    [Senate Hearing 114-204, Part 3]
    [From the U.S. Government Publishing Office]

                                                   S. Hrg. 114-204, Pt. 3

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2016 AND THE FUTURE YEARS DEFENSE PROGRAM

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1356

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2016 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
       MILITARY PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR, AND FOR OTHER
                                    PURPOSES

                                   ----------

                                     PART 3

                        READINESS AND MANAGEMENT SUPPORT

                                   ----------

                          MARCH 11, 25; APRIL 22, 2015

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

             Printed for the use of the Committee on Armed Services

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

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                          COMMITTEE ON ARMED SERVICES

                         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

                                     ______

                Subcommittee on Readiness and Management Support

                     KELLY AYOTTE, New Hampshire, Chairman

    JAMES M. INHOFE, Oklahoma            TIM KAINE, Virginia
    DEB FISCHER, Nebraska                CLAIRE McCASKILL, Missouri
    MIKE ROUNDS, South Dakota            JEANNE SHAHEEN, New Hampshire
    JONI ERNST, Iowa                     MAZIE K. HIRONO, Hawaii
    MIKE LEE, Utah                       MARTIN HEINRICH, New Mexico

                                      (ii)

                                C O N T E N T S

                                  ----------

                                 march 11, 2015

                                                                       Page

    Military Construction, Environmental, Energy, and Base Closure
      Programs.......................................................     1

    Conger, John C., Performing the Duties of Assistant Secretary of
      Defense, Energy, Installations and Environment.................     5
    Hammack, Hon. Katherine G., Assistant Secretary of the Army,
      Installations, Energy and Environment..........................    23
    McGinn, Hon. Dennis V., Assistant Secretary of the Navy, Energy,
      Installations and Environment..................................    32
    Ballentine, Hon. Miranda A. A., Assistant Secretary of the Air
      Force, Installations, Environment and Energy...................    39

    Questions for the Record.........................................    69

                                 march 25, 2015

    The Current State of Readiness of U.S. Forces....................    75

    Allyn, General Daniel B., USA, Vice Chief of Staff, U.S. Army....    79
    Howard, Admiral Michelle J., USN, Vice Chief of Naval Operations,
      U.S. Navy......................................................    88
    Paxton, General John M., Jr., USMC, Assistant Commandant, U.S.
      Marine Corps...................................................    94
    Spencer, General Larry O., USAF, Vice Chief of Staff, U.S. Air
      Force..........................................................   102

    Questions for the Record.........................................   131

                                 april 22, 2015

    Reform of the Defense Acquisition System.........................   163

    Shyu, Hon. Heidi, Assistant Secretary of the Army for
      Acquisition, Logistics, and Technology.........................   165
    Stackley, Hon. Sean J., Assistant Secretary of the Navy for
      Research, Development and Acquisition..........................   169
    LaPlante, Hon. William A., Assistant Secretary of the Air Force
      for Acquisition................................................   176

    Questions for the Record.........................................   204

                                     (iii)

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2016 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                           WEDNESDAY, MARCH 11, 2015

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

    MILITARY CONSTRUCTION, ENVIRONMENTAL, ENERGY, AND BASE CLOSURE PROGRAMS

        The subcommittee met, pursuant to notice, at 2:32 p.m. in
    room SH-216, Hart Senate Office Building, Senator Kelly Ayotte
    (chairman of the subcommittee) presiding.
        Committee members present: Senators Ayotte, Rounds, Ernst,
    Kaine, Hirono, and Heinrich.

          OPENING STATEMENT OF SENATOR KELLY AYOTTE, CHAIRMAN

        Chairman Ayotte. Good afternoon. Today, the Readiness and
    Management Support Subcommittee meets to receive testimony on
    military construction, facility sustainment, environmental and
    energy programs of the Department of Defense. Senator Kaine and
    I look forward to working with you very much this Congress, as
    we have the opportunity of leading this important subcommittee
    of the Armed Services Committee.
        We are joined today by Mr. John Conger, who is performing
    the duties of Assistant Secretary of Defense for Energy,
    Installations and Environment; the Hon. Katherine Hammack,
    Assistant Secretary of the Army for Installations and
    Environment; the Hon. Dennis McGinn, Assistant Secretary of the
    Navy for Energy, Installations, and Environment; and the Hon.
    Miranda Ballentine, the Assistant Secretary of the Air Force
    for Installations, Environment and Energy.
        We look forward to hearing your testimony, and I,
    certainly, appreciate Mr. Conger being here since he is a
    Granite Stater. It is always great to see you.
        Well-maintained, modern Department of Defense installations
    play an essential role in maintaining the readiness of our
    Armed Forces. Military construction (MILCON) projects are not
    just buildings. They are the homes and barracks in which our
    soldiers, sailors, airmen, and marines live. They are the
    facilities where servicemembers and our skilled Department of
    Defense (DOD) civilians work, train, conduct maintenance and
    support operations. That is why we must not shortchange
    military construction or facilities sustainment, restoration,
    and modernization funding.
        The Department of Defense has proposed a budget for 2016
    that includes $8.4 billion for military construction, including
    family housing, and $10.6 billion for facility sustainment,
    restoration, and modernization.
        I look forward to discussing this request in detail.
        I will also be interested in hearing from our witnesses
    about the impact on these programs of a potential return to
    defense sequestration. We need a defense budget based on our
    National security interests and the threats we face, not an
    arbitrary budget that is based on caps, which ignore the fact
    that the foremost responsibility of the Federal Government is
    to protect the American people.
        I look forward to working in a bipartisan way with the
    members of this committee to address defense sequestration.
        Before I turn to my ranking member and we hear from the
    witnesses, I would like to address some military construction
    issues that are important to New Hampshire and our National
    Guard and my constituents who work at the Portsmouth Naval
    Shipyard.
        I had the opportunity to welcome recently the Air Force
    Chief of Staff, General Welsh, to Pease Air National Guard Base
    last month, where we discussed ongoing preparations for the KC-
    46A. In anticipation of the arrival of the KC-46A, I am very
    pleased that the $41.9 million in military construction
    projects at Pease Air National Guard Base that we authorized
    last year in the 2015 National Defense Authorization Act (NDAA)
    are moving ahead.
        More specifically, the projects will modernize the aircraft
    ramp refueling system, reconfigure the airfield's parking apron
    and taxi lanes, and expand and upgrade two aircraft hangars
    that are on track.
        I am also is very pleased that the department is requesting
    $2.8 million for fiscal year 2016 to upgrade the flight
    simulator at Pease to allow our pilots to train for the bedding
    of the KC-46A.
        While there is very positive MILCON progress for New
    Hampshire, in terms of the Air National Guard, I continue to be
    troubled by the condition of New Hampshire Army National Guard
    readiness centers, and I know that we've talked about this in
    our meetings. This is a trend that I know is reflected across
    the country.
        However, the condition of readiness centers in New
    Hampshire is particularly unacceptable. The average condition
    index of New Hampshire Army National Guard readiness centers is
    poor, 64 out of 100, and ranking New Hampshire 51 out of 54
    States and territories evaluated nationwide.
        The Manchester Readiness Center was constructed in 1938. It
    does not comply with building code standards, as well as life,
    health, safety, and antiterrorism force protection standards.
        Members of the New Hampshire Army National Guard and
    servicemembers like them around the country deserve better, and
    I am pleased that the department is finally requesting funding
    for the New Hampshire Army National Guard vehicle maintenance
    shops in Hooksett and Rochester for 2017, as well as readiness
    centers in Pembroke and Concord for 2018 and 2020,
    respectively.
        Considering the poor state of New Hampshire Army National
    Guard facilities, it is essential that these projects not be
    postponed and that they stay on schedule.
        I also look forward to addressing the MILCON situation at
    Portsmouth Naval shipyard, which is the Navy center of
    excellence for fast attack submarine maintenance,
    modernization, and repair. I also look forward, with the
    ranking member, to talking about and having hearings about the
    importance of our shipyards.
        I would like to get an update on the P-266 structural shops
    consolidation reprogramming from all of you. I look forward to
    discussing two other military construction projects that I
    understand have been delayed from fiscal year 2016 to 2018, and
    that is the P-309 crane rail and P-285 barracks.
        Finally, the department is once again seeking authority for
    another round of base realignment and closure, or BRAC, a BRAC
    round, despite the cost and inefficiencies associated with the
    2005 BRAC round. That round is conservatively estimated to have
    cost $35 billion and has been the subject of much discussion
    and criticism.
        Even after acknowledging the shortcomings of the 2005
    round, the Department continues to request the same legislative
    framework. I remain opposed to BRAC and do not want to give the
    department the open-ended authority to pursue another BRAC
    round that has the potential to incur significant upfront costs
    when we do not have the room in our budget in the next few
    years to afford many of the fundamental readiness issues that
    we need to address.
        I thank our witnesses for being here and for all that you
    do for our country, and I would like to turn it over to my
    ranking member, Senator Kaine from Virginia.

                     STATEMENT OF SENATOR TIM KAINE

        Senator Kaine. Thank you, Madam Chairwoman. Thank you all
    for your service and for being here today, and also to all of
    our colleagues who are joining us for this important
    discussion. The hearing is to receive testimony on military
    construction, environmental, energy, and base closure programs,
    as we look at the defense authorization request for fiscal year
    2016 and Future Years Defense Programs. These are important
    topics, and let me just address a couple of them, getting right
    to it.
        Madam Chair, I do look forward to working with you. This
    committee is really a good one in the Senate because we have
    such a tradition of bipartisanship. That doesn't mean we don't
    have differences of opinion, because these are tough issues. We
    are going to have differences of opinions on many issues. But
    we work in a bipartisan way, and I know that that is the way
    this subcommittee will operate.
        On the military construction side, as the chairwoman
    indicated, the budget is $8.4 billion. The good news is that is
    $1.5 billion higher than fiscal year 2015. That is good, but in
    historical perspective, the MILCON requests that were forwarded
    to the DOD in the early 2000s to Congress averaged about $20
    billion a year.
        The budget request for facility sustainment, restoration,
    and modernization is trending positively, 81 percent of the
    requirement necessary to keep facilities in good working order
    would be met by this request, up from 65 percent last year.
    That is positive, but that would suggest, even if we met the
    request, 20 percent of our needs would remain unfunded. That
    can lead, over time, to degradation of facilities that our
    servicemembers live and work in, higher costs to address
    deficiencies, to do repairs, and to ultimately need to replace
    the infrastructure sooner than you otherwise would have to if
    you were maintaining it at an optimal level.
        On the energy side, the DOD is the largest energy user in
    government, and it continues to make significant operational
    investments in fiscal year 2016. This is a statistic that kind
    of stunned me when I came across it. During Operation Iraqi
    Freedom, 20 percent of all casualties came from units having to
    protect resupply convoys, of which 70 percent to 80 percent of
    resupply was for water and fuel. So the energy, fuel, water
    issues are critical.
        There shouldn't be anything politically divisive about
    investments that enhance combat capabilities, save lives,
    increase energy security, and reduce the logistical burdens
    that can lead to insecurity. The Navy invests in more efficient
    hull coatings, stern flaps, and bow bulbs that allow ships to
    stay out an extra week and use fuel more efficiently. This
    results in a longer presence at sea without intrusive
    maintenance.
        I continue to support these smart investments and urge my
    colleagues to do the same.
        One success story in the last years has been the tremendous
    drop in the per unit cost for purchases of biodiesel. Even
    between 2012 and today, we have seen a drop in the per gallon
    costs from the $12 range to the $3.50 range, with more positive
    developments to come.
        I am encouraged to see that climate change adaptation
    roadmap last year, because the DOD is the environmental
    stewards of tens of thousands, hundreds of thousands of acres
    of land in the U.S. for decades, and are some of the most
    forward-thinking stewards of these land resources.
        Virginia understands very, very well that weather events
    have severe consequences on the operation of our military. Mr.
    Conger was with us this summer in Hampton Roads in August, when
    we held a community-wide discussion about the effects of sea
    level rise and its critical impact on a number of Virginia
    bases, including the largest naval base in the world, the
    Norfolk Naval Base and Langley Air Force Base.
        The Norfolk Naval Shipyard experiences today floods on a
    regular basis, deploys over 10,000 sandbags along with a
    floodwall and a super-floodwall under its destructive weather
    plan. There are plans at this space to build an additional
    8,000-foot floodwall to protect the shipyard and its drydock
    from the effects of sea level rise.
        These are not tomorrow issues. They are today issues.
        Underpinning all these, as the chairwoman ably stated, is
    the need to remove budget caps wisely and to, thus, reduce the
    threat of sequestration.
        In a hearing yesterday in the full committee, I said, as
    somebody who has done a lot of budgets in the private sector
    and public sector, sequestration violates every last budget
    principal that any wise public or private sector manager would
    embrace.
        There isn't any reason that we should just keep drifting
    along on this path when we have the capacity to change it. That
    is something that, as both a Budget and Armed Services
    Committee member, I want to work on.
        The tools that have allowed the Department of Defense to
    weather the first few years of sequestration, the budget
    storms, the furloughs, the government shutdowns, the
    uncertainty, those tools, largely, the easy tools have been
    used. So there were unobligated balances that have now been
    used, and other tools that are not so easy to come by as a
    shock absorber. So if the budget caps remain in place, the DOD
    will be forced to sacrifice much needed investments in
    facilities, energy, and environmental cleanup. Readiness seems
    to take the most significant hit.
        So what your views are on these issues are critical.
        Finally, I will just say a word about BRAC. I have been
    involved in BRAC from many different sides of the aisle. As a
    mayor, as a governor in the 2005 round, lieutenant governor and
    governor, working on BRAC issues. While I, certainly,
    understand the need to periodically rationalize base
    infrastructure, just like we analyze what weapons system makes
    sense, or should there be changes to the personnel, we have to
    look at all the assets on the table, especially at a time when
    we have a significant budget deficit and debt.
        I have had questions about the BRAC process, whether it is
    the best way to do that very thing. As the chairwoman
    indicated, while we wouldn't necessarily assume that 2005 would
    be precisely analogous, nevertheless, the 2005 BRAC round was
    not a cost-saver. It was a cost increase that significantly
    exceeded the budget at that time. We have, I think, some
    legitimate worries about whether it would be the same.
        So we look forward to hearing your views on those going
    forward as well.
        Senator Ayotte, thanks for calling this hearing.
        For the witnesses, thanks for your service, and we look
    forward to your testimony. I know all members will have
    significant questions.
        Thanks very much.
        Senator Ayotte. Thank you so much, Senator Kaine.
        I would like to call Mr. Conger for his testimony. Thank
    you.

    STATEMENT OF JOHN C. CONGER, PERFORMING THE DUTIES OF ASSISTANT
      SECRETARY OF DEFENSE, ENERGY, INSTALLATIONS AND ENVIRONMENT

        Mr. Conger. Thank you very much. Chairwoman Ayotte, Ranking
    Member Kaine, distinguished members of the subcommittee, I
    appreciate the opportunity to be here to discuss the
    department's fiscal year 2016 request for energy,
    installations, and environment.
        My written statement addresses the budget request in
    detail. So instead of summarizing it, I would like to raise
    just two topics for you to consider as we enter today's
    discussion.
        First, we cannot contemplate the budget request without
    considering the context of the Budget Control Act of 2014 (BCA)
    caps. The department submitted a budget request that was $35
    billion higher than the caps, $38 billion higher than last
    year. Forcing us to adhere to these caps will have
    reverberations across the budget.
        The President's Budget request includes a significant
    increase for facilities over last year's request, nearly $2
    billion in MILCON and $2.5 billion in facilities, sustainment,
    and recapitalization. Legislation will be required to provide
    relief from the Budget Control Act caps, like the relief
    provided by the Bipartisan Budget Act a couple years ago.
        If you must adhere to the BCA caps, Congress will have to
    cut $35 billion from this request and will, certainly, have to
    consider cutting funds from the request for facilities.
        On this note, I would like to recognize the strong support
    of this committee, of Chairman McCain, of Senator Reed, and
    appreciate the fact that they have already advocated a higher
    budget figure to the Senate Budget Committee.
        The second issue I wanted to raise was BRAC. It should be
    no surprise that we are again requesting authority to conduct a
    BRAC round. As we deal with this constrained budget
    environment, considerable force structure decreases since 2005,
    we must look for ways to divest excess spaces and to reduce the
    cost of supporting our smaller force structure.
        I wanted to make a few key points about BRAC as we go into
    today's discussion.
        First, the Army and the Air Force have done analyses,
    indicating 18 percent and 30 percent excess capacity already. I
    will note that the Army's analysis is based on a figure of
    490,000 soldiers, not the projected 450,000. This aligns with
    our prediction, based on the analysis we performed in 2004.
    There is clearly enough excess to justify another BRAC round.
        Second, partially in response to Congress' urging, we
    conducted a BRAC-like review of European facilities, delivered
    to Congress in January 2015, which we project will save more
    than $500 million annually, once implemented.
        I am happy to take questions on that when we enter into the
    discussion.
        Third, in this budget environment, a new round of BRAC must
    be focused on efficiencies. I know BRAC 2005 was unpopular,
    expensive, and not necessarily the way that this committee
    would want to see a BRAC handled. But the recommendations from
    that round were not necessarily designed to save money. That
    was the problem.
        We did an analysis of those recommendations and found that
    roughly half of the recommendations would pay back in less than
    7 years. From the outset, that was the intent. From the outset,
    the intent was for the other half to have either no payback at
    all or to payback in more than 7 years.
        If you look at the planned efficiency recommendations,
    those cost $6 billion and pay back $3 billion a year in
    perpetuity. That shows that when we want to save money, we do.
        The other recommendations, the ones that were more
    transformational in nature, that were never intended to save
    money, cost $29 billion and save $1 billion a year. So
    successfully, we don't save money when we are not trying to.
        So the point is that if we wanted to hold an efficiency
    BRAC round that mirrors the success of the 1990s, we can.
        The new issue that has been raised during this year's
    discussions the chair mentioned earlier, is that we can't
    expect Congress to pass our legislative proposal because it
    mirrors the 2005 legislation. I understand the reality that no
    matter how many times the administration asserts that a future
    BRAC round will be about cost savings, Congress may want more
    than just our assurance.
        Let me be clear, we are open to a discussion on this point.
    I would like to solicit your suggestions as to changes in the
    BRAC legislation that would make it more acceptable. I would
    offer that Congressman Smith from the House Armed Services
    Committee introduced a proposal last year that puts more
    constraints on what we might do in execution of BRAC
    recommendations.
        I would note that, in last year's defense authorization
    bill, there was a cost cap placed on the Guam relocation that
    we were told to spend no more than this amount, you have no
    more authority than this. A model like that would be worth
    discussion.
        There are a number of things we can do. We are not
    necessarily wedded to the original proposal. We want to have a
    conversation about this.
        So with that, let me yield back. I appreciate your time and
    look forward to your questions.
        Senator Ayotte. Thank you, Mr. Conger.
        [The prepared statement of Mr. Conger follows:]
                     Prepared Statement by Mr. John Conger
                                  introduction
        Chairman Ayotte, Ranking Member Kaine and distinguished members of
    the subcommittee: Thank you for the opportunity to present the
    President's fiscal year 2016 budget request for the Department of
    Defense programs supporting energy, installations, and the environment.
        In my testimony, I will focus first on the budget request. As you
    will note, the Administration's budget includes $8.4 billion for
    Military Construction (including family housing), and $10.6 billion for
    Facility Sustainment and Recapitalization. These are both significant
    increases from last year, increases made possible because the total
    defense budget request is $35 billion more than the Budget Control Act
    cap for fiscal year 2016. It allows a significant reduction in
    facilities risk from last year, but if we are compelled to return to
    the budget caps, we will undoubtedly need to accept more risk in
    facilities. As I have said in the past, facilities degrade more slowly
    than readiness, and in a constrained budget environment, it is
    responsible to take risk in facilities first.
        My testimony will also address the environmental budget. This
    budget has been relatively stable, and we continue to show progress in
    both our compliance program, where we've seen a decrease in
    environmental violations, and in cleanup, where 82 percent of our
    39,000 sites have reached Response Complete. We remain on track to meet
    our goals of 90 percent Response Complete in 2018, and 95 percent in
    2021.
        Given the merger between the Installations & Environment office and
    the Operational Energy Plans and Programs office into the new, combined
    Energy, Installations & Environment office, this testimony will also
    address both Operational and Facilities Energy budgets, though these
    are not as explicitly broken out in the budget request in the same way
    many of the facilities and environmental accounts are. I will address
    the Operational Energy Budget Certification in my testimony, though the
    formal certification report will follow separately.
        In addition to budget, I will also highlight a handful of top
    priority issues--namely, the Administration's request for BRAC
    authority, European consolidation efforts, the status of the movement
    of Marines from Okinawa to Guam, an overview of our energy programs,
    and climate change.
       fiscal year 2016 budget request--military construction and family
                                    housing
        The President's fiscal year 2016 budget requests $8.4 billion for
    the Military Construction (MILCON) and Family Housing Appropriation- an
    increase of approximately $1.9 billion from the fiscal year 2015 budget
    request (see Table 1 below). This increase recognizes the Department's
    need to invest in facilities that address critical mission requirements
    and life, health, and safety concerns, while acknowledging the
    constrained fiscal environment. In addition to new construction needed
    to bed-down forces returning from overseas bases, this funding will be
    used to restore and modernize enduring facilities, acquire new
    facilities where needed, and eliminate those that are excess or
    obsolete. The fiscal year 2016 MILCON request ($6.7 billion) includes
    projects in support of the strategic shift to the Asia-Pacific,
    projects needed to support the realignment of forces, and projects to
    take care of our people and their families, such as unaccompanied
    personnel housing, medical treatment facilities, and schools.
        Despite the slight increase in this year's budget request, the DOD
    Components continue to take risk in the MILCON program in order to
    decrease risk in other operational and training budgets.
        While the Department's fiscal year 2016 budget request funds
    critical projects that sustain our warfighting and readiness postures,
    taking continued risk across our facilities inventory will degrade our
    facilities and result in the need for significant investment for their
    repair and replacement in the future. Our limited MILCON and Family
    Housing budget for fiscal year 2016 leaves limited room for projects
    that would improve aging workplaces, and therefore, could adversely
    impact routine operations and the quality of life for our personnel.

               TABLE 1. MILCON AND FAMILY HOUSING BUDGET REQUEST, FISCAL YEAR 2015 VERSUS FISCAL YEAR 2016
                                                [in millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                       Change from Fiscal  Year 2015
                        Category                        Fiscal Year     Fiscal Year  -------------------------------
                                                       2015  Request   2016  Request      Funding         Percent
    ----------------------------------------------------------------------------------------------------------------
    Military Construction...........................           4,859           6,653           1,794             37%
    Base Realignment and Closure....................             270             251            (19)            (7%)
    Family Housing..................................           1,191           1,413             222             19%
    Chemical Demilitarization.......................              39               0            (39)          (100%)
    NATO Security Investment Program................             200             120            (80)           (40%)
                                                     ---------------------------------------------------------------
        Total.......................................           6,559           8,437           1,878             29%
    ----------------------------------------------------------------------------------------------------------------

                             military construction
        We are requesting $6.7 billion in the military construction account
    (note the difference between that and the military construction
    appropriation which includes items like Base Realignment and Closure
    (BRAC) and Family Housing). While this represents a nearly 37 percent
    increase from our fiscal year 2015 request, this level of funding is
    still significantly less than historic trends prior to the Budget
    Control Act. This fiscal year 2016 military construction funding
    request addresses routine requirements for construction at enduring
    installations stateside and overseas, and for specific programs such as
    the NATO Security Investment Program and the Energy Conservation
    Investment Program. In addition, we are targeting MILCON funds in three
    key areas as discussed immediately below.
        First and foremost, our MILCON request supports the Department's
    operational missions. MILCON is key to supporting forward deployed
    missions as well as implementing initiatives such as the Asia-Pacific
    rebalance, European Infrastructure Consolidation, and cyber mission
    effectiveness. Our fiscal year 2016 budget request includes $50 million
    for construction of an airlift ramp and taxiway at Agadez, Niger; $90
    million for construction of a pier replacement and ship maintenance
    support facility in Bahrain; and $94 million for the second phase of a
    Joint Intelligence Analysis Complex Consolidation at Royal Air Force
    Croughton, United Kingdom. The budget request also includes funding to
    support bed-down of new missions, such as $72 million for three
    projects to support arrival of F-35C squadrons at Naval Air Station
    Lemoore, California; $69 million for three projects to support arrival
    of F-35A squadrons at Nellis Air Force Base, Nevada; $37 million for a
    KC-46A Depot Maintenance Dock at Tinker Air Force Base, Oklahoma; $126
    million for a Live-Fire Training Range Complex at Joint Region
    Marianas, Guam; $221 million for two projects supporting an Aegis
    Ashore Missile Defense Complex at Redzikowo Base, Poland; $37 million
    for Literal Combat Ship Support Facilities at Naval Base San Diego,
    California; and $86 million for a Joint Operations Center to support
    U.S. Cyber Command at Fort Meade, Maryland.
        Second, our fiscal year 2016 military construction budget request
    includes $376 million to replace or modernize ten DOD Education
    Activity (DODEA) schools that are in poor or failing physical
    condition, a reduction compared to the fiscal year 2015 request of
    $394.4 million. The projects included in our fiscal year 2016 budget
    request, four of which are at enduring locations overseas, support the
    Department's plan to replace or recapitalize more than half of DODEA's
    schools over the next several years, but at a slower pace to improve
    execution and to allow time for DODEA to assess the impact of pending
    force structure changes. The recapitalized or renovated facilities,
    including a $55 million replacement elementary school at West Point,
    New York, are intended to be models of sustainability and will provide
    a modern teaching environment for the children of our personnel.
        Third, the fiscal year 2016 budget request includes $673 million
    for seven projects to upgrade our medical treatment and research
    facilities, to include $122 million for a behavioral health/dental
    clinic at Schofield Barracks, Hawaii and $124 million for replacement
    of a medical/dental clinic at Marine Corps Air Station Kaneohe Bay,
    Hawaii. The request also includes $85 million for the fifth increment
    of the Rhine Ordnance Barracks Hospital Replacement, Germany; $239
    million for the seventh increment of the Fort Bliss Hospital
    Replacement, Texas; and $62 million for the fourth increment of the
    Ambulatory Care Center at Joint Base San Antonio, Texas. Our fiscal
    year 2016 request focuses on medical infrastructure projects that are
    crucial to ensure that we can deliver the quality healthcare our
    service members and their families deserve when stationed stateside and
    during overseas deployments.
        One final note on the MILCON request--while the fiscal year 2016
    Overseas Contingency Operations (OCO) budget request includes $789
    million to continue the President's European Reassurance Initiative
    (ERI) to provide temporary support to bolster the security of our North
    Atlantic Treaty Organization allies and partner states in Europe, the
    request includes no ERI military construction funding.
                        family and unaccompanied housing
        A principal priority of the Department is to support military
    personnel and their families and improve their quality of life by
    ensuring access to suitable, affordable housing. Service members are
    engaged in the front lines of protecting our national security and they
    deserve the best possible living and working conditions. Sustaining the
    quality of life of our people is crucial to recruitment, retention,
    readiness and morale.
        Our fiscal year 2016 budget request includes $1.4 billion to fund
    construction, operation, and maintenance of government-owned and leased
    family housing worldwide as well as to provide services to assist
    military members in renting or buying private sector housing (see Table
    2 below). Included in this request is $61 million for the second phase
    of new construction family housing at Camp Walker, South Korea, and $20
    million for replacement family housing at Rock Island Arsenal,
    Illinois.
        Most government-owned family housing is on enduring bases in
    foreign countries now that the Department has privatized the vast
    majority of our family housing in the United States. Our request does
    not include funding for oversight of privatized housing because we will
    utilize cost savings in fiscal year 2015 to cover our fiscal year 2016
    expenses. However, we anticipate requesting funding for oversight of
    privatized housing in future budget requests. The requested fiscal year
    2016 funding will ensure that U.S. military personnel and their
    families continue to have suitable housing choices.

                    TABLE 2. FAMILY HOUSING BUDGET REQUEST, FISCAL YEAR 2015 VERSUS FISCAL YEAR 2016
                                                [in millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                       Change from  Fiscal Year 2015
                        Category                        Fiscal Year     Fiscal Year  -------------------------------
                                                       2015  Request   2016  Request      Funding         Percent
    ----------------------------------------------------------------------------------------------------------------

    Family Housing Construction/Improvements........--------------95-------------277-------------182------------192%
    Family Housing Operations & Maintenance.........           1,094           1,136              42              4%
    Family Housing Improvement Fund.................               2               0             (2)          (100%)
                                                     ---------------------------------------------------------------
        Total.......................................           1,191           1,413             222             19%
    ----------------------------------------------------------------------------------------------------------------

        The Department also continues to encourage the modernization of
    Unaccompanied Personnel Housing (UPH) to improve privacy and provide
    greater amenities. In recent years, we have heavily invested in UPH to
    support initiatives such as BRAC, global restationing, force structure
    modernization, and the Navy's Homeport Ashore initiative. The fiscal
    year 2016 MILCON budget request includes $360 million for construction
    and renovation projects that will improve living conditions for Active
    Duty trainees and unaccompanied personnel, to include $68 million for
    Marine Corps bachelor enlisted quarters at Kaneohe Bay, Hawaii, and $71
    million for an Air Force dormitory at Joint Base San Antonio, Texas.
        The Military Services completed its Military Housing Privatization
    Initiative (MHPI) award phase in fiscal year 2013 with award of the
    final three Air Force MHPI projects, bringing the total privatized
    inventory to about 205,000 housing units. The new challenge will be to
    manage the government's interests in these privatized projects to
    ensure they continue to provide quality housing for their expected
    lifespan.
        Families choosing to live in privatized housing typically pay their
    Basic Allowance for Housing (BAH) as rent which serves as the primary
    revenue stream for the MHPI project. BAH rates in 2015 have been
    updated to incorporate two changes to the computation BAH. First,
    renter's insurance was eliminated from the 2015 Basic Allowance for
    Housing rate computation. Second, based on recent amendment of section
    403(b)(3) of title 37, United States Code, by the fiscal year 2015
    National Defense Authorization Act, a member cost-sharing element
    (i.e., out-of-pocket expense) of 1 percent of the national average
    monthly cost of adequate housing was introduced into the housing
    allowance rates. As a result, the Military Departments will review
    their housing projects and implement necessary changes to the rental
    arrangements to ensure the continued quality of privatized housing, and
    to ensure that residents of privatized housing bear out-of-pocket
    expenses similar to military families living on the local economy.
                  facilities sustainment and recapitalization
        In addition to new construction, the Department invests significant
    funds in maintenance and repair of our existing facilities. Sustainment
    represents the Department's single most important investment in the
    condition of its facilities. It includes regularly scheduled
    maintenance and repair or replacement of facility components--the
    periodic, predictable investments that should be made across the
    service life of a facility to slow its deterioration, optimize the
    Department's investment, and save resources over the long term. Proper
    sustainment retards deterioration, maintains safety, preserves
    performance over the life of a facility, and helps improve the
    productivity and quality of life of our personnel.
        The accounts that fund these activities have taken significant cuts
    in recent years. Recognizing that too much risk has been endured in
    maintaining their facilities, the Military Departments increased
    Facility Sustainment commitments in fiscal year 2016. The fiscal year
    2016 DOD budget request includes $6.4 billion of Operations and
    Maintenance (O&M) funding for sustainment of our real property,
    representing 81 percent of the requirement based on the Facilities
    Sustainment Model (FSM).

           TABLE 3. SUSTAINMENT AND RECAPITALIZATION BUDGET REQUEST, FISCAL YEAR 2015 VERSUS FISCAL YEAR 2016
                                                [in millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                       Change from  Fiscal Year 2015
                        Category                        Fiscal Year     Fiscal Year  -------------------------------
                                                       2015  Request   2016  Request      Funding         Percent
    ----------------------------------------------------------------------------------------------------------------

    Sustainment (O&M)...............................-----------6,429-----------8,022-----------1,593-------------25%
    Recapitalization (O&M)..........................           1,616           2,563             946             59%
                                                     ---------------------------------------------------------------
        Total.......................................           8,046          10,585           2,539             32%
    ----------------------------------------------------------------------------------------------------------------

        For fiscal year 2016, the Department's budget request includes
    nearly $8.0 billion for sustainment and $2.6 billion for
    recapitalization (see Table 3 above) in Operations & Maintenance
    funding. The combined level of sustainment and recapitalization funding
    ($10.6 billion) reflects a 32 percent increase from the fiscal year
    2015 President's Budget (PB) request ($8.0 billion), but still reflects
    an acceptance of significant risk in DOD facilities. In fact, the
    request supports average DOD-wide sustainment funding level that
    equates to 81 percent of the FSM requirement as compared to the
    Department's goal to fund sustainment at 90 percent of modeled
    requirements.
        Recent and ongoing budget constraints have limited investment in
    facilities sustainment and recapitalization to the point that 24
    percent of the Department's facility inventory is in ``poor'' condition
    (Facility Condition Index (FCI) between 60 and 79 percent) and another
    6.5 percent is in ``failing'' condition (FCI below 60 percent) based on
    recent facility condition assessment data. The Department ultimately
    will be faced with larger bills in the out-years to restore or replace
    facilities that deteriorate prematurely due to funding constraints.
        In an effort to better track--and limit--the risk we were accepting
    in our facilities, we issued policy in fiscal year 2014 that reiterates
    DOD's goal to fund sustainment programs at 90 percent or higher of the
    Facility Sustainment Model requirement; establishes 80 percent as the
    minimum inventory-wide Facility Condition Index goal for each Component
    to meet annually for the facilities they manage; and directs Components
    to develop mitigation plans for their failing facilities (those with an
    FCI below 60 percent) to ensure that we have a strategy to improve the
    condition of our real property inventory in the coming years. Component
    mitigation plans could address failing facility conditions through
    repair, replacement, mothballing, or demolition. To complement these
    goals, we've issued policy to standardize inspections and ensure that
    all of the Services are measuring their facility condition the same
    way.
            fiscal year 2016 budget request--environmental programs
        The Department has long made it a priority to protect the
    environment on our installations, not only to preserve irreplaceable
    resources for future generations, but to ensure that we have the land,
    water and airspace we need to sustain military readiness. To achieve
    this objective, the Department has made a commitment to continuous
    improvement, pursuit of greater efficiency and adoption of new
    technology. In the President's fiscal year 2016 budget, we are
    requesting $3.4 billion to continue the legacy of excellence in our
    environmental programs.
        The table below outlines the entirety of the DOD's environmental
    program, but I would like to highlight a few key elements where we are
    demonstrating significant progress--specifically, our environmental
    restoration program, our efforts to leverage technology to reduce the
    cost of cleanup, and the Readiness and Environmental Protection
    Integration (REPI) program.

                 TABLE 4: ENVIRONMENTAL PROGRAM BUDGET REQUEST, FISCAL YEAR 2016 VERSUS FISCAL YEAR 2015
                                                [in millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                       Change from  Fiscal Year 2015
                         Program                        Fiscal Year     Fiscal Year  -------------------------------
                                                       2015  Request   2016  Request      Funding         Percent
    ----------------------------------------------------------------------------------------------------------------

    Environmental Restoration.......................-----------1,105-----------1,108---------------3------------0.3%
    Environmental Compliance........................           1,458           1,389            (69)          (4.7%)
    Environmental Conservation......................             381             389               8            2.1%
    Pollution Prevention............................             119             102            (17)         (14.3%)
    Environmental Technology........................             172             200              28           16.3%
    BRAC Environmental..............................             264             217            (47)         (17.8%)
                                                     ---------------------------------------------------------------
        Total.......................................           3,499           3,405            (94)          (2.7%)
    ----------------------------------------------------------------------------------------------------------------

                           environmental restoration
        We are requesting $1.3 billion to continue cleanup efforts at
    remaining Installation Restoration Program (IRP--focused on cleanup of
    hazardous substances, pollutants, and contaminants) and Military
    Munitions Response Program (MMRP--focused on the removal of unexploded
    ordnance and discarded munitions) sites. This includes $1.1 billion for
    ``Environmental Restoration,'' which encompasses active installations
    and Formerly Used Defense Sites (FUDS) locations and $217 million for
    ``BRAC Environmental.'' While the amount of BRAC Environmental funds
    requested is nearly 18 percent less than the 2015 request, this amount
    will be augmented by $135 million of land sale revenue and prior year,
    unobligated funds. These funds coupled with the $217 million request
    brings the total amount of BRAC Environmental funding to $352 million
    DOD will invest in fiscal year 2016, a 33 percent increase over the
    fiscal year 2015 request. These investments help to ensure DOD
    continues to make steady progress towards our program goals. We remain
    engaged with the Military Departments to ensure they are executing
    plans to spend all remaining unobligated balances.

