we posed the question, Would people be willing to
    extend their tours overseas? And only about 40 percent of the
    population said they would. And then we asked the next
    question, If you had a financial incentive, would you be
    willing? And we varied the financial incentive so we could
    understand what was going on. And, for very little--relatively
    little money, we could get up to 60 to 70 percent of the people
    to extend their tours.
        So, we can use tools to better manage the Department and
    have people make voluntary decisions rather than force them to
    say, ``Well, now you're here and we're going to give you
    another 4--another year, even if it's a bad place.'' Let people
    have the opportunity to stay, and let's use reasonable
    financial incentives to encourage them, where that makes sense.
    And I call your attention to the Navy's outstanding program to
    allow this, in initial assignments, to fill hard-to-fill areas.
    We're not making use of those kinds of incentives.
        Senator King. Dr. Chu, slightly changing the focus: force
    structure in the 21st century. And we've--been a lot of talk
    about contractors and civilians. But, it seems to me that the--
    what we ought to be doing is having warfighters be warfighters.
    And if that's what they're trained for, and it's very expensive
    to train them, then the other functions, whether it's
    maintaining the aircraft or serving the meals, should be done
    by somebody other than uniformed personnel who have that
    expensive and extensive training.
        Dr. Chu. Sir, I couldn't agree with you more. And that
    actually was an initiative of the--one of the Secretaries I had
    the privilege of serving was Secretary Rumsfeld--worked hard on
    looking at which functions should be carried by military
    personnel, which are our most expensive asset, pure dollars-
    and-cents perspective, and which ought to be performed by
    civilians. And interesting, the Department made--and, in fact,
    he succeeded in converting about 50,000 slots. So, the military
    numbers weren't up because of these in the war, but he did
    convert about 50,000 billets from military to civilian status,
    which could be either Federal civilians or contractors,
    depending upon the nature of the task.
        Interestingly, the government does--Department does
    maintain a database on this matter. This--inherently a
    governmental commercial activity database, which can serve as a
    guide and does argue that there's a number of positions to
    which we could use civilian personnel, whether those are
    Federal civilians or contractors. So, I think there's more to
    be had, there. And I think that's an important--as I argue in
    my testimony, it's important source of both performance
    improvement and cost savings for the Department. Choose the
    right mix of personnel for the task at hand.
        Senator King. And as long as the contractors are managed
    properly, that's one--one of the long-term bears in the room
    here long-term personnel costs and the tail costs, in terms of
    healthcare and pensions. If you manage contractors properly,
    they bear that risk, and not the taxpayers.
        Dr. Chu. Yes, sir. And I think that's one of the issues in
    thinking about Federal civilians versus contractors--and back
    to the issue of low performers on the Federal Civil Service.
    One of the reason entities within DOD and other government
    agencies find contractors so attractive, in my judgment, is
    they can turn the contract on and off. If the need diminishes,
    you can stop the activity. It's much harder to do that under
    the U.S. Federal Civil Service practices, not necessarily the
    statutes, but the way they are implemented. And I think that's
    one of the issues that the committee might usefully address.
        Senator King. Thank you.
        Thank you, Mr. Chairman.
        Chairman McCain. Senator Kaine.
        Senator Kaine. Thank you, Mr. Chair.
        And thanks, to the witnesses.
        I have a--one question about recruiting and one kind of
    about structural issues during the tenure of someone's service.
        On the recruiting side, there was an Economist article in
    late October, and the title was ``Who Will Fight the Next
    War?'' And it was about difficulties in recruiting young people
    into military careers. You know, even with only 1 percent
    serving, so the number may be small relative to the general
    population, there's been some challenges recently--I think
    mostly--most of the publicity has been around the Army. But,
    you know, you take the cohort of young people you're trying to
    recruit, and you put out anybody who is, you know, barred
    either because of academic misperformance or a felony or poor
    physical conditioning, then you really whittle down the
    available core. And then that available core has other
    opportunities, too.
        Obviously, better pay is one recruiting mechanism. But, as
    you think about the recruiting needs, you know, the--we want to
    continue to bring in the best and the brightest for the very
    long term. What advice would you have for us as we think about
    things to do, separate from the salary side? Because we can
    figure that out. But, what are things that make the career an
    attractive one that, from that available component of young
    people, would get more to say, ``I want to make a military
    career''?