                                         TABLE 5: PROGRESS TOWARD CLEANUP GOALS
      Goal: Achieve Response Complete at 90% and 95% of Active and BRAC IRP and MMRP sites, and FUDS IRP sites, by
                                             FY2018 and FY2021, respectively
    ----------------------------------------------------------------------------------------------------------------

    ----------------------------------------------------------------------------------------------------------------
                                                              Status as of the   Projected Status   Projected Status
                                                                   end of         at the end of      at the end of
                                                                  FY 2014            FY 2018            FY 2021
    ----------------------------------------------------------------------------------------------------------------
    Army...................................................                89%                96%                97%
    Navy...................................................                78%                88%                94%
    Air Force..............................................                76%                90%                95%
    DLA....................................................                88%                96%                96%
    FUDS...................................................                79%                90%                96%
        Total..............................................                82%                92%                96%
    ----------------------------------------------------------------------------------------------------------------

        By the end of 2014, the Department, in cooperation with state
    agencies and the Environmental Protection Agency, completed cleanup
    activities at 82 percent of Active and BRAC IRP and MMRP sites, and
    FUDS IRP sites, and is now monitoring the results. During fiscal year
    2014 alone, the Department completed cleanup at over 1,000 sites. Of
    the roughly 39,000 restoration sites, almost 31,500 are now in
    monitoring status or cleanup completed. We are currently on track to
    meet our program goals--anticipating complete cleanup at 96 percent of
    Active and BRAC IRP and MMRP sites, and FUDS IRP sites, by the end of
    2021.
        Our focus remains on continuous improvement in the restoration
    program: minimizing overhead; adopting new technologies to reduce cost
    and accelerate cleanup; refining and standardizing our cost estimating;
    and improving our relationships with State regulators through increased
    dialogue. All of these initiatives help ensure that we make the best
    use of our available resources to complete cleanup.
        Note in particular that we are cleaning up sites on our active
    installations in parallel with those on bases closed in previous BRAC
    rounds--cleanup is not something that DOD pursues only when a base is
    closed. In fact, the significant progress we have made over the last 20
    years cleaning up contaminated sites on active DOD installations is
    expected to reduce the residual environmental liability in the
    disposition of our property made excess through the BRAC process or
    other efforts.
                            environmental technology
        A key part of DOD's approach to meeting its environmental
    obligations and improving its performance is its pursuit of advances in
    science and technology. The Department has a long record of success
    when it comes to developing innovative environmental technologies and
    getting them transferred out of the laboratory and into actual use on
    our remediation sites, installations, ranges, depots and other
    industrial facilities. These same technologies are also now widely used
    at non-Defense sites helping the nation as a whole.
        While the fiscal year 2016 budget request for Environmental
    Technology overall is $200 million, our core efforts are conducted and
    coordinated through two key programs--the Strategic Environmental
    Research and Development Program (SERDP--focused on basic research) and
    the Environmental Security Technology Certification Program (ESTCP--
    which validates more mature technologies to transition them to
    widespread use). The fiscal year 2016 budget request includes $66
    million for SERDP and $33 million for ESTCP for environmental
    technology demonstrations, with an additional $20 million requested
    specifically for energy technology demonstrations.
        These programs have already achieved demonstrable results and have
    the potential to reduce the environmental liability and costs of the
    Department--developing new ways of treating groundwater contamination,
    reducing the life-cycle costs of multiple weapons systems, and
    improving natural resource management.
        This past year, the Air Force has deployed a full scale robotic
    laser depainting system at Hill AFB that is the culmination of a
    substantial, multi-year investment by SERDP, ESTCP, and the Air Force
    Research Laboratory. The system is currently operational and offers a
    more environmentally sustainable method to perform essential
    maintenance on the F-16, decreasing processing time from seven days to
    three and increasing the mission availability of the aircraft.
    Additionally, the new process reduces the amount of hazardous waste
    generated from 2000 pounds per F-16 aircraft using previous processes
    to less than one pound using the new system--all while generating
    approximately 70 percent savings in per unit costs and decreasing
    associated labor from 400 hours per aircraft to just 100 hours. A
    second system is planned for the C-130, and similar results are
    expected. This technology truly represents a win-win for the
    environment and the mission.
        Looking ahead, our environmental technology investments are focused
    on the Department's evolving requirements. This year, we expect to
    complete the demonstrations of revolutionary new technology that allows
    us to discriminate between hazardous unexploded ordnance and harmless
    scrap metal without the need to dig up every object and we're moving
    out aggressively to transition the technology to everyday use. We will
    continue our investments in technologies to address the challenges of
    contaminated groundwater sites where no good technical solutions are
    currently available, and we'll seek out innovative ways to address
    munitions in the underwater environment. Lastly, we'll continue our
    efforts to develop the science and tools needed to meet the
    Department's obligations to assess and adapt to climate change, and
    we'll continue the important work of reducing future liability and
    life-cycle costs by eliminating toxic and hazardous materials from our
    production and maintenance processes.
             environmental conservation and compatible development
        To maintain access to the land, water and airspace needed to
    support our mission needs, the Department continues to successfully
    manage the natural resources entrusted to us--including protecting the
    many threatened and endangered species found on our lands. DOD manages
    approximately 25 million acres containing many high-quality and unique
    habitats that provide food and shelter for over 520 species-at-risk and
    over 400 that are federally listed as threatened or endangered species.
    That is 9 times more species per acre than the Bureau of Land
    Management, 6 times more per acre than the United States Fish and
    Wildlife Service (USFWS), 4.5 times more per acre than the Forest
    Service, and 3.5 times more per acre than the National Park Service. A
    surprising number of rare species are found only on military lands--
    including more than ten listed species and at least 75 species-at-risk.
        The fiscal year 2016 budget request for Conservation is $389
    million. The Department invests these funds to manage its imperiled
    species as well as all its natural resources in an effort to sustain
    the high quality lands our service personnel need for testing, training
    and operational activities, and to maximize the flexibility our
    servicemen and women need to effectively use those lands. Species
    endangerment and habitat degradation can have direct mission-
    restriction impacts. That is one reason we work hard to prevent species
    from becoming listed, or from impacting our ability to test and train
    if they do become listed.
        As a result of multiple law suits, the United States Fish and
    Wildlife Service (USFWS) entered into a court-approved agreement in
    2011 that requires USFWS to make decisions about whether to list 251
    species that are ``candidates'' for listing as threatened or endangered
    under the Endangered Species Act by 2016. Of the 125 found on or
    adjacent to military lands, the Department determined 37 of them--if
    USFWS listed and designated critical habitat on DOD lands--could have
    significant or moderate potential to impact military readiness at
    locations such as Yakima Training Center and Joint Base Lewis-McChord
    (JBLM). Furthermore, 12 of those 37 species were identified to have the
    greatest potential to significantly impact military actions. So far,
    USFWS has listed 119 of those 251 species, at least 47 of which are on
    our lands. To minimize actual and potential mission impacts, these
    installations have increased monitoring for these species, incorporated
    appropriate management strategies into their Integrated Natural
    Resource Management Plans, and--when needed--are working with USFWS to
    avoid critical habitat designations and to ensure that listed species
    conservation is consistent with military readiness needs.
        Our focus has been on getting ahead of any future listings. In
    2011, I tasked the Military Departments to ensure our management plans
    adequately address all listed and candidate species to avoid critical
    habitat designations. All but two of our plans now adequately address
    these species, and we have successfully avoided critical habitat for
    all these candidate species where USFWS has made listing decisions.
        We make investments across our enterprise focused on threatened or
    endangered species, wetland protection, and protecting other natural,
    cultural and historical resources, but we cannot continue to manage
    these resources in isolation. Instead, we are working with partners
    across the fence line to expand our conservation activities off-
    installation and promote compatible land uses around our installations
    and ranges. I want to highlight one particularly successful and
    innovative program that is advancing these innovative partnerships--the
    Readiness and Environmental Protection Integration (REPI) Program.
    Included within the $389 million for Conservation, $60.3 million is
    directed to the REPI Program. The REPI Program is a cost-effective tool
    to protect the nation's existing training, testing, and operational
    capabilities at a time of decreasing resources. In the last 12 years,
    REPI partnerships have protected more than 356,000 acres of land around
    80 installations in 28 states. In addition to the tangible benefits to
    testing, training and operations, these efforts have resulted in
    significant contributions to biodiversity and recovery actions
    supporting threatened, endangered and candidate species.
        Under REPI, the Department partners with conservation organizations
    and state and local governments to preserve buffer land and sensitive
    habitat near installations and ranges. Preserving these areas allows
    the Department to avoid much more costly alternatives such as
    workarounds, restricted or unrealistic training approaches, or
    investments to replace existing test and training capability.
    Simultaneously, these efforts ease the on-installation species
    management burden and reduce the possibility of restricted activities,
    ultimately providing more flexibility for commanders to execute- their
    missions.
        The REPI Program supports the warfighter and protects the taxpayer
    because it multiplies the Department's investments through unique cost-
    sharing agreements. Even in these difficult economic times, REPI is
    able to directly leverage the Department's investments at least one-to-
    one with those of our partners, effectively securing critical buffers
    around our installations for half-price.
        In addition, DOD, along with the Departments of the Interior and
    Agriculture, announced the Sentinel Landscapes Partnership to protect
    large landscapes where conservation, working lands, and national
    defense interests converge--places defined as Sentinel Landscapes. The
    Sentinel Landscapes Partnership further strengthens interagency
    coordination and provides taxpayers with the greatest leverage of their
    funds by aligning federal programs to advance the mutually-beneficial
    goals of each agency. The pilot Sentinel Landscape project at Joint
    Base Lewis-McChord (JBLM) helped USFWS avoid listing a butterfly
    species in Washington, Oregon, and California, citing the ``high level
    of protection against further losses of habitat or populations'' from
    investments made by Joint Base Lewis-McChord's REPI partnership on
    private prairie lands in the region. These actions allow significant
    maneuver areas to remain available and unconstrained for active and
    intense military use at JBLM.
                fiscal year 2016 budget request--energy programs
        Unlike the Department's Military Construction and Environmental
    Remediation programs, where the budget request includes specific line
    items, our energy programs are subsumed into other accounts. The
    following sections describe the Energy portion of the budget request.
    Further discussion of energy follows in the highlighted issues section.
                               operational energy
        There is no explicit request for Operational Energy. Fuel is not
    separately budgeted, but instead is part of multiple operational
    accounts. We can track previous years' fuel expenditures, and know that
    we spent approximately $14 billion on fuel in fiscal year 2014.
    However, investments in how the Department uses operational energy are
    spread across multiple appropriations, and are detailed in the
    Department's annual budget certification report, which assesses the
    alignment of the President's Budget with the goals of the DOD
    Operational Energy Strategy.
        The Department of Defense budgeted approximately $1.6 billion in
    fiscal year (FY) 2016 and $10.9 billion over the five-year Future
    Defense Plan (FYDP) on operational energy initiatives. Although the FY
    2016 budget request maintains approximately the same funding levels as
    FY 2015, the overall FY 2016-20 FYDP funding includes an increase of
    approximately $2 billion over FY 2015-19 FYDP funding. The increase
    largely results from increases in Army and Air Force operational energy
    funding over the FYDP.
        Approximately 92 percent of Department spending on operational
    energy initiatives focuses on reducing demand, while the remainder
    addresses energy supplies and adapting the future force. Specific to
    energy demand, the Services are investing in an array of innovations
    designed to improve the endurance, resilience, and agility of Joint
    operations. For instance, the Army is investing in vehicle power train
    technology, improved batteries and solar chargers for individual
    Soldier equipment, and more efficient generators. The Navy is pursuing
    hybrid electric propulsion for the DDG-51 class destroyers that will
    increase time on station, and aviation simulator upgrades that will
    allow more training to occur in simulators, reducing the amount of fuel
    and aircraft maintenance needed to support the Naval Flight Hour
    program. Marine Corps investments include tactical vehicle fuel
    efficiency and improvements in expeditionary base camp initiatives. The
    Air Force is pursuing a range of improved operational practices for the
    airlift and tanker fleet, as well as mid-life engine upgrades (KC-135
    Engine Upgrade) and wholly new propulsion programs (Adaptive Engine
    Technology Development) that increase range, payload, and/or endurance.
        The full certification report, which will be provided to Congress
    in the near future, will provide a more comprehensive assessment of the
    alignment of these operational energy initiatives in the fiscal year
    2016 President's Budget with the goals of the Operational Energy
    Strategy.
                               facilities energy
        As with Operational Energy, there is no explicit request for
    Facilities Energy--utilities expenditures are included in the Base
    Operations O&M request. We can track actual expenditures, and we spent
    $4.2B on Facilities Energy in fiscal year 2014. Energy efficiency
    initiatives are found either as part of construction or sustainment
    budgets. Moreover, the preponderance of renewable energy initiatives
    that the Services pursue involve third party investments and power
    purchase agreements that result in electricity bills that are less than
    or equal to historical prices.
        The Department's fiscal year 2016 budget request includes
    approximately $700 million for investments in conservation and energy
    efficiency, most of which will be directed to existing buildings. The
    majority ($550 million) is in the Military Components' operations and
    maintenance accounts, to be used for sustainment and recapitalization
    projects. Such projects typically involve retrofits to incorporate
    improved lighting, high-efficiency HVAC systems, double-pane windows,
    energy management control systems, and new roofs. The remainder ($150
    million) is for the Energy Conservation Investment Program (ECIP), a
    Military Construction account used to implement energy efficiency,
    water conservation and renewable energy projects. Each individual ECIP
    project has a positive payback (i.e. Savings to Investment Ratio (SIR)
    > 1.0) and the overall program has a combined SIR greater than 2.0.
    This means for every dollar we invest in ECIP, we generate more than
    two dollars in savings.
        The Military Component investments include activities that would be
    considered regular maintenance and budgeted within the Operation and
    Maintenance accounts for Facilities Sustainment, Restoration, and
    Maintenance activities. The risk that has been accepted in those
    accounts will not only result in fewer energy projects, but failing to
    perform proper maintenance on our buildings will without question have
    a negative impact on our energy usage. In plain terms, upgrades to air
    conditioning systems will not reduce energy usage as projected if the
    roof is leaking or the windows are broken. Sequestration and BCA budget
    cuts to the Department's facilities energy program have negatively
    impacted the DOD's ability to meet mandated energy intensity reduction
    goals. The DOD projects the Department will catch up and begin meeting
    its energy intensity reduction goals in fiscal year 2019.
        In addition to retrofitting existing buildings, we continue to
    drive efficiency in our new construction. We are implementing a new
    construction standard for high-performance, sustainable buildings
    issued by my office last year, which will govern all new construction,
    major renovations, and leased space acquisition. This new standard,
    which incorporates the most cost effective elements of commercial
    standards like ASHRAE 189.1, will accelerate DOD's move toward
    efficient, sustainable facilities that cost less to own and operate,
    leave a smaller environmental footprint, and improve employee
    productivity.
                               highlighted issues
    Base Realignment and Closure
        Given the state of the budget and the fact that we demonstrated we
    can save money by closing and realigning facilities in Europe, the
    Administration is once again requesting the authority from Congress to
    conduct a BRAC round.
        Many members of Congress have stated that the Government as a whole
    could more efficiently use its resources. We absolutely agree. BRAC is
    an objective, proven, and effective means of doing just that. The
    Deputy Secretary, the official responsible for the efficient management
    of the Department, has been clear on this. Last fall he said ``[The]
    first place we should look at is our basing infrastructure.'' He went
    on to talk about how large private companies would not retain excess
    capacity. Reiterating the need for BRAC, he said; ``in this time of
    constrained resources, I just don't understand why we are hamstringing
    ourselves. [M]aintaining that extra capacity is a big problem for us
    because it is wasteful spending, period. It is the worst type of
    bloat.''
        Getting at this bloat is why the goal for BRAC remains focused on
    efficiency and savings.
        We believe the opportunity for greater efficiencies is clear, based
    on three basic facts that have not changed over the last year:

          In 2004, DOD conducted a capacity assessment that
    indicated it had 24 percent aggregate excess capacity;
          In BRAC 2005, the Department reduced only 3.4 percent of
    its infrastructure, as measured in Plant Replacement Value--far short
    of the aggregate excess indicated in the 2004 study;
          Force structure reductions subsequent to that analysis--
    particularly Army personnel (from 570,000 to 450,000 or lower), Marine
    Corps personnel (from 202,000 to 182,000 or lower) and Air Force force
    structure (reduced by 500 aircraft)--point to the presence of
    additional excess.

        A new BRAC round will be different than BRAC 2005, where we
    incurred significant costs by forwarding recommendations that did not
    promise significant savings. That said, in BRAC 2005, we also included
    many recommendations that returned the initial investment in less than
    7 years. These ``efficiency'' recommendations cost $6 billion and
    resulted in $3 billion in annual savings. (The ``transformation''
    recommendations cost $29 billion and return $1 billion in annual
    savings.)
        We project that a new efficiency-focused BRAC round will save about
    $2 billion a year after implementation with costs and savings during
    the six year implementation being a wash at approximately $6 billion.
    Our projection is based on the efficiency rounds of the 1990s.
        In addition to being a proven process that yields savings, BRAC has
    several advantages that we have outlined before in our testimony. I
    want to highlight a few of these:

          BRAC is comprehensive and thorough--all installations are
    analyzed using certified data aligned against the strategic imperatives
    detailed in the 20-year force structure plan
          The BRAC process is auditable and logical which enables
    the Commission to conduct an independent review informed by their own
    analysis and testimony of affected communities and elected officials
          The Commission has the last say on the Department's
    recommendations--being fully empowered to alter, reject, or add
    recommendations
          The BRAC process has an ``All or None'' construct which
    prevents the President and Congress from picking and choosing among the
    Commission's recommendations; thereby insulating BRAC from politics
          The BRAC process imposes a legal obligation on the
    Department to close and realign installations as recommended by the
    Commission by a date certain; thereby facilitating economic reuse
    planning by impacted communities; and grants the Department the
    authorities needed to satisfy that legal obligation.

        While we are certainly open to some changes to the legislatively
    designed BRAC process that has remained essentially the same for each
    of the last four BRAC rounds, we should be careful about altering the
    fundamental principles of the process, particularly those that I
    outlined above.
        For example, Congressman Adam Smith circulated an amended version
    of the BRAC authorization last year, proposing several changes to the
    BRAC process. His bill required a certification that the new round
    would primarily focus on eliminating excess infrastructure; it required
    emphasis on the cost criteria as well as military value; it required
    all recommendations to be completed more quickly--within five years
    rather than six; and it required master plans that would constrain the
    execution of recommendations and limit cost growth. Taken together, the
    intent is clear: the Smith proposal is designed to create cost and
    business case constraints on the BRAC process from the outset--
    unfortunately while several aspects of that proposal would
    fundamentally alter key aspects of what makes BRAC work: the priority
    given to military value; insulation from politics; and the legal
    obligation to implement the recommendations together with the
    authorities needed to satisfy that legal obligation--the proposal
    advances a constructive discussion of BRAC authorization.
        While not in the context of BRAC, recent legislation authorizing
    the Department to proceed with the relocation of Marines to Guam
    imposed a cost cap on the overall program in an effort to underscore
    cost consciousness and limit the Department's fiscal exposure.
        We would welcome discussion on mechanisms to limit cost and
    emphasize savings in future BRAC rounds. Ultimately, we recognize the
    reality that no matter how many times the Administration asserts that a
    future BRAC round will be about cost savings, Congress may want more
    than just our assurance.
        Whatever changes we discuss, the key is maintaining the essence of
    the BRAC process: treating all bases equally, all or none review by
    both the President and Congress, an independent Commission, and a clear
    legal obligation to implement all of the recommendations in a time
    certain together with all the authorities needed to accomplish
    implementation (specifically MILCON).
                     european infrastructure consolidation
        Past and ongoing force structure changes, a changing security
    environment, and our tough fiscal climate provided the Department a
    catalyst to undertake a comprehensive review of the infrastructure
    requirements necessary to support U.S. forces and their missions in and
    around Europe. The actions resulting from this comprehensive review of
    our European infrastructure will allow us to create long-term savings
    by eliminating excess infrastructure without reducing our operational
    capabilities. In other words, operationally we will continue to do
    everything we currently do--but at a lower cost.
        The Department has been reducing its European footprint since the
    end of the Cold War. Generally, infrastructure reductions have been
    proportional to force structure reductions, but prior to our European
    Infrastructure Consolidation (EIC) effort we hadn't taken a holistic,
    joint review of our European infrastructure. In response to our recent
    requests for Base Realignment and Closure (BRAC) authority, Congress
    made it clear that it wanted DOD to do so.
        To analyze our European infrastructure we used a process very
    similar to the proven U.S. BRAC process. We looked at capacity,
    requirements, military value, cost, and at the diplomatic dynamics
    involved with each action. As we consolidate our footprint, the
    infrastructure remaining in place will continue to support our
    operational requirements and strategic commitments, but we will not
    need as many support personnel (military, civilian, and host nation
    employees) to maintain a reduced infrastructure. We did not contemplate
    changes that reduced operational force structure or warfighting
    capability--that was a fundamental constraint of the analysis.
        The largest action resulting from the EIC analysis is our return of
    RAF Mildenhall to the United Kingdom. Approximately 3,200 U.S.
    personnel from RAF Mildenhall will be re-stationed elsewhere. This move
    will be partially offset by the addition of about 1,200 personnel that
    will support the F-35s being stationed at nearby RAF Lakenheath. Both
    of these events will occur in the 2018-2021 timeframe.
        Including the initial adjustments announced last April and the
    final actions announced in January, the Department will realize more
    than $500 million in annual recurring savings once all actions are
    fully implemented--all while maintaining the same operational
    capability. This is in addition to the more than $600 million in annual
    savings resulting from previously announced Army divestitures of
    Bamberg and Schweinfurt that were validated through the EIC process--
    divestitures directly associated with the recent force structure
    reductions in Europe.
        Although detailed implementation planning is still underway,
    initial estimates indicate these actions will require approximately
    $800 million to construct facilities at receiving sites. The vast
    majority of these construction requirements support divesting RAF
    Mildenhall (construction likely beginning in fiscal year 2017) and
    consolidation of our joint intelligence analysis facilities at RAF
    Croughton, with $93 million for the second of three phases included in
    this year's budget request.
        These recommendations will be executed over the next several years,
    but that does not mean that everything will remain static in Europe
    while these changes occur. There were consolidations made before EIC
    and there will undoubtedly be future basing actions. However, the
    holistic review we conducted over the last two years allows us to
    redirect resources currently supporting unneeded infrastructure and
    apply them to higher priorities, thus strengthening our posture in
    Europe.
        Although we continually seek efficiencies as we manage
    installations worldwide, the Department does not conduct this degree of
    comprehensive analyses of its infrastructure on a regular basis. That's
    one of the reasons we have requested BRAC authority from Congress to do
    a review of our U.S. installations. In this fiscal environment it would
    be irresponsible of us not to look for such savings.
                    rebasing of marines from okinawa to guam
        The movement of thousands of Marines from Okinawa (and elsewhere)
    to Guam is one of the most significant re-basing action in recent
    years. We appreciate Congress' support in lifting restrictions on the
    relocation. Removal of these restrictions will allow us to move forward
    on this essential component of our rebalance to the Asia-Pacific
    region, resulting in a more geographically dispersed, operationally
    resilient, and politically sustainable posture in the area. As a U.S.
    territory, Guam offers strategic advantages and operational
    capabilities that are unique in the region. Presence in Guam is a force
    multiplier that contributes to a force posture that reassures allies
    and partners and deters aggression.
        We understand Congress' concerns regarding both the cost and
    feasibility of the previous plan. Now, after much effort, we have a
    unified position on an executable plan. It is affordable, has fewer
    effects on Guam (peak population, power demand, and water demand are
    all reduced significantly), and is de-linked from progress on the
    Futenma Replacement Facility on Okinawa, yet preserves Japan's
    commitment to fund a substantial portion of the relocation. The new
    plan stations a smaller and more rotational force on Guam (85,000
    Marines/1,300 dependents) leaving 811,500 Marines on Okinawa. The new
    plan, similar to the previous plan, requires Japan to contribute $3.1
    billion (all in cash) of the estimated $8.7 billion total cost (in
    fiscal year 2012$).
        In addition to the $3.1 billion the Government of Japan has
    committed to construction on Guam, it is committing approximately $12
    billion to relocation efforts on Okinawa, including approximately $7-8
    billion for Okinawa consolidation and approximately $4-5 billion for
    the Camp Schwab replacement for Marine Corps Air Station Futenma.
        The Department has begun executing the Guam Master Plan in earnest
    and we expect only minor adjustments going forward. The Department
    plans to execute more than half a billion dollars of combined U.S. and
    Japanese funds in fiscal year 2016. Specifically, in fiscal year 2016,
    the Department is requesting $126 million for the Known Distance Live-
    Fire Training Range at the Northwest Field of 0ersen. We appreciate the
    fiscal year 2015 authorization and appropriation of $50.7 million for
    construction of Ground Support Equipment shops and Marine Wing Support
    Squadron Facilities at Andersen's North Ramp.
        The relocation effort will reach a critical milestone in 2015, as
    the Department will complete the Supplemental Environmental Impact
    Statement (SEIS) associated with the modified plan and issue a Record
    of Decision. That document will reflect the significantly reduced
    strain that will be imposed on Guam as a result of a much smaller--and
    much slower--transition.
        The long-term effects of the earlier plan's greater number of
    Marines and their families, larger footprint, need for additional land
    in the vicinity of the culturally important Pagat Cave (for the live--
    fire range), and the large number of imported workers necessary to meet
    the 2014 construction deadline fueled opposition. The new plan
    addresses most of these concerns through a smaller, more rotational
    number of Marines with less effect on the island; no requirement for
    additional land; a ``preferred alternative'' for the live-fire range at
    existing Andersen Air Force Base (AAFB) property; and a longer timeline
    needing far fewer imported workers. Additionally, in August 2014, the
    Department of Navy revised its planning to take advantage of existing,
    but underutilized, family housing at AAFB that needs recapitalization--
    a more cost- effective joint USMC/Air Force solution that further
    reduces our planned footprint.
        The table below from the SEIS highlights some of the key
    differences between the original and revised plans:

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        In parallel with the effort on the SEIS, the Department called a
    formal meeting of the Economic Adjustment Committee on July 29, 2014 to
    begin an assessment of ``outside-the-fence'' requirements. The EAC's
    work is important as the earlier plan required significant investment
    due to the build-up's effects on Guam's fragile infrastructure. Nearly
    $1.3 billion was previously identified in water and wastewater
    investments following the Navy's 2010 Record of Decision. Japan was to
    provide $740 million in financing for these investments with the
    Department providing the balance.
        However, because the new plan significantly reduces the effect on
    Guam's infrastructure and because Guam itself has upgraded some of its
    infrastructure, ``outside-the-fence'' requirements are expected to be
    significantly less. At its formal meeting on July 29, 2014, the EAC
    empowered teams of member agencies to identify required actions, their
    costs, and a timeline for outside- the- fence investments for those
    requirements specifically identified in the Navy's Final SEIS as being
    necessary to mitigate effects on the Territory. The plans and reports
    from these efforts will comprise the content for the final 2014 NDAA
    Section 2822 report (the ``EAC Implementation Plan'') to Congress. The
    EAC Implementation Plan is to be issued no later than the Department of
    the Navy's Record of Decision later this year.
        We understand the concerns about spending funds for ``outside-the-
    fence'' projects, but the Department intends to seek funding only for
    those projects required by the SEIS to address impacts of the build-up.
    The President's fiscal year 2016 budget requests an additional $20.0
    million for work necessary to repair Guam's civilian water and
    wastewater infrastructure and remedy deficiencies that could affect the
    health of DOD personnel. This effort is aligned with the water and
    wastewater investments identified as part of the Guam SEIS and the
    parallel EAC analysis. A more detailed--and complete--cost estimate
    will be included in our Report to Congress later this year.
                       operational and facilities energy
    Merger of the Energy, Installations, and Environment Organizations
        In the fiscal year 2015 National Defense Authorization Act,
    Congress directed the merger of the Assistant Secretary of Defense for
    Operational Energy Plans and Programs and the Deputy Under Secretary of
    Defense for Installations and Environment, creating a new Assistant
    Secretary of Defense for Energy, Installations and Environment,
    mirroring the organizational structure of the Services.
        Without question, the operational and facilities facets of the
    Department's energy programs have much in common. First, they
    principally focus on the ability of the Department to carry out its
    missions. Both at installations and in combat platforms, energy is a
    critical resource and vulnerability across the full range of military
    operations. As an enabler, energy availability and resilience define
    the capabilities of weapons platforms, facilities and equipment. In
    addition, energy remains a substantial expense that competes with other
    investments in people and equipment. The drive to protect taxpayer
    dollars, especially in this budget environment, compels us to pursue
    cost-effective measures that increase energy efficiency and reduce our
    cost of operations.
        The management strategies are similar also. Both heavily emphasize
    energy efficiency and reduction in demand, but also include recognition
    of the need to diversify supply. Energy security is a common theme, and
    while that means different things to different people, here it means
    the need for assured access to energy, during both combat and day-to-
    day operations. Finally, they look to the future and note the important
    role that technology investments play in setting the groundwork for the
    future force.
        While there are many similarities in approach, fuels, the dominant
    manifestation of operational energy, and electricity, the primary
    medium of facilities energy, are fundamentally different and involve
    very different communities and programs within the Department of
    Defense. I'd like to highlight a few topics in each area.
    Operational Energy
        Within the operational energy portfolio, most of our efforts to
    date reflected the imperatives of operations in Afghanistan and Iraq,
    and focused on mitigating the risks of supplying energy to distributed
    contingency bases in an environment characterized by desert conditions
    and irregular adversaries. Looking ahead, we recognize that the
    Department's rebalance to the Asia-Pacific will mean a shift in our own
    operational energy initiatives to reflect a broader set of missions,
    equipment, and threats. I believe we must focus on the energy
    implications of air and sea operations supported from a mix of
    permanent and contingency locations in both the United States and other
    host countries.
        Over the long run, including energy considerations early in the
    force development process offers the largest opportunities to increase
    capability, reduce risk, and mitigate costs. We have continued to
    enhance the role of operational energy in Service Title X wargames that
    influence future organization, training, and equipment. Operational
    energy played a role in wargames led by each of the Services and the
    Defense Logistics Agency over the past year, and we anticipate this
    trend to continue in fiscal year 2016.
        The Department also continues to advocate the importance of
    developing and acquiring platforms that are energy supportable and
    operationally effective in contested environments. Achieving this goal
    will rely on the consistent and appropriate use of the Energy Key
    Performance Parameter (KPP) in new programs. During 2014, we worked
    with the Joint Staff J-4 to refine the Energy KPP instructions in the
    Joint Capabilities Integration and Development System (JCIDS) Manual to
    improve the quality and use of energy supportability analyses. By
    analyzing the energy performance and supportability early in the
    requirements and acquisition process, the Department is provided the
    opportunity to make informed decisions with regard to operational
    energy.
        Using the new guidance, ASD (EI&E) and Joint Staff J-4 continued to
    assess the role of the Energy KPP compliance in new and updated
    systems, including LHA(R), TAO(X), Amphibious Combat Vehicle (ACV) and
    KC-46A aerial tanker. For example, with ASD (EI&E) and Joint Staff
    direction, the USMC is using a future wargame to analyze the
    operational ability of the LHA(R), the largest of the Amphibious
    Assault Ships, to support the F-35B Joint Strike Fighter (JSF). OASD
    (EI&E) and Joint Staff also are working with the Services to determine
    whether the planned fleet of air and sea refuelers--TAO(X) and KC-46A--
    are sufficient to meet the energy needs of the future force.
        As the Department considers additional initiatives to address the
    demand for operational energy, I anticipate future attention to how
    adaptations to air and sea platforms can improve our operational
    capability and decrease risks. Changes in operational practices,
    improvements in supporting routing, maintenance, and on-board energy
    management systems, and mid-life upgrades each represent significant
    opportunities for improvement.
    Facilities Energy
        Where operational energy is most often a characteristic of
    warfighting platforms, the use of electricity, natural gas and other
    utilities is a fundamental characteristic of the nearly 300,000
    buildings DOD owns and operates. The very nature of the problems are
    different, both in complexity and risk. Delivery of fuel to a forward
    operating location or an aircraft carrier in the Pacific Ocean is
    fundamentally different than tapping into the commercial electric grid.
    As such, fiscal considerations can take a more prominent role in
    facilities energy decisions. For example, energy efficiency projects
    are prioritized, in large part, by return on investment.
        This also leads us to emphasis on third-party financing. For
    example, the Services have increased their focus on third-party
    financing tools, such as Energy Savings Performance Contracts (ESPCs)
    and Utility Energy Service Contracts (UESCs), to improve the energy
    efficiency of their existing buildings. With these tools private energy
    firms or utility companies make energy upgrades to our buildings and
    are paid back over time using utility bill savings. While such
    performance-based contracts have long been part of the Department's
    energy strategy, since 2012 the Department has significantly increased
    our efforts in response to the President's Performance Contracting
    Challenge issued in Dec 2011 and extends to 2016 and beyond.
        In addition, most renewable energy projects we pursue are financed
    by private developers. DOD's authorities for renewable energy--
    particularly the ability to sign power purchase agreements of up to 30
    years--provide incentives for private firms to fund the projects
    themselves, and can also provide a strong business case that they are
    able to offer DOD lower energy rates than are being paid currently. In
    addition, both Congress and the President have established renewable
    energy goals that motivate us to pay closer attention to these
    opportunities.
        As a result, the Military Services have stepped up their efforts to
    develop robust renewable energy programs with a goal to deploy a total
    of 3 gigawatts of renewable energy by 2025.
        Within the last three years, the Department has more than doubled
    the number of renewable energy projects in operation with over 800
    megawatts in place today. The Military Departments are developing a
    number of new renewable energy projects, anticipating that all these
    will be operational by fiscal year 2020. These planned projects will
    provide approximately 2 gigawatts of additional renewable energy,
    enough to power 400,000 American homes. The Army recently completed a
    number of large renewable energy projects, including Fort Drum, NY (28
    MW Biomass) and Fort Huachuca, AZ (18 MW Solar PV), and the Air Force's
    large solar project at Davis-Monthan Air Force Base came online in
    fiscal year 2014 (16.4 MW Solar PV). In addition, the Navy has
    innovatively partnered with utilities across the U.S. to construct
    large renewable energy projects to power multiple Navy bases at once,
    with over 380 MW being procured in California and the East Coast.
                           climate change adaptation
        Climate change continues to be a priority for the Department. Both
    the 2010 and 2014 Quadrennial Defense Review (QDR) discussed that the
    impacts associated with a changing climate present a threat to DOD's
    national security mission. I know there is interest in Congress on this
    issue, and many would like to ensure we do not take significant risks
    in response to climate projections. I would suggest that not only are
    we not taking such risks, but we are working to minimize the risks
    posed by future climate changes through prudent planning and analysis.
        First, it is important to understand that DOD looks at climate
    change impacts through the lens of its mission. In the QDR, we refer to
    climate change as a ``threat multiplier'' because it has the potential
    to exacerbate many of the challenges we are dealing with today--from
    infectious disease to terrorism.
        My focus, however, is on installations and infrastructure. Sea-
    level rise results in degradation or loss of coastal areas and
    infrastructure, as well as more frequent flooding and expanding
    intrusion of storm surge across our coastal bases. Facilities and
    transportation infrastructure are already impacted by thawing
    permafrost and melting sea ice around our Alaskan installations. The
    changing environment increases the threat to 400 threatened or
    endangered species our installations are home to, leading to increased
    probability of training and operating restrictions. Increased high-heat
    days impose limitations on what training and testing activities our
    personnel can perform. Decreasing water supplies and increased numbers
    of wildfires in the Southwest may jeopardize future operations at
    critical ranges.
        Our warfighters cannot do their jobs without bases from which to
    fight, on which to train, or in which to live when they are not
    deployed. When climate effects make our critical facilities unusable,
    that is an unacceptable impact.
        Even without knowing precisely how the climate will change, we can
    see that the forecast is for more sea level rise; more flooding and
    storm surge on the coasts; continuing Arctic ice melt and permafrost
    thaw; more drought and wildfire in the American Southwest; and more
    intense storms around the world. DOD is accustomed to preparing for
    contingencies and mitigating risk, and we can take prudent steps today
    to mitigate the risks associated with these forecasts. These range from
    the strategic (DOD's Arctic Strategy) to the mundane (ensuring backup
    power and computer servers are not in basements where facilities are
    facing increased flood risk). In 2014, we released the updated DOD
    Climate Change Adaptation Roadmap, which outlines our strategy for
    responding to climate change across the Department.
        The Military Services have conducted initial studies that indicate
    critical installations in the West could run out of water within
    decades. Not only do we need to begin reducing this risk today, but we
    need to comprehensively review our installation footprint to identify
    similarly vulnerable installations. We are conducting a screening level
    assessment of all DOD sites world-wide to identify where we are
    vulnerable to extreme weather events and tidal anomalies today. This
    assessment will be completed later this year and will inform the
    Military Services more comprehensive assessments of individual site
    adaptation needs.
        Given the projected increases in major storm events, we've
    conducted a review of power resilience. We did a comprehensive review
    of installations to ensure critical capabilities have been identified,
    and have back-up power resources that have been tested and will work
    when there is a significant outage.
        We have reviewed Department-level directives, instructions and
    manuals to identify where considerations of climate change should be
    incorporated. We are continuing to update those policies and programs
    that provide the foundation of the Department's actions to ensure we
    are considering the effects of a changing climate on our investments
    and actions. It's not necessarily exciting to change a master planning
    policy, but when we decide to build on higher ground, it reduces the
    risk to those new facilities and is a wiser use of taxpayer funds.
        Our research continues on the effects of thawing permafrost on our
    Alaskan infrastructure, Southwestern extreme heat, Gulf and Atlantic
    coast sea level rise risks, and water issues in the Pacific islands.
        In conclusion, our goal is to increase the Department's resilience
    to the impacts of climate change. To achieve this goal, we are dealing
    with climate change by taking prudent and measured steps to reduce the
    risk to our ability to conduct missions.
                                   conclusion
        Thank you for the opportunity to present the President's fiscal
    year 2016 budget request for DOD programs supporting installations,
    energy, and the environment. As I have outlined above, our request is
    significantly more than last year because the total defense budget
    request is $35 billion more than the Budget Control Act cap for fiscal
    year 2016. That translates into a significant reduction in facilities
    risk from last year, but if we are compelled to return to the budget
    caps, that reduction in risk will evaporate.
        We appreciate Congress' continued support for our enterprise and
    look forward to working with you as you consider the fiscal year 2016
    budget.

        Senator Ayotte. Ms. Hammack?

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

        Ms. Hammack. Chairwoman Ayotte and Ranking Member Kaine,
    and other members of the committee, thank you for the
    opportunity to talk about the Army's fiscal year 2016 budget
    for military construction, Army family housing, environmental,
    and energy.
        To lay the framework, the velocity of instability around
    the world has increased, and the Army is now operating on
    multiple continents simultaneously in ways unforeseen a year
    ago. Although we believe we can meet the primary missions of
    the Defense Strategic Guidance today, our ability to do so has
    become tenuous.
        Fiscal challenges brought on by the Budget Control Act
    strain our ability to bring into balance readiness,
    modernization, and end strength. Even as demand for Army forces
    is growing, budget cuts are forcing us to reduce end strength
    and base support to dangerously low levels.
        We face a mismatch between requirements and resources.
    Although, in 2016, the Army is asking for a 26 percent increase
    from 2015 in military construction, family housing, and base
    closure activities, our budget request is a 33 percent
    reduction from fiscal year 2014, and a 55 percent reduction
    from fiscal year 2013.
        So as force structure declines, we must right-size the
    supporting infrastructure. We must achieve a balance between
    the cost of sustaining infrastructure and Army readiness,
    because degraded readiness makes it more difficult for us to
    provide for the common defense.
        The BCA increases risk for sending insufficiently trained
    and underequipped soldiers into harm's way, and that is not a
    risk that this Nation should accept.
        We need a round the base closure and realignment in 2017.
    Without a BRAC, the realized cost savings from a BRAC, the only
    alternative is to make up for shortages in base funding by
    increasing risk and readiness.
        We did conduct a facility analysis, like Mr. Conger talked
    about, based upon our 2013 audited real property, and
    determined that excess facility capacity is 18 percent at a
    force of 490,000.
        As Army force structure declines even further, excess
    capacity is going to grow. We must size and shape the Army
    facilities for the forces that we support.
        The European infrastructure consolidation review addressed
    excess capacity in Europe. For the Army, an investment of $363
    million results in annual savings of $163 million, which is
    less than a 3-year payback. Our focus was to reduce capacity,
    not capabilities.
        We are facing critical decisions that will impact our
    capabilities for the next decade. It is important that we make
    the right decisions now.
        Without the savings from a BRAC round, the risk is that our
    installations will experience larger cuts than would otherwise
    occur. We look forward to working with Congress to ensure the
    Army is capable of fulfilling its many missions.
        So on behalf of soldiers, families, and civilians, and the
    best Army in the world, thank you for the opportunity to be
    here today. I look forward to your questions.
        Senator Ayotte. Thank you, Secretary Hammack.
        [The prepared statement of Ms. Hammack follows:]
                 Prepared Statement by Ms. Katherine G. Hammack
                                  introduction
        Chairman Ayotte, Ranking Member Kaine, and Members of the
    Committee, on behalf of the Soldiers, Families, and Civilians of the
    United States Army, thank you for the opportunity to present the Army's
    fiscal year 2016 military construction (MILCON) and installations
    programs budget request.
        The Army installation management community is committed to
    providing the facilities necessary to enable a ready and capable Army.
    The President's fiscal year 2016 MILCON budget request supports a
    regionally-engaged Army in a fiscally-constricted environment.
        We ask for the Committee's continued commitment to our Soldiers,
    Families, and Civilians and support for the Army's MILCON and
    installations programs.
                                    overview
        The President's fiscal year 2016 budget requests $1.6 billion for
    Army MILCON, Army Family Housing (AFH), and Base Closure Accounts
    (BCA). This request represents 1.3 percent of the total Army budget
    request. Of this $1.6 billion request, $743 million is for Military
    Construction, Army; $197 million is for Military Construction, Army
    National Guard; $114 million is for Military Construction, Army
    Reserve; $493 million is for AFH; and $30 million is for BCA.
        The Army's facility investments are focused on supporting necessary
    training, maintenance, and operations facilities. These investments
    take into consideration the fiscal landscape we are facing as a Nation,
    which is influenced by the Budget Control Act of 2011, the Bipartisan
    Budget Agreement of 2013, and the strategic shift to realign forces
    toward the Asia/Pacific theater.
                              army force structure
        Fiscal reductions required by current law, and outlined in the 2014
    Quadrennial Defense Review, have put the Army on a path to shrink our
    active component end
        strength and corresponding force structure a second time from a
    peak of 570,000 in fiscal year 2010, to 450,000 by fiscal year 2017.
    This is a total reduction of 120,000 active component Soldiers,
    approximately 22 percent. If sequestration level cuts are imposed in
    fiscal year 2016 and beyond, the Army may have to reduce our end
    strength and corresponding force structure to 420,000 Soldiers by
    fiscal year 2019. This is a cumulative reduction of 150,000 Soldiers,
    approximately 26 percent.
        These reductions will affect every installation in the Army. The
    Army must retain our adaptability and flexibility so we can continue to
    provide regionally-aligned and mission-tailored forces in support of
    national defense requirements. Failing to maintain the proper balance
    between end-strength, readiness, and modernization will result in a
    ``hollow'' Army. The Army is already reducing our active component from
    45 Brigade Combat Teams (BCTs) to 32 by the end of fiscal year 2015.
        When we evaluated our initial force structure reductions from
    570,000 to 490,000 Soldiers, we conducted a Programmatic Environmental
    Assessment (PEA), which was prepared in accordance with the National
    Environmental Policy Act (NEPA). The PEA analyzed potential
    environmental impacts that could result from the force reductions,
    including socioeconomic impacts at specified population loss
    thresholds. Since the Army's active component end-strength and
    corresponding force structure will decline further than 490,000 to
    450,000 by fiscal year 2017, the Army initiated a supplemental PEA
    (SPEA) analysis in February 2014 to analyze additional potential
    population loss scenarios that accounted for the impacts of full
    sequestration and Budget Control Act funding levels in fiscal year 2016
    and beyond. Following publication of the SPEA, the Army is in the
    process of conducting approximately 30 community listening sessions at
    all Army installations with military and civilian populations of 5,000
    or more. The community listening sessions give communities an
    opportunity to contribute feedback that will be taken into
    consideration by Army leaders before decisions are made on force
    structure reductions for specific installations.
                           facility capacity analysis
        As the Army reorganizes to address these reductions, we must gauge
    the facility capacity and facility mix that we require to support a
    ready and resilient Army. We have begun conducting a facility capacity
    analysis to determine how much excess capacity will be created at the
    aggregate or enterprise level by the decrease in our end strength and
    corresponding force structure.
        We have conducted programmatic analyses of real property needed to
    support an end-strength and corresponding force structure of 490,000
    active component Soldiers. Results show that with 490,000 active
    component Soldiers, we will have nearly 18 percent excess capacity
    across our worldwide installations, totaling over 160 million square
    feet of facilities that could be repurposed to serve a wide variety of
    other uses (including satisfying other Army facility requirements).
    Inside the United States, excess capacity ranges between 12 and 28
    percent, depending on facility category group, with an average of
    approximately 18 percent.
        The Army estimates it costs $3 per square foot each year to
    maintain underutilized facilities. Accordingly, it costs the Army over
    $480 million a year to operate and sustain worldwide excess capacity.
    Additional excess capacity will be created when the active component
    shrinks further, necessitating incremental facility capacity analyses
        In January 2013, the Secretary of Defense directed a thorough
    review of European infrastructure requirements. This effort is
    consistent with the Congressional direction communicated in the fiscal
    year 2014 National Defense Authorization Act. In May 2014, the first
    set of decisions resulting from the European Infrastructure
    Consolidation (EIC) analysis was released. The Secretary of Defense
    approved 22 actions, 13 of which were Army actions. Many of these
    actions had been underway prior to EIC, yet they were formally
    reevaluated and found to be wholly consistent with the intent of EIC:
    to reduce excess infrastructure and associated operating costs, without
    sacrificing operational capabilities.
        In January 2015, the Department of Defense announced 26 additional
    decisions, 20 of which were Army actions, which resulted from a
    rigorous analytic method that adapted elements of the Base Closure and
    Realignment (BRAC) process to an overseas environment. This analysis
    included a Capacity Analysis, a Military Value Analysis, and a
    structured Scenario Development and Evaluation process. The Army is now
    nearing completion of fully developed and coordinated business plans to
    ensure these decisions are implemented between 2016 and 2020, in a
    manner that conforms to the Secretary of Defense's guidance and
    achieves both the projected savings and infrastructure reductions.
        The 33 Army EIC actions will significantly reduce our
    infrastructure in Europe at a considerably faster pace than previously
    envisioned. They are projected to yield Annual Recurring Savings of
    $163 million by fiscal year 2021 after implementation costs of $358
    million are incurred between fiscal year 2014 and 2020.
        The use of BRAC methods and tools to evaluate our European
    infrastructure was helpful in building expertise and proficiency that
    will help prepare the Army for a future BRAC Round. Moreover, the rigor
    of the analysis helped to demonstrate that DOD has reduced, or
    identified for reduction, all that it can overseas, and must now seek
    reductions within the United States, for which new BRAC authority is
    essential. This authority is needed to eliminate excess, balance
    infrastructure and force structure, and operate within projected fiscal
    constraints. DOD and the Army have the tools and authorities needed to
    identify and reduce our excess capacity overseas. Inside the United
    States, however, the best and proven method to address excess
    infrastructure, in a cost-effective, transparent, and equitable manner,
    is through the BRAC process.
        Our evaluation of European infrastructure followed the BRAC
    analytic methods and laid the foundation for the next round of BRAC.
    BRAC is a proven, fair, and cost effective process; the savings have
    been validated by the Government Accountability Office (GAO). Similar
    to our EIC effort, the Army is committed to a future BRAC round that is
    focused on efficiency and consolidation rather than transformation.
        The Army needs BRAC to achieve savings of a sufficient magnitude to
    prevent the deterioration of our critical infrastructure. As the Army's
    end-strength and force structure decline alongside available funding,
    hundreds of millions of scarce dollars will be wasted in maintaining
    underutilized buildings and infrastructure. Trying to spread a smaller
    budget over the same number of installations and facilities will
    inevitably result in rapid declining conditions of Army facilities.
        The Army has used existing authorities to vacate leased space and
    move from temporary buildings into permanent buildings. For example, at
    Fort Campbell, Kentucky, when the Fourth BCT of the 101st Airborne
    Division was inactivated, it resulted in 228 facility reallocation
    moves affecting 5 different Brigades. At the end of the process, Fort
    Campbell vacated and removed 91 relocatable buildings consisting of
    over 200,000 square feet.
        As laudable as the Fort Campbell efficiency measures have been,
    however, the stark budgetary reality is that modest savings from these
    prudent efficiency measures cannot substitute for the significant
    savings of a new BRAC round. The cost of running a garrison is
    relatively fixed, regardless of whether the supported population is
    reduced by 10, 20, or 40 percent. The Army must continue to evaluate,
    balance, and right-size the diverse and extensive supporting
    infrastructure that enables our effective fighting forces. BRAC is the
    only proven authority that allows the Army to achieve this balance,
    reduce costs, and achieve the necessary savings.
        For many communities near our installations, BRAC is better than
    proceeding with the reduction of force structure and excess capacity
    under current law. It provides the impacted communities a chance to
    conduct comprehensive redevelopment planning with federal resources to
    assist them. It also can provide the community additional property
    conveyance options. Neither the Army nor the supporting communities
    benefit from retaining underutilized installations that are
    unaffordable for the Army with diminished economic benefit to the
    community.
                       facility investment strategy (fis)
        As the Army shapes the Force of 2025 and Beyond through a series of
    strategic initiatives, the Installation Management Community continues
    to focus on providing quality, energy-efficient facilities in support
    of the Army Leadership priorities.
        The FIS provides a strategic framework that is synchronized with
    the Army Campaign Plan (ACP); Total Army Analysis; and the Planning,
    Programming, Budgeting & Execution (PPBE) to determine capital
    investment needed to sustain Army facilities at installations and Joint
    Service bases across the country. The FIS is a cost-effective and
    efficient approach to facility investments that reduces unneeded
    footprint, saves energy by preserving efficient facilities,
    consolidates functions for effective space utilization, demolishes
    failing buildings, and uses appropriate excess facilities to eliminate
    off-post leases.
        FIS uses MILCON funding to replace failing facilities and build out
    critical facility shortages; Operation and Maintenance (O&M) funding to
    address the repair and maintenance of existing facilities; O&M
    Restoration and Modernization (R&M) funding to improve existing
    facility quality; O&M Sustainment funding to maintain existing
    facilities; and Demolition and Disposal funding to eliminate failing
    excess facilities. Focused investments from MILCON and O&M funding
    support facilities grouped in the following categories: Redeployment/
    Force Structure, Barracks, Revitalization, Ranges, and Training
    Facilities. The fiscal year 2016 budget request implements the FIS by
    building out shortfalls for unmanned aerial vehicle units, Army Cyber,
    initial entry training barracks, selected maintenance facilities, and
    reserve component facilities. Additional departmental focus areas
    include Organic Industrial Base and Energy/Utilities.
                        fiscal year 2016 budget request
                          military construction, army
        The fiscal year 2016 Military Construction, Army (MCA) budget
    requests an authorization of $609 million and appropriations for $743.2
    million. The appropriations request includes $134.2 million for
    planning and design, minor military construction, and host nation
    support. The MCA program is focused on the MILCON categories of Army
    Cyber, Barracks, Revitalization, Ranges and Training Facilities, and
    Other Support Programs.
        Of the $743.2 million, $90 million will be spent on Army Cyber. The
    fiscal year 2016 MCA budget requests a Command and Control Facility for
    the recently-established Army Cyber Command (ARCYBER) and Joint Forces
    Headquarters Cyber at Fort Gordon, Georgia.
        Of the $743.2 million, $56 million will be spent on Barracks. As
    part of the Army's continued investment in barracks, the fiscal year
    2016 MCA budget provides for one project to complete a Reception
    Barracks Complex at Fort Sill, Oklahoma, which includes 254 barracks
    spaces and company operations facilities for Initial Entry Training
    (IET) Soldiers during their in-processing.
        Of the $743.2 million, $397.6 million will be spent on
    Revitalization. As part of the Army's Facility Investment Strategy, the
    Army is requesting eight projects to address failing facilities and/or
    critical facility shortfalls to meet the unit mission requirements.
    Projects include the $43 million Homeland Defense Operation Center at
    Joint Base San Antonio, Texas; a $70 million Waste Water Treatment
    Plant at West Point, New York; a $37 million Instruction Building at
    Joint Base Myer-Henderson Hall, Virginia; a $85 million Powertrain
    Facility (Infrastructure/Metal) at Corpus Christi Army Depot, Texas; a
    $98 million replacement of Pier 2 at the Military Ocean Terminal
    Concord, California; a $7.8 million Physical Readiness Training
    Facility at Fort Greely, Alaska; a $5.8 million Rotary Wing Taxiway at
    Fort Carson, Colorado; and a $51 million Vehicle Maintenance Shop at
    Grafenwoehr Training Area, Germany.
        Of the $743.2 million, $65.4 million will be spent on Ranges and
    Training Facilities. These funds will be invested to construct a Non-
    Commissioned Officer (NCO) Academy at Fort Drum, New York ($19 million)
    as well as two new Training Support Facilities. These facilities are
    located at Fort Sill, Oklahoma ($13.4 million) and Fort Lee, Virginia
    ($33 million) to meet Program of Instruction (POI) training
    requirements for Soldiers, Non-Commissioned Officers and Junior
    Officers undergoing Military Occupational Specialty training.
        Of the $743.2 million, $134.2 million will be spent on Other
    Support Programs. This includes $73.2 million for planning and design
    of MCA projects, $36 million for the oversight of design and
    construction of projects funded by host nations, and $25 million for
    unspecified minor construction.
                   military construction, army national guard
        The fiscal year 2016 Military Construction, National Guard (MCNG)
    budget requests an authorization of $132.1 million and appropriations
    for $197.2 million. The appropriations request includes $35.3 million
    for planning and design and minor military construction and $29.8
    million for previously-authorized projects at Dagsboro, Delaware ($10.8
    million) and Yakima, Washington ($19 million). The MCNG program is
    focused on the readiness centers, maintenance facilities, training
    facilities, ranges and barracks.
        Of the $197.2 million, $88.3 million will be spent on Readiness
    Centers. The fiscal year 2016 budget request includes five readiness
    centers: Palm Coast, Florida ($18 million); Easton, Maryland ($13.8
    million); Salem, Oregon ($16.5 million); Richmond, Virginia ($29
    million); and Camp Hartell, Connecticut ($11 million). The readiness
    centers include new facilities as well as expansions/alterations to
    existing facilities. The projects primarily address space shortfalls
    and replacement of obsolete facilities. In one case, the project will
    eliminate the need to continue leasing a facility. The new readiness
    centers will enhance the Army National Guard's readiness to perform
    state and federal missions.
        Of the $197.2 million, $26.7 million will be spent on Maintenance
    Facilities. Three National Guard maintenance shops are included in the
    request. The Dagsboro, Delaware facility ($10.8 million) addresses
    shortfalls in interior space, privately-owned vehicle parking, and
    military vehicle parking. A project in North Hyde Park, Vermont ($7.9
    million) adds space to an existing facility that only has 22 percent of
    the required space. One final addition/alteration project is located in
    Reno, Nevada ($8 million) and will address space shortfalls and
    modernize the existing facility.
        Of the $197.2 million, $16 million will be spent on Training
    Facilities. At Fort Indiantown Gap, Pennsylvania, a new training aids
    center ($16 million) replaces a deteriorated World War Two-era facility
    and other temporary storage.
        Of the $197.2 million, $11.9 million will be spent on Ranges. The
    Army National Guard's request contains four range projects. Two range
    projects are located in Salina, Kansas and consist of an automated
    combat pistol/military police firearms qualification course ($2.4
    million) and a modified record fire range ($4.3 million). Both of these
    ranges are necessary in order to meet current training range criteria
    and achieve the required throughput. The range project at Camp Ravenna,
    Ohio, a modified record fire range ($3.3 million), will provide needed
    capacity for unit training. In Sparta, Illinois a basic firing range
    ($1.9 million) will address the lack of this type of facility in south
    central Illinois.
        Of the $197.2 million, $19 million will be spent on Barracks
    facilities. At Yakima, Washington, a new transient training barracks
    ($19 million) addresses a shortfall in space and quality.
        Of the $197.2 million, $35.3 million will be spent on Other Support
    Programs. The fiscal year 2016 Army National Guard budget request
    includes $20.3 million for planning and design of future year projects
    and $15 million for unspecified minor military construction.
                      military construction, army reserve
        The fiscal year 2016 Military Construction, Army Reserve (MCAR)
    budget requests an authorization of $88.2 million and appropriations
    for $113.6 million. The appropriations request includes $16.1 million
    for planning and design and minor military construction and $9.3
    million for a previously-authorized project at Starkville, Mississippi.
        Of the $113.6 million, $97.5 million will be spent on
    Revitalization. The fiscal year 2016 Army Reserve budget request
    includes five projects that build out critical facility shortages and
    replace and modernize failing infrastructure and inefficient facilities
    with new operations and energy efficient facilities. The Army Reserve
    will construct three new reserve centers in Riverside, California;
    MacDill AFB, Florida; and Starkville, Mississippi that will provide
    modern training classrooms, simulations capabilities, and maintenance
    platforms that support the Army force generation cycle and the ability
    of the Army Reserve to provide trained and ready soldiers for Army
    missions when called. The Starkville, Mississippi project was
    authorized in the fiscal year 2015 National Defense Authorization Act,
    but no funds were appropriated. In Conneaut Lake, Pennsylvania the Army
    Reserve, through the Defense Access Road Program, will improve an
    access road leading to an Army Reserve Local Training Area and
    maintenance facilities. The request also includes a new vehicle
    maintenance facility at Orangeburg, New York.
        Of the $113.6 million, $16.1 million will be spent on Other Support
    Programs. The fiscal year 2016 Army Reserve budget request includes
    $9.3 million for planning and design of future year projects and $6.8
    million for unspecified minor military construction to address
    unforeseen critical needs.
                              army family housing
        The Army's fiscal year 2016 AFH budget requests $493.2 million for
    construction and housing operations worldwide. The AFH inventory
    includes 10,614 government-owned homes, 4,984 government-leased homes,
    and 86,077 privatized-homes. The Army has privatized over 98 percent of
    on-post housing assets inside the United States. All Army overseas
    Family housing quarters are either government-owned or government-
    leased units.
        Of the $493.2 million, $85.8 million will be spent on Operations.
    The Operations account includes four sub-accounts: management,
    services, furnishings, and a small miscellaneous account. Within the
    management sub-account, Installation Housing Services Offices provide
    post housing, non-discriminatory listings of rental and for-sale
    housing, rental negotiations and lease review, property inspections,
    home buying counseling, landlord-tenant dispute resolution, in-and-out
    processing housing assistance, and assistance with housing
    discrimination complaints and act as a liaison between the installation
    and local and state agencies. In addition, this account supports remote
    access to housing information from anywhere in the world with direct
    information or links to garrison information such as schools,
    relocation information, installation maps, housing floor plans, photo
    and housing tours, programs and services, housing wait list
    information, and housing entitlements.
        Of the $493.2 million, $65.6 million will be spent on Utilities.
    The Utilities account includes the cost of delivering heat, air
    conditioning, electricity, water, and wastewater support for owned or
    leased (not privatized) Family housing units.
        Of the $493.2 million, $75.2 million will be spent on Maintenance
    and Repair. The Maintenance and Repair account supports annual
    recurring projects to maintain and revitalize AFH real property assets
    and is the account most affected by budget changes. This funding
    ensures that we appropriately maintain the 10,614 housing units so that
    we do not adversely impact Soldier and Family quality of life.
        Of the $493.2 million, $144.9 million will be spent on Leasing. The
    Army Leasing program is another way to provide Soldiers and their
    Families with adequate housing. The fiscal year 2016 budget request
    includes funding for 575 temporary domestic leases in the US, and 4,409
    leased units overseas.
        Of the $493.2 million, $22 million will be spent on Privatization.
    The Privatization account provides operating funds for the Army's
    Residential Communities Initiatives (RCI) program portfolio and asset
    management and government oversight of privatized military Family
    housing. The need to provide oversight of the privatization program and
    projects is reinforced in the fiscal year 2013 National Defense
    Authorization Act, which requires more oversight to monitor compliance,
    review, and report performance of the overall privatized housing
    portfolio and individual projects.
        In 1999, the Army began privatizing Family housing assets under the
    Residential Communities Initiative (RCI). All scheduled installations
    have been privatized through RCI. RCI Family housing is established at
    44 locations--98 percent of the on-post Family housing inventory inside
    the United States. Initial construction and renovation investment at
    these 44 installations is estimated at $13.2 billion over a 3-14-year
    initial development period (IDP), which includes an Army contribution
    of approximately $2 billion. All IDPs are scheduled to be completed by
    2019. From 1999 through 2013, our RCI partners have constructed 31,935
    new homes and renovated another 25,834 homes.
        Of the $493.2 million, $99.7 million will be spent on Construction.
    The Army's fiscal year 2016 Family Housing Construction request is for
    $89 million for new construction, $3.5 million for construction
    improvements and $7.2 million for planning and design. The Army will
    construct 38 single Family homes at Rock Island Arsenal, Illinois to
    support Senior Officer and Senior Non-Commissioned Officer and
    Families. These new homes enable the Army to fully address the housing
    deficit and to eliminate dependency on leased housing. The Army will
    construct 90 apartment quarters on Camp Walker in Daegu, Korea to
    replace aged and worn out leased units to consolidate Families on post.
                           base closure account (bca)
        BRAC property disposal remains an Army priority. Putting excess
    property back into productive re-use, which can facilitate job
    creation, is important to the communities in which they are located.
        The Army's portion of the fiscal year 2016 BCA budget request
    totals $29.7 million. The request includes $14.6 million for caretaker
    operations and program management of remaining properties and $15.1
    million for environmental restoration efforts. In fiscal year 2016, the
    Army will continue environmental compliance and remediation projects at
    various BRAC properties. The funds requested are needed to keep planned
    environmental response efforts on track particularly at legacy BRAC
    installations including Fort Ord, California and Pueblo Chemical Depot,
    Colorado. Additionally, funds requested support environmental projects
    at several BRAC 2005 installations including Riverbank Army Ammunition
    Plant, California; Fort Monmouth, New Jersey; Fort Monroe, Virginia;
    and Umatilla Chemical Depot, Oregon. The current estimated cost to
    complete all BRAC environmental cleanup requirements is $957 million
    over a period of approximately 30 years.
        When the Army sells excess BRAC property, proceeds go back into our
    Base Closure Account to fund remaining Army environmental and
    maintenance requirements on our BRAC sites. Sales of Army BRAC property
    at substantially fair market value help protect programs that support
    Active, Guard, and Reserve installations.
        In total, the Army has disposed of almost 225,000 acres (76 percent
    of the total acreage disposal requirement of 297,000 acres), with
    approximately 72,000 acres (24 percent) remaining. The current goal is
    for all remaining excess property to be conveyed by 2023. Placing this
    property into productive reuse helps communities rebuild the local tax
    base, generate revenue, and, most importantly, replace lost jobs.
        There is life after BRAC for defense communities. BRAC-impacted
    communities have leveraged planning grants and technical assistance
    from the DOD Office of Economic Assistance (OEA), as well as BRAC
    property disposal authorities, to adjust in ways that are often not
    possible outside the BRAC process. There are many instances of how BRAC
    property has been put to new uses; below are three examples.
        At Fort Monmouth, transferred property is now in productive re-use.
    During November 2014, CommVault, a data protection and information
    software company moved its global headquarters to a portion of the
    former Fort Monmouth. CommVault moved 500 existing employees and 400
    new employees into the new 275,000 square foot facility less than two
    years after the Army conveyed a 55 acre parcel to the public
    development authority in consideration for an Economic Development
    Conveyance under BRAC law CommVault officials anticipate 2,000
    additional employees will be hired upon completion of a 650,000 square
    foot addition to the 55 acre campus. The company's decision to re-
    locate and expand at its new location is a major step to establish a
    technology hub on the former Fort Monmouth.
        At Fort Gillem, Kroger, one of the world's largest grocery
    retailers, will open a one million square foot state-of-the-art
    distribution center on 253 acres at the former Fort Gillem, creating
    120 new jobs and investing more than $175 million into the former Army
    and Air Force Exchange Service (AAFES) distribution facility over the
    next five years. The new jobs will include warehouse, security,
    transportation management, engineering and facilities management
    positions. The community anticipates 1,500 new jobs over the next two
    years and revenues to support critical services for the residents of
    Forest Park. Like Ft Monmouth, the Army conveyed this property to the
    Local Redevelopment Authority as an Economic Development Conveyance,
    receiving $15 million at closing with an additional $15 million in
    structured payments over the next seven years.
        The third BRAC example is the US Army Reserve Center #2 in Houston,
    Texas. This six acre site, including more than 15,000 square feet, was
    conveyed in August 2012 to the City of Houston under a Department of
    Justice Public Benefit Conveyance (PBC) for use as a police department.
    This type of re-use is common across the country whenever the Army
    closes a Reserve Center.
                                     energy
        The Army is improving our installation energy use and
    sustainability efforts. In fiscal year 2016, the Installation Energy
    budget total is $1.68 billion. This budget total includes $45.8 million
    from the DOD-wide MILCON appropriation for the Energy Conservation
    Investment Program (ECIP), $150.1 million for the Energy Program/
    Utilities Modernization Program, and $1.48 billion for Utilities
    Services. The Army conducts financial reviews, business case and life
    cycle cost analysis, and return on investment evaluations for all
    energy initiatives.
        Of the $1.68 billion, $45.8 million will be spent on the Energy
    Conservation Investment Program (ECIP). The Army invests in energy
    efficiency, on-site small-scale energy production, and grid security
    through the DOD's appropriation for ECIP. In fiscal year 2014, the DOD
    began conducting a project-by-project competition to determine ECIP
    funding distribution to the Services. In fiscal year 2016, the Army
    received $45.8 million for seven projects, including six energy
    conservation projects and one renewable energy project.
        Of the $1.68 billion, $150.1 million will be spent on Energy
    Program/Utilities Modernization. Reducing consumption and increasing
    energy efficiency are among the most cost-effective ways to improve
    installation energy security. The Army funds many of its energy
    efficiency improvements through the Energy Program/Utilities
    Modernization program account. Included in this total are funds for
    energy efficiency projects, the Army's metering program, modernization
    of the Army's utilities, energy security projects, and planning and
    studies. In addition, this account funds planning and development of
    third party financed renewable energy projects through the Office of
    Energy Initiatives (OEI). The OEI currently has 14 projects completed,
    under construction, in the procurement process, or in the final stages
    before procurement with a potential of over 400 Mega Watts (MW) of
    generation capacity. Power purchased in conjunction with OEI projects
    will be priced at or below current or projected installation utility
    rates.
        Of the $1.68 billion, $1.48 billion will be spent on Utilities
    Services. The Utilities Services account pays all Army utility bills
    including the repayment of Utilities Privatization (UP), Energy Savings
    Performance Contracts (ESPCs), and Utilities Energy Service Contracts
    (UESCs). Through the authority granted by Congress, ESPCs and UESCs
    allow the Army to implement energy efficiency improvements through the
    use of private capital, repaying the contractor for capital investments
    over a number of years out of the energy cost savings. The Army has the
    most robust ESPC program in the Federal government. The ESPC program
    has more than 200 Task Orders at 78 installations, representing $1.68
    billion in private sector investments, and over 370 UESC Task Orders at
    47 installations, representing $583 million in utility sector
    investments. We have additional ESPC projects in development, totaling
    over $300 million in private investment and $60 million in development
    for new UESCs. From December 2011 through December 2014, under the
    President's Performance Contracting Challenge, the Army executed $725
    million in contracts with third-party investment using ESPCs and UESCs.
                                  environment
        The Army's fiscal year 2016 budget provides $1.1 billion for
    Environmental Programs in support of current and future readiness. This
    budget supports legally-driven environmental requirements under
    applicable Federal and State environmental laws, binding agreements,
    and Executive Orders. It also promotes stewardship of the natural
    resources that are integral to our capacity to effectively train our
    land-based force for combat.
        This budget maintains the Army's commitment to acknowledge the past
    by restoring Army lands to a useable condition and by preserving
    cultural, historic and Tribal resources. It allows the Army to engage
    the present by meeting environmental standards that enable Army
    operations and protect our Soldiers, Families, and communities.
    Additionally, it charts the future by allowing the Army to
    institutionalize best practices and technologies to ensure future
    environmental resiliency.
                 sustainment/restoration & modernization (r&m)
        This year's fiscal year 2016 sustainment funding is $2.9 billion or
    80 percent of the DOD Facilities Sustainment Model (FSM) requirement
    for all the Army components. Due to this lower level of sustainment
    funding, we are accepting a level of risk in degraded facilities due to
    deferred maintenance. Our facility inventory is currently valued at
    $299 billion.
        In keeping with the FIS, the Army continues to invest in facility
    restoration through O&M R&M currently budgeted for $562 million. Our
    focus is to restore trainee barracks, enable progress toward energy
    objectives, and provide commanders with the means of restoring other
    critical facilities. The Army's demolition program has been increased
    by 46 percent to $42.2 million, which increases the rate at which we
    are removing failing excess facilities. Facilities are an outward and
    visible sign of the Army's commitment to providing a quality of life
    for our Soldiers, Families, and Civilians that is consistent with their
    commitment to our Nation's security.
                            base operations support
        The Army's fiscal year 2016 Base Operations Support (BOS) request
    is $9.2 billion in support of leadership's commitment to provide
    quality of life to our Soldiers, Civilians, and Families that is
    commensurate with their service. The fiscal year 2016 BOS funding
    request represents a 10 percent reduction compared to fiscal year 2014
    full year execution (including OCO authorized in support of Base
    Budget). It should be noted that the fiscal year 2016 BOS budget
    reflects a 6 percent increase above the fiscal year 2015 BOS-enacted
    level ($8.7 billion), demonstrating senior leadership's desire to
    address installation readiness. Although the Military and Civilian
    workforce is being reduced, the number of installations remains the
    same. Balancing the BOS funding across 154 installations world-wide
    stresses the Army's ability to provide a safe training environment and
    a respectable quality of life on our installations. The Army will
    continue to be fiscally challenged to meet the demands of our
    installation communities.
        The Army remains committed to our Family programs and continues to
    evaluate these services in order to maintain relevance and
    effectiveness. Ensuring the resiliency of our Soldiers and Families is
    the priority of programs such as Army Substance Abuse Program, Soldier
    Family Assistance Centers, and Suicide Prevention.
        Given fiscal realities, the Army continues to evaluate programs to
    fully optimize resources by eliminating redundant or poorly performing
    programs and making tough decisions to adjust service levels and then
    manage expectations. We continue to seek internal efficiencies/
    tradeoffs as our fiscal environment forces the internal realignment of
    BOS funds to support these Army priorities.
        Budget uncertainties are producing real life consequences in
    training and installation readiness, as well as the local community.
    Current funding requires installations to scale back or cancel service
    contracts that employ people in local communities and requiring
    installations to work with commanders to use special duty assignments
    to support installation services and programs (e.g., installation
    security, transportation, vehicle and range maintenance, POL and Ammo
    handling).
        Without a reduction in the number of installations, the Army will
    be forced to sacrifice quality of life programs at the expense of
    maintaining excess capacity. The cumulative effect of funding
    reductions over the years harm the overall quality of life on our
    installations and adjoining communities as the Army realigns our
    Military and Civilian population and reduces supporting service program
    contracts across the garrisons.
                      intergovernmental support agreements
        The Army is implementing an overarching strategy to incorporate
    Intergovernmental Support Agreements (IGSAs) as authorized in the
    fiscal year 2013 NDAA, Section 331 (codified as 10 U.S.C. Sec.  2336).
    The clarification included in the fiscal year 2015 NDAA facilitates the
    Army's ability to enter and participate in public-public partnerships.
    The Department of the Army issued an Execution Order to Army Commands
    in August of 2013 with initial guidance. Installations have identified
    96 IGSA concepts, three of which have been submitted to Army
    headquarters for approval. These initial proposals will assist the Army
    to develop a standardized process for identifying, evaluating and
    approving IGSAs. Further guidance is being developed from the
    clarifications provided last year.
                                   conclusion
        The Army's fiscal year 2016 installations management budget request
    is a balanced program that supports the Army as we transition from
    combat and supports our Soldiers, Families, and Civilians while
    recognizing the current fiscal conditions.
        The Army's end-strength and force structure are decreasing
    consistent with the 2014 QDR. At 450,000 active component Soldiers, we
    have evidence that the Army will have well over 18 percent excess
    capacity. The Army needs the right tools to right size our capacity.
    Failure to reduce excess capacity will divert hundreds of millions of
    dollars per year away from critical training and readiness functions.
        The European Infrastructure Consolidation Assessment (EIC) has been
    extremely successful. It shows that the combination of our Army BRAC-
    based Infrastructure Analysis and the already robust strategic plans
    effort of the U.S. Army in Europe prepare us to meet the challenges of
    the future. The European Infrastructure Consolidation results
    demonstrate the Army's commitment to seek greater efficiencies and
    ensure we are focusing resources where they can have the greatest
    effect. The resulting actions ensure, even in the context of a
    challenging fiscal environment, that we are ready and able to defend
    U.S. interests and meet our commitment to our Allies now and in the
    future.
        BRAC is a proven and fair means to address excess capacity. BRAC
    has produced net savings in every prior round. On a net $13 billion
    investment, the BRAC 2005 round is producing a net stream of savings of
    $1 billion a year. In this case, BRAC 2005 is producing a 7.7 percent
    annual yield. That is a successful investment by any definition. A
    future round of BRAC is likely to produce even better returns on
    investment. We look forward to working with Congress to determine the
    criteria for a BRAC 2017 round.
        Thank you for the opportunity to appear before you today and for
    your continued support for our Soldiers, Families, and Civilians.

        Senator Ayotte. Secretary McGinn?

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

        Mr. McGinn. Chairman Ayotte, Ranking Member Kaine, members
    of the committee, I would like to start my testimony by noting
    the tragic loss overnight of 11 patriotic Americans in the Gulf
    of Mexico, 4 Army National Guard, 7 marines. We send our
    thoughts and prayers to their families, and hope that they find
    solace in the fact that the loss of their loved ones was in the
    service of our country.
        The world events of last year and the first part of this
    year demonstrate the complex and unpredictable nature of our
    times. From the rise of the Islamic State, an emboldened
    Russian Federation, outbreak of the Ebola virus, the Navy and
    Marine Corps team has been on station forward as America's
    first responders, operating around the clock and around the
    world.
        Our installations provide the backbone of support for our
    maritime forces, enabling that forward presence. Our Nation's
    Navy and Marine Corps team must have the ability to sustain and
    project power, effect deterrence, and provide humanitarian
    assistance in disaster relief whenever, wherever, and for
    however long needed to protect the interests of the United
    States and our allies.
        Yet, fiscal constraints introduce additional complexity and
    challenges as our department strives to strike the right
    balance between resources, risk, and strategy.
        The President's Budget request for fiscal year 2016, while
    supporting the 2014 Quadrennial Defense Review, requests $13.3
    billion to operate, maintain, and recapitalize our Department
    of the Navy shore infrastructure.
        This is a welcome increase of $1.5 billion from amounts
    appropriated in fiscal year 2015, but remains below the DOD
    goal for facilities sustainment.
        On the question of risk and reduced investment, we are
    funding the sustainment, restoration and, modernization of our
    facilities at a level to arrest the immediate decline in the
    overall condition of our most critical infrastructure. By
    deferring less critical repairs, especially for nonmission-
    critical items, we acknowledge that we are allowing certain
    facilities to degrade.
        However, this budget has us headed back in the right
    direction. Last year's budget risks would lead, if continued,
    to rapid degradation of overall shore establishment readiness,
    if continued into the future.
        I will look forward to working with you to sustain the
    warfighting readiness and quality of life for the U.S. Navy and
    Marine Corps, the most formidable expeditionary fighting force
    the world has ever known.
        Thank you for the opportunity to testify, and I look
    forward to your questions.
        Senator Ayotte. Thank you, Secretary McGinn.
        Please know, as a committee, that we offer our condolences
    as well to the families and to those lost by the marines.
        Mr. McGinn. Thank you.
        Senator Ayotte. Thank you.
        [The prepared statement of Mr. McGinn follows:]
                     Prepared Statement by Dennis V. McGinn
        Chairman Ayotte. Ranking Member Kaine, and members of the
    Subcommittee, I am pleased to appear before you today to provide an
    overview of the Department of the Navy's (DON's) investment in its
    infrastructure and energy programs.
                          toward a more secure future
        The world events of 2014 demonstrate the complex and unpredictable
    nature of our times. From the rise of the Islamic State, an emboldened
    Russian Federation, and the outbreak of the Ebola virus, the Navy-
    Marine Corps team has been on station as America's ``first
    responders'', operating around the clock and around the world. Our Navy
    and Marine Corps must be manned, trained, and equipped to deter and
    respond to geo-political crises and natural events wherever, whenever,
    and however they occur.
        Our installations provide the backbone of support for our maritime
    forces, enabling their forward presence. Last year's budget, while
    conforming to the spending caps imposed by the Bipartisan Budget Act of
    2013, would lead to rapid degradation of shore establishment readiness
    if continued into the future. In contrast, the DON's President's Budget
    request for fiscal year 2016 (PB 2016) makes progress toward achieving
    a more sustainable investment profile, with increases of 50 percent in
    military construction funding and nearly 30 percent in the Facilities
    Sustainment, Restoration and Modernization accounts, while continuing
    to manage risk in shore infrastructure investment and operations. This
    increased funding enables the Department to meet the 6 percent
    statutory investment in our shipyards, aviation fleet readiness
    centers, and depots and will accomplish the deferred critical
    maintenance on other facilities. We're making investments in safety and
    quality of life projects, too, but this progress assumes the Department
    will not be held to the discretionary budget caps.
                        investing in our infrastructure
        Overview  In fiscal year 2016, the Department is requesting $13.3
    billion in various appropriations accounts, an increase of $1.5 billion
    from amounts appropriated in fiscal year 2015 to operate, maintain and
    recapitalize our shore infrastructure. These investments will enable
    the Department to support the three pillars upon which the 2014
    Quadrennial Defense Review (QDR) is based: protect the homeland, build
    security globally; project power and win decisively. Figure 1 provides
    a comparison between the fiscal year 2015 enacted budget and the PB
    2016 request by appropriation.

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                  Figure 1: DON Infrastructure Funding by Appropriation

        We continue to accept risk in shore infrastructure by prioritizing
    life/safety issues and efficiency improvements to existing
    infrastructure, focusing on the repair of only the most critical
    components of our mission critical facilities, and by deferring less
    critical repairs, especially for non-mission-critical facilities.
        Protecting the Homeland  Together, the Navy and Marine Corps will
    invest over $250 million domestically in military construction funds to
    upgrade or modernize utilities and critical infrastructure that will
    ensure continuity of operations in the event of man-made or natural
    disasters. In Georgia at Kings Bay, the Navy would upgrade the
    electrical distribution and supporting communications network that
    haven't been substantially modified since 1997. At its logistics base
    in Albany, the Marine Corps will replace an aging and degraded heating
    and ventilation system that has exceeded its useful life. In Washington
    State, a $34 million project would complete the waterfront restricted
    area at Naval Submarine Base, Bangor, ensuring the security of our
    strategic weapons arsenal.
        We're making investments to protect and be good stewards of our
    natural environment, too. At its Recruit Depot in Parris Island, South
    Carolina, the Marine Corps will construct additional safety berms at
    its ranges to retain expelled rounds and thereby protecting the
    adjacent sensitive wetlands from copper and lead contamination. At the
    Naval Magazine in Indian Island, Washington, the Navy will provide
    shore power to an ammunitions pier, replacing leased generators that
    now run under operationally limiting air permits. Unrelated to the
    broader issue of rebalancing forces to the Asia-Pacific Region, the
    Navy will correct deficiencies in the storm water and waste water
    systems in Guam, resolving an outstanding Notice of Violation issued by
    the Environmental Protection Agency.
        Building Global Security  The fiscal year 2016 budget request
    supports global security by strengthening our international
    partnerships and enhancing our defense posture abroad. Fulfilling the
    U.S. commitment to our NATO allies regarding the Phased Adaptive
    Approach to European ballistic missile defense, we will construct an
    interceptor site in Redzikowo, Poland, complementing the one we're
    building in Romania. We have enduring interests in the Middle East and
    the Gulf region. In Bahrain, the pier replacement and ship maintenance
    support facility projects included in this budget request will enable
    our forces to respond swiftly to emerging threats.
        We will also continue to rebalance our force structure to the Asia-
    Pacific region and this budget request includes funding to support the
    arrival of new aviation assets to Marine Corps Base Kaneohe, Hawai'i
    and Japan. Additionally, the DON budget request provides $126 million
    to construct a live-fire training range complex in Guam that will
    support current and future training needs of the Marine Corps and our
    allied partners. Finally, DOD, through its Office of Economic
    Adjustment, is requesting an additional $20 million to supplement the
    amount of $106 million previously appropriated--and the associated
    authority-- to continue improvements to Guam's civilian water and
    wastewater infrastructure necessary to support the Marine relocation.
        Guam, and the relocation of Marines to that island, remains an
    essential part of the United States' larger Asia-Pacific strategy of
    achieving a more geographically distributed, operationally resilient
    and politically sustainable force posture in the region. The Department
    appreciates the removal of the restrictions from the National Defense
    Authorization Act for fiscal year 2014, as well as the language in
    section 2822 in the National Defense Authorization Act for fiscal year
    2015 permitting the Navy to enter into a Refuge agreement with the U.S.
    Fish and Wildlife Service. Together, these provisions will allow us to
    move forward on the essential Guam component of our Pacific force
    laydown plan.
        Last July we provided Congress with our revised Guam Master Plan.
    Under this plan, also referred to as ``the distributed laydown,''
    approximately 5,000 Marines and 1,300 dependents will come to Guam
    versus the original plan that had considered approximately 8,600
    Marines and 9,000 dependents. The estimated cost, scope, and schedule
    for the military construction and Government of Japan funded projects
    necessary to carry out the revised plan were detailed in the Guam
    Master Plan. In the next year the Government of Japan will commit $176
    million to construct a Driver Convoy Course and a complex for Urban
    Terrain Range Operations at Anderson AFB South. To date, we have
    received in our Treasury almost $1 billion in Japanese funding toward
    completion of the relocation. This in itself is indeed a strong
    statement of the Japanese commitment to the relocation.
        Projecting Power  The advanced capabilities of our ships and
    aircraft help make us the most effective expeditionary fighting force
    in the world and these weapons systems and platforms require facilities
    and infrastructure capable of supporting them. The fiscal year 2016
    budget request will provide hangars and mission control facilities to
    accommodate our increasing deployment of and dependence on unmanned
    aerial systems such as the Navy's Triton and the Marine Corps'
    ``Blackjack.'' As the Navy continues its transition from the Orion P-3
    maritime patrol aircraft to the Poseidon P-8s, we will build hangars
    and other necessary facilities to enable their deployment to Hawai'i
    and Sigonella, Italy. Finally, the Navy will construct supporting
    facilities for the Littoral Combat Ships homeported in San Diego,
    California and Mayport, Florida. Together, these investments will
    increase our ability to collect intelligence, and conduct surveillance,
    reconnaissance and targeting--extending our reach and enabling us to
    prevail in anti-access and area-denial regions.
                            investing in our people
        Overview  The strength of our Navy-Marine Corps team lies not only
    in advanced weaponry or faster, stealthier ships and aircraft. Our
    naval forces derive their greatest strength from the Sailors and
    Marines who fire the weapon, operate and maintain the machinery, or fly
    the plane, and from the families and civilians supporting them. We
    continue to provide the best education, training, and training
    environments available so our forces can develop professionally and
    hone their warfighting skills. Providing quality of life is a
    determining factor to recruiting and retaining a highly professional
    force. To this end, we strive to give our people access to high-quality
    housing, whether government-owned, privatized, or in the civilian
    community, that is suitable, affordable, and located in a safe
    environment.
        Training and Education  Of the $1.7 billion request for military
    construction, the Navy and Marine Corps together have programmed almost
    $190 million in operational and technical training facilities,
    including the live-fire training range complex in Guam. Of the
    remaining projects, the majority support aviation training for a
    variety of manned and unmanned aircraft, including the Joint Strike
    Fighter, E-2D Hawkeye, KC-130 tankers, MH-60 and CH-53 helicopters, and
    the Triton. Finally, the Marine Corps will construct a Reserve Center
    that will support the training requirements of an amphibious assault
    unit that is relocating from Little Creek to Dam Neck, Virginia.
        Unaccompanied Housing  The Navy plans to make $117.6 million in
    operations & maintenance-funded repairs to its bachelor housing
    inventory, focusing on the barracks in the worst condition. This is a
    three-fold increase over the amount of funds programmed in fiscal year
    2015. Additionally the Navy's budget request includes two projects that
    will recapitalize inadequate (Q4) barracks at Naval Air Station
    Pensacola, Florida and at Naval Air Station, Patuxent River, Maryland.
    The Marine Corps completed programming of its substantial investment in
    unaccompanied housing in fiscal year 2012, although several are in
    various stages of construction. The arrival of new aviation squadrons
    at Marine Corps Base Hawai'i will increase personnel base loading and
    in response, the fiscal year 2016 budget request includes funds to
    construct a new barracks and improve our Marines' quality of life.
        Family Housing  The Department continues to rely on the private
    sector as the primary source of housing for Sailors, Marines, and their
    families. When suitable, affordable, private housing is not available
    in the local community, the Department relies on government-owned,
    privatized, or leased housing. The fiscal year 2016 budget request of
    $370 million supports Navy and Marine Corps family housing operation,
    maintenance, and renovation requirements. Of this amount, $11.5 million
    will revitalize government owned homes at Marine Corps Air Station
    Iwakuni, Japan and Wallops Island, Virginia. The budget request also
    includes $260.2 million for the daily operation, maintenance, and
    utilities expenses of the military family housing inventory.
        To date, over 62,000 Navy and Marine Corps family housing units
    have been privatized through the Military Housing Privatization
    Initiative. As a result, the Department has leveraged its resources to
    improve living conditions for Sailors, Marines, and their families. The
    Department has programmed $28.7 million to provide oversight and
    portfolio management to ensure the Government's interests in these
    public/private ventures remain protected and quality housing continues
    to be provided to military families.
        Safety Workforce Initiative  The safety workforce reform initiative
    is already in progress supporting over 750,000 personnel serving the
    Department in diverse, complex and evolving missions across the globe.
    The Naval Safety program is pressing forward on two key fronts: people
    and technology. To do this, the Department is recruiting, hiring and
    developing its safety professionals to ensure we employ the right
    people at the right place at the right time. Concurrently, we are
    expanding our global online training resources to ensure the Naval
    Safety workforce exceeds best practices found throughout industry.
        Steps toward expanding the knowledge base of our safety workforce
    have yielded positive results. During fiscal year 2014 global online
    safety training increased 65 percent from previous years with savings
    in administrative costs and the equivalent of 1,720 workdays of
    productivity gained. The same was true for the Annual Joint Safety
    Professional Development Conference (PDC). As a result of the fiscal
    year 2013 sequester, we offered the PDC as a ``virtual'' conference.
    ``Web'' attendance doubled actual attendance over previous years, with
    an approval rating reaching 97 percent, and an overall cost savings to
    the government in excess of $2.2 million.
        Finally, the Department is in the process of acquiring a system of
    commercial off-the-shelf information technology tools that will
    revolutionize our tireless fight to reach our objective of zero
    mishaps--the only ethically acceptable goal if we are to keep faith
    with our magnificent Sailors and Marines. The Risk Management
    Information initiative comprises a streamlined mishap reporting system,
    data base consolidation, state-of-the-art analytical innovations, and
    sophisticated data collection and distribution capabilities that will
    allow us to ascend above explaining mishaps after the fact and begin
    predicting and preventing them before they occur.
                             managing our footprint
        Overview  It has long been a basic tenet that the Department of
    Defense should own or remove from public domain only the minimum amount
    of land necessary to meet national security objectives. The Department
    is grateful for the Congressional land withdrawals during 2013 and
    2014. These withdrawals allow the Department to continue vital testing
    and training in California at China Lake, Twentynine Palms, and the
    Chocolate Mountains Range. The fiscal year 2016 budget request includes
    funds to modernize and expand the Townsend Bombing Range in Georgia.
    This project will allow pilots based on the East Coast to train using
    precision guided munitions without having to travel to the Bob Stump
    Training Complex in Arizona and California.
        Base Realignment and Closure (BRAC)  The Department of the Navy
    fully supports the Administration's request to authorize a single round
    of BRAC in 2017. The BRAC process continues to offer the best
    opportunity to objectively assess and evaluate opportunities to
    properly align our domestic infrastructure with our evolving force
    structure and laydown. Under previous BRAC efforts, the Navy has been
    able to realize approximately $4.4 billion in annual recurring savings.
        We appreciate the support of the Congress in providing additional
    fiscal year 2015 funds for environmental cleanup at BRAC properties.
    For fiscal year 2016, the Department has programmed $157 million to
    continue cleanup efforts, caretaker operations, and property disposal.
    By the end of fiscal year 2014, we disposed of 93 percent of our excess
    property identified in previous BRAC rounds through a variety of
    conveyance mechanisms with approximately 12,710 acres remaining. Of the
    original 131 installations with excess property, the Navy only has 17
    installations remaining with property requiring disposal. Here are
    several examples of what we were able to achieve last year:
        In the San Francisco Bay Area, the Department completed the
    transfer of 624 acres at Naval Station Alameda to the Department of
    Veterans Affairs under a no-cost transfer that will ultimately support
    an outpatient clinic, a National Cemetery, and office space. The
    Department also completed radiological surveys of over 700 residential
    housing units at Naval Station Treasure Island, most of which are under
    lease to the City of San Francisco. Additionally, the Department and
    the Treasure Island Development Authority signed a Development
    Conveyance that will allow initial property transfers to begin in
    fiscal year 2015.
        We reduced our overall number of BRAC installations by four last
    year completing final disposals at Naval Support Activity New Orleans,
    LA, Naval Air Station Cecil Field, FL, and Navy/Marine Corps Reserve
    Centers in Akron, OH, and Reading, PA.
        The balance of the property at the remaining installations will be
    disposed as we complete our environmental remediation efforts, which we
    project will cost $1.1 billion (fiscal year 2016 and beyond) with
    nearly 50 percent of the costs attributed to long-term operations and
    monitoring of remedies already in place. The major program cost drivers
    are low-level radiological waste and munitions cleanup.
        Although cleanup and disposal challenges from prior BRAC rounds
    remain, we continue to work with regulatory agencies and communities to
    tackle complex environmental issues and provide creative solutions to
    support redevelopment priorities, such as Economic Development
    Conveyances with revenue sharing.
        Compatible Land Use The Department of the Navy has an aggressive
    program to promote compatible use of land adjacent to our installations
    and ranges, with particular focus on limiting incompatible activities
    that affect the Navy and Marine Corps' ability to operate and train,
    and protecting important natural habitats and species. This includes
    the Air Installation Compatible Use Zones Studies and Range Air
    Compatible Use Studies that are provided by Installations to nearby or
    adjacent communities to encourage development compatible with
    installation and range operations in their comprehensive development
    plans. A key element of the program is Encroachment Partnering, which
    involves cost-sharing partnerships with States, local governments, and
    conservation organizations to acquire interests in real property
    adjacent and proximate to our installations and ranges.
        The Department is grateful to Congress for providing funds for the
    DOD Readiness and Environmental Protection Integration (REPI) Program.
    Since 2005, DON has acquired restrictive easements on approximately 73
    thousand acres around Navy and Marine Corps installations. We are
    poised to purchase restrictive easements over additional lands using
    funds appropriated this year for the REPI program and are developing
    projects for future funding.
                           protecting our environment
        Overview  The Department is committed to environmental compliance,
    stewardship and responsible fiscal management that support mission
    readiness and sustainability, investing over $1 billion across all
    appropriations to achieve our statutory and stewardship goals. The
    funding request for fiscal year 2016 is about 1.7 percent more than
    enacted in fiscal year 2015, as shown in Figure 2:

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                    Figure 2: DON Environmental Funding by Program

        The Department continues to be a Federal leader in environmental
    management by focusing our resources on achieving specific
    environmental goals, implementing efficiencies in our cleanup programs
    and regulatory processes, proactively managing emerging environmental
    issues, and integrating sound policies and lifecycle cost
    considerations into weapon systems acquisition to achieve cleaner,
    safer, more energy-efficient and affordable warfighting capabilities.
        Partnering for Protection  In fiscal year 2016 we will focus on
    environmental planning for at-sea training in the Pacific Northwest and
    the Gulf of Alaska, and on Combined Joint Military Training in the
    Marianas Islands. The Department has been partnering with the National
    Marine Fisheries Service (NMFS) over the past two years to improve the
    regulatory process and reduce the cost of obtaining authorizations for
    at-sea testing and training. We are exploring mutually agreeable
    recommendations with NMFS which could reduce the time and cost of
    preparing environmental planning documentation and securing permits,
    while ensuring the continued protection of marine mammals.
        We are also leading Federal efforts in the Pacific islands to
    standardize and implement biosecurity plans for military actions. The
    importance of effective biosecurity is demonstrated by the recent
    infestation of the Coconut Rhinoceros Beetle in Hawai'i. The
    Department, in cooperation with U.S. Department of Agriculture and
    State of Hawai'i, has taken important steps to help eradicate this
    destructive insect that was initially discovered at the International
    Airport and quickly spread to Joint Base Pearl Harbor-Hickam. The
    Department is also partnering with the State of North Carolina and non-
    governmental organizations on recovery of the Red Cockaded Woodpecker
    and expanding training capabilities at Marine Corps Base Camp Lejeune,
    and with the Bureau of Ocean Energy Management on sharing marine mammal
    science on the east coast. Working together we can save money and
    achieve better results.
                          fueling combat capabilities
        Overview  The Department of the Navy's Energy Program has two
    central goals: (1) enhancing Navy and Marine Corps combat capabilities,
    and (2) advancing energy security afloat and ashore. Partnering with
    other government agencies, academia and the private sector, we strive
    to meet these goals with the same spirit of innovation that has marked
    our history--new ideas delivering new capabilities in the face of new
    threats.
        Enhancing Combat Capabilities  Our naval forces offer us the
    capability to provide presence--presence to deter potential conflicts,
    to keep conflicts from escalating when they do happen, and to take the
    fight to our adversaries when necessary. Presence means being in the
    right place, not just at the right time, but all the time; and energy
    is key to achieving that objective. Using energy more efficiently
    allows us to go where we're needed, when we're needed, stay there
    longer, and deliver more firepower when necessary.
        Improving our efficiency and diversifying our energy sources also
    saves lives. During the height of operations in Afghanistan, we were
    losing one Marine, killed or wounded, for every 50 convoys transporting
    fuel into theater. That is far too high a price to pay. Reducing demand
    at the tip of the spear through energy efficiency and new technologies
    takes fuel trucks off the road.
        Improving Energy Security and Resilience   We need to make smart
    investments to ensure our shore installations stay up and running
    because installations, like our shipyards, are central to our forward
    operations. That means maintaining and upgrading our utility
    infrastructure and getting smarter about how we're using electricity.
    It means managing our electricity demand to reduce stress on the
    electric grid and decrease outages. It means investing in technologies
    like advanced storage, fuel cells, and solar panels so we increase our
    resilience in the face of natural events or future threats like cyber
    attacks that affect the electric grid.
        In 2014, the Department executed an agreement through our Renewable
    Energy Program Office to buy renewable energy produced from a 17
    megawatt solar array located across three Navy and Marine Corps
    installations in Hawai'i. That agreement includes the ability for us to
    draw power from the solar panels even when the grid goes down. Not only
    does this project enhance our energy security, it will save us money on
    our electric bills, too. We also awarded a $13 million Energy Savings
    Performance Contract for Webster Field, an outlying annex of Naval Air
    Station Patuxent River in southern Maryland. The contract will provide
    for ground source heat pumps, lighting retrofits, and various other
    energy conservation measures that are projected to virtually eliminate
    the need for shore fossil fuel, reducing energy consumption by 38
    percent in the first year of performance.
        More recently, we entered into a lease with Duke Energy for just
    over 80 acres on Camp Lejeune for development of 17 megawatts of
    renewable electric power for the North Carolina grid to meet renewable
    portfolio standards. Electricity will be made available to meet the
    base's contingency energy requirements under the agreement.
        Strategic Investments to Fuel the Future  As we look to the future,
    we have to make smart investments that preserve operational
    flexibility. The private sector, including major airlines like United
    and Cathay Pacific, is diversifying its fuel supply through the use of
    alternative fuels. Our program to test and certify emerging alternative
    fuels is critical for us to keep pace with those developments and
    maintain interoperability with the private sector.
        Under a Presidential Directive, the Department of the Navy has also
    worked with the Departments of Energy and Agriculture to promote the
    growth of a domestic biofuel industry. In September 2014, the
    Department of Defense, under the authority provided by the Defense
    Production Act (DPA), provided funds to three companies supporting the
    construction and commissioning of biofuel refineries to produce cost
    competitive, drop-in biofuels. The total of $210 million in government
    commitments to those companies is expected to be matched by nearly $700
    million in private investment. The three refineries are planned to have
    a combined annual production capacity of more than 100 million gallons
    of advanced drop-in alternative fuel.
        It is important to point out that neither Defense Logistics Agency
    (DLA) Energy (through which the Navy buys operational fuels) nor the
    Navy is under any obligation to purchase alternative fuels from any
    company--including the three that received DPA awards. In fact, Section
    316 of the fiscal year 2015 NDAA requires that drop-in alternative
    fuels be cost competitive with traditional fuels (unless waived by the
    Secretary of Defense). That requirement is consistent with DOD and DON
    policy.
                                   conclusion
        Our Nation's Navy-Marine Corps team operates globally, having the
    ability to project power, effect deterrence, and provide humanitarian
    aid whenever and wherever needed to protect the interests of the United
    States. The Department's fiscal year 2016 request supports critical
    elements of the 2014 Defense Quadrennial Review by making needed
    investments in our infrastructure and people; preserving access to
    training ranges, afloat and ashore, and promoting energy resiliency and
    security.
        Thank you for the opportunity to testify before you today, I look
    forward to working with you to sustain the war fighting readiness and
    quality of life for the United States Navy and Marine Corps, the most
    formidable expeditionary fighting force in the world.

        Senator Ayotte. Secretary Ballentine?

    STATEMENT OF HON. MIRANDA A. A. BALLENTINE, ASSISTANT SECRETARY
        OF THE AIR FORCE, INSTALLATIONS, ENVIRONMENT AND ENERGY

        Ms. Ballentine. Chairwoman Ayotte, Ranking Member Kaine,
    and esteemed members of the subcommittee, I am honored to
    testify before you today.
        First, thank you for your support in 2014 and 2015, in
    giving the Air Force much-needed relief from untenable
    sequestration levels.
        In my first 143 days on the job, but who's counting, I have
    learned that the Air Force installations are simply too big,
    too old, and too expensive to operate. There are really only
    two ways to make installations more affordable and more viable.
    You can spend more money, or you can make them cost less.
    Today, I am asking the Senate to help us do both.
        On the spend-more side of the equation, the Air Force's
    President's Budget 2016 $1.6 billion MILCON request and $3.2
    billion facilities sustainment, restoration, and modernization
    request would allow us to begin to chip away at the backlog of
    infrastructure projects that have contributed to the
    degradation of combat readiness.
        BCA-level funding of facilities budgets could cut hundreds
    of millions of dollars from facilities projects and would force
    the Air Force to make hundreds of no-win decisions between all-
    important infrastructure projects, and could have sober impacts
    to mission readiness.
        On the cost-less side of the equation, the Air Force is
    accelerating every tool in the toolkit, including enhanced-use
    leases, energy service performance contracts, power purchase
    agreements, and community partnerships.
        Additionally, the Air Force has completed an updated
    parametric infrastructure capacity analysis using real property
    data in both current and future force structure plans. We
    replicated the approach used in 1998 and 2004, as approved by
    both the Government Accountability Office (GAO) and Congress.
    The Air Force currently has about 30 percent excess
    infrastructure capacity.
        Thus, the Air Force strongly supports the Office of the
    Secretary of Defense's (OSD) request that Congress allow us to
    comprehensively, transparently align infrastructure to
    operational needs through a BRAC authorization.
        Nothing about BRAC is easy, and congressional leaders have
    shared three very specific concerns that I believe can be best
    summarized as communities, dollars, and mission. So let me
    address very briefly, from the Air Force perspective, and, of
    course, we can talk further in the question section of the
    hearing.
        So first, communities, I have heard concerns that base
    closures are simply too economically difficult for affected
    communities. Air Force communities are some of our greatest
    partners and supporters. Only BRAC authority provides
    communities an avenue to engage in the process, as well as
    access to economic support, if they are affected by BRAC. A
    non-BRAC hollowing of bases does not.
        Second, dollars, Congress rightly wants to ensure that the
    savings of BRAC justify the costs. The 2005 BRAC round cost the
    Air Force $3.7 billion and saves the Air Force $1 billion every
    single year. We completed it on time and under budget.
        In the business world, where I come from, that is a good
    deal.
        Third, mission, some have expressed concerns that today's
    force structure may be too small and, therefore, question the
    wisdom of rightsizing infrastructure to current force
    structure. Let me assure you that infrastructure decisions are
    driven by military value and then shaped by budgetary
    realities.
        Like in prior BRAC rounds, the military requirements in the
    analysis will be set by operational planners. The BRAC process
    will be used to ensure that we have the right infrastructure in
    the right places to support the right force structure to meet
    the mission.
        Taken together, improved MILCON and the facilities
    sustainment, restoration, and modernization (FSRM) budgets,
    plus BRAC, and the range of other tools and programs I
    mentioned make me optimistic that we can restore Air Force
    installations to the place they need to be.
        Chairwoman Ayotte, Ranking Member Kaine, and esteemed
    members of the committee, thank you again for the opportunity
    to represent America's airmen today, and I ask for your full
    support of the Air Force's fiscal year 2016 requests, and look
    forward to your questions.
        [The prepared statement of Ms. Ballentine follows:]
               Prepared Statement by Ms. Miranda A. A. Ballentine
                                  introduction
        The Air Force's fiscal year 2016 President's Budget (PB) sets us on
    the path to fully meet the Quadrennial Defense Review through strategy-
    based long-term resourcing decisions. This budget submission is rooted
    in necessity and is based upon our long-term strategy and vision to
    provide ready installations, resilient environmental infrastructure,
    and reliable energy, directly supporting the Secretary and Chief of
    Staff of the Air Force's three priorities of balancing today's
    readiness with tomorrow's modernization, taking care of our people, and
    making every dollar count to help ensure we can maintain and field a
    credible and affordable future force.
        The Air Force's fiscal year 2016 PB sets us on a path to provide
    the Air Force America deserves. However, even at the fiscal year 2016
    PB level, the Air Force remains stressed to meet the defense strategy.
    If sequestration funding levels return in fiscal year 2016, the Air
    Force will not be able to meet the defense strategy, nor sustain its
    asymmetric advantage over potential peer competitors. Additionally,
    these levels will cause continued degradation of infrastructure and
    installation support. The AF would expect a reduction in Military
    Construction funding resulting in reduced support to COCOMs, reduced
    funding to upgrade the nuclear enterprise and support new weapons
    systems beddown, and elimination of permanent party dormitories from
    the fiscal year 2016 budget request. Additionally, the AF would expect
    similar reductions in fiscal year 2016 facility sustainment,
    restoration and modernization funding, forcing AF priority on day to
    day facility maintenance at the expense of much needed facility
    repairs.
        Our unequalled security, economic, and political advantages,
    depends on investment in an Air Force that is able to easily succeed
    against any competitor, in any environment. In order to ensure a
    trained and ready force, along with the facilities and support to
    maintain the capabilities required to engage in a full range of
    contingencies and threats, at home and abroad, the Air Force needs to
    make smart investments in its installations through military
    construction (MILCON) and facility sustainment, and maintain strong
    environmental and energy focused programs.
                                 installations
        Ready installations are an integral part of ensuring a ready Air
    Force. The Air Force views its installations as foundational platforms
    comprised of both built and natural infrastructure which: (1) serve as
    the backbone for Air Force enduring core missions--it delivers air,
    space and cyberspace capabilities from our installations; (2) send a
    strategic message to both allies and adversaries--they signal
    commitment to our friends, and intent to our foes; (3) foster
    partnership-building by stationing our Airmen side-by-side with our
    Coalition partners; and (4) enable worldwide accessibility when our
    international partners need our assistance, and when necessary to repel
    aggression. Taken together, these strategic imperatives require us to
    provide efficiently operated, sustainable installations to enable the
    Air Force to support the Quadrennial Defense Review.
        In its fiscal year 2015 President's Budget request, the Air Force
    attempted to strike the delicate balance between a ready force for
    today with a modern force for tomorrow while also recovering from the
    impacts of sequestration and adjusting to budget reductions. To help
    achieve that balance, the Air Force elected to accept risk in
    installation support, MILCON, and facilities sustainment in fiscal year
    2015. However, in its fiscal year 2016 request, the Air Force begins to
    ameliorate the impacts of that risk by increasing funding for
    installations in all three of the areas noted above.
        In total, the Air Force's fiscal year 2016 PB request is $1.9
    billion more than our fiscal year 2015 President's Budget request and
    contains $4.8 billion for MILCON, facility sustainment, restoration and
    modernization, as well as another $331 million for Military Family
    Housing operations and maintenance and $160.5 million for Military
    Family Housing Construction. For sustainment, it requests $2.4 billion;
    for restoration and modernization, $850 million; and for military
    construction, it requests $1.59 \1\ billion. At these levels, the Air
    Force funds Facilities Sustainment to 80 percent of the OSD modeled
    requirement. The increase in MILCON begins to revitalize infrastructure
    recapitalization while maintaining support to Combatant Commander
    (COCOM) requirements, weapon system beddowns, the nuclear enterprise,
    and provides equitable distribution of $ 203.7 million to the Reserve
    components.
    ---------------------------------------------------------------------------
        \1\  $1.59B is the Total Force funding request including Active,
    Guard and Reserve
    ---------------------------------------------------------------------------
                                   readiness
        The Air Force fiscal year 2016 PB request seeks to balance
    readiness for today's fights, while also modernizing our infrastructure
    for the future. The Air Force's fiscal year 2016 budget proposes
    investments in infrastructure to support the Quadrennial Defense Review
    and Combatant Commanders' stated readiness needs in the following
    areas: nuclear defense operations (NDO); space; cyberspace;
    intelligence, surveillance and reconnaissance (ISR); and the Asia-
    Pacific theater.
        Our fiscal year 2016 PB supports Nuclear Enterprise priorities and
    includes three projects, totaling $144 million. With this budget
    submission, the Air Force intends to provide a new state-of-the-art
    Weapon Storage Facility at FE Warren AFB which consolidates 22 aging
    facilities (some of which have been in service since the 1960s),
    achieving a 19 percent reduction in facility footprint while addressing
    security and operational inefficiencies through recapitalization. The
    2016 program also includes investment to revitalize the Malmstrom AFB,
    Montana, Tactical Response Force Alert Facilities as well as the
    Whiteman AFB, Missouri, Consolidated Stealth Operations and Nuclear
    Alert Facility. Together, these projects will consolidate scattered
    installation functions, provide adequately sized and configured
    operating platforms, as well as reduce critical response times to
    generate alert sorties.
        As previously mentioned, ``Making every dollar count'' is one of
    the Secretary and Chief of Staff of the Air Force's priorities.
    Consistent with this, the Air Force focused on fiscal year 2016 space,
    cyberspace, and ISR investments. These target areas account for two
    space, two cyber, and four ISR projects in the proposed fiscal year
    2016 PB, totaling $172 million. The Air Force continues its multi-year
    efforts to construct the U.S. Cyber Command Joint Operations Center at
    Fort Meade, Maryland; strengthen its space posture through information
    and communication facilities; and enhance ISR readiness with remotely
    piloted aircraft facilities, intelligence targeting facilities, as well
    as digital ground stations.
        Consistent with Quadrennial Defense Review, the Asia-Pacific
    Theater remains a focus area for the Air Force where it will make an
    $85 million investment in fiscal year 2016 to ensure our ability to
    project power into areas which may challenge our access and freedom to
    operate, and continue efforts to enhance resiliency. Guam remains one
    of the most vital and accessible locations in the western Pacific. For
    the past nine years, Joint Region Marianas-Andersen AFB has
    accommodated a continuous presence of our Nation's premier air assets,
    and will continue to serve as the strategic and operational center for
    military operations in support of a potential spectrum of crises in the
    Pacific.
        To further support Pacific Command's strategy, the Air Force is
    committed to hardening critical structures, mitigating asset
    vulnerabilities, increasing redundancy, fielding improved airfield
    damage repair kits and upgrading degraded infrastructure as part of the
    Asia-Pacific Resiliency program. In 2016, the Air Force plans to
    construct a hardened Wing Installation Control Center to sustain Guam's
    remote operations, ensure resiliency with the Dispersed Maintenance
    Spares and Storage Facility, and continue our efforts to upgrade Guam's
    South Ramp Utilities, supporting a Continuous Bomber Presence, Tanker
    Task Force, Theater Security Packages, and Global Hawk beddown. The Air
    Force also wraps up its development of the Pacific Regional Training
    Center (PRTC) by constructing a permanent road to support facilities
    located at Northwest Field. This Regional Training Center will enable
    mandatory contingency training and enhance the operational capability
    to establish, operate, sustain, and recover a 'bare base' at forward-
    deployed locations, and foster opportunities for partnership building
    in this vitally important area of the world.
        This year's Presidential budget request also includes $252 million
    for additional COCOM requirements extending beyond NDO, space,
    cyberspace, ISR, and the Asia-Pacific theater. The Air Force continues
    with phase two of the U.S. European Command Joint Intelligence Analysis
    Center Consolidation at RAF Croughton, United Kingdom while supporting
    six other COCOMs. Our total fiscal year 2016 COCOM support makes up 21
    percent of the Air Force's MILCON program.
                                 modernization
        Additionally, the fiscal year 2016 PB request includes
    infrastructure investments to support the Air Force's modernization
    programs, including the beddown of the F-35A, KC-46A, and the
    Presidential Aircraft Recapitalization efforts. The Air Force's ability
    to fully operationalize these new aircraft depends not just on
    acquisition of the planes themselves, but also on the construction of
    the planes' accompanying hangars, training facilities, airfields and
    fuel infrastructures funded within this fiscal year 2016 budget.
        This year's President's Budget request includes $54.5 million for
    the beddown of the KC-46A at four locations. This consists of $10.4
    million at Altus AFB, Oklahoma, the Formal Training Unit (FTU); $4.3
    million at McConnell AFB, Kansas, the first Main Operating Base (MOB
    1); $2.8 million at Pease International Tradeport Air National Guard
    Base (ANGB), New Hampshire, the second Main Operating Base (MOB 2); and
    $37 million at Tinker AFB, Oklahoma, for KC-46A depot maintenance.
        This request also includes $198.3 million for the beddown of the F-
    35A at five locations, consisting of $69 million at Nellis AFB, Nevada;
    $56.7 million at Luke AFB, Arizona; $26.9 million at Hill AFB, Utah;
    $37 million at Eielson AFB, Alaska; and $8.7 million at Eglin AFB,
    Florida.
        In preparation for the Presidential Aircraft Recapitalization
    acquisition, the Air Force's 2016 budget request also accounts for the
    planning and design requirements essential to this future beddown. In
    total, our fiscal year 2016 modernization program is a balanced
    approach ensuring critical infrastructure requirements meet mission
    needs and operational timelines.
                                     people
        During periods of fiscal turmoil, we must never lose sight of our
    Airmen and their families. Airmen are the source of Air Force airpower.
    Regardless of the location, the mission, or the weapon system, our
    Airmen provide the knowledge, skill, and determination to fly, fight
    and win. There is no better way for us to demonstrate our commitment to
    service members and their families than by providing quality housing on
    our installations. We are proud to report that as of September 2013,
    the Air Force has privatized its military family housing (MFH) at each
    of its stateside installations, including Alaska and Hawaii. To date,
    the Air Force has awarded 32 projects at 63 bases for 53,240 end-state
    homes.
        The Air Force continues to manage approximately 18,000 government-
    owned family housing units at overseas installations. Our $331 million
    fiscal year 2016 Military Family Housing Operations and Maintenance
    (O&M) sustainment funds request allows us to sustain adequate units,
    and our $152 million fiscal year 2016 request for MFH MILCON funds
    allows us to upgrade and modernize older homes to meet the housing
    requirements of our Airmen, their families and the Joint service
    members the Air Force supports overseas.
        Similarly, our focused investment strategy for dormitories enables
    the Air Force to remain on track to meet the DOD goal of 90 percent
    adequate permanent party dorm rooms for unaccompanied Airmen by 2017.
    The fiscal year 2016 President's Budget MILCON request includes four
    dormitories at Offutt AFB, Nebraska; Ellsworth AFB, South Dakota; Altus
    AFB, Oklahoma; and Joint Base San Antonio, Texas. With your support, we
    will continue to ensure wise and strategic investment in these quality
    of life areas to provide modern housing and dormitory communities. More
    importantly, your continued support will take care of our most valued
    asset, our Airmen and their families.
                  european infrastructure consolidation (eic)
        The United States remains committed to NATO and our presence in
    Europe. The Air Force has invested heavily in its European
    infrastructure in the last several years in order to ensure it is ready
    and able to defend U.S. interests and meet its commitment to our Allies
    now and in the future. At the same time, in the context of a
    challenging fiscal environment, the Department of Defense recently
    sought greater infrastructure efficiencies in Europe and to ensure it
    was focusing resources where they can have the greatest effect.
        Two years ago, the Secretary of Defense directed a European
    Infrastructure capacity analysis to provide the basis for reducing
    long-term expenses through footprint consolidations, while retaining
    current and projected force structure. Under OSD direction, the Air
    Force used previously established Base Realignment and Closure (BRAC)
    processes to analyze the infrastructure capacity of 128 total sites,
    including six Main Operating Bases and six Forward Operating Sites in
    Europe.
        In January 2015, the Secretary of the Defense approved the results
    of the European Infrastructure Consolidation (EIC) process. This
    process produced eight consolidation opportunities. These opportunities
    will eliminate excess infrastructure capacity, consolidate missions,
    and produce savings without reducing force structure. In the United
    Kingdom, the Air Force will divest of RAF Mildenhall, and will
    consolidate intelligence and support activities from RAF Alconbury and
    RAF Molesworth to RAF Croughton. The Air Force also reaffirmed previous
    decisions to streamline operations at Moron Air Base, Spain, and Lajes
    Field, Portugal, and returned four small unused facilities back to
    their respective host nations.
        The Air Force European Infrastructure Consolidation opportunities
    will require approximately $1.1 billion (fiscal year 2016--fiscal year
    2021) to implement, but will enable the Air Force to save $315 million
    a year, while still maintaining our readiness and responsiveness
    capabilities in Europe. Most of the implementation costs will be funded
    through previously programmed European Infrastructure Consolidation
    funding.
        The EIC ensures Air Force installations in Europe are right-sized
    and in the right location. Our capability in Europe, along with our
    ability to meet commitments to Allies and partners, is not diminished
    by these actions. The Air Force is maintaining sufficient
    infrastructure in Europe to support six Combatant Commands, the North
    Atlantic Treaty Organization, and U.S. strategic allies through
    permanently stationed forces, additional rotational forces, and
    contingency requirements. The EIC adjustments will allow the Air Force
    to address emerging concerns in Europe and elsewhere, by focusing
    resources on critical operational support infrastructure.
        We have consulted closely with our allies on our specific plans and
    the broader security picture. These consolidations, force realignments,
    and new deployments were validated through the EIC and other processes
    and approved by the Secretary of Defense, in full coordination with the
    U.S. State Department, and after discussions with the host nations.
                           closures and realignments
        Building on the success of the European Infrastructure
    Consolidation process, the Air Force strongly supports DOD's requests
    for an fiscal year 2017 BRAC round in the United States.
        In fiscal year 2015 budget discussions, Congress requested that the
    Services update their analyses of CONUS infrastructure capacity based
    upon current infrastructure data and current force structure
    projections.
        The Air Force has completed a high-level capacity analysis,
    comparing current infrastructure capacity to projected force structure
    and mission requirements. The results of the analysis indicate the Air
    Force has approximately 30 percent excess infrastructure capacity. \2\
    This excess capacity results from decreases in Air Force personnel and
    force structure outpacing reductions in infrastructure. Since our last
    round of BRAC in 2005, the Air Force has 50,000 fewer personnel and 500
    fewer aircraft in its planned force structure.
    ---------------------------------------------------------------------------
        \2\ The 30 percent excess infrastructure capacity estimate was
    calculated using the same approved methodology that has been employed
    to measure excess infrastructure prior to previous rounds of BRAC.
    ---------------------------------------------------------------------------
        Since the last congressionally directed round of BRAC in 2005, the
    Air Force has worked diligently to identify new opportunities and
    initiatives to enable it to maximize the impact of every dollar. We
    have demolished excess infrastructure, recapitalized our family housing
    through privatization, unlocked the fiscal potential of under-utilized
    resources through leasing and partnerships, and reduced our energy
    costs. All of which have paid dividends. But these efforts are not
    enough to allow us to continue to fund infrastructure we do not need
    and pale in comparison to the savings that can be achieved with BRAC
    authorities.
        Despite our best efforts and innovative programs, the Air Force
    continues to spend money maintaining excess infrastructure that would
    be better spent recapitalizing and sustaining our weapons systems,
    training to improve readiness, and investing in the quality of life
    needs of its Airmen. The Air Force continues to face hard choices
    between modernization and operational combat capability, and sustaining
    installation platforms used to conduct its missions. The Air Force
    recognizes that it achieve its greatest savings when fully divested of
    unneeded infrastructure, and therefore it strongly supports DOD's
    requests for another round of BRAC; specifically an efficiency BRAC
    focused on reducing the Air Force's 30 percent excess infrastructure
    capacity and ultimately reducing the demand on resources.
                                 environmental
        Within its environmental programs, the Air Force continues to
    prioritize resources to, 1) ensure a resilient environmental
    infrastructure to support its mission and its communities; 2) comply
    with legal obligations; and 3) continuously improve. The fiscal year
    2016 PB seeks a total of $862 million for environmental programs. This
    is $57 million less than last year due to sustained progress in
    cleaning up contaminated sites and efficiencies gained through
    centralized program management. By centrally managing its environmental
    programs the Air Force can continue to strive for compliance with all
    applicable laws, while applying every precious dollar to its highest
    priorities first, increasing flexibility to select standardized
    solutions, when appropriate, to complex environmental issues. Further,
    its environmental programs are designed to provide environmental
    stewardship to ensure the availability of air, land and water necessary
    to provide ready installations and ensure military readiness.
                           environmental restoration
        The Air Force fiscal year 2016 PB request seeks $425 million in
    Environmental Restoration funding for cleanup of both current
    installations and those closed during previous BRAC rounds. The Air
    Force established its restoration program in 1984 to clean-up former
    hazardous waste disposal sites on these installations. The Air Force's
    focus has been on completing investigations and getting remedial
    actions in place, to reduce unacceptable risk to human health and the
    environment in a prioritized manner consistent with environmental law.
    Ultimately, the Air Force seeks to make real property available for
    mission use at its non-BRAC installations, or for transfer and reuse at
    its BRAC installations. We believe this balanced approach continues to
    simultaneously serve our mission needs, our statutory requirements, and
    our stakeholders' interests.
        With more than 8,100 restoration sites at its non-BRAC
    installations, and more than 5,200 sites at our BRAC installations, the
    Air Force has made progress over time in managing this complex program
    area. In addition to regulatory and mission requirements, the DOD has
    committed to restoration program execution goals to help ensure an
    acceptable pace is maintained in program execution. While Air Force
    BRAC restoration sites are on-track to meet the next DOD milestone to
    have response complete at 90 percent of the Installation Restoration
    Program (IRP) sites by the end of fiscal year 2018, its non-BRAC
    restoration sites are currently projected to fall 5 percent short of
    this goal, but are expected to meet DOD milestones by fiscal year 2020.
        Since recognizing in early 2011 the need to improve its process in
    order to close the gap toward meeting this goal, the Air Force has
    implemented policy and formulated a contracting strategy specifically
    to improve its performance. Since a large component of its cleanup
    program relies on expertise acquired under contracts, this policy
    emphasized performance-based contracts that reward increased use of
    innovative technologies and cleanup strategies that consider the total
    life cycle cost of getting remedies in place and sites cleaned up. At
    Kirtland AFB, New Mexico, utilizing performance base contracting, we
    are continuing our efforts to remediate the clean-up of the fuel spill
    at the bulk fuels facility. Although this effort will encompass several
    years, we developed our clean-up strategy in concert with state and
    local officials, and are already seeing positive results.
        The Air Force's policy and performance-based contracting strategy,
    aligned with federal environmental laws and regulation has generated
    substantial improvements, but work still remains in order to meet DOD
    goals for non-BRAC installation cleanup. With this approach, the Air
    Force is finding better solutions and cleaning up sites faster with
    lower projected lifecycle costs. The Air Force expects performance and
    progress to accelerate over the next year, while continuing to meet
    federal, state and other stakeholder requirements.
                             environmental quality
        The Air Force's fiscal year 2016 PB request seeks $437 million in
    Environmental Quality funding for environmental compliance,
    environmental conservation, pollution prevention, and environmental
    technology investments. With this request, the Air Force provides a
    resilient environmental infrastructure and continues to strive for in
    compliance with environmental laws in order to remain good stewards of
    the environment. The Air Force has instituted a standardized and
    centralized requirements development process that prioritizes its
    environmental quality program in a manner that minimizes risk to
    Airmen, the mission and the natural infrastructure. This balanced
    approach ensures the Air Force has ready installations with the
    continued availability of land, air, and water resources at its
    installations and ranges so it can train and operate today and into the
    future.
        The environmental compliance program focuses on regulatory
    compliance for our air, water, and land assets. Examples of compliance
    efforts include: more detailed air quality assessments when analyzing
    environmental impacts from Air Force activities; protecting its
    groundwater by improving management of its underground and aboveground
    storage tanks; and minimizing waste through source reduction. At
    overseas installations, the Air Force takes prompt action to remediate
    environmental contamination when there are substantial impacts to human
    health, or when such remediation is mandatory arising from a binding
    international agreement to which the United States is a party.
        The Air Force remains committed to a robust environmental
    conservation program in fiscal year 2016. Prior appropriations allowed
    the Air Force to invest in conservation activities on its training
    ranges, providing direct support to mission readiness. The conservation
    program in fiscal year 2016 builds on the efforts of past years to
    continue habitat and species management for 115 threatened and
    endangered species across 45 Air Force installations. This year's
    budget request also provides for continued cooperation with other
    agencies, like the U.S. Fish and Wildlife Service, to provide effective
    natural resources management and to manage risk from wildland fires
    through coordinated planning and incident response and the application
    of prescribed fire techniques. The Air Force has also published formal
    guidance to the field on improving and sustaining tribal relations
    which supports the unique trust relationship the U.S. Government has
    with tribes and emphasizes aspects of the Air Force's mission that may
    affect tribes.
        The Air Force remains committed as good environmental stewards
    complying with legal requirements, reducing risk to our natural
    infrastructure, and honing its environmental management practices to
    ensure the sustainable management of the resources it needs to fly,
    fight, and win now and into the future.
                                energy security
        Reliable energy is a common thread that runs through each of the
    five core missions of the Air Force and serves as a cornerstone to
    ensure the Air Force can provide the Nation with Global Vigilance,
    Global Reach, and Global Power. To meet its energy needs, the Air Force
    is leveraging sound business practices and making prudent investments
    in energy conservation and alternative sources of energy to enable its
    warfighters and improve energy surety. These investments are crucial to
    ensure the Air Force has the energy where and when it is needed to
    conduct the military missions that protect core national interests.
        Energy security means, ``having assured access to reliable supplies
    of energy and the ability to protect and deliver sufficient energy to
    meet mission essential requirements.'' To enhance energy's contribution
    to mission assurance, the Air Force is focused on four priorities:

        1)  Improve resiliency to ensure the Air Force has the ability to
    recover from energy interruptions and sustain the mission,
        2)  Reduce demand through operational and logistical efficiencies
    and new technologies, without losing mission capabilities,
        3)  Assure supply by diversifying the types of energy and securing
    the quantities necessary to perform its missions, and
        4)  Foster an energy aware culture by increasing the Airmen's
    understanding of energy and its impact to the mission.

        There are risks from depending solely upon traditional energy
    supplies, as global access and costs are impacted by demand growth,
    natural disasters, accidents, terrorism, and political instability. In
    addition to fossil petroleum fuels, Air Force installations are heavily
    dependent on the commercial grid. These dependencies expose core
    mission support functions to external threats and can jeopardize
    effectiveness. To address those dependencies, the Air Force is
    mitigating risks by identifying alternate sources of energy where
    appropriate, building in redundancies where direct mission support
    requires it, and identifying where and for how long it needs to ensure
    it has the ability to operate. This requires an energy security posture
    that is robust, resilient, and ready. In short, energy security enables
    the warfighters, expands operational effectiveness, and enhances
    national security.
                                 budget impact
        The Air Force is the largest single consumer of energy in the
    federal government. As energy costs increase and budgets decrease,
    energy places greater pressure on the Air Force budget. In fiscal year
    2014, the Air Force spent almost $9 billion on fuel and electricity,
    with over 85 percent of those costs dedicated to aviation fuel. That $9
    billion represented over 8 percent of the total Air Force budget, and
    it could have been an even larger amount. As a result of the energy
    efficiencies the Air Force has put in place in its aviation and
    facilities programs, the Air Force avoided over $2.5 billion in energy
    costs last year.
        As part of its institutional effort to utilize energy to sustain an
    assured energy advantage, the Air Force is requesting over $416 million
    for targeted operational energy initiatives in fiscal year 2016. This
    includes $26 million for energy improvements to the legacy fleet and
    $212 million for materiel acquisition and energy research, development,
    test and evaluation (RDT&E) opportunities. The Air Force does not
    specifically budget for facility energy projects; it funds facility
    energy projects using facility sustainment, restoration, and
    modernization funding based on Air Force priorities.
        The Air Force recognizes the value of the financial resources made
    available for investments. To ensure it is making the best use of
    taxpayer dollars, the Air Force corporate structure requires strong
    evaluations based on sound business case analyses, with a particular
    focus on return on investment and payback period. Every action taken by
    the Air Force to improve its energy security and efficiency is well
    researched and executed to provide the greatest impacts in support of
    the Air Force mission.
                        energy resiliency and continuity
        The first priority is mission success, and this includes what is
    best from an energy perspective to make sure we have energy when and
    where we need it to achieve the Air Force mission. Energy security is
    key to mission assurance. In order to reach and maintain energy
    security the Air Force must be energy resilient, and the Air Force has
    taken the first step by analyzing the energy requirements of its weapon
    systems and identifying the risks related to energy use. Resiliency
    occurs by expanding energy supply through improved efficiencies and
    reduced demand, diversifying the energy sources the Air Force can use,
    and mitigating energy security risks from disruptions. As the Air Force
    looks to improve efficiency, it understands that every megawatt of
    power it avoids using on its bases is one megawatt that it does not
    need to replace in a disruption.
        Energy security is more than ``efficiency;'' it translates to
    productivity and mission effectiveness. Using energy as a strategic
    advantage allows the Air Force to fly farther, stay on station longer,
    transport more cargo, and accomplish its mission more effectively. The
    Air Force is continually looking to increase mission effectiveness
    through increased productivity and efficiency.
                        efficiency and demand reduction
        The Air Force is focused on reducing its energy footprint across
    all operations. Since 2003, the Air Force has reduced both its total
    facility energy and its facility energy intensity--the amount of energy
    used per square foot in a facility--by over 22 percent. At this time,
    the Air Force is on track to reduce its facility energy intensity by
    37.5 percent by 2020 from 2003 baseline data, meeting the goals
    outlined by Congress and the President.
        While the Air Force has made considerable progress to reduce its
    energy consumption and increase its energy diversity, there is still
    more to do. The Air Force is pursuing Energy Savings Performance
    Contracts (ESPC) and Utility Energy Service Contracts (UESC) to fund
    energy conservation projects. Since fiscal year 2012, the Air Force has
    awarded approximately $107 million in ESPCs and UESCs. In 2015 the Air
    Force expects to award up to $232 million in such contracts.
        The Air Force's aviation fleet is composed of nearly 5,000 aircraft
    that consume over two billion gallons of jet fuel every year. At 85
    percent, aviation fuel represents the largest share of the Air Force's
    energy bill. To address this, the Air Force has a goal to improve the
    aviation energy efficiency, which it defines as productivity per
    gallon, of its fleet by 10 percent by 2020. The Air Force faces a
    challenge, as many of the material solutions require significant
    upfront investments with long-term paybacks. However, making flying
    operations more productive is not just about material solutions, but
    also implementing changes is how the Air Force flies. For example, last
    year, the 97th Air Mobility Wing at Altus Air Force Base, Oklahoma,
    instituted five scheduling and airspace utilization initiatives that
    contributed to increased training efficiency. These changes produced
    $64 million in savings and a 5 percent reduction in Average Mission
    Duration, without reducing the number of missions flown or student
    training accomplished time. These innovations, improvements, and plans
    happen because the Air Force is fostering an energy-aware culture
    within the Air Force that empowers Airmen to take a smart approach to
    energy to better complete their mission.
                              assurance of supply
        The Air Force is looking to improve its energy security and
    diversify its energy supply through the increased use of renewable
    energy. In fiscal year 2014, almost six percent of the electrical
    energy used by the Air Force was produced from renewable sources, and
    the amount of renewable energy used by the Air Force continues to
    increase every year. Moving forward, the Air Force's goal is to develop
    1,000 megawatts of renewable energy capacity on its installations by
    2025 by capitalizing on underutilized land to develop those projects.
    By the end of fiscal year 2014, the Air Force had 287 renewable energy
    projects on 97 sites, either installed, in operation, or under
    construction across a wide variety of renewable energy sources,
    including wind, solar, geothermal, and waste-to-energy projects. These
    projects, which are typically owned and operated by private industry,
    have increased energy production on Air Force installations by over 50
    percent from 2013 to 2014.
        This year, the Air Force is planning projects that are expected to
    provide over 73 megawatts of capacity, with another 100 megawatts
    planned for fiscal year 2016. A prime example is the development and
    construction of the Air Force's largest solar project, a 19.0 megawatt
    (MW) array at Nellis AFB, NV. Combined with the existing 14.2 MW solar
    photovoltaic (PV) array, renewable energy will account for 38 percent
    of energy usage at Nellis. This comes only a short time after the Air
    Force unveiled a 16.4 MW solar PV array at Davis-Monthan AFB, AZ. The
    Davis-Monthan array, which was developed through a public private
    partnership, will provide approximately 35 percent of the base's
    electricity requirements and is expected to reduce base utility costs
    by about $500,000 annually.
        The Air Force is also committed to diversifying the types of energy
    and securing the quantities necessary to perform its missions, both for
    near-term benefits and long-term energy security. The ability to use
    alternative fuels in its aircraft provides the Air Force with both
    increased flexibility and capability concerning the types of fuels
    available for use. The entire Air Force fleet has been certified to use
    two alternative aviation fuel blends--one of these is generated from
    traditional sources of energy and one generated from biobased
    materials. The Air Force chose these fuels based on an evaluation of
    market conditions and discussions with commercial partners. Should
    another alternative fuel process become viable in the future, the Air
    Force will evaluate how to proceed at that time.
                                   conclusion
        The Air Force made hard strategic choices during formulation of
    this budget request. The Air Force attempted to strike the delicate
    balance between a ready force for today with a modern force for
    tomorrow while also recovering from the impacts of sequestration and
    adjusting to budget reductions. Our fiscal year 2016 PB request begins
    the recovery of installation and infrastructure investments necessary
    to meet the defense strategy. The return of sequestration level funding
    will halt this recovery. We also must continue the dialogue on right-
    sizing our installations footprint for a smaller, more capable force
    that sets the proper course for enabling the Defense Strategy while
    addressing our most pressing national security issue--our fiscal
    environment.
        In spite of fiscal challenges, we remain committed to our Service
    members and their families. The privatization of housing at our
    stateside installations and continued investment in Government Housing
    at overseas locations provide our families with modern homes that
    improve their quality of life now and into the future. We also maintain
    our responsibility to provide dormitory campuses that support the needs
    of our unaccompanied Service members.
        Finally, we continue to carefully scrutinize every dollar we spend.
    Our commitment to continued efficiencies, a properly sized force
    structure, and right-sized installations will enable us to ensure
    maximum returns on the Nation's investment in her Airmen, who provide
    our trademark, highly valued airpower capabilities for the Joint team.