        Dr. Chu. I'll be delighted to start. I think I'd come back
    to something that Mr. Hale emphasized, which is how the country
    values the service of the individual. One of the things I
    thought was very interesting in the surveys--the Department
    does those surveys of young people's attitudes, as you know,
    the surveys in the early part of the century--is that the
    reasons cited for being interested in the military changed from
    what had been true 10-20 years earlier, which had focused, in
    that earlier period, on learning a skill. And it may sound a
    little bit old- fashioned, but a good deal of the responses
    focused on patriotic values of one sort or another. And so, I
    think the way the country honors the service of the individual
    and speaks to service as being a calling that is part of your
    duty as a citizen, as opposed to something that is something
    somebody else does, which is too much, I think, part of the
    current American conversation, I think that is of enormous help
    to the Department's recruiting apparatus.
        Admiral Roughead. Senator, I----
        Senator Kaine. Admiral Roughead.
        Admiral Roughead.--as I looked at the future, the thing I
    watched most were the economic predictions, because that's
    what's really going to drive your recruiting. And compensation
    is important, but it really is the total compensation. And how
    do you deal, particularly with the force now that is more
    married than when I came in--that's a significant component
    that has to be taken into account.
        But, with regard to the positive experience, the one thing
    that we discount--and I've been through this cycle in my
    career--that when you take away the means for a young
    professional to properly maintain their equipment, to have the
    resources to go out and do the things that they enjoy doing,
    whether it's flying or being out on a submarine, or whatever,
    that is huge. And, as we struggle with the departmental costs,
    and as we come down on those operation and maintenance funds
    that allow for proper maintenance and pride in what they do,
    the opportunity to do what they love to do, cutting those funds
    is going to have a significant impact. When those go up, you
    can see the attitude of the force change, because they're given
    the tools and the means to do that which they came in the
    military to do.
        Senator Kaine. Just to close the circle on that, I want to
    make sure I understand your point. So, if we're dealing with
    budget caps or a tough budget environment, we've tended to--
    while we can't take it all out of personnel, and if we did,
    we'd have to grandfather it, and we'd only see the savings way
    down the road. And we can't cancel weapons acquisitions
    midstream, so we tend to take it out of readiness and O&M
    expenses and, you know, decrease the number of flying hours
    that are available to people who want to be aviators or
    decreasing the training that's available for people who want to
    do that, and then that becomes kind of a demoralization factor
    that either will make people not come in or maybe more likely,
    when they're in, make then decide to hasten their departure.
        Admiral Roughead. Yes, sir. And I go back in my earlier
    days in the Navy when I had young sailors bringing their own
    tools from home to maintain the equipment that they were
    responsible for. When that changed, things changed
    dramatically. And I--and so, this O&M dimension is more than
    just how many ships you have deployed or how many airplanes
    you're flying. It's much, much more substantial than that.
        Dr. Hale. Senator----
        Senator Kaine. Please, Mr. Hale.
        Dr. Hale.--Kaine, at least in the last 5 years, we've
    actually cut back primarily in the procurement areas to meet
    the budget caps, in that services have tended to try to
    maintain the operation and maintenance funding, I think,
    because of the readiness concerns. Moreover, as I said in my
    testimony, I mean, the Congress has made some changes, or
    allowed changes to be made, in compensation that have freed up
    funding, and, depending on the recruiting climate, some modest
    additions to that may be appropriate. Because, as Admiral
    Roughead said, it's not just the money, it's whether or not you
    are trained, you feel you can actually operate. That's maybe
    particularly true with the Reserves. Ironically, I think we
    used the Reserves heavily--and I take my hat off to them--over
    the last 14 years. I worry that we'll use them a lot less now,
    and they want to be used in militarily meaningful ways--not all
    the time, but occasionally. So, the services, I think, are
    pushing hard to keep the O&M budgets up, and the Congress needs
    to help them, where that's appropriate.
        Senator Kaine. Thank you. I had a second question dealing
    with the use of kind of a specialist designation, which I know
    services have used to try to provide non-career--non-
    traditional, non-up-or-out career paths, but I think I'll ask
    that one for the record, since I'm over time.
        Thank you, Mr. Chair.
        Chairman McCain. Go ahead.