        Senator Ayotte. Thank you, Secretary Ballentine.
        I want to thank all of you. I would just start, as I
    mentioned in my opening statement, Secretary McGinn, I wanted
    to follow up, which I had raised in the full Armed Services
    Committee yesterday, about the reprogramming requests for the
    shipyard, on the P-266 structural shops consolidation, which we
    believe actually can save some money because it is,
    unfortunately, falling apart at the moment.
        Mr. McGinn. Madam Chairman, I noted the exchange that you
    had yesterday in the hearing with Admiral Greenert and his
    taking the question for the record. We will be working with
    Admiral Greenert and his staff to provide you the details.
        Let me assure you, though, that we recognize the tremendous
    value of Portsmouth, especially in the great work they are
    doing keeping our attack submarines out there and ready, and
    coming out of the yard on budget or under budget, and faster
    than planned. That is absolutely essential.
        As far as that particular project, we recognize that it
    will in fact, in the long run, save money and it will provide a
    much better platform, if you will, to continue the great work
    that is done at Portsmouth.
        We are in the process of doing a reprogramming request,
    which will be coming to the Congress to make sure that the
    dollars lineup with the requirements for the actual military
    construction project.
        Additionally, I had a good telephone call with Captain Bill
    Carroll up at Portsmouth yesterday. I wanted to find out from
    him on the ground exactly what other either MILCON projects or
    other things are going on. They have a really nice, as you
    know, energy savings record.
        Senator Ayotte. Yes. They are saving a tremendous amount of
    energy and money by what they have been trying to do.
        Mr. McGinn. They are. We want to work with them to do that
    even more through energy savings performance contracts, a steam
    decentralization project, and to make sure that they have the
    right kind of platform to take care of those great boats.
        Senator Ayotte. Great, and thank you.
        Since we are on the topic of Portsmouth, I do have two
    other areas that are being delayed, and that is P-285. That is
    a situation where we have barracks there for our sailors who
    have a hot-water distribution system that is beyond repair and
    doesn't meet safety standards, and a fire suppression system
    that isn't fully operational. So you can imagine, in terms of
    safety, why we are a little worried about that.
        Mr. McGinn. Sure.
        Senator Ayotte. So that one has been delayed, and it has
    been delayed from 2015 to 2018. So that is one, if I can get a
    follow-up on, I would appreciate.
        Mr. McGinn. Right.
        [The information referred to follows:]

        Fiscal constraints and competing priorities have caused the
    Department to defer some Military Construction projects in our 2016
    budget request, including P285 to replace Building 191 at Portsmouth
    Naval Shipyard. Thank you for bringing to our attention your concerns
    with the quality of Building 191 as living quarters for our junior
    Sailors. Navy leadership is aware of the historical issues with this
    facility, and problems have been addressed by shipyard leadership as
    they have been discovered and reported. As a matter of practice, the
    shipyard assigns Sailors to other, more modern, living quarters on base
    whenever possible.
        The Navy is committed to providing our Sailors with the highest
    quality living conditions possible. To that end, on June 5, the Navy
    vacated Building 191 and all Sailors are now housed in more modern
    barracks on base. If shipyard loading requires more unaccompanied
    housing that other Portsmouth barracks can provide, we may berth
    Sailors out in town.
        We will continue to carefully evaluate P285 as part of our annual
    budget process. Thank you for your continued support of our people and
    the quality of work and life at Portsmouth Naval Shipyard.

        Senator Ayotte. Then the other one would be in terms of the
    P-309, which is a portal crane. This is one where the crane
    that is used has some problems and capacity restrictions, which
    limit efficiencies in drydocking. In fact, there is an estimate
    that we lost 6 days a year of operational availability for this
    crane. That one has been delayed from 2016 to 2018 or 2019.
        So those two, if you can let me know why they have been
    delayed? Obviously, the longer we delay these things, we miss
    money savings. I understand the fiscal challenges we are
    facing, but--
        Mr. McGinn. Right. I will be sure to get back to you on
    those in detail.
        [The information referred to follows:]

        The Naval Shipyards are essential to meet operational requirements,
    and we are committed to sustaining, recapitalizing and modernizing
    shipyard infrastructure. In fact, we have invested more than $240
    million to repair and modernize the infrastructure at Portsmouth Naval
    Shipyard since 2012.
        But fiscal constraints and competing priorities have caused the
    Department to defer some Military Construction projects in our 2016
    budget request, including P309 to improve portal crane capability at
    Portsmouth Naval Shipyard. The Navy has been able to accomplish some
    repairs to the wharf infrastructure in the interim using the Navy's
    restoration and modernization program.
        We will continue to carefully evaluate and prioritize proposed
    military construction projects with all other competing requirements in
    future budget submissions as we balance risk across the Department. It
    is our goal to provide the greatest warfighting readiness and
    capability with the limited resources available.

        Senator Ayotte. Excellent. Appreciate it.
        I wanted to follow up, I know there has been a lot of
    discussion among all of you on this issue of BRAC. Let me just
    make clear up front, I continue to be opposed to BRAC. But I do
    want to understand where we are, in terms of the language that
    the department has submitted to us on BRAC. It is identical,
    essentially, to the 2005 language. So you can understand why
    Congress says that wasn't exactly what we thought in terms of a
    BRAC round focused on cost.
        But just so that we all understand, for the committee, what
    kind of infrastructure does the department think needs to be
    reduced?
        By service area, I know, Secretary Ballentine, you talked
    about the Air Force. Can you give us more specificity, in terms
    of whether we are talking about ranges, warehouses, barracks,
    industrial facilities? Because this, obviously, I think, is
    important for us to have a better understanding of what types
    of facilities you are thinking about.
        I also would like to understand which services are you
    seeking a BRAC round for.
        For example, as far as I understand, Secretary McGinn, the
    Navy doesn't have excess capacity right now.
        Mr. McGinn. I wouldn't go so far as to say we don't have
    excess capacity. We would use a BRAC round as what I would call
    a stress test, to make sure that we have the right balance
    between our force structure and our base infrastructure. The
    advantage of it is that it is very disciplined. It is data-
    driven, analytical. We would use the results prudently.
        One of the reasons that our need for BRAC is less
    compelling is because we did so much since the very first one
    in 1991. We closed 56 major installations, completely closed
    them down, over 250 smaller installations or facilities.
        So our balance is fairly good right now. But we would not
    want to avoid a BRAC. We would use it to our advantage.
        Senator Ayotte. I think you have already testified about
    what the Air Force excess capacity is, 20 percent.
        Ms. Ballentine. Thirty percent excess infrastructure
    capacity at this time. I would be happy to go through in more
    detail specifically what we looked at.
        The parametric-level capacity analysis doesn't allow us to
    really get to the fine-grained detail that a full comprehensive
    capacity analysis that we would do through the BRAC structure
    would allow us to do.
        But in the parametric capacity analysis, we look at nine
    specific types of infrastructure, which I would be happy to
    list for you now, or provide you for the record.
        Senator Ayotte. I think it would be helpful, just because I
    don't want to hold up my colleagues here, but I think it is
    important for the committee that we understand what you are
    requesting of us.
        I, certainly, think that we need some specificity. I
    understand that is the purpose of undertaking this kind of
    round, but just a sense of what kind of excess capacity you
    think for the service areas.
        So if that could be provided to the committee, I think it
    would be very helpful.
        Ms. Ballentine. Absolutely.
        [The information referred to follows:]

        Ms. Ballentine. The Air Force headquarters-level parametric
    capacity analysis considered nine broad categories comparing simple
    ratios relating capacity to force structure and determined the Air
    Force has approximately 30 percent excess infrastructure capacity. The
    categories include:

          Reserves Parking Apron
          Air National Guard Parking Apron
          Education & Training Parking Apron
          Small Aircraft Parking Apron
          Large Aircraft Parking Apron
          Education & Training Classroom Space
          Depot Labor
          Space Operations
          Product Centers, Laboratories and Test & Evaluation
    Facilities.

        Ms. Hammack. Only a comprehensive BRAC analysis can determine the
    exact nature or location of potential excess. For the Army we know we
    have excess infrastructure. The Army did an internal review of real
    property in 2014 and found an average of 18 percent excess with a range
    of between 12 percent and 28 percent by building type. This was at an
    active component force structure of 490,000 Soldiers. As the Army's
    force structure is reduced further below 490,000, Army excess capacity
    will grow.
        Significant savings are only achieved when lower military value
    installations are closed and remaining missions are consolidated into
    excess capacity at higher military value installations. Most
    installation costs are Base Operations Support (BOS)--salaries, service
    contracts, and utilities. These expenses do not decrease in a 1:1 ratio
    when a building is demolished or the installation population is reduced
    by 10, 20, or even 40 percent. This is why BRAC is crucial to reducing
    the total cost of excess capacity.

        [Prepared question submitted to Mr. McGinn by Senator
    Ayotte:]

        Question: What kind of infrastructure does the department think
    needs to be reduced?
        Answer: The Department of Navy would use the BRAC authorization
    process to ensure our infrastructure is optimally aligned to support
    the force structure and the associated mission capability requirements.
    Although we have not analyzed our overall excess capacity in detail
    since BRAC 2005, we believe the best way to fairly and accurately
    evaluate excess capacity within the Department of Navy is to conduct a
    functional analysis following the BRAC process using certified data
    that collects detailed information from each base across a broad array
    of metrics and compares the information against required force
    structure capabilities and the infrastructure requirements for new
    weapons system platforms.

        Senator Ayotte. Let me just note again, my going-in
    position is that I am opposed to BRAC, but I would like this
    information. You have spent a lot of time testifying about it.
    I think that all of us should have the opportunity to have more
    details on what kind of facilities you think are excess, what
    it is by branch and represented, and what kind of cost-savings
    you think can be achieved from it.
        Thank you.
        [The information referred to follows:]

        Only a comprehensive BRAC analysis can determine the exact nature
    or location of potential excess. For DOD as a whole we know we have
    excess infrastructure. Our 2004 parametric study found 24 percent
    excess while BRAC 05 only produced a 3.4 percent reduction in plant
    replacement. More recently the Army and Air Force's internal parametric
    reviews have found 18 and 30 percent excess respectively.

        Senator Kaine. Thank you to the witnesses.
        A number of topics, on the sequestration point, you have
    all testified to the challenges that would result if the budget
    caps were imposed as-is. I think the statistic I thought was an
    interesting one is an improvement this year so that we meet 81
    percent of the requirements necessary to keep our facilities in
    good working order, which is better than last year. But that is
    at the President's proposed 2016 budget level.
        So if we take $35 billion out of the DOD budget, because of
    the budget caps, then you are not at 81 percent. I don't know
    exactly the portion of that you would absorb, but you would be
    back down into the 65 percent or less. That imposes risks on
    the men and women who are working and serving in these
    facilities.
        Am I basically following your testimony?
        Mr. Conger. That is pretty much it. We don't have a
    specific BCA-level budget that we have the developed. But the
    BCA caps are not dissimilar from last year's budget request. So
    it is probably instructive as to the puts and takes, the trade-
    offs that we had to consider.
        Senator Kaine. I want to focus on some of the climate
    issues. Mr. Conger, I alluded to them in my opening.
        You were a panelist at a bipartisan symposium that I called
    this summer with three other Members of Congress, Congressman
    Scott, Congressman Wittman, Congressman Rigell, two Democrats,
    two Republicans. We had bipartisan mayors.
        We held a hearing on sea level rise affecting our military
    installations in Hampton Roads. We held it on a Wednesday
    morning in August, the worst possible time to get a good crowd.
    We had 500 people who showed up who were very concerned about
    this issue. You were good enough to be a panelist, to help us
    think this through.
        Hampton Roads has embraced sort of an all-of-government
    approach where we have the installations, main DOD, the
    Pentagon, but also municipal governments, local planning
    councils, elected officials, businesses, the Chambers of
    Commerce. What are the virtues of that kind of all-of-
    government approach to looking at resilience planning for
    military installations?
        Mr. Conger. So in order to answer that question, let me ask
    sort of give you the 10,000-foot level and swoop in.
        We look at climate change as a risk, a risk to be
    considered along with other risks as we contemplate. We can't
    just look at it--climate doesn't recognize the borders of the
    installation. There are things that will happen inside the
    installation that we have to incorporate this risk into,
    placing MILCON projects, developing natural resource plans, et
    cetera.
        But there are some things that happen outside the fence
    line. What about utilities provided by the local community that
    we are going to count on? The fact that many of our
    servicemembers and their families live off-base? How does that
    affect our ability to operate if there is a flood or other
    event?
        So it is absolutely necessary to, A, work with other
    Federal agencies, the Department of Transportation, the Federal
    Emergency Managment Agency (FEMA), et cetera, as we think about
    the long-term planning for a particular area. But it is also
    important to deal with local municipalities. We do this anyway.
        Climate change aside, all the people here at this table,
    all of the folks inside the services who work at the base
    level, work with their local municipalities on any number of
    issues. Long-term planning in a climate-affected environment,
    whether you're worried about drought or you're worried about
    sea level rise or frequent flooding, you have to have those
    conversations with the planners from the municipalities.
        Senator Kaine. There is a tool that Virginia has found
    particularly helpful, REPI, which I think stands for readiness
    and environmental protection initiative.
        Mr. Conger. REPI.
        Senator Kaine. REPI, which pairs DOD funds with private
    funds from the Nature Conservancy or other organizations to
    help deal with encroachment-type issues.
        What are some of the examples of the ways that
    installations have used REPI funds to help them protect the
    integrity of operations on the installations?
        Mr. Conger. Sure. REPI tends to be focused on the partial
    levels. Is there an increase in buffers that we need close to a
    base? Are there conservation areas that the local natural
    resources advocates are interested in spending money on, as
    well as the Defense Department needing that land to be
    preserved as buffer, holding off development near an
    installation?
        That serves our interest, because we are being selfish
    about this. It serves the natural resources constituencies, the
    non-governmental organizations' (NGOs') interests. So we
    essentially partner. We share the cost.
        So we get a half-price buffer project, and they get a half-
    price conservation project. So it is more bang for the buck, as
    it were.
        Senator Kaine. Secretary McGinn, in my opening statement, I
    just referred to what I thought I remembered about a pretty
    amazing drop in purchase costs. Secretary of the Navy Mabus, I
    hear him talking about the Green Fleet, the big Green Fleet
    trying to find alternative energy, much like nuclear was an
    alternative to diesel and petroleum, to look at green
    biodiesel.
        My understanding is, and it is hard to compare all
    contracts, apples to apples, I know. But in 2012, when we did
    green biodiesel purchases, we were paying up to $12 a gallon.
    We are now involved in purchase contracts that are in the $3.40
    a gallon range because of innovation that has driven down the
    cost of biodiesel.
        Am I getting that right, essentially, on the order of
    magnitude?
        Mr. McGinn. You are, Senator. In fact, it is even lower
    than $3.50. It is the result of a demand signal that is pretty
    strong, clearly, one from the Department of Navy, but also one
    from the civilian aviation industry as well.
        We view the diversification of our transportation fuel
    portfolio as really critical to our future national security.
    It is not something that may make a difference next year or
    even the year after that, but if you look 5, 10, or 15 years
    down, there is a tremendous imbalance between availability of
    supply and demand in the world's transportation and energy
    market.
        So we think that in addition to being much more energy
    efficient, and you cited bulbous bows and coatings and other
    means by which we are trying to squeeze as much fight out of
    every unit of fuel we can, that we have a diversification of
    supply.
        The industry is responding by scaling up and getting those
    economies of scale that are driving the prices down. We are
    working very closely with the Defense Logistics Agency on
    solicitations for mixes of petroleum and biofuel blends. But we
    are not going to pay a premium. We aren't going to buy anything
    that isn't cost-competitive.
        Senator Kaine. Great. Thank you for that.
        Thank you, Madam Chair.
        Senator Ayotte. Senator Rounds?
        Senator Rounds. Thank you, Madam Chair.
        I was the Governor of South Dakota during the 2005 BRAC
    round. Ellsworth Air Force Base began on the BRAC list.
        The challenge that we faced was literally trying to provide
    accurate data, and making sure that the data that we could
    provide would be considered by the BRAC commission.
        Ultimately, it was, and we were successful in getting the
    Ellsworth Air Force Base off the closure list.
        But in doing so, we found that there were issues within
    BRAC that we thought didn't adequately allow for consideration
    of critical needs long term for our country. That was the basis
    upon which we challenged the placing of Ellsworth in the first
    place.
        With that in mind, I would just like to go through a couple
    real quick questions on this. Honestly, the first thing, and I
    agree with you, Madam Chair. I come with a dislike for the BRAC
    process to begin with, so this is going to be a case of
    convincing me that it is the right thing to do.
        The first thing I look at is you provide an estimate
    upfront of $2 billion per year savings with the implementation
    with a $6 billion cost, which clearly would suggest that there
    is a BRAC list, which has already been developed and ready to
    go. Or if not, how can you come up with those numbers upfront
    as a fair estimate?
        Second of all, and this would be to Mr. Conger, we
    understand the negatives of excess capacity in scoring
    installations in a future BRAC. But can you tell us some of the
    most positive qualities you would be looking for in an
    installation's infrastructure, in terms of military value and
    readiness?
        Mr. Conger. Okay, let me take your first question first.
        Senator Rounds. Sure.
        Mr. Conger. Where did the numbers come from? It is a
    reasonable question, and we don't have any sort of a list
    already in the hopper. What we did was we looked at previous
    BRAC rounds, in particular the ones from the 1990s. We looked
    at the efficiency recommendations from the 2005 round, the ones
    that were designed to save money. We said all right, if we were
    to reduce 5 percent of our infrastructure, which is not an
    unreasonable number considering the numbers that we have heard
    today, the 18 percent, the 30 percent, the 24 percent figure
    that we had in 2004, and we only reduced 3.4 percent in that
    the BRAC round.
        So given that 5 percent projection, and the behavior and
    the spend pattern of previous rounds, we estimated what we
    would end up with, what that 5 percent reduction would yield
    us. That was where we got the $2 billion in recurring savings.
    It is also where we got the $6 billion of input costs.
        Senator Rounds. A SWAG?
        Mr. Conger. An estimate based on previous performance.
        Senator Rounds. So in the 2005 round, I presume that those
    who were there at that time and the actual closures that
    occurred, and this was the first round in a number of years,
    was that the low-hanging fruit?
        Mr. Conger. I am not sure that I would characterize low-
    hanging or not low-hanging. We obviously went through a long
    process, at that time. Since you were the governor at the time,
    you know how painful that can be, and we respect that. It is
    painful at the base level.
        We ask for certified data to answer a huge number of
    questions. We don't assume the data that is in databases is
    correct. We collect it all and get it certified at the
    beginning of the round.
        There is an assessment that is done where you find the
    excess capacity, where you assess military value, and you try
    to make sure that the bases that you recommend closing are the
    ones with the lowest military value. Those numbers change over
    time.
        Senator Rounds. So let's slide back in again. Tell us some
    of the most positive qualities that you would be looking for in
    an installation's infrastructure, in terms of military value
    and readiness.
        Mr. Conger. So those questions are defined by each of the
    services going into the round. They are not OSD-dictated. So
    each of the services will have a different set of priorities, a
    different set of questions that they ask.
        Frankly, recently we went through, I will call it a Euro
    BRAC round, and used the BRAC process. We practiced the BRAC
    process and developed those kinds of questions.
        I would defer to my colleagues to talk to the priorities,
    how they value military value in that. That is probably going
    to be the most instructive.
        Senator Rounds. That is fair. I would then ask Secretary
    Ballentine, for bases with flying missions, will an
    installation's proximity to a quality aerial training range be
    one of those positive features that you will be looking for,
    not only in terms of the BRAC analysis but when evaluating
    beddowns for new missions, particularly when considering
    savings in fuel costs?
        Ms. Ballentine. So all of those details would be developed
    by the operators and then taken into account by the
    installations folks. I would say that we are incredibly
    grateful to the South Dakota congressional delegation (codel)
    for the great partnership that we have in developing the Powder
    River Training Complete (PRTC) training range, which is going
    to be an excellent national resource for us.
        But precisely how the military value will be assessed will
    be developed by the operators as we go through the process.
        Senator Rounds. Okay.
        Secretary Ballentine, once again, in 2005, the BRAC, during
    that process, the Air Force deviated on criteria, which was
    used to evaluate a base, from the three previous BRACs. A point
    system was used in 2005 to determine the ability of a base to
    receive other missions, versus whether the military value of a
    base warranted its retention.
        As a future BRAC would deal less with transformation and
    more with closure, has the Air Force determined the criteria
    that it would use for the next BRAC round? I am hearing you say
    no.
        Ms. Ballentine. No, not at this time.
        Senator Rounds. Thank you.
        Ms. Ballentine. You're welcome.
        Senator Ayotte. Senator Heinrich?
        Senator Heinrich. Thank you, Madam Chair.
        Assistant Secretary Ballentine, as you know, and we talked
    a little bit about this just before the hearing, Kirtland Air
    Force Base in Albuquerque, NM, has been mired with a fuel spill
    that now literally dates back decades.
        For too long, the cleanup of the spill has been fraught
    with delays and very little discernible progress. The result of
    these missteps has been that there has been a crisis of trust
    between the community and Kirtland Air Force Base.
        But frankly, under your leadership and that of Ms. Kathleen
    Ferguson, Mr. Mark Correll, and Dr. Adria Bodour, things are
    now moving in the right direction, and that trust is being
    restored.
        We are now seeing all the stakeholders work together in
    moving forward to meet some very aggressive deadlines in the
    coming months. I want to say I can't thank you enough for this
    progress. But this progress would not be possible without
    funding and leadership.
        Therefore, I ask, does the Air Force remain committed to
    the funding necessary to ensure cleanup and commit to keeping
    the Air Force Civil Engineers Center's project leader Dr. Adria
    Bodour, who has done a remarkable job at the helm? So I would
    just ask, I guess my question is, will the Air Force continue
    to provide the funding necessary to ensure that this cleanup
    gets to completion? Can you ensure that the strong leadership
    that we are now seeing will remain in place?
        Ms. Ballentine. Sir, first of all, I thank you for your
    appreciation, and will be sure to pass it on to my team.
        Senator Heinrich. Please.
        Ms. Ballentine. I, personally, can take very little credit.
    They had started this process well before I arrived. But I
    assure you that I will continue the focus. We will continue the
    funding. We are really excited about the robust interim
    measures we have put in place. I agree with you 100 percent
    that Dr. Bodour is doing a fabulous job. I will see you in
    June, when we cut the ribbon on that first extraction well.
        Senator Heinrich. I look forward to it. This is an issue
    that has drug on far too long. Having been frustrated in the
    past, I just really want to see the current progress and what
    has become a very positive working relationship be the norm
    moving forward. So thank you.
        I was also very pleased to see $12.8 million in the budget
    request for some much-needed MILCON at Kirtland Air Force Base
    regarding our space facilities.
        Kirtland Air Force is home to the Air Force research labs,
    space vehicles directorate, operationally the space and the
    space test program. Some of our Nation's most advanced space
    research and development (R&D) occurs there at Kirtland.
        But in the past, one of the challenges is that that work is
    performed in 11 substandard, inadequate, obsolete facilities
    that are literally spread over miles and miles of what is a
    very large Air Force installation.
        Can you talk a little bit about what value this new
    facility would bring to the Air Force's overall space programs?
        Ms. Ballentine. Yes, sir. You have hit the nail on the
    head, that nuclear, space, and cyber are key priorities for
    Secretary James and Chief Welsh. We just simply cannot have a
    21st-century space platform when we are operating out of 1960s
    vintage buildings. So we are quite excited about the $12-plus
    million MILCON project at Kirtland, which will allow us to test
    and develop space components and bring us to a 21st-century
    space program.
        Senator Heinrich. Great. Thank you.
        With that, I want to also take a moment and thank Assistant
    Secretary Conger and Assistant Secretary Hammack for all of
    your work, your time, your engagement, trying to deal with some
    of the challenges revolving around New Mexico's electrical
    transmission needs. I would say that your efforts ensured that
    we can pursue energy independence, the jobs that come with it,
    but also while protecting the truly unique testing and training
    assets at White Sands Missile Range.
        With that, I would just segue into this issue that we have
    been talking about regarding a potential BRAC round. I come
    with my own doubts about that process. I guess what I want to
    understand is, when you say excess infrastructure, how do we
    judge that? Can you give us some sort of concrete examples of
    what would be excess infrastructure in the current environment?
        I don't mean a specific location, so much as something that
    we wouldn't use. How would you judge what is excess?
        Also, finally, going back to Ms. Ballentine, would the
    proximity for things like ground to infinity airspace to an Air
    Force installation or uniqueness of testing facilities be part
    of that decision-making?
        Mr. Conger. Let me try and hit the first two parts of your
    question first, and then pass to Miranda.
        We measure excess in a couple different ways. When we do
    these sort of big picture capacity analyses, we are looking at
    different types of infrastructure, planes per apron space,
    ships per pier space, et cetera, in trying to see whether our
    bases are more empty than they once were and whether we think
    there is trade space to do a more comprehensive analysis.
        When we do the capacity analysis within the actual BRAC
    round, it is based on much more granular data. We go out to
    each base and ask all these detailed questions. The best way to
    look at how that is going to work is to look at our European
    analysis that we just did, where we searched out excess at each
    of those installations in Europe. In so doing, we were able to
    identify different scenarios of where we might be able to fit
    missions that are at one location in another.
        Those are the scenarios that we analyze in more detail,
    once we have identified what they are based on the excess and
    the actual military value of those installations.
        When we analyze those scenarios, we look at the business
    case, but we also look at the operational impacts. We want to
    find a scenario where we are simply being able to do the same
    thing for less money. We don't want to reduce our operational
    capability.
        Now I will pass to Miranda for the specific question you
    asked her.
        Ms. Ballentine. I think Secretary Conger described the
    parametric-level capacity analysis well. So at the Air Force,
    again, we use nine broad categories. So you can imagine what we
    do, looking at a simple ratio of a particular type of capacity.
    So say small aircraft parking aprons to force structure of
    small aircraft, and apply a ratio based on 1989 levels, using
    the same process we have used in the prior parametric capacity
    analyses.
        Now we would be able to get into much finer-grained detail
    when we do a comprehensive analysis.
        30 percent excess infrastructure capacity does not mean 30
    percent excess bases. It doesn't even mean 30 percent excess
    infrastructure. It just means capacity of the infrastructure.
    So how much of that we would actually consolidate, close, move,
    we wouldn't be able to identify until we go through that
    comprehensive analysis, identifying what those operational
    needs and priorities are.
        Senator Heinrich. I want to thank you, Madam Chair.
        Obviously, all of us are somewhat skeptical about BRAC. I
    think we should be equally skeptical about seeing our bases
    hollowed out, and that kind of reinforces for all of us why we
    need to fix the sequestration mess that we find ourselves in.
    Thank you.
        Senator Ayotte. Senator Ernst?
        Senator Ernst. Thank you, Madam Chair.
        Thank you to our guests today for your time and testimony.
    I do appreciate this.
        This is a difficult issue. Any time we face BRAC, there is
    a lot of trepidation in our communities that go through this,
    not only with BRAC but also with the changing needs of the
    military. We have had a mission transformation within the Iowa
    Air Guard. Just recently, actually, this last weekend, I did
    have the honor of attending an activation ceremony.
        We had a fighter wing that has now become focused on
    intelligence, surveillance, and reconnaissance (ISR). Their
    mission has changed. We don't have the fighter jets any longer.
    But we do have a much more technologically-based mission.
        So, Ms. Ballentine, if you would, please, the MILCON budget
    request for our Air National Guard notes the improvement of the
    Air Operations Group beddown site at the Des Moines
    International Airport. The justification data report that had
    been submitted to Congress last year, according to that, the
    building where this unit will be housed did not have the
    required communication, security systems, or backup and standby
    power required to support the new ISR mission.
        I am pleased to see that it has been included in the
    budget. It is being allocated and that this beddown sight will
    support a national defense mission in my home State.
        So what I would like to ask is, does this MILCON budget
    request provide enough for this group to be mission-ready in
    Des Moines? How critical is this group site to the Air Force
    and to our National security?
        Ms. Ballentine. Thanks, ma'am.
        I can tell you that ISR is in demand like never before.
    When the Secretary and Chief go out and ask our combatant
    commanders what they need, what they hear is ISR, ISR, ISR.
    This is a community that is under pressure in terms of the
    number of airmen we have doing the job, and the Secretary and
    Chief are really spending a lot of time to get this community
    healthy to meet the demand.
        I am going to have to get back to you on all the specific
    details that you asked about those particular projects. I will
    say that we work very hard to make sure that we have total
    force equity in our MILCON budgets and make sure that the Guard
    and Reserve have their fair share of MILCON and FSRM as we go
    through the year.
        So I will get back to you on the specific details that you
    asked about. But, of course, we would be sure to be trying to
    fund projects to the extent that they are necessary to meet the
    mission.
        [The information referred to follows:]

        Des Moines Air Guard Station has been selected as a beddown site
    for an Cyber Protection Squadron (CPT) to conduct cyber operations. In
    fiscal year 2014 the installation lost its 24-PAA F-16 mission and
    began conversion to an Cyber Protection Squadron as well as a Remotely
    Piloted Aircraft (RPA) Mission Control Element (MCE), and an
    Intelligence Targeting Group. The installation is configured to support
    fighter aircraft and requires significant work to convert the
    installation to the security and operational support needed for the new
    missions. A design study has identified building 430 as the most
    suitable location for these new missions. Facility conversion for RPA/
    MCE and Intelligence Targeting Group are being executed in a project
    authorized and appropriated in fiscal year 2015.
        This fiscal year 2016 project requests authority and funding
    necessary to provide the facilities necessary to enable the CPT to
    reach full operational capability.
        This group represents part of a constellation of ANG Cyber
    Operations units which are part of the National Guard Bureau's
    contributions to the nationwide Cyber Mission Force construct managed
    by United States Cyber Command. Cyber security is a critical tenet of
    United States national security.

        Senator Ernst. Okay. Thank you very much. I appreciate
    that.
        Ms. Ballentine. You're welcome.
        Senator Ernst. Definitely an exciting transformation,
    again, a lot of trepidation with these airmen as they
    transition from their known unit into something that is totally
    new, much more technologically advanced. But in the course of
    their training over the past year, they are seeing long-term
    sustainability with this type of mission and unit. We are proud
    to have it located in Iowa. Thank you.
        I will look forward to having the responses back.
        I would like to hop back to Mr. Conger, if you could assist
    me with this one.
        Something that Senator Heinrich had mentioned earlier with
    the environmental spills that occur out there. It is my
    understanding that there are POL spills, petroleum, oils, and
    lubricant spills, that occur. Whether they are large or small
    or other types of environmental accidents, when they occur
    caused by U.S. troops in certain European nations, then the
    U.S. Government pays a very, very hefty penalty in those
    situations.
        If you are familiar with that, could you please explain
    that process? Maybe how much the government has expended in
    cleaning up some of these spells and the fines associated with
    that?
        Mr. Conger. So in general, our cleanup activities in
    foreign nations are governed by specific Status of Forces
    Agreements (SOFAs). I am not familiar with the fines you are
    referring to. I am under the impression that, generally, we
    don't conduct cleanup activities that don't have a direct
    threat to human health and the environment on the bases that we
    reside in overseas.
        But recognizing that I am not fully apprised to the answer
    this question, why don't I take it for the record, and get you
    a more formal answer.
        Senator Ernst. I would, certainly, appreciate that.
        [The information referred to follows:]

        It is DOD policy to plan, prevent, control, and report spills of
    hazardous substances and POL. It is also DOD policy to provide for a
    prompt, coordinated response to contain and remediate spills when they
    occur.
        The U.S. Government does not pay fines and penalties to any
    European nation for spills. DOD does pay claims for environmental
    damage to the property of host nation landowners under Article VIII of
    the North Atlantic Treaty Organization (NATO) Status of Forces
    Agreement (SOFA). The NATO claims process is a long-established process
    in which the U.S. pays a share of each approved claim and the host
    nation pays a smaller share (e.g., 75 percent/25 percent). The nations
    covered by the NATO SOFA (such as Germany) are generally excluded from
    filing such claims on their own behalf because of inter-governmental
    waiver provisions contained in the agreement. However, this exclusion
    does not usually cover local municipalities and local water
    authorities. Our primary expenditure for environmental claims is for
    pollution that migrates from our installations to adjacent property or
    water sources.

          Army has spent $1.8M on POL spill claims in Europe during
    2012-14.
          Navy has not paid any claims for environmental damage
    since 2013.
          Air Force has spent $1.9M in Europe for spill response
    since 2009.

        I would like to go back, also, Ms. Hammack, very briefly, I
    am running out of time.
        Energy and sustainability, you have done a lot of hard work
    in this area, and I do appreciate that. Your part in
    establishing the Army's NetZero program, which seeks to
    minimize energy use on Army installations and offsets any
    remaining use with renewable energy, can you just please give
    us a very quick update on where you stand with that project?
        Ms. Hammack. Thank you very much, Senator Ernst.
        It has been a very successful program, and so we have
    expanded it to all Army installations because we found it is a
    cost-effective means of allocating limited resources to ensure
    that we don't put renewable energy on an inefficient building.
    We want to be able to look at efficiency first.
        We are using a lot of energy savings performance contracts,
    leveraging private-sector money, not taxpayer money, so that
    when the energy savings are achieved, we pay the contractor
    back out of the energy savings. Sometimes we will be able to
    put renewable energy in there.
        The intention is to get all of our installations more
    resilient so that they are using less energy. They are able to
    make more out of renewable energy. So that we are able to
    standby and serve this Nation, the State, in case of a natural
    disaster or otherwise.
        So the NetZero program is working great, both on energy and
    water efficiency projects, too.
        Senator Ernst. That is fantastic. I commend you on that.
        Thank you so much, Madam Chair.
        Senator Ayotte. Thank you.
        I have some follow-up questions, and wanted to ask, we have
    submitted to you, Secretary McGinn--there are all kinds of
    questions for you to follow up. It is great.
        Mr. McGinn. My staff will be very pleased.
        Senator Ayotte. I know they will be.
        A number of questions about security personnel at our
    shipyards. In fact, I was meeting with some of the management
    at our shipyard today in Portsmouth.
        One of their concerns is that it is taking them too long to
    hire security personnel, and that by the time they train the
    personnel, given where they are in the classification system,
    they are training them and then losing them fairly quickly. So
    I think this is probably not just an issue at Portsmouth but
    maybe an issue elsewhere, at all of our facilities.
        So we are, obviously, in light of the tragedy that we
    experienced on September 16 of 2013 at the Washington Navy
    Yard, all of us want to make sure that we have proper security
    at our military installations. So I wanted to follow up on
    that. If you have any comments on that or if that is one you
    want to take for the record? I saw Secretary Hammack shaking
    her head as well.
        Mr. McGinn. We recognize that we need to do a better job at
    recruiting, training, and retaining our security personnel,
    civilian personnel. We are doing a review with the commander of
    Naval Installations Command, which the headquarters is located
    in the Navy Yard, taking a look at the attrition, if you will,
    of the security personnel.
        I will be happy to share with you the results of that
    review, as we go forward. But we recognize that we have to
    create an attractive career-enhancing pathway for folks in that
    critical area of discipline. We will make sure we do that, make
    sure that the pay and compensation and training opportunities
    are commensurate with responsibilities.
        Senator Ayotte. Excellent. Thank you.
        Mr. Conger, I know Senator Ernst asked you and I think
    Senator Heinrich as well, about environmental cleanups. I
    think, unfortunately, all of our States have some of those.
        Let me just applaud the Department's efforts and impressive
    progress. In New Hampshire, 83 percent of our sites have been
    cleaned up, including Pease, Manchester, Rochester, New Boston,
    Concord, Langdon, and on Mount Washington. We really treasure
    our beautiful environment in New Hampshire, as we do across the
    country.
        I understand that there are 32 remaining sites in New
    Hampshire. Obviously, we want to get them all cleaned up. If
    you can give me an update, this is one you can take for the
    record, give me a project date of completion of what you
    estimate in terms of when we might get to these other
    unfinished projects. I would appreciate it.
        Mr. Conger. You bet. We have that information. We will be
    able to get it to you.
        Senator Ayotte. Fantastic. Thank you.
        [The information referred to follows:]

        The table below identifies the remaining 32 cleanup sites in New
    Hampshire. This information is based on the end of fiscal year 2014
    Knowledge Based Corporate Reporting System (KBCRS) data submitted by
    the Military Components.

    ----------------------------------------------------------------------------------------------------------------
                                                                                                   Project response
              DOD component            Installation name       Site name         Current phase    complete date (FY)
    ----------------------------------------------------------------------------------------------------------------
    Air Force.......................  New Boston........  Former WWTP (Bldg   Study.............               2017
                                                           130 & 121).
    Air Force.......................  Pease AFB.........  Burn Area-1.......  Cleanup...........               2016
    Air Force.......................  Pease AFB.........  Burn Area-2.......  Cleanup...........               2015
    Air Force.......................  Pease AFB.........  FDTA-2............  Cleanup...........               2019
    Air Force.......................  Pease AFB.........  PFC-FDTA-2........  Study.............               2044
    Air Force.......................  Pease AFB.........  LFTS..............  Cleanup...........               2017
    Air Force.......................  Pease AFB.........  Bldg 222..........  Cleanup...........               2015
    Air Force.......................  Pease AFB.........  Bldg 227..........  Cleanup...........               2018
    Air Force.......................  Pease AFB.........  Bldg 234..........  Cleanup...........               2018
    Air Force.......................  Pease AFB.........  BFSA..............  Cleanup...........               2016
    Air Force.......................  Pease AFB.........  Bldg 119..........  Cleanup...........               2017
    Air Force.......................  Pease AFB.........  Bldg 120..........  Cleanup...........               2015
    Air Force.......................  Pease AFB.........  OJESTS............  Cleanup...........               2017
    Air Force.......................  Pease AFB.........  Communications      Cleanup...........               2018
                                                           Bldg #22 Solvent
                                                           release.
    Air Force.......................  Pease AFB.........  Plume 13/14.......  Cleanup...........               2017
    Air Force.......................  Pease AFB.........  Plume 41..........  Cleanup...........               2015
    Air Force.......................  Pease AFB.........  Pumphouse 2.......  Cleanup...........               2016
    Air Force.......................  Pease AFB.........  Motor Pool (site    Cleanup...........               2015
                                                           72).
    Air Force.......................  Pease AFB.........  Bldg 136 Self Help  Cleanup...........               2016
                                                           Fac (Site 81).
    Air Force.......................  Pease AFB.........  Flightline          Cleanup...........               2020
                                                           refueling System
                                                           (FLRS) plumes.
    Air Force.......................  Pease AFB.........  Bldg 113..........  Cleanup...........               2020
    Air Force.......................  Pease AFB.........  Bldg 226..........  Cleanup...........               2015
    Air Force.......................  Pease ANG NH......  Former OWS at Bldg  Study.............               2021
                                                           157.
    Air Force.......................  Pease ANG NH......  OWS (1) Removal     Study.............               2021
                                                           pending at Bldg
                                                           260.
    Air Force.......................  Pease ANG NH......  OWS (2) Removal     Study.............               2021
                                                           pending at Bldg
                                                           260.
    Air Force.......................  Pease ANG NH......  Former drum         Study.............               2015
                                                           storage area at
                                                           Bldg 253.
    Air Force.......................  Pease ANG NH......  Former USTs at      Study.............               2020
                                                           Bldg 145.
    Air Force.......................  Pease ANG NH......  Former USTs/pump    Study.............               2020
                                                           island/OWS/former
                                                           lubrication bay.
    Army............................  Cold Regions        Former TCE And      Study.............               2051
                                       Research And        Fuel Oil USTs.
                                       Engineering Lab.
    Army............................  Cold Regions        Research Ice Well.  Study.............               2051
                                       Research And
                                       Engineering Lab.
    Army............................  Cold Regions        Open Storage Area.  Study.............               2051
                                       Research And
                                       Engineering Lab.
    FUDS............................  Grenier Mil AF....  Former Grenier      Cleanup...........               2016
                                                           Landfill PRP.
    ----------------------------------------------------------------------------------------------------------------

        Secretary McGinn, I wanted to ask you about a project in
    California. This is one that was a $44 million water project
    that is going to provide water from Camp Pendleton to the
    community of Fallbrook, California. One of the issues that I
    would like some clarification on is that it appears that the
    benefits to the Department of Navy, it is just not clear to me
    how much benefit the Department of Navy gets.
        The authority that was granted to the Secretary of the
    Interior for the construction only allows Navy to reimburse
    costs of the project that the Secretary and Secretary of Navy
    determine reflects the extent to which the Department of Navy
    benefits from the project.
        So what portion of the water from the project will be used
    by the Department of Navy, versus how much will the State of
    California or the City of Fallbrook and the Department of
    Interior be investing?
        Mr. McGinn. It has a very detailed background that goes to
    water rights and usage, making sure that we are looking at
    future demand and doing that in as a water-conserving way as we
    possibly can.
        Senator Ayotte. You can appreciate where we don't want to
    build municipal water projects, but we want to help the Navy.
        Mr. McGinn. Exactly. Out great marines and sailors at
    Pendleton need that.
        We will provide you a briefing on that project as well and
    provide you the rationale and the numbers, and what exactly our
    costs are, what our expected benefits are.
        Senator Ayotte. Excellent.
        I, certainly, appreciate, this has been one of the ongoing
    issues that has been from Congress to Congress, the issue of
    Guam.
        Secretary McGinn, the Department is requesting an
    additional $20 million through the Office of Economic
    Adjustment to add to the already provided $106 million to
    upgrade the civilian water and wastewater infrastructure on
    Guam, so lest California think that I am picking on them.
        The Department does not provide the same level of support
    for other local community infrastructure where we have forces,
    as I understand it.
        So how much is the Government of Guam investing in its
    infrastructure? What will be the marines use of the water and
    wastewater, versus the residents of Guam, because obviously,
    our focus is on our marines as well? One of the issues, I
    think, actually, to include in this is the element of housing.
    As I understand it, there are some additional questions on
    housing and how much that is going to cost.
        So could you help us understand what the analysis is to
    determine the number of accompanied versus unaccompanied
    personnel stationed on Guam? This has been a continuous issue,
    I know, from Congress to Congress.
        Mr. McGinn. I think we are in a pretty good position
    compared to past years.
        First of all, the footprint of marines on this relocation
    to Guam is much lower. It will be a total of about 5,000
    marines, and about two-thirds of them will be unit-deployed
    marines, so we will have Permanent Change of Station marines
    with about 1,300 dependants that will be relying on the
    infrastructure for support there.
        Since last year, we have worked closely with our colleagues
    in the Air Force to locate the family housing at Anderson. That
    provides benefit to us. It provides benefit to the Air Force
    personnel who are based there.
        We are also looking very, very hard at what is driving
    housing costs there. Obviously, it is a remote location, parts,
    labor, et cetera, market conditions.
        I would, on the first part of your question, like to defer
    to Mr. Conger. He has done a great job in leading the effort by
    the Department on this economic adjustment business. So I
    recommend John provide some insight.
        Mr. Conger. Sure. Briefly, the outside-the-fence
    initiatives--water and wastewater as the preponderance of the
    effort--are driven by requirements to mitigate the impact that
    we are going to have on the island by introducing additional
    personnel and the stress on their utility system.
        The challenge is getting the Environmental Impact Statement
    (EIS) approved through the intraagency, and there are certain
    things that the island of Guam had not been in compliance with.
    So as a consequence, we are stressing an already stressed
    system.
        That said, I think that what Secretary McGinn alluded to
    earlier, in the sense that we have significantly reduced our
    footprint, therefore, we have significantly reduced our impact.
        Because we are going from a situation where we have gone
    from 9,000 marines and roughly the same number of dependents to
    5,000 marines and about 1,300 dependents, the impact is much
    smaller. The housing area is much smaller. The cantonment area
    is much smaller. The impacts are much smaller.
        We are finishing up the Supplemental Environmental Impact
    Statement (SEIS) now, but in conjunction, the Economic
    Adjustment Committee, which is an interagency group, is
    analyzing those impacts that are identified in the Supplemental
    Environmental Impact Statement, and repricing everything.
        We have gone from, in 2010, where we had a $1.3 billion
    program that was required by the EIS, in order to accommodate
    the much larger plan, to a figure that is closer to $200
    million or $300 million. The down-scoping has been dramatic.
        We will have final numbers to the committee this late
    spring, early summer. Obviously, any one of those outside-the-
    fence projects that is required will have to get individual
    approval here.
        So we recognize that. We are going to get you the
    information. But I think it is a good-news story, the
    requirement dropping significantly. But it is all about the
    impacts that we are having, by the influx of marines.
        Senator Ayotte. Thank you.
        Senator Kaine?
        Senator Kaine. Thank you, Madam Chairwoman.
        Two other items of inquiry. In response to one of my
    questions, but also to one of my other colleagues, I heard a
    little bit from the Navy side and from the Army side about
    operational energy investments, power purchase contracts,
    energy conservation. But I haven't heard from my Air Force
    witness.
        I know the Secretary Ballentine came out of the private
    sector at Walmart, where your company was one of the real
    innovators in energy savings on the private sector side. Could
    you talk a little bit about what the Air Force is doing in this
    area to reduce energy usage, promote efficiency, and,
    ultimately, reduce costs?
        Ms. Ballentine. Yes, thanks for the opportunity.
        So like our sister services, energy assurance is critical
    to mission assurance at the Air Force. Energy really is the
    backbone for all parts of our mission. It launches every
    sortie, propels every space launch, and powers every bit of our
    base infrastructure. So energy is absolutely critical to what
    we do.
        As we look to build energy resilience in the face of
    potential supply disruptions, as we look to build diversity of
    our energy supply, and as we look to reduce energy demand, we
    have to do all of that in the face of this constrained budget
    environment that we have all been talking about today.
        So while in the past, the Air Force has invested more of
    our own money in energy reduction programs, we really are
    shifting our strategy pretty dramatically to accelerate the use
    of the energy savings performance contracts.
        On the renewable energy side, we have about 300 renewable
    energy projects at about 100 different locations, all of which
    meet or beat utility prices today. We just completed our
    largest solar installation to date, 16.4 MW at Davis-Monthan
    Air Force Base in Arizona.
        That project is pretty exciting. During peak sunlight, it
    is producing over 100 percent of the base's power. On average,
    day and night, it is about 35 percent of the base's power, and
    saves that base $500,000 a year.
        So those are exactly the kind of projects that we are
    looking at, bringing those electrons closer to home, saving
    money, building in some flexibility and resilience.
        Senator Kaine. Great. Thank you very much.
        Mr. Conger, back to the BRAC question. I think we have all
    expressed our concerns about BRAC, but we also understand that
    excess capacity has a cost. If you have to pay for that cost,
    it may come out of something else that could challenge you.
        So I want to ask you to really educate me about non-BRAC
    means for dealing with excess physical capacity. You used the
    example in your opening statement, and I think alluded to it
    once or twice, about the European study that was done, that you
    viewed as like a test BRAC.
        DOD did that, reached some conclusions about savings, and
    has been able to implement and has a pretty good fix on what
    savings would be.
        Is there any bar in law right now, if Secretary Carter says
    to all the service chiefs, I want you to tell me what your
    excess capacity is, and in your best military judgment, tell me
    what reductions you would make in your infrastructure in order
    to eliminate that excess capacity.
        I recognize that BRAC sets up a procedure that leads to an
    up or down vote, et cetera. But there is nothing in law that I
    know, but I could be wrong about this, that would bar the DOD
    from doing that kind of study about domestic installations and
    even forwarding recommendations to Congress that would be part
    of our debate, just like when you forward recommendations to us
    about personnel practices, end-force strength, or weapons
    systems.
        Am I right about that, that if the DOD wanted to forward
    recommendations not as part of a BRAC, but just based on best
    military judgment, the DOD would be able to do that?
        Mr. Conger. So the answer is, ``yes, but.'' Yes, of course,
    the Secretary of Defense can ask for that study, and, of
    course, we will do what he tells us to do.
        But the quandary you are putting yourself in is when you
    contemplate a future possibility of BRAC, where you adhere to
    the principle of treating all bases equally, you have just set
    up a dynamic where we can't do that because we have pointed
    out, ``Now I have a secret list,'' as Senator Rounds was
    alluding to earlier.
        We don't want to have that secret list, because it
    obviously makes people nervous.
        There are examples, specific examples in the past several
    years where there have been proposals that have come up here
    for consideration, and have ultimately been unsuccessful: the
    reductions at Eielson Air Force Base, the closure at Pittsburgh
    that didn't end up happening.
        There are things that have been proposed and ultimately
    rejected. It is not a recipe for a successful enterprise to go
    up and do onesie-twosie types of things, because they generally
    don't succeed.
        You are personally familiar with what happened with the
    Joint Forces Command, but that was not a base closure, right?
    The location for most of those individuals was technically part
    of Norfolk Naval Station. So, as a consequence, you weren't
    closing a base, you were reducing one. So, therefore, it didn't
    come under the same restrictions.
        There are restrictions as far as what we can and cannot
    propose.
        Senator Kaine. But I use that one as kind of a good example
    of how I think the process could work right. There was the
    proposal to close that joint operation. Now, it wasn't a full
    base closure because it was assigned under the umbrella of
    another. But that was huge and, in the area, extremely
    unpopular. It wasn't subject to the BRAC requirements.
        Everybody pulled together after that proposal was made and
    tried to make a case to the Pentagon, look, if you completely
    close this, you are actually going to be doing the wrong thing
    because you are going to need to re-create it somewhere else.
    The Pentagon at the time considered the advocacy by the
    congressional delegation. I wasn't part of it at the time, but
    I was governor.
        They considered the advocacy and concluded, you know what,
    you are right. We ought to close a lot of it, but there are
    aspects of it that should be maintained. Everybody walked away
    thinking, well, we didn't get everything we wanted, but we made
    our case, and a good decision was made.
        That was not a BRAC but it was sort of an iterative process
    where the DOD made a proposal, and folks said we don't like it,
    we think we you ought to look at it in a different way. In that
    dialogue, a synthesis was reached that was neither the thesis
    or antithesis. But now we have moved on and it seems to be
    working.
        I get your point. The DOD makes everybody nervous, if they
    think the DOD has the secret list or if the DOD is compiling
    the secret list. But you make everybody nervous when you do a
    BRAC, because as soon as you do a BRAC, every last community in
    the United States has to hire lobbyists and lawyers. Even if
    there is no danger that that installation actually is going to
    be closed or downsized at all, you have to do that. That is the
    burden that the mayors are in.
        You have to, because everybody else is, hire lobbyists and
    lawyers. There is this massive, collective check written out of
    public treasuries from States and localities to the lobbyist
    and lawyer community to make the case.
        Then we go through the whole process and there is a
    recommendation. I always just thought, well, gosh, I trust the
    military leadership to make the best recommendation they can.
    You guys are used to making recommendations that we follow 75
    percent of them and don't follow 25 percent.
        If you do it on personnel and you do it on weapons, and if
    you do it on everything else, you could do it on installations.
    Yes, we would battle about it, and I would fight to protect my
    thing, and somebody else would fight to protect theirs, and you
    probably would get 75 percent of what you proposed. On the
    other 25 percent, you might not get it 100 percent, but there
    would be some iterative discussions like there was on the Joint
    Forces Command in Norfolk.
        So I think we can't sit up here and say we want you to
    solve it. We have to solve our deficit problem, but we can't
    cut anything. We would be hypocritical to say that.
        But I think those of us who have had experience with BRAC,
    we found it to be an unwieldy way to come at what is always
    going to be difficult. But the DOD always has it in its
    province at least make recommendations to us about excess
    capacity that we then take into the political realm and put on
    our shoulders. We are going to be held accountable for
    decisions, as we ought to be. Our voters want us to be
    accountable.
        So it is messy, but I am not sure it is any messier, and it
    may ultimately be closer in terms of accountability, than the
    way the BRAC processes have been done.
        That is sort of my critique.
        Mr. Conger. I respect your viewpoint, and I understand
    where you are coming from.
        In the past, before BRAC was invented, there were base
    closures. They were often criticized for their political
    nature. If one party was in charge, then the other party would
    worry that theirs were being targeted for political reasons.
    This is in apolitical process.
        It is an analytical process. It is very number-crunch
    intensive. The recommendations that come out have all that
    analysis baked into them.
        I would hope that at least there is some faith that it is
    not just finger in the wind.
        Senator Kaine. We have faith in the way you did it,
    separate and apart from the BRAC. We would know the
    recommendations the Pentagon would make to us would not be
    based on this or that party, or this or that committee chair.
        Now, we might get into a little bit of that up here, and
    our voters would kind of understand that, and they would either
    punish us or reward us. But we would have faith that you would
    use the right analytical tools separate and apart from a BRAC
    process.
        That is the way you guys would come at it, in my view. I
    mean, I would have that expectation.
        Anyway, I made my point. I hear your critique. This
    discussion is going to continue. But I didn't leave it just
    saying, no, you can cut costs everywhere, but we don't want you
    to cut excess infrastructure costs.
        Obviously, we have to figure out a way to save on
    infrastructure. It is just what is the best way to save on
    infrastructure.
        Senator Ayotte. I have a few questions that I will just
    submit for the record.
        Senator Ayotte. But in wrapping this up, I appreciate what
    Senator Kaine is saying. I mean, let's face it, in some ways,
    BRAC was created as a copout, so that somehow we wouldn't have
    to make these decisions. Well, we are making these decisions
    every day, when it comes to important decisions. That is what
    we get elected to do.
        Where I disagree a little bit, Mr. Conger, I think there is
    a lot of politics to BRAC, too. So we are never going to remove
    politics from any of this process, because it is the nature of
    a democracy and elected officials.
        So I appreciate what my ranking member had to say here,
    because I think, in some ways--I wasn't here when BRAC was
    created, but it is almost like it was to insulate us from
    having to make hard decisions, and that is what we get elected
    to do on behalf of our constituents.
        Mr. McGinn. Kind of like sequester.
        Senator Ayotte. Exactly.
        Mr. McGinn. The same kind of copout logic.
        Senator Ayotte. Yes, that is a good analogy. Absolutely,
    Secretary McGinn. A very good analogy.
        Well, thank you all for being here today and for what you
    do for the country. We really appreciate it.
        [Whereupon, at 4:01 p.m., the subcommittee adjourned.]

        [Questions for the record with answers supplied follow:]
                    Questions Submitted by Senator Mike Lee
                                      brac
        1. Senator Lee. Mr. Conger, Secretary Hammack, Secretary McGinn,
    and Secretary Ballentine, the Department of Defense (DOD) has asked for
    a round of base reconstruction and closure (BRAC) for 2017 to reduce
    excessive infrastructure and facilities. How does your Service
    determine when a facility or infrastructure becomes excessive or
    surplus and what are some of the more general characteristics of the
    facilities and infrastructure in your services that believe it would be
    more cost effective to dispense with?
        Mr. Conger. Each of the Military Departments has procedures in
    place to determine whether an individual asset should be declared
    excess to its needs, and a screening process for subsequently assessing
    whether that asset is surplus to the needs of all DOD Components. If a
    mission has more assets than required, or some of its assets are not
    sized or configured properly (e.g., the hangar ceiling is not high
    enough for the aircraft), the extra assets are then assessed for
    adaptive reuse by other missions or other DOD Components that require
    space. Assets not required are declared surplus and are disposed of
    through the General Services Administration.
        For DOD as a whole we know we have excess infrastructure. Our 2004
    parametric study found 24 percent excess while BRAC 05 only produced a
    3.4 percent reduction in plant replacement. More recently the Army and
    Air Force's internal parametric reviews have found 18 and 30 percent
    excess respectively.
        While the process for disposing of individual assets is generally
    workable on a single installation, the Department believes that given
    the large excess, BRAC is the only fair, objective, and proven process
    for undertaking a comprehensive review of installations and assets to
    determine how to best reconfigure our infrastructure to reduce this
    excess.
        Ms. Hammack. The Army's mission requirements and force structure
    decisions drive its infrastructure and facility needs. Facilities and
    infrastructures become excess or surplus when they exceed existing or
    projected Army requirements due to decreasing force structure or
    mission changes, or when they cannot be cost-effectively repurposed or
    converted for other valid Army requirements.
        Facilities and infrastructure become more cost effective to
    dispense with when they can no longer be economically repaired, or the
    required capability exists at another location where facilities and
    infrastructure cost less to maintain and functions can be transferred
    or consolidated to better meet mission requirements.
        Most existing excess capacity in the Army is actually under-
    utilized capacity, not empty buildings. Buildings can accommodate a
    given level of personnel and functions as designed. When force
    structure is cut, those buildings have fewer personnel working in them.
    The population of a building can be reduced by 10 percent, 20 percent,
    or even 40 percent but facility maintenance and utility costs do not
    decline in a linear or 1:1 ratio because the cost of maintaining a
    building is somewhat inelastic to changes in population. The whole
    building needs a certain level of heat, cooling, and maintenance
    regardless of whether there are 60 persons or 100 persons in the
    building. As a result, the cost of underutilized buildings accounts for
    much of the Army's carrying cost of excess capacity.
        The Army has existing tools to dispose of excess buildings or
    property outside of the BRAC process, but those tools cannot produce
    the same kinds of substantial recurring savings as a BRAC. The reason
    is that the same relatively inelastic relationship between population
    and buildings is also applicable to installations themselves. If an
    installation's population is reduced by 10, 20, or even 40 percent, the
    garrison costs will not decrease in a 1:1 ratio. The garrison still has
    to provide the same set of installation services (fire/police, housing,
    child care, garbage removal, IT support, landscaping, etc). These
    services require a relatively fixed overhead or workforce regardless of
    whether they are serving 12,000 or 20,000 Soldiers and Families. Only
    by closing the lowest military value installations, and realigning the
    remaining required functions into the under-utilized space of our
    higher military value installations, can we realize substantial
    savings.
        Mr. McGinn. The Navy determines an asset (facility or
    infrastructure) to be excess through the identification of facility
    requirements for the missions on the installation and the comparison of
    those requirements to the existing assets on the installation. The
    assets are also assessed to determine how well they support the
    mission. If a mission has more assets than required, or some of its
    assets are not sized or configured properly (e.g. the hanger ceiling is
    not high enough for the aircraft), then these assets are further
    evaluated for adaptive reuse by other missions on the installation that
    require space. If adaptive reuse is not feasible, then the asset is
    declared excess and reported to GSA for potential reuse outside of DOD
    or a declaration of surplus enabling the service to move forward with
    disposal.
        The assets which are most cost effective to dispose of are
    typically those in very poor condition generating a high sustainment or
    restoration cost to repair. Additionally, if these assets are not well
    utilized due to their condition or configuration and the mission is not
    highly dependent on them, then relocation of the current functions and
    disposal of the facility is normally less expensive than repair or
    restoration.
        Ms. Ballentine. The Air Force has determined approximately 30
    percent excess infrastructure capacity, based on a comparative review
    of categories such as parking apron as a function of aircraft or total
    facilities square footage as a function of personnel for specific types
    of installation. More specific infrastructure and costing analysis
    would be performed upon authorization of a new round of Base
    Realignment and Closure (BRAC).
        The primary savings generated from a BRAC would come from the
    complete divestiture of infrastructure, personnel, and support
    resources for entire installations. Reduction in infrastructure
    footprint and lowered sustainment costs from a partially closed
    installation pale in comparison to the savings from a fully closed
    installation. Closing one base and fully divesting infrastructure at
    that installation would save considerably more than closing one-third
    of the infrastructure on three different installations. Therefore the
    Air Force would seek to consolidate its force structure and reduce
    infrastructure through base closures as the most cost effective means
    to achieve infrastructure savings.

        2. Senator Lee. Mr. Conger, Secretary Hammack, Secretary McGinn,
    and Secretary Ballentine, how do you determine that it becomes more
    cost-efficient to dispense with a facility or infrastructure than to
    keep in for potential future use?
        Mr. Conger. DOD has several options when dealing with obsolete,
    inefficient or underutilized support infrastructure, including
    renovation, conversion, shuttering, divesture and demolition. When
    determining what option to pursue, the Defense Components consider such
    factors as the asset's facility condition, configuration, size,
    location, facility capacity at that location, current mission
    requirements, funding and funding authority. An engineering analysis is
    conducted to determine if it is cost effective to repair or replace the
    asset for a current or new mission. If the Military Service cannot
    identify a reuse for a particular asset and the underlying land is
    essential for future military requirements, the Military Department
    will likely identify the asset for demolition versus declaring it
    excess or surplus.
        Ms. Hammack. In general, facilities and infrastructure become more
    cost effective to dispose when they can no longer be economically
    repaired, cannot be cost-effectively repurposed or converted for other
    valid Army requirements, or the required capability exists at another
    location where facilities and infrastructure cost less to maintain and
    functions can be transferred or consolidated to better meet mission
    requirements.
        The Army has existing tools to dispose of excess buildings or
    property outside of the BRAC process, but those tools cannot produce
    the same kinds of substantial recurring savings as a BRAC. The reason
    is there is a relatively inelastic relationship between population and
    buildings, and the cost of running the installations themselves. If an
    installation's population is reduced by 10, 20, or even 40 percent, or
    several buildings are demolished by 100,000 or 200,000 square feet, the
    garrison costs will not decrease in a 1:1 ratio. The garrison still has
    to provide the same set of installation services (fire/police, housing,
    child care, garbage removal, IT support, landscaping, etc). These
    services require a relatively fixed overhead or workforce regardless of
    whether they are serving 12,000 or 20,000 Soldiers and Families. Only
    by closing the lowest military value installations, and realigning the
    remaining required functions into the under-utilized space of our
    higher military value installations, can we realize substantial
    savings.
        Mr. McGinn. The Shore Facilities Planning System (SFPS) is the
    Navy's tool that enables a five year planning process that analyzes:
    the facilities needed to perform assigned missions; existing facilities
    and their condition; existing facility uses; and how to achieve
    efficient facility utilization, thus minimizing facility footprint.
    Through the SFPS the analysis of future mission, base loading and asset
    condition are factored in to develop site specific solutions to
    successfully acquire, maintain, optimally utilize and/or dispose of
    shore assets. Longer term facility requirements including
    infrastructure investment and divestment are addressed during
    installation master planning efforts consistent with Unified Facilities
    Criteria # 2-100-01 Installation Master Planning of 15 May 2012.
        Ms. Ballentine. Through the BRAC process, the Air Force seeks to
    eliminate infrastructure capacity that exceeds both current and future
    force structure requirements. The Air Force does not seek to eliminate
    excess infrastructure capacity that it deems necessary for future use.
        Likewise, the Air Force is seeking an ``efficiency BRAC'' that
    implements scenarios that will pay for themselves as quickly as
    possible and continue to provide savings forever.
                  conventional vs. alternative energy sources
        3. Senator Lee. Mr. Conger, Secretary Hammack, Secretary McGinn,
    and Secretary Ballentine, the cost of petroleum-based energy products
    have decreased sharply with the drop in oil prices over the past year.
    Is your Service able to fully take advantage of the lower costs for
    these conventional fuels while having to maintain statutory and
    regulatory alternative fuel standards?
        Mr. Conger. Statutory and regulatory alternative fuel standards
    only apply, if at all, to the Defense Department's non-tactical vehicle
    (NTV) fleet, the great majority of which is comprised of conventionally
    fueled vehicles. The DOD is taking advantage of lower fuel costs at
    refueling stations on or near military installations.
        Bulk fuel for operational purposes is not subject to statutory or
    regulatory requirements mandating the use of alternative fuels. In
    addition, the Department will make bulk purchases of alternative fuels
    for operational purposes only if such alternative fuels are cost
    competitive with conventional fuels and qualified as compatible with
    DOD's existing equipment and infrastructure.
        Ms. Hammack. Statutory and regulatory alternative fuel standards
    only apply, if at all, to the Defense Department's non-tactical fleet
    (NTV) fleet, the great majority of which is comprised of conventionally
    fueled vehicles. The DOD is taking advantage of lower fuel costs at
    refueling stations on or near military installations.
        Bulk fuel for operational purposes is not subject to statutory or
    regulatory requirements mandating the use of alternative fuels. In
    addition, the Department will make bulk purchases of alternative fuels
    for operational purposes only if such alternative fuels are cost
    competitive with conventional fuels and qualified as compatible with
    DOD's existing equipment and infrastructure.
        Specific Army addition: In regards to the Non-Tactical Vehicle
    Fleet the Army has reduced total consumption of petroleum in the NTV
    fleet by 38.4 percent since fiscal year 2005. These savings have come
    through a combination of vehicle downsizing and significant increases
    in vehicle fuel efficiency.
        Mr. McGinn. Statutory and regulatory alternative fuel standards
    only apply, if at all, to the Defense Department's non-tactical fleet
    (NTV) fleet, the great majority of which is comprised of conventionally
    fueled vehicles. The DOD is taking advantage of lower fuel costs at the
    pump at refueling stations on or near military installations.
        Bulk fuel for operational purposes is not subject to statutory or
    regulatory requirements mandating the use of alternative fuels. In
    addition, the Department will make bulk purchases of alternative fuels
    for operational purposes only if such alternative fuels are cost
    competitive with conventional fuels and qualified as compatible with
    DOD's existing equipment and infrastructure.
        Ms. Ballentine. Statutory and regulatory alternative fuel standards
    only apply, if at all, to the Defense Department's non-tactical vehicle
    (NTV) fleet, the great majority of which is comprised of conventionally
    fueled vehicles. The DOD is taking advantage of lower fuel costs at
    refueling stations on or near military installations.
        Bulk fuel for operational purposes is not subject to statutory or
    regulatory requirements mandating the use of alternative fuels. In
    addition, the Department will make bulk purchases of alternative fuels
    for operational purposes only if such alternative fuels are cost
    competitive with conventional fuels and qualified as compatible with
    DOD's existing equipment and infrastructure.

        4. Senator Lee. Mr. Conger, Secretary Hammack, Secretary McGinn,
    and Secretary Ballentine, how are you working to take advantage of
    these lower costs and save funding?
        Mr. Conger. The price for the bulk of DOD fuel purchases is set by
    The Office of the Secretary of Defense, Comptroller (OUSD (C)) in
    coordination with the Defense Logistics Agency as a set of Standard
    Fuel Prices (SFP) for various products worldwide. The SFP provides
    budgetary stability for the Services and Defense Agencies by absorbing
    commodity market price volatility through a revolving fund known as the
    Defense Wide Working Capital Fund (DWWCF). The SFP is not a marketplace
    price. When prices rise, the increase in costs is absorbed by the
    DWWCF; when prices fall, the DWWCF replenishes that cash. In each
    budget cycle, the DWWCF's previous year's operating result and the
    projected cash balance are taken into consideration and prices are
    adjusted to return gains or recoup losses.
        Recent decreases in petroleum prices worldwide are reflected in a
    decrease of the SFP for various products for fiscal year 2014.
        The Department will continue to monitor the DWWCF cash balances in
    execution to determine possible fiscal year 2015 adjustments. Such
    adjustments may include funding for emerging Departmental requirements,
    in accordance with reprogramming rules established by Congress;
    increasing or decreasing standard fuel prices to provide resources to
    the DWWCF or the operating forces; and maintaining an adequate cash
    corpus to address future market volatility.
        Ms. Hammack. The price for the bulk of DOD fuel purchases is set by
    The Office of the Secretary of Defense, Comptroller (OUSD (C)) in
    coordination with the Defense Logistics Agency as a set of Standard
    Fuel Prices (SFP) for various products worldwide. The SFP provides
    budgetary stability for the Services and Defense Agencies by absorbing
    commodity market price volatility through a revolving fund known as the
    Defense Wide Working Capital Fund (DWWCF). The SFP is not a marketplace
    price. When prices rise, the increase in costs is absorbed by the
    DWWCF; when prices fall, the DWWCF replenishes that cash. In each
    budget cycle, the DWWCF's previous year's operating result and the
    projected cash balance are taken into consideration and prices are
    adjusted to return gains or recoup losses.
        Recent decreases in petroleum prices worldwide are reflected in a
    decrease of the SFP for various products for fiscal year 2014.
        The Department will continue to monitor the DWWCF cash balances in
    execution to determine possible fiscal year 2015 adjustments. Such
    adjustments may include funding for emerging Departmental requirements,
    in accordance with reprogramming rules established by Congress;
    increasing or decreasing standard fuel prices to provide resources to
    the DWWCF or the operating forces; and maintaining an adequate cash
    corpus to address future market volatility.
        Mr. McGinn. The fiscal year 2015 standard fuel price (SFP) for the
    Department of Defense was reduced by $18.48 per barrel effective
    February 1, 2015, from $155.40 to $136.92, reflecting the reduced
    market cost experienced to date. The Department continues to monitor
    the market and may obtain additional adjustments, either through its
    pricing mechanism or through other means, if the Working Capital Fund
    (WCF) cash balance rises above the target cash balance range for
    operations.
        The Department's fuel pricing system establishes the SFP, a budget
    lead-time in advance, to ensure reliable prices wherever and whenever
    operating forces require aviation, maritime, or other fuels around the
    world.
        The Department will continue to monitor the WCF cash balances in
    execution to determine possible fiscal year 2015 adjustments. Such
    adjustments may include funding for emerging Departmental requirements,
    in accordance with reprogramming rules established by Congress;
    increasing or decreasing standard fuel prices to provide resources to
    the WCF or the operating forces; and maintaining an adequate cash
    corpus to address future market volatility.
        Ms. Ballentine. The price for the bulk of DOD fuel purchases is set
    by The Office of the Secretary of Defense, Comptroller (OUSD (C)) in
    coordination with the Defense Logistics Agency as a set of Standard
    Fuel Prices (SFP) for various products worldwide. The SFP provides
    budgetary stability for the Services and Defense Agencies by absorbing
    commodity market price volatility through a revolving fund known as the
    Defense Wide Working Capital Fund (DWWCF). The SFP is not a marketplace
    price. When prices rise, the increase in costs is absorbed by the
    DWWCF; when prices fall, the DWWCF replenishes that cash. In each
    budget cycle, the DWWCF's previous year's operating result and the
    projected cash balance are taken into consideration and prices are
    adjusted to return gains or recoup losses.
        Recent decreases in petroleum prices worldwide are reflected in a
    decrease of the SFP for various products for fiscal year 2014.
        The Department will continue to monitor the DWWCF cash balances in
    execution to determine possible fiscal year 2015 adjustments. Such
    adjustments may include funding for emerging Departmental requirements,
    in accordance with reprogramming rules established by Congress;
    increasing or decreasing standard fuel prices to provide resources to
    the DWWCF or the operating forces; and maintaining an adequate cash
    corpus to address future market volatility.
                                     ______

                    Questions Submitted by Senator Tim Kaine
                                excess capacity
        5. Senator Kaine. Mr. Conger and Secretary Hammack, I am concerned
    that DOD's proposed BRAC authorization language does not include
    protections against the type of implementation cost growth that we
    experienced in the 2005 BRAC round--estimated by the Government
    Accountability Office (GAO) to be 67 percent over budget.
        How much excess infrastructure would an additional BRAC round be
    designed to eliminate? In other words, would it be the intent of DOD to
    maintain some excess for unforeseen requirements?
        Mr. Conger. In making our $2 billion savings projections for a
    future BRAC round, the Department conservatively assumed a small
    reduction of five percent in plant replacement value. This is based on
    70 percent of the 1993/1995 efficiency focused rounds. Because BRAC
    2005 only eliminated 3.4 percent of the 24 percent aggregate excess
    capacity identified in the 2004 BRAC Capacity Analysis, significant
    excess at the aggregate level should remain after a future round.
    Through execution of prior BRAC rounds, and as verified in a 1999
    study, the Department has demonstrated that it will retain within the
    U.S. installation infrastructure sufficient difficult-to-reconstitute
    assets to respond to surge, accommodate a significant reconstitution of
    the force, and support all forces, including those currently based
    outside the United States. Furthermore, the selection criteria
    specified in the language, specifically criteria one and three, capture
    the concept of surge capacity as they are currently drafted. Criterion
    one requires the Department to consider ``current and future'' mission
    capabilities and criterion three assesses the ``ability to accommodate
    contingency, mobilization and future total force requirements.''
        Ms. Hammack. The Army has completed a capacity analysis which
    indicates that we have about 18 percent excess capacity with an Active
    Component Army force structure of 490,000. That equates to about 160
    million square feet. The Army will assess all excess infrastructure to
    determine any need for possible retention based on current or projected
    mission requirements, force structure and stationing decisions, and
    contingency requirements.
        A future round of BRAC would be an efficiency BRAC intended to
    produce significant recurring savings through the development of BRAC
    scenarios that provide relatively quick returns on investment. The Army
    looks forward to discussing BRAC authorization language that ensures
    expected savings. Generating savings measured in hundreds of millions
    of dollars per year simply cannot be accomplished by taking a few
    buildings at each installation and demolishing them, finding another
    paying tenant to cover its upkeep, or transferring the underlying
    property to the local community. A considerable portion of the Army's
    excess capacity is scattered and dispersed across many thousands of
    buildings at many dozens of CONUS Army installations. The best and
    proven way to realize substantial savings and also reduce excess
    infrastructure, is to close lower military value installations, and
    realign the remaining required functions into the under-utilized space
    of our higher military value installations.
        The goal of a future BRAC round is not to reduce the excess
    capacity to zero, or even to reduce it by a specific percentage. There
    will always be some amount of excess capacity. Some excess is retained
    to accommodate unforeseen future and/or surge requirements. The type of
    assets the Army typically tries to retain even if mathematically
    excess, are training ranges, maneuver space, and certain other types of
    infrastructure that are extremely difficult, expensive, and/or lengthy
    to reconstitute. Infrastructure that is relatively easy to expand or
    utilize more heavily, like barracks spaces or administrative buildings,
    is where the Army tends to be more comfortable divesting.
                      alternative base closure authorities
        6. Senator Kaine. Mr. Conger and Secretary Hammack, given the
    concerns about the 2005 BRAC round, I am interested in learning more
    about alternative means to reduce excess infrastructure. DOD's fiscal
    year 2016 budget materials state ``The need to reduce unneeded
    facilities is so critical that, in the absence of authorization of a
    new round of BRAC, the administration will pursue alternative options
    to reduce this wasteful spending.''
        In the absence of a BRAC authorization, what alternative tools are
    available to DOD to eliminate excess infrastructure?
        Mr. Conger. As far as using other authorities, the Department only
    has authority to undertake a BRAC round if Congress authorizes it to do
    so. However, budget cuts require exploring any and all authorities
    Congress has provided to eliminate wasteful infrastructure. The
    Department has not yet decided which options we will pursue if Congress
    does not provide BRAC authority.
        Ms. Hammack. At present, the Army has about an 18 percent excess
    capacity at the 490,000 active component force structure level. This
    equates to about 160 million square feet, or an average carrying cost
    of about $480 million dollars per year. The Army has existing tools to
    dispose of excess buildings or property outside of the BRAC process,
    but those tools cannot produce the kinds of substantial recurring
    savings from BRAC. The Army assesses its excess infrastructure to
    determine any need for possible retention based on current or projected
    mission requirements, force structure and stationing decisions, and
    contingency requirements. As alternative options to eliminate excess
    infrastructure, truly unneeded facilities can be reduced through
    transfer, sale, disposal, demolition, abandoning in place, or setting
    the facility in an inactive status.
        A future round of BRAC would be an efficiency BRAC intended to
    produce significant recurring savings. Generating savings measured in
    hundreds of millions of dollars per year simply cannot be accomplished
    by taking a few buildings at each installation and demolishing them,
    finding another paying tenant to cover its upkeep, or transferring the
    underlying property to the local community. A considerable portion of
    the Army's excess capacity is scattered and dispersed across many
    thousands of buildings at many dozens of CONUS Army installations. The
    best and proven way to realize substantial savings and also reduce
    excess infrastructure, is to close lower military value installations,
    and realign the remaining required functions into the under-utilized
    space of our higher military value installations.
        The alternatives to BRAC are not as advantageous to local
    communities. BRAC legislation authorizes the Department to work with
    communities to develop closed bases productively. Technical, planning,
    and grant assistance is made available to redevelop excess property. By
    contrast, under existing authorities, installations that experience
    deep force structure reductions become ghost towns both on the base and
    in the community as we are restricted in realignment and closure
    options.

        [Whereupon, at 4:12 p.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2016 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                           WEDNESDAY, MARCH 25, 2015

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

                 THE CURRENT STATE OF READINESS OF U.S. FORCES

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

          OPENING STATEMENT OF SENATOR KELLY AYOTTE, CHAIRMAN

        Senator Ayotte. I'm going to call this hearing to order.
        Very much want to thank our distinguished witnesses who are
    here before us today who have so admirably served our Nation.
        This hearing of the Subcommittee on Readiness and
    Management Support will be the second hearing of the year to
    receive testimony on the current readiness of our military
    forces.
        I want to thank my Ranking Member, Senator Kaine, for his
    continued leadership on defense issues and his eagerness to
    work together in a bipartisan manner for the sake of our
    national security.
        We are joined this afternoon with a very distinguished
    panel. We are here with General Daniel Allyn, Vice Chief of
    Staff of the Army; Admiral Michelle Howard, Vice Chief of Staff
    of Naval Operations; General John Paxton, Vice Commandant of
    the Marine Corps; and General Larry Spencer, Vice Chief of
    Staff for the Air Force.
        Again, I don't think we can say enough about what a
    tremendous group of leaders that we have testifying before this
    committee today. I cannot think of a more important hearing
    topic for this committee than the readiness of our Armed
    Forces.
        The preeminent responsibility of the Federal Government is
    to provide for the common defense. In order to fulfill this
    foundational responsibility of our Government, Congress has
    been explicitly charged, in Article 1, Section 8, of the
    Constitution, with the authority and responsibility to raise
    and support armies, and provide and maintain the Navy. We have
    to begin with an objective assessment of our national security
    interests and the threats that we're facing around the world.
    We then should determine what defense capabilities and
    capacities we need in order to protect our interests against
    likely threats. That is how you develop a defense budget that
    keeps America safe.
        Unfortunately, that's not what we have been seeing with the
    impact of sequester in Washington. Rather than a reality-based,
    strategy-based defense budgets, we are seeing that the impact
    of sequester is deeply disconnected from the many threats that
    we face around the world right now. In fact, in testimony
    before the Armed Services Committee earlier this year, the
    Director of National Intelligence (DNI), James Clapper, I think
    summed up the current situation very well. He said, ``In my 50-
    plus years in the intelligence business, I don't know of a time
    that has been more beset by challenges and crises around the
    world. As these threats have grown in complexity and severity,
    the defense budget cuts have created a growing and troubling
    gap between the military we need and the military our national
    security interests require. The consequences of failing to
    address this are grave.''
        It's easy for us in Washington to lose sight of the real-
    world consequences of our decisions. We all know that the
    readiness of our forces is something that we don't often see,
    but we'll know right away if it's not there, given what we ask
    of our men and women of uniform.
        When we send our fellow citizens into harm's way, they rely
    on us to provide them with the best possible training and
    equipment so that they can accomplish their missions and return
    home safely. I think not only do we have a constitutional
    obligation to do so, we have a moral obligation to do so. I
    know the witnesses before me appreciate that better than
    anyone.
        That's why I look forward to continuing to work across the
    aisle with people like my Ranking Member to address the
    sequestration, because we do need to come up with a bipartisan
    solution to this in the long term so that we can make the right
    decisions today by our men and women in uniform and to ensure
    that we are prepared to face the grave threats that,
    unfortunately, are unfolding around the world.
        Before I go to my Ranking Member, you know, I know that
    many of my colleagues right now are having a meeting with
    President Ghani, the President of Afghanistan, who just
    finished a joint address to the Congress. Having been present
    for that address, I think that he, the President, first of all,
    made very clear the gratitude that the leader of Afghanistan
    has for the sacrifices that our men and women in uniform have
    made to help ensure the security of Afghanistan. But, what we
    also heard is what a difference our men and women in uniform
    have made in Afghanistan, and appreciate the difference we have
    made throughout the world, and particularly when he talked
    about the freedom with which he believes women should have in
    Afghanistan and the fact that, before our presence in
    Afghanistan, not one girl went to school.
        So, I want to bring this up, because we need to understand
    there is no other leader in the world like the United States of
    America. If we do not continue to invest in the best military
    in the world, then we will not be prepared for the challenges
    we face, but also the world will be a much worse place and a
    much more dangerous place without our assistance.
        I want to--in that regard, I wanted to mention, since we
    have the President of Afghanistan here, that there has been a
    report, unfortunately, that today there were 6 people killed
    and more than 30 wounded in a suicide bombing in Kabul, right
    near the presidential palace. So, I think it reminds us that
    dangers still remain there, and that they remain many places
    around the world. So, your testimony today is so important.
        I would like to turn this over to my Ranking Member.