        Senator Kaine. Well, I just--if I could on that, several of
    the military services have had a fairly extensive rank
    structure known as ``specialists'' that went beyond the current
    system, not so much ``up or out,'' for the recruiting of
    specific technical skills. Is that something that's still done?
    Should it be done more? Does that provide some of the
    flexibility that a number of you have talked about in your
    testimony?
        Dr. Chu. Yes, absolutely. The classic case, in my judgment,
    is the Army use of warrants for helicopter pilots. So, you can
    aspire to a long career at the flight controls. It has a small
    cadre of what we call--classically have called ``commissioned
    officers'' who are prepared for the more senior
    responsibilities in the enterprise. The Navy has used limited
    duty officers for some elements of that. We have that in the
    professions. So, the judge advocate generals corps, although--
    except for what Dr. Rostker said about promotion
    opportunities--career limits--but, for doctors, chaplains,
    health professional service kinds, we have carved out somewhat
    different paradigms over time. The Navy's supply corps is
    another example of that approach.
        So, there are other ways to do this. They may not be used
    as aggressively and as immediately when a new issue like cyber
    comes up. So, cyber comes up, we immediately turn to the line
    structure as our model, not to these other opportunities as a
    way to proceed, including, I might emphasize, back to Senator
    King's question, Federal civilians who could hold Reserve
    appointments if that becomes an important issue from a Law of
    War perspective.
        Senator Kaine. Thank you, Mr. Chair.
        Thanks, to the witnesses.
        Chairman McCain. Senator Gillibrand.
        Senator Gillibrand. Thank you, Mr. Chairman.
        On January 24th, 2013, the Secretary--then Secretary of
    Defense Leon Panetta announced the repeal of the Combat
    Exclusion Policy. The Secretary gave the three services and
    Special Operations Command until January 1, 2016, to open all
    positions to women or formally request an exception to keep
    certain positions closed.
        Admiral Roughead, can--what can the other branches learn
    about the Navy--or learn from the Navy about integrating women
    once these positions are open? And we know that women attain
    advanced degrees at a higher rate than men, suggesting they may
    well be positioned to offer expertise to the DOD, yet about
    half the women separate from the service after their first
    commitment. What are the reasons women do not remain in the
    military? Why do they make up such a small percentage of the
    services? And how could the military better recruit and retain
    women?
        Admiral Roughead. Thank you very much for the question.
        I think that what the Navy has done is open certain
    specialties, early on, which one would classify in a combat
    category. And only now are we beginning to see women rise to
    positions of leadership, where young women who are coming in
    the Navy today can look up and see themselves, and also having
    in place the types of programs that allow family considerations
    to be emphasized. And so, now we have young women coming in the
    Navy that can see themselves, can see having a professional
    fulfilling career, and also see their personal life fulfilled.
    And it's going to take a little bit of time, but I think we
    have to open up those opportunities and look at supporting both
    professionally and personally as young women progress through
    the ranks.
        Senator Gillibrand. So, one of the supports that you've put
    in place is a very good paid leave policy. Do you think that's
    relevant for your ability to retain women?
        Admiral Roughead. I think that that is important. One of
    the things that we did during the time that I was on Active
    Duty, with the help of Congress, was to put in a pilot
    sabbatical program. I think that's helpful. But, it--I think
    it's also important to recognize that it's not always the young
    woman that will take advantage of the sabbatical. It may be
    that, in a dual-service family, that the male spouse takes over
    that responsibility.
        Senator Gillibrand. And we've seen, in the civilian world,
    that that really makes a difference. When men and women both
    take paid leave, it enhances people's values to support
    families overall. And it doesn't marginalize the woman because
    she's the only one who ever takes time off for the dying mother
    or the sick child or the new infant. So, it makes a difference
    that you do encourage it to be gender- neutral, because then
    you become a family-friendly place, and it's not just the women
    who are being sidelined.
        Admiral Roughead. Exactly. And the family will decide what
    career they want to prioritize over the other. And that's----
        Senator Gillibrand. At a given time.
        Admiral Roughead.--a decision that they have to make, and--
    --
        Senator Gillibrand. Right.
        Admiral Roughead.--not one that should be made by the
    service.
        Senator Gillibrand. Yeah. I think that's wonderful. Thank
    you.
        Do any of you have anything you want to say on these topics
    before I move to the next topic?
        [No response.]
        Senator Gillibrand. Okay.