                     STATEMENT OF SENATOR TIM KAINE

        Senator Kaine. Great. Thank you, Madam Chair.
        I echo your comments. It's good to work together on these
    issues. We have a bipartisan working relationship and, I think,
    a common understanding of the dangers of sequester.
        Could they just give us the budget for 15 minutes, just the
    two of us, and--we can hammer this out.
        Senator Ayotte. We could do it.
        [Laughter.]
        Senator Ayotte. We really could work this out.
        Senator Kaine. Let me start with the thank you that
    Chairman Ayotte was talking about with respect to the speech
    from the Afghan President this morning. If you were--I wish you
    were there. I hope you watched it. It should make you feel
    really proud. You know, it made me feel proud on your behalf,
    but you should feel proud, and you should feel proud for your
    folks, because the notion of a country--I'll just pick one
    statistic--that's gone from a 44-year-old life expectancy to a
    61- or 62-year-old life expectancy in 15 years, I mean, it--
    there's just no precedent in human history for that. I have
    been doing my back-of-the-envelope calculation. Seventeen years
    of human life multiplied by 30 million Afghans is 510 million
    years of human life. That's what the U.S. has enabled them to
    achieve, because they didn't have a functioning health system,
    and it was a whole lot of non-governmental organizations (NGOs)
    who came in and helped set it up, but they couldn't set it up
    if the security situation didn't enable them to. So, the U.S.
    and partners, working together with the Afghan people, have
    created a situation where, violence notwithstanding, challenges
    notwithstanding, kids are in school, there's a new sense of
    optimism and hope, people are living longer. As the President
    said, for the kids that are in school, their parents thank you.
    For the people who are living longer, their children thank you.
    He did that in a very poetic way that was really special.
        So, look, but it also means that the work doesn't end. You
    can't stop the investment. We've got to continue the
    partnership. That partnership demands a military that's ready.
        We've had a series of hearings--this is the second one of
    this subcommittee, but others--where we've talked about
    sequester. Madam Chair, we had one this morning in the Seapower
    Subcommittee, where this was the testimony. The Seapower
    hearing this morning, chaired by Senator Wicker and Ranking
    Member Hirono, dealt with the naval and marine aviation
    platforms. That was the hearing. But, they were talking about
    the triple whammy of sequester. So, here's the triple whammy of
    sequester on this kind of component of readiness. Sequester and
    budget caps slows down the ability to purchase new platforms.
    So, since we can't purchase the new platforms we need, let's
    extend the life of existing platforms, let's take planes that
    were meant to fly 6,000 hours and make them fly 10,000 hours.
    Well, to do that, you've got to do a lot of maintenance. Since
    the planes weren't supposed to fly after 6,000 hours, you find
    a whole lot of challenging maintenance problems with planes
    that have been in saltwater environments, corrosion because of
    saltwater, or have been in desert environments, corrosion
    because of sand--so then there's a whole lot of extra depot and
    maintenance demand that we didn't necessarily plan for. Oh, by
    the way, because we furloughed a whole lot of employees and
    stuff, and great aviation mechanics can get jobs elsewhere,
    we're down about 10 percent of what we need in the workforce.
        So, sequester stopped us on the--slowed us on the new
    purchases. Sequester is imposing significant extra demands on
    the maintenance of these aircraft. Sequester is driving away
    some of our workforce. Yet, we are supposed to, nevertheless,
    do the mission that the Nation demands. Then you add to it the
    Chairwoman's comment from DNI Clapper, ``This is the most
    complex strategic set of challenges we see,'' readiness is not
    happening in a vacuum. Readiness is happening after our
    military has been at Operational Tempo (Ops Tempo) for 15
    years. That, in and of itself--forget about sequester--that has
    a readiness challenge to it.
        So, you combine 15 years of Ops Tempo and a complex
    strategic environment and the budgetary challenges of caps and
    across-the-board cuts and furloughs and then sort of the
    uncertainty, ``Is Congress going to fix it, or not?'' and you
    can see why we have such a huge budgetary challenge that we
    have to resolve.
        Retired General Mattis, at a hearing earlier this year,
    said, ``No foe could wreak such havoc on our security as
    mindless sequestration is achieving.'' No foe could wreak such
    havoc on our security as mindless sequestration is achieving.
        If a large-scale conflict were to occur in the near future,
    Armed Forces would not have enough ready forces to respond to
    the Combatant Command (COCOM) requirements, we'd likely suffer
    additional casualties as a result. We've had that testimony.
        So, this has been like an alarm bell that's just been
    ringing, you know, on our table next to us. Your testimony,
    combined testimony, has been like the alarm bell's been
    ringing, ringing, ringing, ringing, ringing. There just has to
    be a moment where we take a step to turn off the alarm and
    adjust to a better path. In the fiscal year 2014 and 2015
    budget, we were able to find a way to reduce the impact of
    sequester--not eliminate it, cut it in half. It may be pie in
    the sky to think we could eliminate it. But, we ought to be
    finding significant sequester relief, whether it's depot
    maintenance or extra plane hours or the effect on the workforce
    that furloughs create, in terms of morale for people who have
    other opportunities. All these are significant.
        That's what we'll be hearing about during the testimony
    today. I look forward to working with my colleagues trying to
    find, based on your testimony, and based on your--you know,
    giving us the stories and the anecdotes we need to convince our
    colleagues, I look forward to trying to find a better path.
        With that, thank you, Madam Chair.
        Senator Ayotte. Thank you, Senator Kaine.
        I would like to first call on General Allyn, the Vice Chief
    of Staff for the Army.
        Thank you, General.

    STATEMENT OF GENERAL DANIEL B. ALLYN, USA, VICE CHIEF OF STAFF,
                           UNITED STATES ARMY

        General Allyn. Thank you, Chairman Ayotte, Ranking Member
    Kaine, Senator Rounds, distinguished members of the
    subcommittee. Thank you for the opportunity to testify on the
    readiness of your United States Army.
        On behalf of our Secretary, The Honorable John McHugh, and
    our Chief of Staff, General Ray Odierno, I thank you for your
    support and demonstrated commitment to our soldiers, Army
    civilians, families, and veterans.
        There are over 140,000 soldiers committed around the globe,
    partnered with our allies, in response to increasing
    instability across Europe, the Middle East, Africa, and the
    Pacific, continuing the mission in Afghanistan, and reacting to
    humanitarian crises. The velocity of instability is increasing,
    as you have all stated; and now is not the time to drastically
    reduce our capability or capacity. The Army needs Congress to
    provide adequate, consistent, and predictable funding.
        Today, only 33 percent of our brigades are ready, when our
    sustained readiness rate should be closer to 70 percent. The
    fiscal year `15 enacted funding for our Army is $5.1 billion
    less than what we had in fiscal year 2014 and challenges
    commanders and leaders across our Army to sustain hard-fought
    gains in our readiness. We are funded to achieve just enough
    readiness for immediate consumption, but are unable to generate
    the readiness required to respond to an unknown contingency.
        While the fiscal year 2015 budget constrains training, we
    remain committed to our Combat Training Center rotations to
    develop leaders and build unit readiness. We accept risk in
    home-station training to conserve resources for these Combat
    Training Center rotations. The result of this approach is that
    we expect our units to arrive at our Combat Training Centers
    not fully ready for these complex training scenarios and,
    therefore, unable to derive the full benefit of this training.
        Under the President's Budget in fiscal year 2016 (PB-16),
    our goal is to increase regular Army brigade combat team
    readiness closer to 70 percent, allowing us to balance force
    requirements while maintaining surge capability. But, we need
    consistent resources to get there.
        Sequestration will undermine readiness, ultimately putting
    soldiers' lives and our mission success at risk, and it will
    increase significantly the involuntary separation of officer
    and noncommissioned officer leaders who have steadfastly served
    their country through the last 13 years of war. Sequestration
    will also severely impact our ability to maintain our
    installation readiness and protect the industrial base, both
    key components to maintaining a readiness--a ready force. It
    will cut essential funds from military construction,
    sustainment, restoration, and modernization on our
    installations. Sequestration will degrade the industrial base's
    ability to sustain the life-cycle readiness of warfighting
    equipment while also maintaining the capability to surge to
    meet future demands.
        To achieve our required readiness level in fiscal year '16,
    we need Congress to support all the cost-saving measures the
    Army has proposed. These include compensation reform, a new
    round of Base Realignment and Closure, and the Aviation
    Restructure Initiative (ARI). Aviation restructure eliminates
    700 aircraft from the Active component and 111 from the Guard
    and Reserve, but increases our readiness and saves $12 billion.
    If the Army does not execute ARI, we will incur additional
    costs buying aircraft and performing maintenance, at the
    expense of modernizing our systems and maintaining readiness
    for our heroic aviators.
        The Army remains committed to protecting our most important
    resource: our soldiers, civilians, and families. We build
    leaders of character and trusted professionals who provide an
    environment where every member of our great Army is treated
    with dignity and respect, supported by essential soldier and
    family programs. We will protect our most vital programs, but
    sequestration-driven budget cuts affect every facet of our
    Army.
        I thank you again for your steadfast support of the
    outstanding men and women of the United States Army. I look
    forward to your questions.
        Thank you.
        [The prepared statement of General Allyn follows:]
                   Prepared Statement by General Daniel Allyn
                                  introduction
        Chairman Ayotte, Ranking Member Kaine, distinguished Members of the
    Subcommittee, thank you for the opportunity to testify on the readiness
    of your United States Army. On behalf of our Secretary, the Honorable
    John McHugh, and our Chief of Staff, General Raymond Odierno, I would
    also like to thank you for your support and demonstrated commitment to
    our Soldiers, Army Civilians, Families, and Veterans.
        We live in a dangerous world and the Leadership of the United
    States Army is committed to ensuring our Army is ready. The
    accelerating insecurity and instability across Europe, the Middle East,
    Africa and the Pacific, coupled with the continued threat to the
    homeland and our ongoing operations in Afghanistan, remain a
    significant focus for our Army. The Islamic State in Iraq and the
    Levant's (ISIL) unforeseen expansion and the rapid disintegration of
    order in Iraq and Syria have dramatically escalated conflict in the
    region. In Europe, Russia's intervention in Ukraine violates
    international law and threatens to undermine the post-World War II
    security architecture. Across the Asia-Pacific, China's lack of
    transparency regarding its military modernization efforts raises
    concerns with the United States and our allies, and the continuing
    development of North Korea's nuclear and missile programs contributes
    to instability. The rate of complex-humanitarian requirements and the
    unpredictable nature of disaster relief missions heighten the level of
    uncertainty we face around the world, along with constantly evolving
    threats to the homeland. With the velocity of instability increasing
    around the world and the threat of terrorism growing rather than
    receding, now is not the time to drastically reduce capability and
    capacity that would occur under prolonged sequestration level-funding.
        As the Chief of Staff of the Army stated in his testimony, there is
    a growing divide between the emerging geopolitical realities and the
    Budget Control Act's (BCA) arbitrary funding mechanism. The Army budget
    has decreased in nominal terms every year since 2011. Yet today, the
    Army is as globally engaged as ever, with more than 140,000 Soldiers
    deployed, forward stationed, and committed worldwide. We are training
    alongside our allies and partners to help them develop professional and
    capable armies. At home, we are supporting civil authorities while
    defending our critical networks against cyber attacks. Yet prolonged
    funding at BCA levels prevents us from appropriately balancing
    readiness, modernization and end strength, and threatens to make the
    Army a hollow force. Under sequestration-level funding, the Army will
    be unable to meet its current target for regaining full-spectrum
    readiness by fiscal year 2023.
        Our Nation requires a trained and ready Army prepared to rapidly
    deploy, fight, sustain itself and win decisively against complex state
    and non-state threats in diverse, austere environments, rugged terrain
    and urban megacities. Readiness is measured at both the service and
    unit level. Service readiness incorporates installations and the
    critical ability of the Army to provide requisite capabilities in
    support of the Joint Force in sufficient capacity to execute the
    missions required by combatant commands. Unit readiness is the
    combination of personnel, materiel and supplies, equipment and
    training, that, when properly balanced, enables immediate and effective
    application of military power.
        To ensure readiness now and in the future, the Army needs Congress
    to provide adequate, consistent and predictable funding. The Army
    supports the President's Budget as meeting the required funding and
    needed reforms to fulfill our responsibilities defined in the Defense
    Strategic Guidance. One critical assumption in the President's Budget
    request is that Congress will enact critical cost saving measures we
    have proposed. These include compensation reform, sustainable energy
    and resource initiatives, a new round of Base Realignments and Closure
    (BRAC), and the Aviation Restructure Initiative (ARI). We ask Congress
    to support these initiatives because without the flexibility to manage
    our budgets to achieve the greatest capability possible, we will be
    forced to make even steeper reductions to manpower, modernization, and
    training across the Total Army.
    Current State of Readiness
        Thirteen years of sustained counterinsurgency-focused operations
    have degraded the Army's ability to conduct operations across the
    entire spectrum of war. In fiscal year 2011, the Army began a multi-
    year transition to rebuild core readiness and build capability to
    conduct Decisive Action for Unified Land Operations. The speed and
    scale of the funding reductions mandated under sequestration in fiscal
    year 2013 curtailed this transition plan by forcing the Army to absorb
    the majority of the cuts within the operations and training accounts.
    This resulted in tiered readiness of units as opposed to broad gains
    across the force.
        Last year the Chief of Staff of the Army testified that only two of
    our Brigade Combat Teams, the Army's basic warfighting unit, were fully
    ready for decisive action operations. Since then, we have trained 13
    BCTs to that standard (other CTC rotations were mission-specific for
    deploying units) thanks to funding provided in the 2013 Bipartisan
    Budget Agreement (BBA). However, of those 13 BCTs, we have consumed the
    readiness of nine to support on-going operations. At prolonged
    sequestration-level funding, the Army will be unable to train units
    quickly enough to outpace, or even meet demand.
        With the support of Congress, the Army executed $126.2 billion for
    base budget purposes in fiscal year 2014 to begin rebuilding readiness
    lost during sequestration in fiscal year 2013. Though known and
    predictable, the fiscal year 2015-enacted level of $121 billion is $5.1
    billion less than fiscal year 2014, and is challenging Commanders
    across the Army to sustain our hard-earned readiness. To operate under
    this budget, we are significantly reducing key installation services,
    individual training events, and modernization to such an extent as to
    jeopardize future readiness and quality of life. For example, Logistics
    Readiness Centers were underfunded by $350 million in fiscal year 2015,
    which covers funding for dining facilities, contract operations at ammo
    supply points, central issue facilities, maintenance, laundry and dry
    cleaning operations. In addition to the effect on Soldier quality of
    life, these cuts force Commanders to divert Soldiers from training to
    perform logistics tasks.
        The President's Budget request for fiscal year 2016 increases
    readiness funding above fiscal year 2015 levels, which is critical to
    sustain and improve the readiness of the force. While the reduced
    fiscal year 2015 budget will reduce overall training, we remain
    committed to CTC rotations to develop leaders and build unit readiness.
    fiscal year 2015 plans fund 19 CTC rotations: two for deploying BCTs
    and 17 decisive action rotations (15 Active Army and two Army National
    Guard). fiscal year 2016 will continue this level of CTC exercises.
        We are improving Training Support Systems to enable more realistic
    home station training, increase collective training proficiency and
    enhance operational readiness for contingencies across the globe;
    however, funding constraints in fiscal year 2015 impede our ability to
    maximize home station training goals. We accepted risk in home station
    training to conserve resources for units to continue to conduct
    training at the CTCs. This resulted in units arriving at the CTCs not
    yet ``fully ready'' for these complex training scenarios, and therefore
    unable to derive the full benefit of the training. Although the Army
    attempts to mitigate the impacts on training readiness, we must
    continue to implement the Contingency Force model of fiscal year 2015
    in order to maintain readiness for the 24 of 60 BCTs that will receive
    sufficient funding to conduct training at CTCs and home station. The
    remaining 36 BCTs will train only to Individual/Crew/Squad resourcing
    levels. The President's Budget request for fiscal year 2016 allows the
    Army to increase training readiness to battalion-level across the
    active Component force and to platoon-level in the Reserves. Lower
    funding levels will not allow us to achieve this balanced readiness.
        Our aim is to provide tough, realistic multi-echelon home-station
    training using a mix of live, virtual and constructive methods that
    efficiently and effectively build Soldier, leader and unit competence
    over time. Training will integrate the unique capabilities of the
    Light, Medium and Heavy forces, as well as the capabilities of
    Conventional and Special Operations Forces. Training centers including
    the Joint Multinational Readiness Center in Germany will increase our
    interoperability with Allies. Our goal is to achieve a high level of
    readiness for 70 percent of our Active Component BCTs compared to the
    current 33 percent, allowing the Army to balance Combatant Command
    force requirements while maintaining surge capability--but we need
    consistent resources to get there.
        We are also increasing funding for our individual and institutional
    training. Funding increases focus on leader development, entry-level
    training and flight training. The unpredictable nature of human
    conflict requires leaders ready to lead in close combat and to
    understand the operational and strategic environment, including its
    socio-economic, cultural and religious underpinnings. Junior leaders
    will frequently confront ethical dilemmas, with resultant decisions
    that have strategic impacts. Our leaders must demonstrate the
    competence and professional values necessary to achieve operational and
    strategic mission success.
        However, sequestration in fiscal year 2016 would mortgage the
    functional skills and training of individual Soldiers. Sequestration
    will force the Army to further reduce Specialized Skill Training by
    over 85,000 seats (65 percent drop) and fund only the most critical
    courses. This will reduce readiness as Soldiers will lose proficiency
    on their individual tasks. These reductions include 900 fewer graduate
    flight school seats, resulting in unfilled and unqualified pilot
    positions throughout the force. We would continue to emphasize leader
    development by protecting Professional Military Education, minimizing
    cuts to about 10 percent.
        The Army continues to make progress at integrating the unique
    capabilities of each of its components to support the needs of the
    Combatant Commanders. As part of the Army's Total Force Policy, the
    U.S. Army Forces Command is leading the way by partnering Guard and
    Reserve divisions and brigades with Active Army peer units. The Army is
    also piloting a program to assign Guard and Reserve personnel directly
    to Active Army corps and division headquarters. For example, the
    Reserve Component rapidly provided support capabilities to Operation
    United Assistance in Liberia to augment and replace elements of the
    initial Active Component response. We fight as a Total Army, and each
    component has a unique role. We must also draw down as a Total Army--
    Active, Guard, and Reserve--in order to maintain the correct balance
    between capacity and readiness.
        As we transition from combat operations in Afghanistan, our Army is
    focused on the ability to rapidly deploy forces around the world in
    order to meet the needs of our Combatant Commanders. To do this, we
    enhanced prepositioned equipment sets and created activity sets to
    support operations in Europe, the Pacific and around the world.
    Activity sets are prepositioned arrays of equipment that enable U.S.
    regionally-aligned forces and multinational partners in Europe to train
    and operate. We have also reinvigorated our Emergency Deployment
    Readiness Exercise program and enhanced the en route mission command
    capability of our Global Response Force. The President's Budget request
    provides sufficient capability to respond in each Geographical
    Combatant Command's area of responsibility.
        The Army continues to be a good steward of the resources returning
    from operations in Afghanistan. In 2014, the Army efficiently
    synchronized equipment retrograde out of theater. Redeployment and
    retrograde operations remain on schedule; however, the Army continues
    to forecast a need for reset funding for three years after redeployment
    of the last piece of equipment from theater. In addition, we identified
    almost $2 billion of potential requirement reductions in Contractor
    Logistics and Training Support. These and other changes allowed the
    Army to increase the capability of its prepositioned stocks program
    without an increase in associated costs.
        Finally, during this period of drawdown, the Army is reorganizing,
    realigning and restructuring forces. The Brigade Combat Team
    reorganization enhances brigade combat power by adding a third maneuver
    battalion to 38 BCTs by the end of fiscal year 2015 and reducing the
    total number of BCTs to 60 (32 Active Army and 28 Army National Guard)
    in the Total Force. This effort decreases the number of headquarters
    units and personnel without negatively affecting the number of
    operational battalions.
        Since May 2014, we have been developing a sustainable force
    generation and readiness model to account for the new, volatile,
    strategic operating environment and the need to remain regionally-
    engaged under budgetary and force-sizing realities. The Sustainable
    Readiness Model (SRM) will provide force generation policies and
    processes that optimize the readiness of the force and balance the
    Army's steady state missions, contingency response capability, and
    available resources. We cannot predict the specific events that will
    cause the next surge in demand for Army forces, but history suggests it
    will come sooner than we expect. The SRM will better enable the future
    smaller force to sustain readiness at optimal levels over time.
        One critical assumption in the President's Budget request is that
    Congress will enact necessary compensation reform and force structure
    initiatives. We fully support the modest reforms to pay raises, health
    care and other benefits that have been proposed. Without these reforms,
    savings assumptions we have included in our planning will not be
    realized, placing increasing pressure on further end strength
    reductions and reducing funding needed to sustain readiness.
    Future Readiness: The Army Operating Concept
        While we are most concerned about the BCT's short-term effects on
    readiness, we are keenly focused on the long-term readiness of the
    Total Force to meet future demands. As such, we developed a new Army
    Operating Concept (AOC), ``Win in a Complex World.'' The AOC provides
    an intellectual framework for learning and for applying what we learn
    to future force development under Force 2025 and Beyond. The foundation
    of the Army Operating Concept is our ability to conduct joint combined
    arms maneuver. The Army Operating Concept endeavors to build a force
    capable of operating alongside multiple partners, able to create
    multiple dilemmas for our adversaries, while giving our Senior Leaders
    multiple options and synchronizing and integrating effects from
    multiple domains onto and from land. Recognizing the changing world
    around us, the Army Operating Concept envisions an Army that is
    expeditionary, tailorable, scalable and prepared to meet the challenges
    of the global environment. The Army Operating Concept sets the
    foundation upon which our leaders can focus our efforts and resources
    to maintain strategic and operational flexibility to deter and operate
    in multiple regions simultaneously--in all phases of military
    operations--to prevent conflict, shape the security environment, and
    win wars now and in the future.
        It is imperative that our Army adapts to the future joint operating
    environment, one that consists of diverse enemies that employ
    traditional, irregular and hybrid strategies which threaten U.S.
    security and vital interests. Through a dedicated ``Campaign of
    Learning'' under Force 2025 Maneuvers, we will assess new capabilities,
    force designs, and doctrine to ensure the readiness of our future
    force. We are focusing our innovation efforts in this Campaign of
    Learning to address the 20 Army Warfighting Challenges identified in
    the Army Operating Concept. The Army Warfighting Challenges are
    enduring first-order problems, and solving them will improve combat
    effectiveness. They range from shaping the Security Environment, to
    countering Weapons of Mass Destruction, to conducting Space and Cyber
    Operations, to Integrating and Delivering Fires, to Exercising Mission
    Command. The Army Operating Concept represents a long-term, cost-
    effective way to enhance readiness, improve interoperability and
    modernize the force.
    Installation Readiness
        In order to partially mitigate the severe impacts of sequestration-
    level funding on training readiness, the Army will be forced to take
    significant risk with installation readiness. Installation maintenance
    has been underfunded since 2011 which impacts efficiency and readiness.
    Sequestration in fiscal year 16 would cut essential funds for military
    construction, sustainment, restoration and modernization on our posts,
    camps and stations. The President's fiscal year 2016 budget funds 79
    percent of the OSD Facility Sustainment Model requirement. Under
    sequestration the Army would only be able to fund 62 percent of needed
    repairs, limiting repairs to those needed for life, health, and safety.
    Restoration and modernization accounts would be underfunded as well.
    Without relief from sequestration 20 percent of the Army's
    infrastructure will remain in substandard condition and approximately
    100,000 maintenance orders will be deferred each month. Recovery from
    unfilled maintenance requests will take at least 2-3 years if fully
    funded and ultimately will affect morale, retention, and readiness.
        A return to sequestration-level funding will result in a $1 billion
    decrease to base operations support, requiring installations to
    eliminate jobs and scale back or cancel service contracts that employ
    people in local communities. We will have to increase further our
    reliance on Soldiers to support basic installation functions in order
    to provide a safe training environment and adequate quality of life.
    These include access control point manning by MTOE units, manning ammo
    and fuel handling points, and conducting essential range maintenance.
    These requirements pull Soldiers away from important training and
    ultimately detract from readiness. We will also reduce contract funding
    for a number of quality-of-life services such as custodial services,
    waste collection, and grounds maintenance.
        It is important to highlight the need for another round of Base
    Realignment and Closure (BRAC). We simply have too much surplus
    infrastructure and will have even more as we continue to downsize. We
    are already in the process of separating nearly 152,000 Soldiers from
    the Total Army by fiscal year 2018, and sequestration would force us to
    separate another 60,000 by fiscal year 2020--for a total reduction of
    212,000. In addition, we have reduced over 50,000 Civilians from these
    same installations. Without a BRAC and the realized cost savings, the
    only alternative is to make additional cuts in training, manpower and
    modernization to make up for shortages in installation funding. We have
    reduced all that we can from our overseas bases, and are now reducing
    personnel at U.S. installations. We expect excess facility capacity
    will be about 18 percent Army-wide by late fiscal year 2015.
    Industrial Base
        The Industrial Base consists of Government-owned (organic) and
    commercial industry and is designed to be readily available to
    manufacture and repair items during both peacetime and national
    emergencies. The current financial uncertainty of sequestration,
    combined with the cuts in Army force structure, is driving workload
    down. Over 4,500 employees within the organic industrial base (OIB)
    have already lost their jobs due to budget uncertainty and declining
    workloads since fiscal year 2013, and the Army has deferred $323
    million of depot maintenance from fiscal year 2013 into fiscal year
    2015. The highly skilled industrial base workforce serves an enduring
    mission, and provides critical capabilities in support of our National
    defense today, while also preparing for the threats of tomorrow.
    Sequestration will result in insufficient resources to complete
    critical depot maintenance and will continue to degrade the industrial
    base's ability to sustain the life-cycle readiness of war-fighting
    equipment while also maintaining the capability to surge to meet the
    demands of future contingency operations.
        Should sequestration-level funding return in fiscal year 2016,
    furloughs, overtime restrictions and hiring freezes will again
    negatively impact the OIB productivity, workforce availability and
    capability. In order to mitigate the loss of critical skill sets and
    ensure the OIB is ready for the next contingency, the Army requires
    consistent and predictable funding. We also need to carryover workload
    to keep production lines functioning between fiscal years.
        The Army is taking several actions to reshape the OIB to support
    the Army of 2025 and beyond, to include assessing OIB capabilities and
    capacities and effectively aligning them to planned workloads. We are
    not sustaining aging systems that are planned for divesture within the
    next five years, and we are continuing reset and sustainment of our
    modernized platforms. This strategy will enable the Army to sustain and
    modernize our most capable fleets, while accomplishing our Title 10
    requirements to sustain the core depot and critical manufacturing
    capabilities necessary to fight and win the Nation's wars.
    Aviation Restructure Initiative
        One of our most important reforms is the Aviation Restructuring
    Initiative (ARI), which we continued in fiscal year 2015. Our current
    aviation structure is unaffordable, so the Army's plan will avoid $12
    billion in costs and saves an additional $1 billion annually if we
    fully implement ARI. We simply cannot afford to maintain our current
    aviation structure and sustain modernization while providing trained
    and ready aviation units across all three components. Our comprehensive
    approach through ARI will ultimately allow us to eliminate obsolete
    airframes, sustain a modernized fleet, and reduce sustainment costs.
        Through ARI, we will eliminate nearly 700 aircraft from the active
    Component, while removing only 111 airframes in the Reserve Component.
    A byproduct of ARI is the reduction in the number of Active Duty Combat
    Aviation Brigades from 13 to 10. ARI eliminates and reorganizes
    structure, while increasing capabilities in order to minimize risk to
    meeting operational requirements within the capacity of remaining
    aviation units across all components. If the Army does not execute ARI,
    we will incur additional costs associated with buying aircraft and
    structure at the expense of modernizing current and future aviation
    systems in the Total Force.
        The Army notes the establishment by Congress of a National
    Commission on the Future of the Army and ARI specifically, and is fully
    committed to working with the Commission as it fulfills its charter.
    Army Cyber
        Network dominance and defense is an integral part of our National
    security, and the Army is focused on providing increased capability to
    the Joint Force. Investment in cyber capability and readiness is a top
    priority, and we are working to improve requirements and resourcing
    processes to ensure that they are agile enough to rapidly translate
    innovative concepts into realized capabilities. Army readiness includes
    cyber readiness.
        We are aggressively manning, training and equipping cyber mission
    teams and established a new cyber branch to help recruit, train and
    retain cyber Soldiers. The Army has grown from zero Cyber teams in
    fiscal year 2013 to 24 Army Cyber Mission Teams today at Initial
    Operating Capability (IOC). By the end of fiscal year 2016, we will
    have 41 Cyber Mission Teams. The Army has established the Cyber Center
    of Excellence at Fort Gordon, GA, to serve as our focal point to drive
    change across the Army. This is a Total Force effort--Active, National
    Guard, and Reserve--and through our Reserve Components we will leverage
    the professional expertise within the civilian population to build
    greater capacity, expertise, and flexibility across DOD, Federal,
    state, and private sector activities. We recently established a full-
    time Army National Guard Cyber Protection Team (CPT) that is training
    to conduct network defense. We will create three more Army National
    Guard CPTs in fiscal year 2016.
        We must make prudent investments in our cyber infrastructure,
    including facilities, networks and equipment to ensure a capable force.
    Network modernization is critical to the success of Army operations
    across all domains, and the Army is fully integrated into the build-out
    of the Joint Information Environment (JIE). JIE efforts will enhance
    the defensibility of our networks while providing global access for the
    joint force. However, sequestration-level funding in fiscal year 2016
    will reduce network funding by almost $400 million and defer critical
    scheduled IT infrastructure upgrades at three major installations,
    reducing the Army's warfighting capability and its ability to protect
    itself against cyber attacks.
    Essential Investments: People and Equipment
      Soldiers, Families and Army Civilians
        Army Professionalism and the resilience of those who serve--
    Soldiers, their Families and Army Civilians--are directly linked to the
    Readiness of our Force. That is why we must develop and sustain a
    system of capabilities and services that are designed to mitigate the
    unique challenges of military life, foster life skills, strengthen
    resilience, and promote a strong and ready Army. As Army leaders, we
    continue to express our enduring commitment to those who serve,
    recognizing that attracting and retaining highly-qualified individuals
    in all three components is critical to readiness. Two of our key
    efforts, the Army's Ready and Resilient Campaign (R2C) and Soldier for
    Life, exist to ensure we are taking care of our most precious resource:
    our people, throughout Army life and beyond.
      Ready and Resilient Campaign
        We will make every effort to protect our most important Soldier and
    Family programs, but budget cuts are ultimately affecting every facet
    of the Army. To ensure we maintain our focus on our most invaluable
    resource: our people, we continue to develop a Ready and Resilient
    Army. A Ready and Resilient Army is composed of resilient individuals,
    adaptive leaders and cohesive teams that are committed to the Army
    professional ethic and capable of accomplishing a range of operations
    in environments of uncertainty and persistent danger. We are developing
    a comprehensive system that empowers Army Commanders and Leaders to
    improve Leader engagement and early Leader intervention. We are taking
    a more holistic look at negative behaviors and their correlation in
    order to better target training, tools and resources with more emphasis
    placed on resilience and prevention skills to reduce incidents of
    escalated negative behavioral outcomes.
        We continue to provide resilience and performance enhancement
    training to Soldiers, Families and Army Civilians through Comprehensive
    Soldier and Family Fitness. To date, we have trained more than 26,000
    Master Resilience Trainers Army-wide who are taking these skills back
    to their formations. We have established an online assessment and self-
    development platform where Soldiers, their Families and Army Civilians
    can, in their own time, confidentially take action to improve their
    overall health and resilience.
        We are also emphasizing the importance of sleep, physical activity,
    and nutrition. The Performance Triad is a comprehensive plan to improve
    readiness and increase resilience through health initiatives and
    leadership engagement. Sleep, activity and nutrition are key actions
    that influence overall health.
        Personal Readiness is critical to mission readiness. Those who
    serve must have the physical, psychological, social, emotional and
    spiritual preparedness to achieve and sustain optimal performance in
    supporting the Army mission.
    Soldier for Life
        Soldier for Life (SFL) is a program that drives a change in
    mindset. We encourage the SFL mindset through senior leader and
    installation engagements, and focused training curriculum. We want
    individuals to understand from their entry day in the Army that they
    will receive the tools to succeed throughout their service lifecycle--
    ``Once a Soldier, always a Soldier . . . a Soldier for Life!'' As they
    return to civilian life, Soldiers will continue to influence young
    people to join the Army and, along with retired Soldiers, will connect
    communities across the Nation with its Army.
        As we reduce the Army's end strength, we owe it to our Soldiers and
    their Families to facilitate their transition to civilian life. The
    Army supports continuum of service initiatives to help in this effort
    by communicating the benefits of continued service in the Reserve
    Components. Additionally, the ``Soldier for Life'' Program connects
    Army, governmental and community efforts to facilitate the successful
    reintegration of our Soldiers and Families back into communities across
    the Nation through networks in employment, education and health. Our
    pre- and post-retirement services ensure those who served become and
    remain leaders in their community. For example, we have developed
    strong relationships with government, non-government and private sector
    entities to include direct collaboration with the Departments of
    Veterans Affairs, Labor, and the Chamber of Commerce to bring
    employment summits to installations worldwide.
      sexual harassment / assault response and prevention (sharp) program
        Trust between Soldiers, between Soldiers and Leaders, between
    Soldiers, their Families and the Army, and between the Army and the
    American people is fundamental to readiness. Sexual assault and sexual
    harassment undermine that trust.
        Across the Army, we are committed to maintaining momentum in Army
    SHARP and making further advances along our five lines of efforts:
    Prevention, Investigation, Accountability, Advocacy and Assessment. In
    the last year, our efforts along the Prevention Line of Effort resulted
    in actions such as consolidating SHARP training under TRADOC and
    Initial Entry Training and Professional Military Education to increase
    the quality and accessibility of our prevention tools. Our
    Investigation Line of Effort showed advances in Special Victim
    capabilities and Trial Counsel Assistance Programs. The Accountability
    Line of Effort had successes through our Special Victim Investigation
    and Prosecution capability and through tools such as Command Climate
    Surveys and Commander 360 degree assessments. Our Advocacy Line of
    Effort resulted in initial indicators of progress in establishing SHARP
    resource centers for over 12 installations. We continue to see interim
    progress along our Assessment Line of Effort as noted in the 2014
    ``Department of Defense Report to the President of the United States on
    Sexual Assault Prevention and Response.''
        Recent statistics outlined in the 2014 ``DOD Report to the
    President'' indicate a decrease in unwanted sexual contact in fiscal
    year 2014 compared to fiscal year 2012. Within the Army, survey-
    estimated rates of unwanted sexual contact for the past year decreased
    significantly for active duty women (4.6 percent), compared to fiscal
    year 2012 (7.1 percent). In addition, reporting data demonstrates more
    victims are coming forward to report sexual harassment and sexual
    assault. In fiscal year 2014, sexual assault reporting in the Army
    increased by 12 percent over the previous year. We view this as a vote
    of confidence and a sign of increased trust. Nevertheless, we must
    continue striving to foster a climate where individuals are not afraid
    of retaliation or stigma for reporting a crime by ensuring individuals,
    units, organizations and specifically commanders and leaders understand
    their responsibilities. Retaliation takes many forms and originates
    from many sources--leaders, family, friends and, most pervasively, peer
    to peer. Retaliation in its simplest form is bullying. It enables
    offenders, threatens survivors, pushes bystanders to shy from action,
    and breeds a culture of complacency. Retaliation has no place in the
    Army and we must stamp it out.
        The chain of command must be at the center of any effort to combat
    sexual assault and harassment, and we must ensure leaders remain fully
    engaged, involved and vigilant. With commanders at the center of our
    efforts, we will continue to decrease the prevalence of sexual assault
    through prevention and encourage greater reporting of the crime.
        Sexual assault and sexual harassment will be eliminated when every
    Soldier, Civilian and Family Member stands up and unequivocally acts to
    stamp it out. Together, we have an obligation to do all we can to
    safeguard America's sons and daughters, and maintain trust between
    Soldiers, Civilians, Families and the Nation. Army leaders, at every
    level of the chain of command, are doing this through prevention,
    investigation, accountability, advocacy and assessments.
    Modernization
        It is impossible to discuss readiness without highlighting
    modernization, as systems and equipment play a key role in future force
    readiness. Equipment modernization must address emerging threats in an
    increasingly sophisticated technological environment. The Army must
    maintain its ability to contend with such diverse threats as cyber
    attacks, electronic warfare, unmanned systems, chemical and biological
    agents, and air and missile threats. Decreases to the Army budget over
    the past several years significantly impacted Army modernization. Since
    2011, the Army has ended 20 programs, delayed 125 and restructured 124.
    Between 2011 and 2015, Research and Development and Acquisition
    accounts plunged 35 percent from $31 billion to $20 billion.
    Procurement alone dropped from $21.3 billion to $13.9 billion. We
    estimate that sequestration-level funding will affect over 80 Army
    programs. Major impacts include delays in equipping to support
    expeditionary forces, delays in combat vehicle and aviation
    modernization, unaffordable increases in sustainment costs to repair
    older equipment and increases in capability gaps.
        The centerpiece of the Army's Modernization Strategy continues to
    be the Soldier and the squad. The Army will also develop and field a
    robust, integrated tactical mission command network linking command
    posts, and extending out to the tactical edge and across platforms. The
    Army's objective is to rapidly integrate technologies and applications
    that empower, protect and unburden the Soldier and our formations, thus
    providing the Soldier with the right equipment, at the right time, to
    accomplish the assigned mission.
        The President's Budget request would provide over $2 billion to
    begin to address the growing gaps in our modernization accounts. Even
    with this additional funding, modernization will require several years
    to recover from the effects of recent budget reductions and regain
    balance in the Force. As such, the Army emphasizes early affordability
    reviews, establishing cost caps (funding and procurement objectives),
    synchronizing multiple processes and divesting older equipment.
    End Strength
        Readiness includes possessing the capacity to execute the missions
    required by the Defense Strategic Guidance and the Combatant
    Commanders. The minimum end strength the Army requires to fully execute
    the 2012 Defense Strategic Guidance is 980,000 Soldiers--450,000 in the
    active Army, 335,000 in the Army National Guard and 195,000 in the Army
    Reserve. All three components will be smaller than pre-2001 force. If
    prolonged sequestration-level funding occurs, we will need to reduce
    end strength even further--to 420,000 in the AC by fiscal year 2020,
    and 315,000 in the National Guard and 185,000 in the Army Reserve, both
    by fiscal year 2019. At these levels we assess the Army would be unable
    to fulfill all the elements of the Defense Strategic Guidance.
        Although the Army expects to lose combat-seasoned Soldiers and
    leaders, our focus through these processes will be on retaining those
    individuals with the greatest potential for future service in the right
    grades and with the right skills.
    Recap: Effects of Sequestration
        At force levels driven by affordability under full sequestration,
    the Army cannot fully implement its role in the defense strategy.
    Sequestration would require the Army to further reduce our Total Army
    end strength to at least 920,000 or 60,000 below the 980,000 currently
    reflected in the President's Budget request and would severely limit
    the Army's investment to equip Soldiers to meet the warfighting
    requirements of tomorrow. Under sequestration-level funding readiness
    will be reduced to a level the Army will be unable to recover from
    until well past the current target of fiscal year 2023. Only 24 of 60
    Brigade Combat Teams will receive sufficient funding to conduct
    required readiness training. An estimated 85,000 seats will be lost in
    specialized skills training, and there will be a $1 billion decrease to
    base operations support, eliminating jobs, contracts, causing barracks
    and furnishings to further deteriorate. While we will protect funding
    for the Combat Training Centers (CTCs), funding for home station
    training will be severely reduced which will undermine many units'
    readiness and inhibit those scheduled for a CTC from adequate
    preparation.
        We are expecting a decline in the overall readiness of our forces
    because of reduced funding in fiscal year 2015, and sequestration in
    fiscal year 2016 will dissipate the gains we achieved from the
    Bipartisan Budget Agreement in fiscal year 2014 and leave the Army in a
    precarious state. Because we cannot draw down end strength in a rapid
    manner, operations and training funding would absorb the majority of
    the budget cuts resulting from sequestration, leaving the Army hollow--
    lacking training and modern equipment and vulnerable if needed in a
    crisis. Ultimately, sequestration will put Soldiers' lives at risk.
                                    closing
        As the velocity of instability increases so does the demand for a
    ready and modern Army, adequately sized and trained to prevent, shape,
    and win. We ask Congress to repeal the harmful cuts arbitrarily imposed
    under sequestration-level funding and provide Soldiers with greater
    predictability in these uncertain times.
        We are committed to working closely with Congress to ensure that we
    are good stewards of our Nation's resources. There are critical cost-
    saving measures that allow the Army to further reallocate scarce
    resources to ensure we remain ready and resilient. These include
    compensation reform, sustainable energy and resource initiatives, a new
    round of Base Realignment and Closure (BRAC), and the Aviation
    Restructure Initiative (ARI). We also ask Congress to support a Total
    Army solution to end strength reductions. Cuts must come from the Total
    Force--Active, National Guard, and Reserve--to maintain the balance
    among all components to best execute the Army's strategic mission. We
    ask Congress to support these initiatives because without the
    flexibility to manage our budgets to achieve the greatest capability
    possible, we will be forced to make even larger reductions to manpower,
    modernization, and training.
        The United States Army plays a foundational role in the Joint Force
    and is indispensible as we work to reassure our allies, deter our
    enemies, and when necessary, win our Nation's wars. The strength of the
    All Volunteer Force is our Soldiers, Civilians and their Families, and
    we must ensure they always stand Ready. History has taught us that the
    price of improperly managing the readiness of our force will ultimately
    fall on the backs of our fighting Soldiers. With your assistance, we
    will continue to resource the best-trained, best-equipped and best-led
    fighting force in the world. We thank Congress for their steadfast and
    generous support of the outstanding men and women of the United States
    Army, our Army Civilians, Families, and Veterans.