        Traditionally, military training has followed a generalist
    or a one-size-fits-all approach. However, technology is
    becoming increasingly complex, requiring a specialized set of
    skills. We have also seen emerging threats in new areas, such
    as cyberwarfare. The private sector offers more money and no
    requirements, like boot camp. All together, these trends
    suggest that there might be a benefit for the military to
    consider different models that would allow at least some of our
    servicemembers to be recruited and retained in a different way.
    What changes do you think would be needed, in terms of
    recruiting and training personnel, to better position the
    military to develop cyberwarriors? How might we better leverage
    our Reserve components to address recruitment and retention of
    cyberwarriors? And are there ways the military can collaborate
    with the private sector to improve cybersecurity specialties
    and capabilities?
        Dr. Chu. Senator, I think you raised an important issue,
    and it does open the door on a conversation about one matter we
    have not discussed today, and that is the opportunity for
    lateral entry. We do allow it for the professions--so, the
    chaplains, health professionals, lawyers, that's okay. But, we
    don't for the rest of the structure, as a generalization. The
    Reserves are better at it, for a variety of reasons. And I
    think this notion of encouraging people who are mid-career in
    the civil sector to think about a period of military service
    under rules that are available to the Department, or could be
    made available to the Department, would be an important step
    for the future.
        Senator Gillibrand. Would you, for the record, give me a
    letter on that describing what you would envision for lateral
    service and what type of accommodations you would make. Because
    I envision someone who's brilliant behind a computer that's
    never going to be brilliant behind a rifle. So, I can imagine
    that, when you can designate someone to be a cyberwarrior, to
    be a cyberdefender, necessarily--being in the field is not
    necessary, because they can be behind a computer anywhere in
    the world at any given time. So, I'd like you to be specific
    about what that would look like, because I'd like to have that
    for the record.
        [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Dr. Chu. Delighted to do so. Thank you, ma'am.
        Senator Gillibrand. Thank you, Mr. Chairman.
        Chairman McCain. Thank you.
        Just briefly, would the witnesses agree that, although it's
    a beginning, this change in the retirement system is the right
    thing to do?
        Dr. Chu. Yes, sir.
        Dr. Rostker. Yes.
        Dr. Hale. Yes.
        Admiral Roughead. Yes, sir.
        Chairman McCain. Thank you.
        On the issue of tours, very briefly, Dr. Rostker, there's
    a--different kinds of tours, as you know. There's the overseas
    tour at a base in Germany, where we have the school and the
    hospital, et cetera, and then we have the rotational through
    our joint base in Australia. I mean, there--when we talk about
    ``tours,'' it's--I think we ought to define it a little bit.
        And, Admiral Roughead, I'm informed that the carriers are
    now on 10-month deployments. I think that's too long. And I
    think it's harmful. Do you agree?
        Admiral Roughead. I agree completely. We've been through
    this before, and, when we talk about retention, the longer you
    stretch those deployments out, the--you'll see the effect in
    retention. And I would submit that the model of getting to 6-
    month deployments worked out very well for us. It seemed to
    strike the right balance between familiarity with the region in
    which you're operating and retention.
        Chairman McCain. And time in different ports is drastically
    reduced, as well. It's too tough on these people and their
    families, this kind of separation. And maybe I have some bias,
    but clearly I'd--I'm even--I understand that our obligations
    are expanded, but to keep people at sea for that long a period
    of time, I'd be interested--maybe we can get a readout from the
    Navy on what it does to retention.
        Chairman McCain. Finally, could I say--I thank the
    witnesses--the complexities of these issues, I'm aware of. And
    I know that Jack and I appreciate it. But, this testimony
    today, I think, emphasizes to me that we really have scratched
    the surface, to start with; and, second of all, the--none of
    these issues are simple. None of them are--that there's just a
    easy solution to them. And I think your testimony today, with
    the benefit of probably a century of experience on personnel
    issues, has highlighted the complexities of many of these
    challenges we face, and the need for us to act. But, we want to
    remember the old adage about ``First, do no harm.''
        So, I appreciate the witnesses here today. I appreciate
    your long, many years? service to the Nation. And,
    unfortunately, we will be interrogating you again in the
    future.
        Thank you.
        [Whereupon, at 11:29 a.m., the hearing was adjourned.]

                                     [all]