        Senator Ayotte. Thank you, General Allyn.
        We're now going to hear testimony from Admiral Michelle
    Howard, who's the Vice Chief of Staff for Naval Operations.
        Thank you, Admiral Howard.

      STATEMENT OF ADMIRAL MICHELLE J. HOWARD, USN, VICE CHIEF OF
                  NAVAL OPERATIONS, UNITED STATES NAVY

        Admiral Howard. Chairwoman Ayotte, Senator Kaine, and
    Senator Rounds, distinguished members of the committee, thank
    you for the opportunity to testify today.
        It is my honor to represent the Navy's Active and Reserve
    sailors and civilians, and particularly the 41,000 sailors who
    are underway and deployed around the world today. They're
    standing watch right now, and ready to meet today's security
    challenges. The citizens of this Nation can take great pride in
    the daily contributions of their sons and daughters who fulfill
    our Navy's longstanding mandate to be where it matters when it
    matters.
        Recent events exemplify the benefit of forward presence.
    Last August, the George Herbert Walker Bush Carrier Strike
    Group relocated 750 nautical miles from the Arabian Sea to the
    Arabian Gulf in less than 30 hours. They executed 20 to 30
    combat sorties per day. For 54 days, they were the only
    coalition strike option to project power against the Islamic
    State of Iraq and Syria (ISIS). Then there's the U.S.S.
    Truxton, a destroyer that arrived in the Black Sea within a
    week after Russia invaded Crimea, to help reassure our allies
    in the area. Another destroyer, U.S.S. Sampson, and littoral
    combat ship U.S.S. Fort Worth were among the first vessels to
    support the search effort for Air Asia Flight 8501 in the Java
    Sea. Our forward presence truly allows us to be where it
    matters when it matters.
        Effectively operating forward around the globe requires a
    high state of readiness of our people and platforms. We are
    still recovering from a degraded readiness as a result of over
    a decade of combat operations. Sequestration in 2013
    exasperated our circumstances and created maintenance backlogs
    that have prevented us from getting ships back to the fleet on
    time and aircraft back on the flight line. Since 2013, many
    ships have been on deployment for 8 to 10 months or longer,
    negatively impacting the morale of our people and readiness of
    our ships.
        Our Navy fiscal year 2016 budget is designed to continue
    our readiness recovery, restoring our required contingency
    operations capacity by the 2018-to-2020 timeframe, while
    continuing to provide a sustainable forward presence. It also
    includes credible and survivable sea-based strategic
    deterrence. With continued overseas operation funding, our
    fiscal year 2016 budget meets the requirements of the global
    force management allocation plan. This includes at least two
    carrier strike groups and two amphibious ready groups operating
    forward, fully mission capable and certified for deployment.
        Recovery of readiness also requires a commitment to protect
    the time it takes to properly maintain and modernize our
    capital-intensive force and to conduct full-spectrum training.
    Achieving full readiness entails the restoration of shipyard
    capacity and aviation depots primarily through hiring and
    workforce development, and PB-16 puts us on a path to address
    these challenges.
        I want to make it clear. The Navy's fiscal year 2016 budget
    is the minimum funding required to execute the Nation's defense
    strategy. In other words, if we return to a sequestered budget,
    we will not be able to execute the defense strategic guidance.
    Past budget shortfalls have forced us to accept significant
    risks in two important mission areas. The first mission at risk
    is ``deter and defeat aggression,'' which means to win a war in
    one theater while deterring another adversary in a different
    theater. Assuming risk in this mission leads to loss of
    credibility and ability to assure our allies of our support.
    The second mission at risk is ``project power despite anti-
    access aerial-denial challenges.'' This brings risk in our
    ability to win a war. Some of our people and platforms will
    arrive late to the fight and inadequately prepared. They will
    arrive with insufficient ordnance and without the modern combat
    systems and sensors and networks required to win. Ultimately,
    this means more ships and aircraft out of action, more sailors,
    marines, and merchant marines killed.
        As we look to the future, the Navy will continue to be
    globally deployed to provide a credible and survivable
    strategic deterrent and to support the mission requirements of
    the regional combatant commanders. The Navy is fundamentally
    multi-mission and will rapidly adjust to meet new challenges
    that might require U.S. presence and the--and projecting power.
        Our Navy will continue to ensure the security of the
    maritime domain by sustaining its forward presence, warfighting
    focus, and readiness preparations. Since there is no
    foreseeable reduction to global maritime requirements, we have
    focused our fiscal year Navy budget to address the challenges
    to achieving the necessary readiness to execute our missions.
    Any funding below this submission requires a revision of the
    defense strategy. To put it simply, sequestration will gravely
    damage the national security of this country. Despite these
    future challenges, we are fortunate to have the highest
    quality, the most diverse force in my Navy's history. These
    outstanding men and women who serve our Nation at sea make us
    the finest navy in the world.
        So, on behalf of all our Active and Reserve sailors, our
    civilians, and their families, I extend our appreciation to
    this committee for your efforts and continued support to keep
    our Navy ready to defend this Nation.
        Thank you.
        [The prepared statement of Admiral Howard follows:]

                 Prepared Statement by Admiral Michelle Howard
        Chairman Ayotte, Senator Kaine, and distinguished members of the
    Senate Armed Services Subcommittee on Readiness and Management Support,
    I appreciate the opportunity to testify on the current state of Navy
    readiness and the resources necessary to provide a ready Navy in the
    future as described in our Fiscal Year 2016 budget request. As we meet,
    the Navy and our sister Services have entered a third year of fiscal
    uncertainty. In addition, new threats to our nation's interests are
    emerging and old tensions are surfacing. Today, it is my honor to
    represent all our active and reserve Sailors, particularly the 41,000
    Sailors who are underway on ships and submarines or deployed in
    expeditionary roles overseas today. They are standing the watch and are
    ready to meet today's security challenges. American citizens can take
    great pride in the daily contributions of their sons and daughters who
    serve in Navy units around the world. We are where it matters, when it
    matters, ensuring the security that underpins the global economy and
    responding to crises.
        Last August, the George H.W. Bush carrier strike group, already
    forward present in the North Arabian Sea quickly relocated to the North
    Arabian Gulf. Flying 20-30 combat sorties per day, this Navy-Marine
    Corps strike fighter team was the only coalition strike option to
    project power against the Islamic State of Iraq and the Levant (ISIL)
    from the skies over Iraq and Syria for 54 days. Similarly, USS Truxton
    (DDG-103) arrived in the Black Sea to establish U.S. presence and to
    reassure allies a week after Russia invaded Crimea. In the Java Sea,
    USS Fort Worth (LCS-3), a littoral combat ship, and USS Sampson (DDG-
    102), a destroyer, were among the first to support the Indonesian-led
    search effort for Air Asia Flight 8501. This forward presence is
    possible because Navy planning and budget decisions continue to be
    guided by the three tenets the Chief of Naval Operations (CNO)
    established when he first took office: Warfighting First, Operate
    Forward, and Be Ready. Each of these tenets helps drive a strong focus
    on readiness--both now and in the future.
        Actions of Congress helped stabilize readiness by supporting
    increases over sequestered funding levels through the Bipartisan Budget
    Act of 2013, and the subsequent authorization and appropriations acts
    for fiscal year 2014 and this year. Nonetheless, we have not yet
    recovered from the readiness impact of over a decade of combat
    operations, exacerbated by the imposition of a lengthy Continuing
    Resolution and followed by budget sequestration in fiscal year 2013,
    just as we were beginning to reset the force. These circumstances
    created maintenance backlogs that have prevented us from getting ships
    back to the Fleet on time and aircraft back on the flight line. We
    continue our efforts to rebuild the workforce in our public depots--
    both shipyards and aviation readiness centers--and reduce the number of
    lost operational days, but it will take years to dig out of a readiness
    hole.
        The fiscal year 2016 Navy budget submission is designed to continue
    our readiness recovery, restoring our required contingency operations
    capacity by 2018-2020 while continuing to provide a sustainable forward
    presence. PB-16 is the minimum funding required to execute the nation's
    Defense Strategy, though we still carry risks in two important mission
    areas, notably when confronted with a technologically advanced
    adversary or when forced to deny the objective of an opportunistic
    aggressor in a second region while already engaged in a major
    contingency. As the CNO stated in his recent testimony to the full
    committee, risk in our ability to Deter and Defeat Aggression and
    Project Power Despite Anti-Access/Area Denial (A2/AD) Challenges mean
    ``longer timelines to win, more ships and aircraft out of action in
    battle, more Sailors, Marines, and Merchant Mariners killed, and less
    credibility to deter adversaries and assure allies in the future.''
    That level of risk arises from capacity and readiness challenges as
    well as slower delivery of critical capabilities to the Fleet,
    particularly in air and missile defense and overall ordnance capacity.
        My testimony today will focus on the current readiness of the Navy,
    and our plan, supported by our fiscal year 2016 budget submission, to
    meet the challenges to delivering future readiness. If we return to a
    sequestered budget in fiscal year 2016, we will not be able to execute
    the Defense Strategy as it is conveyed in the 2014 Quadrennial Defense
    Review and a revision will be required.
    Current Navy Operations and Readiness
        Employing a combination of Forward Deployed Naval Force ships
    homeported overseas and rotationally deploying units from CONUS, our
    Navy sustains a global presence of about 100 ships and submarines.
    Their combat power and other capabilities include the contributions of
    embarked Carrier Air Wings or other aviation units, Marine
    Expeditionary Units or elements of a Special Purpose Marine Air/Ground
    Task Force, Coast Guard detachments, and Special Operations units,
    among others. These capabilities are further enhanced by land-based or
    expeditionary Navy forces in theater. With additional ships training in
    home waters, approximately half the battle force is underway or
    deployed on any given day.
        Every hour of every day around the globe we are executing missions.
    The sun never sets on the U.S. Navy. Ballistic Missile Submarines
    sustain the most survivable leg of our nation's nuclear triad. Carrier
    Strike Groups (CSGs), Amphibious Ready Groups (ARGs) and attack
    submarines (SSNs) conduct named operations in support of the Combatant
    Commanders (COCOMs) or exercise with other nations to build the
    partnerships essential to the stability of the global system. Ballistic
    Missile Defense-capable Cruisers and Destroyers protect U.S. and allied
    sea and shore-based assets. Our units operate with other nations
    through exercises or through executing theater security cooperation
    plans; activities essential to the stability of the global system. As
    an example, last month, USS Fort Worth (LCS-3) practiced the Code for
    Unplanned Encounters at Sea (CUES) with the Chinese Navy, enhancing the
    professional maritime relationship between the U.S. Seventh Fleet and
    the People's Liberation Army-Navy [PLA(N)]. Our crews and platforms are
    trained and certified to execute their core capabilities across the
    spectrum of military operations and are ready to be re-tasked as
    required to meet the next challenge. This was the case in August 2014
    when the George HW Bush CSG relocated from the Arabian Sea to the North
    Arabian Gulf and was on station, ready for combat operations, in less
    than 30 hours. The Navy is fundamentally multi-mission and rapidly
    adjusts to meet new challenges that might require U.S. presence and
    power projection forces.
        Navy will continue to sustain the readiness of our deployed forces
    under our fiscal year 2016 budget submission, but it will require
    several years to fully recover the capability to rapidly respond to
    COCOM requirements for a major contingency. In addition to our forces
    that are globally deployed today, combined requirements include: three
    extra CSGs and three ARGs to deploy within 30 days to respond to a
    major crisis. However, on average, we have only been able to keep one
    CSG and one ARG in this readiness posture, 1/3 of the requirement.
    Assuming the best case of an on-time, sufficient, and stable budget
    with no major contingencies, we should be able to recover from
    accumulated backlogs by 2018 for CSGs and 2020 for ARGs--five plus
    years after the first round of sequestration.
        Recovery of readiness also requires a commitment to protect the
    time required to properly maintain and modernize our capital-intensive
    force and to conduct full-spectrum training. Our updated force
    generation model--the Optimized Fleet Response Plan (OFRP)--is designed
    to meet this commitment as well as better align all elements that
    support readiness development. Achieving full readiness entails the
    restoration of required capacity to our public shipyards and aviation
    depots-primarily through hiring and workforce development. In addition
    to aviation depots backlogs, we must also overcome the challenges of
    extending the service life of our legacy F/A-18 Hornet aircraft to
    10,000 hours. Underlying our plan is the need to operate the battle
    force at a sustainable level over the long term. With this plan we
    recover our material readiness, keep faith with our Sailors and their
    Families by providing more predictability in the operations schedule,
    and control the pace of deployments.
    Meeting Our Readiness Challenges
        The Navy fiscal year 2016 budget request continues to fully support
    the readiness of our deployed forces. The budget request sustains our
    credible and survivable sea-based strategic deterrent and with
    continued overseas contingency operations (OCO) funding meets the
    adjudicated requirements of the fiscal year 2016 Global Force
    Management Allocation Plan (GFMAP). This includes at least two CSGs and
    two ARGs, operating forward, fully mission-capable and certified for
    deployment. We continue to employ innovative approaches, including the
    use of new platforms like the Joint High Speed Vessel and the Mobile
    Landing Platform, to ensure the Navy/Marine Corps team continues to
    meet the security requirements of our nation, while providing the
    opportunity to reset and sustain the material condition of the force.
    Greater use of capable auxiliaries helps relieve pressure on our
    overstretched amphibious fleet.
      Generating the Force
        Navy readiness is at its lowest point in many years. Budget
    reductions forced cuts to afloat and ashore operations, generated ship
    and aircraft maintenance backlogs, and compelled us to extend unit
    deployments. Since 2013, many ships have been on deployment for 8-10
    months or longer, exacting a cost on the resiliency of our people,
    sustainability of our equipment, and service life of our ships.
        Navy has managed force generation using the Fleet Response Plan
    (FRP) since it was adopted in 2003 and fully implemented in 2007. This
    cyclic process was designed to support readiness by synchronizing
    periodic deep maintenance and modernization with the Fleet training
    required to achieve GFMAP forward presence objectives and provide
    contingency response capacity. However, the continued employment of our
    contingency response units to generate increased presence over the past
    decade has not only increased maintenance requirements, it has also
    limited their availability to complete required maintenance and
    training. As with previous testimony of the last few years, this
    practice is unsustainable.
        In 2013 and 2014, for example, Naval forces provided six percent
    and five percent more forward presence, respectively, than allocated
    due to emergent operations and unanticipated contingencies. This
    unbudgeted employment amounted to greater than 2,200 days in theater
    over that approved on the global force management plan in 2013 and
    greater than 1,800 days in theater over in 2014. We should operate the
    Fleet at sustainable presence levels in order for the Navy to meet
    requirements, while still maintaining material readiness, giving ships
    time to modernize, and allowing them to reach their expected service
    lives.
        This year, Navy began implementation of the Optimized Fleet
    Response Plan (OFRP) to address these challenges. Designed to stabilize
    maintenance schedules and provide sufficient time to maintain and train
    the force while continuing to meet operational commitments, OFRP aligns
    supporting processes and resources to improve overall readiness.
    Furthermore, it provides a more stable and predictable schedule for our
    Sailors and their Families. We will continue OFRP implementation across
    the FYDP.
      Ship Operations
        The baseline Ship Operations request for fiscal year 2016 provides
    an average of 45 underway steaming days per quarter for deployed ships
    and 20 days non-deployed, and would support the highest priority
    presence requirements of the Combatant Commanders to include global
    presence for two CSGs, two ARGs and an acceptable number of deployed
    submarines. With OCO, ship operations are funded at 58 steaming days
    deployed/24 days non-deployed. The requested funding will meet the full
    adjudicated fiscal year 2016 GFMAP ship presence requirement, support
    higher operational tempo for deployed forces and provide full operating
    funding for individual ship level maintenance and training.
      Air Operations (Flying Hour Program)
        The Flying Hour Program (FHP) funds operations, intermediate and
    unit-level maintenance, and training for ten Navy carrier air wings,
    three Marine Corps air wings, Fleet Air Support aircraft, training
    squadrons, Reserve forces and various enabling activities. The fiscal
    year 2016 baseline program provides funding to build required levels of
    readiness for deployment and sustain the readiness of units that are
    deployed. Navy and Marine Corps aviation forces are intended to achieve
    an average T-2.5/T-2.0 USN/USMC training readiness requirement with the
    exception of non-deployed F/A-18 (A-D) squadrons. Because of shortfalls
    in available aircraft due to depot throughput issues, these squadrons
    are funded at the maximum executable level while non-deployed,
    resulting in an overall readiness average of T-2.8/2.4. All squadrons
    deploy meeting theT-2.0 readiness requirement and OCO provides for
    additional deployed operating tempo above baseline funding.
      Spares
        The replenishment of existing, ``off the shelf'' spares used in
    ship and aircraft maintenance is funded through the Ship Operations and
    Flying Hour Programs. With OCO, those programs are fully funded in
    PB16. The provision of initial and outfitting spares for new platforms,
    systems and modifications is funded through the spares accounts.
    Traditionally, these accounts have been funded below the requirement
    due to limited funding or past execution issues. Due to the ultimate
    impact on readiness, PB16 sustains executable funding levels to reduce
    cross-decking and cannibalization of parts driven by large backlogs.
    This is complemented by Navy-wide efforts to improve execution of these
    accounts, which have shown considerable success in aviation spares over
    the last two years, and continues to be a focus area.
      Readiness Investments Required to Sustain the Force--Ship and
            Aircraft Maintenance
        The Navy maintenance budget requests are built upon proven
    sustainment models. They are focused on continuing our ongoing
    investment to improve material readiness of our surface combatants, and
    support the integration of new capabilities into naval aviation.
        The fiscal year 2016 baseline budget request funds 80 percent of
    the ship maintenance requirement across the force, addressing both
    depot and intermediate level maintenance for carriers, submarines and
    surface ships. OCO funding provides the remaining 20 percent of the
    full baseline requirement to continue reduction of the backlog of life-
    cycle maintenance in our surface ships after years of high operational
    tempo and deferred maintenance. This year, the additional OCO for
    maintenance reset ($557M) includes funding for aircraft carriers (CVNs)
    as well to address increased wear and tear outside of the propulsion
    plant as a result of high operational demands. Since much of this work
    can only be accomplished in drydock, maintenance reset must continue
    across the FYDP.
        To address the increased workload in our public shipyards and
    improve on-time delivery of ships and submarines back to the Fleet, the
    fiscal year 2016 budget grows the shipyard workforce, reaching a high
    of 33,500 personnel in fiscal year 2017, with additional investment in
    workforce training and development. One attack submarine (SSN)
    availability is moved to the private sector in fiscal year 2016 with
    plans for two additional SSN availabilities in the private sector in
    fiscal year 2017 to mitigate total workload. The fiscal year 2016
    budget includes $89.5M in MILCON projects and $142M in restoration and
    modernization projects for Naval Shipyards in fiscal year 2016, for a
    total capital investment of 8.7 percent in these important facilities.
        The Fleet Readiness Centers (FRCs), Navy's aviation depots, have
    been challenged to recover full productivity after hiring freezes,
    furlough, and overtime restrictions in fiscal year 2013. They face a
    growing workload, particularly for the additional service life
    extension of our legacy
        F/A-18 Hornets. FRCs are aggressively hiring with a goal of
    reaching full capacity by the end of this year. The hiring of
    additional engineering support to address new repairs required to reach
    10,000 hours of service life, reallocation of some of the workforce,
    and contracting for private sector support have all been undertaken to
    complete existing work-in-process at the FRCs, particularly for legacy
    Hornets. Field teams have been increased to improve flight line
    maintenance and understanding of the material condition of airframes
    coming to the depots. As new repairs and parts are identified and
    approved, kits are developed to ensure long-lead parts are readily
    available.
        As a result of these challenges, the Aviation Depot Maintenance
    program is funded to an executable level of 77 percent in baseline, 83
    percent with OCO for new work to be inducted in fiscal year 2016. This
    funding level supports a total of 564 airframes and 1,834 engines/
    engine modules to be repaired.
      Navy Expeditionary Combat Forces
        Navy expeditionary combat forces support ongoing combat operations
    and enduring Combatant Commander requirements by deploying maritime
    security, construction, explosive ordnance disposal, logistics and
    intelligence units to execute missions across the full spectrum of
    naval, joint and combined operations. In fiscal year 2016, baseline
    funding is improved significantly over prior years, providing 80
    percent of the enduring requirement, with OCO supporting an additional
    15 percent of the requirement.
      Readiness Investments Required to Sustain the Force--Shore
            Infrastructure
        The Navy's shore infrastructure, both in the United States and
    overseas, provides essential support to our Fleet. In addition to
    supporting operational and combat readiness, it is also a critical
    element in the quality of life and quality of work for our Sailors,
    Navy Civilians, and their Families. As we have done for several years,
    we continue to take risk in the long-term viability of our shore
    infrastructure to sustain Fleet readiness under the current funding
    level. However, in fiscal year 2016 our facilities sustainment is
    improved to 84 percent of the OSD Facilities Sustainment Model versus
    70 percent this year. When restoring and modernizing our
    infrastructure, we intend to prioritize life/safety issues and
    efficiency improvements to existing infrastructure and focus on
    repairing only the key components of our mission critical facilities.
    Lessor critical projects will remain deferred. Overall, the Department
    of the Navy will exceed the mandated capital investment of 6 percent
    across all shipyards and depots described in 10 USC 2476 with a 7.4
    percent total investment in fiscal year 2016. With the support provided
    by the Congress, Navy is on track to exceed the minimum investment in
    fiscal year 2015 as well.
    Looking Ahead
        As we look to the future, the Navy will continue to be globally
    deployed to provide a credible and survivable strategic deterrent and
    to support the mission requirements of the regional Combatant
    Commanders. Global operations continue to assume an increasingly
    maritime focus, and our Navy will sustain its forward presence,
    warfighting focus, and readiness preparations to continue operating
    where it matters, when it matters. We see no future reduction of these
    requirements and we have focused the fiscal year 2016 Navy budget
    submission to address the challenges to achieving the necessary
    readiness to execute our missions. Any funding below this submission
    requires a revision of America's defense strategy. Sequestration would
    outright damage the national security of this country.
        In closing, we should recall that our Sailors are the most
    important element of the future readiness of the Navy. Fortunately,
    they are the highest quality, most diverse force in our history and
    continue to make us the finest Navy in the world. As the CNO says,
    ``They are our asymmetric advantage.'' On behalf of all our Sailors
    (active and reserve), Civilians and their Families let me reiterate our
    appreciation for the continued support of the members of the committee.

        Senator Ayotte. Thank you, Admiral Howard.
        I would like to now receive testimony from General Paxton,
    the Assistant Commandant of the United States Marine Corps.
        Thank you, General Paxton.

       STATEMENT OF GENERAL JOHN M. PAXTON, JR., USMC, ASSISTANT
                 COMMANDANT, UNITED STATES MARINE CORPS

        General Paxton. Thank you, Chairman Ayotte, Ranking Member
    Kaine, Senator Rounds, and distinguished members of the
    Readiness Subcommittee. I appreciate the opportunity to appear
    before you today and to report on the readiness of your United
    States Marine Corps.
        Today, as always, your Marine Corps is committed to
    remaining our Nation's ready force, a force that's truly
    capable of responding to a crisis anywhere around the globe at
    a moment's notice. I know that this committee and the American
    people have high expectations of your marines. You expect your
    marines to operate forward, to stay engaged with our partners,
    to deter potential adversaries, and to respond to crises. When
    we fight, you expect us to always win. You expect a lot of your
    marines. You should.
        As we gather today, more than 31,000 marines are forward
    deployed and engaged, doing just what you expect and we expect
    them to be doing. Our role as the Nation's ready force
    continues to inform how we man, train, and equip the Marine
    Corps. It also prioritizes the allocation of resources which we
    receive from Congress. I can assure you that your forward-
    deployed marines are well trained, well led, and well equipped.
        In fact, our readiness was proven last year, as your Marine
    Corps supported recent evacuations of United States citizens in
    South Sudan and then Libya and then Yemen. Those ready forces
    are also currently engaged in the Middle East, conducting
    strikes against Syria and Iraq, training Iraqi army units, and
    protecting our Embassy in Baghdad. They also routinely deploy
    and exercise across the Asia-Pacific region, where over 21,000
    are west of the International Dateline.
        These events demonstrate the reality and the necessity of
    maintaining a combat-ready force that's capable of handling
    today's crisis today. Such an investment is essential to
    maintaining our Nation's security and the prosperity for the
    future.
        We will work hard with you in order to maintain the
    readiness of our forward-deployed forces. While we do that, we
    have not sufficiently invested in our home-station readiness
    and in our next-to-deploy forces. We have also underfunded or
    delayed the full funding for our modernization, for our
    infrastructure sustainment, and some of our quality-of-life
    programs. As a result, approximately half of our non-deployed
    units are suffering personnel, equipment, or training
    shortfalls. Ultimately, this has created an imbalance in our
    institutional readiness. At the foundation of our readiness, we
    emphasize that all marines and all marine units are physically
    and mentally ready, are fully equipped, and have sufficient
    time to train with quality small-unit leaders at the helm. They
    are, thus, ready to move out whenever they're called.
        As we continue to face the possibility of full
    implementation of the Budget Control Act (BCA), our future
    capacity for crisis response, as well as our capacity for major
    contingency response, is likely to be significantly reduced.
    Quite simply, if our home-station units are not ready due to a
    lack of training, a lack of equipment or manning, it could mean
    a delayed response to resolve a contingency or to execute an
    operational plan, both of which would create unacceptable risk
    for our national defense strategy as well as risk to the limits
    of mission accomplishment or the physical risk to the force,
    itself.
        The readiness challenge we already see today provide
    context for our messages this morning. Your United States
    Marine Corps can, indeed, meet the requirements of the defense
    strategic guidance with the President's Budget, but,
    unfortunately, there is no margin. As our chairman stated, even
    under PB-16, we are already at the ragged lower edge for
    readiness.
        I thank each of you for your faithfulness to our Nation,
    for your support of the Department and all four of our
    services.
        I request that my written testimony be accepted for the
    record.
        I thank you for the opportunity to appear before you this
    afternoon, and I look forward to your questions.
        Thank you.
        [The prepared statement of General Paxton follows:]

                   Prepared Statement by General John Paxton
        General Paxton was promoted to General and assumed the duties of
    Assistant Commandant of the Marine Corps on December 15, 2012. A native
    of Pennsylvania, he graduated from Cornell University with a Bachelor
    and Master of Science in Civil Engineering and was commissioned through
    Officer Candidate School in 1974.
        General Paxton's assignments in the operating forces include Rifle
    and Weapons Platoon Commander and Company Executive Officer, Co. B, 1st
    Battalion, 3d Marines; Training Officer, 4th Marine Regiment; Executive
    Officer, Co. G, 2d Battalion, 4th Marines; Company Commander, Co. L and
    Operations Officer, 3d Battalion, 5th Marines; GCE Operations Officer,
    II MEF, and Assistant Chief of Staff, G-3, 1st Marine Division. He
    commanded the 1st Battalion, gth Marines in support of operations in
    Bosnia and Somalia and later the 1st Marine Regiment.
        Other assignments include Company Commander, Co. B, Marine Barracks
    Washington and Commanding Officer of Marine Corps Recruiting Station
    New York. He served as a Plans Division Officer, Plans, Policies and
    Operations, HQMC; the Executive Assistant to the Undersecretary of the
    Navy; and Amphibious Operations Officer/Crisis Action Team Executive
    Officer, Combined Forces Command, Republic of Korea.
        As a general officer, he has served as the Director, Programs
    Division,Programs and Resources, HQMC; the Commanding General of Marine
    Corps Recruit Depot San Diego/Western Recruiting Region; Commanding
    General,1st Marine Division; Chief of Staff, Multi-National Forces--
    Iraq; Director for Operations, J-3, The Joint Staff; and Commanding
    General, II Marine Expeditionary Force and Commander Marine Forces
    Africa. Most recently he served as the Commander, Marine Corps Forces
    Command; Commanding General, Fleet Marine Force Atlantic; and
    Commander, Marine Forces Europe.
        General Paxton is a graduate of the U.S. Army Infantry Officer
    Advanced Course and Marine Corps Command and Staff College. He has also
    served as a Commandant's Fellow at the Brookings Institute as well as
    at the Council on Foreign Relations.
    Introduction
        Chairman Ayotte, Ranking Member Kaine, and distinguished members of
    the Senate Armed Services Subcommittee on Readiness: I appreciate the
    opportunity to testify on the current state of readiness in your Marine
    Corps and on our Fiscal Year 2016 budget request. We greatly appreciate
    the continued support of Congress and of this subcommittee in ensuring
    our ability to remain the Nation's ready force.
        Since 1775 the Marine Corps, has been our nation's Crisis Response
    force. This was mandated by our 82nd Congress. Continuing to fulfill
    this role remains our top priority. Balanced air-ground-logistics
    forces that are forward-deployed, forward-engaged, and postured to
    shape events, manage instability, project influence, and immediately
    respond to crises around the globe are what we provide. Marine forces
    remain expeditionary and are partnered with the Navy, coming from the
    sea, operating ashore, and providing the time and decision space
    necessary for our National Command Authority. Ultimately, our role as
    America's 9-1-1 force informs how we man, train, and equip our force
    both for today and into the future.
        This past year has demonstrated that the Marine Corps must be ready
    to respond, fight, and win more than just the last war. In 2014 the
    performance of your Marine Corps underscored the fact that
    responsiveness and versatility are in high demand today and that fact
    can be expected in the future.
                     your marines--operationally responsive
    OEF--Afghanistan
        In 2014, Marine Expeditionary Brigade-Afghanistan (MEB-A) concluded
    six years of sustained Marine Air-Ground Task Force (MAGTF) operations
    in Afghanistan. Operations there focused on ensuring the success of the
    Afghanistan presidential elections in the summer of 2014 and
    transitioning security responsibilities to the Afghanistan National
    Defense Security Forces (ANDSF). With Marines serving in an advisory
    capacity, the ANSF in Helmand Province held control of all district
    centers.
        Regional Command (SW) also turned over operational responsibilities
    to the
        International Security Assistance Force Joint Command (IJC). Today,
    a residual Marine presence of several hundred continues to support the
    Resolute Support Mission (NATO)/OPERATION FREEDOM'S SENTINEL (US) in
    Afghanistan.
    Special Purpose Marine Air Ground Task Force--Crisis Response (SPMAGTF-
            CR) Operations
        While not as independent, flexible and responsive as our Marine
    Expeditionary Units (MEU) embarked and underway aboard Amphibious Ready
    Groups (ARG), two SPMAGTF-CRs are filling crisis response critical
    capability gaps for the combatant commanders in AFRICOM and CENTCOM.
    This past year SPMAGTF-CR units assigned to AFRICOM positioned forward
    in Moron, Spain and Signonella, Italy safeguarded the lives of our
    diplomatic personnel and conducted military-assisted departures from
    the U.S. Embassy in South Sudan in January and our Embassy in Libya in
    July 14.
        The Marine Corps SPMAGTF-CR unit assigned to CENTCOM (SPMAGTF-CR-
    CC) became fully operational on 1 November 2014 and deployed to the
    CENTCOM AOR. Since that time, SPMAGTF-CR-CC conducted embassy
    reinforcement, Theater Security Cooperation (TSC) exercises, and
    provided critical aviation and ground capabilities in the fight against
    ISIL. Most recently, Marines from SPMAGTF-CR-CC supported the
    evacuation of our Embassy in Sana'a, Yemen in February of this year.
    Current Operations
        Today, there are over 31,000 Marines forward deployed, conducting a
    full range of theater security and crisis response missions. Marines
    are currently conducting security cooperation activities in 29
    countries around the globe. Over 22,000 Marines are west of the
    international dateline in the Pacific building partnership capacity,
    strengthening alliances, deterring aggression, and preparing for any
    contingency. Your Marines serving today in the operating forces are
    either deployed, getting ready to deploy, or have recently returned
    from deployment. Our operational tempo since September 11, 2001 has
    been high and remains high today. We expect this trend to continue.
                             institutional balance
        The Marine Corps is committed to remaining the Nation's ready
    force, a force truly capable of responding to a crisis anywhere around
    the globe at a moment's notice. Thus, the American people and this
    Congress have rightly come to expect the Marine Corps to do what must
    be done in ``any clime and place'' and under any conditions. As our
    36th Commandant recently published in his Commandant's Planning
    Guidance (CPG), ``you expect us to respond quickly and win always.''
        This obligation requires the Marine Corps to maintain a high state
    of combat readiness at all times. Readiness is the critical measure of
    our Marine Corps' capacity to respond with required capability and
    leadership. We look at readiness through the lens of our five
    institutional pillars of readiness--high quality people, unit
    readiness, capacity to meet the combatant commanders' requirements,
    infrastructure sustainment, and equipment modernization. These pillars
    represent the operational and foundational components of readiness
    across the Marine Corps. We know we are ready when leaders confirm that
    their units are well trained, well led at all levels, and can respond
    quickly to the unforeseen. This capability helps to minimize
    operational risk and provides our national leaders the time and space
    to make reasoned decisions.
        While we will always ensure that our forward deployed Marines and
    Sailors are properly manned, trained, and equipped, we must seek a
    balanced investment across the pillars to simultaneously ensure current
    as well as future (i.e. next to deploy) readiness. At the foundation of
    this readiness, we emphasize that all Marines and all Marine units
    (i.e. from home station) are physically and mentally ready, are fully
    equipped, and have sufficient time with quality small unit leaders in
    place to move and train whenever called upon.
        We also fully appreciate that our readiness and institutional
    balance today, and the ability to maintain it in the future, are
    directly related to today's fiscal realities. During these fiscally
    constrained times, we must remain focused on the allocation of
    resources to ensure the holistic readiness of the institution (i.e.
    training, education, infrastructure and modernization), making every
    dollar count when and where it is needed most.
        As the Marine Corps looks to achieve balance across the five
    pillars of readiness after thirteen years of uninterrupted war, our
    efforts have been frustrated by two clearly tenuous variables. First,
    the continued high operational tempo of, and high demand for, Marine
    forces, and second, the continued budget uncertainty surrounding annual
    appropriations (i.e. sequestration and impacts). Both of these
    variables have been keenly and repeatedly felt throughout the Marine
    Corps all this year as we have protected near-term readiness at the
    expense of our long-term modernization and of our infrastructure
    investments. This reality has forced the Marine Corps' to make the hard
    choice to underfund, reduce or delay funding, which threatens our
    future readiness and responsiveness.
        As America's 9-1-1 force, your Corps is required to maintain an
    institutional capability, an operational balance, and an expeditionary
    mindset that facilitates our ability to deploy ready forces tonight.
    However, as we continue to face the possibility of sequestration-level
    funding for FY 2016, we may well be forced into adopting some short
    term or limited scope and scale variations for future unexpected
    deployments over the next few years. This means quite simply, that we
    will see increased risk in timely response to crises, in properly
    training and equipping our Marines to respond, and in their overall
    readiness to respond. By responding later with less and being less
    trained we may eventually expect to see an increase in casualties.
    Readiness and the Capacity to Respond
        With the support of Congress, the Marine Corps is committed to
    remaining ready and continuing the tradition of innovation, adaptation,
    and winning our Nation's battles. The challenges of the future
    operating environment will demand that our Nation maintain a force-in-
    readiness that is capable of true global response. America's
    responsibility as a world leader requires an approach to the current
    and future strategic landscape that leverages the forward presence of
    our military forces in support of our diplomatic and economic elements
    of power.
        As stated in the 2012 President's Defense Strategic Guidance, ``The
    United States will continue to lead global efforts with capable allies
    and partners to assure access to and use of the global commons, both by
    strengthening international norms of responsible behavior and by
    maintaining relevant and interoperable military capabilities.'' High-
    yield, relatively low-investment Marine Corps capabilities (ready and
    responsive air-ground-logistics forces) uniquely support this strategic
    approach.
                               current readiness
        Maintaining the readiness of our forward deployed forces during a
    period of high operational tempo while amidst fiscal uncertainty; as
    well as fiscal decline, comes with ever increasing operational and
    programmatic risk. Today, approximately half of the Marine Corps' home-
    station units are at an unacceptable level ofreadiness in their ability
    to execute wartime missions, respond to unexpected crises, and surge
    for major contingencies. Furthermore, the ability of non-deployed units
    to conduct full spectrum operations continues to degrade as home-
    station personnel and equipment are sourced to protect and project the
    readiness of deployed and next-to-deploy units. As the Nation's first
    responders, the Marine Corps' home-stationed units are expected to be
    at or near the same high state of readiness as our deployed units,
    since these non-deployed units will provide the capacity to respond
    with the capability required (leadership and training) in the event of
    unexpected crises and or major contingencies.
        Despite this challenge and imbalance, the Marine Corps continues to
    provide units ready and responsive to meet core and assigned missions
    in support of all directed current operational, crisis, and contingency
    requirements. However, we continue to assume long-term risk
    particularly in supporting major contingencies in order to fund unit
    readiness in the near term. Consequently, the Marine Corps' future
    capacity for crisis response and major contingency response is likely
    to be significantly reduced. Quite simply, if those units are not ready
    due to a lack of training, equipment or manning, it could mean a
    delayed response to resolve a contingency or to execute an operational
    plan, both of which create unacceptable risk for our national defense
    strategy as well as risk to mission accomplishment and to the whole-of-
    force itself. The following sections elaborate on some specific
    readiness challenges the Corps is facing today.
          current challenges to readiness and the capacitv to respond
        As the Nation's first responders, we firmly believe that the Marine
    Corps as a service, and in its entirety, is expected to be always in a
    high state of readiness. Today however, there are numerous challenges
    that have created a readiness imbalance, affecting our capacity to
    respond to future challenges with the required capability and
    leadership. For example, our home station unit's ability to train is
    challenged. Time is the essential component required to fix worn
    equipment and to train units to standard. A lower end-strength and
    unwavering and high unit deployment to dwell (D2D) ratios exacerbate
    time at home stations to prepare, train, and maintain. This, coupled
    with temporary shortages of personnel and equipment at the unit level,
    validate operational requirements that exceed resource availability,
    and a growing paucity of amphibious platforms on which to train, all
    contribute to degraded full-spectrum capabilities across the entire
    Service. As an example, a D2D ratio of 1:2 means your Marines are
    deploying for 7 months and home for 14 months before deploying again.
    During that 14-month ``dwell,'' units are affected by personnel changes
    and gaps (duty station rotations, schooling, and maintenance), ship
    availability shortfalls and growing maintenance requirements, equipment
    reset requirements (service life extensions and upgrades), degraded
    supply storages, training schedule challenges (older ranges and
    equipment, and weather) and more. These collective challenges factor
    into every unit's compressed and stressing task to remain constantly
    ready. In some case, the D2D ratio is even lower than 1:2 (MV-22
    squadrons, Combat Engineer units, and F/A-18 squadrons), placing
    considerable stress on high demand, low density units and equipment.
    Also concerning is the inability to assess the long-term health of the
    force at lower D2D ratios and the impact on overall force retention.
    Quite simply, despite OIF and OEF being ``over,'' the unstable world
    and ``New Normal'' is causing your Corps to continue to ``run hot.'' As
    referenced earlier, just over half of Marine Corps home-stationed units
    are at unacceptable levels of readiness. For example, Marine Aviation
    contains some of our most stressed units. As operational commitments
    remain relatively steady, the overall number of Marine aircraft
    available for tasking and or training has decreased since 2003. At that
    time Marine Aviation contained 58 active component squadrons and 12
    reserve component squadrons for a total of 70 squadrons.
        The Marine Corps has 55 active component squadrons today, three of
    which (2 VMM, and lVMFA) are in transition. Of the 52 remaining
    squadrons, 33 percent are deployed and 17 percent are in pre-deployment
    workups to deploy. Our minimum readiness goal to deploy is T-2.0, which
    is simply the cut line between a squadron trained to accomplish its
    core mission and a squadron that is not. To attain a T-2.0 rating, a
    squadron must be qualified to perform at least 70 percent of its
    Mission Essential Tasks (METs) (i.e. tasks required to accomplish the
    multiple missions that are or may be assigned to a unit). Currently,
    our deployed squadrons and detachments remain well trained and properly
    resourced, averaging T-2.17. Next-to-deploy units are often unable to
    achieve the minimum goal of T-2.0 until just prior to deployment. Non-
    deployed squadrons experience significant and unhealthy resource
    challenges, which manifest in training and readiness degradation,
    averaging T-2.96.
        The Marine Corps is actively and deliberately applying resources to
    maintain the readiness of deployed and next-to-deploy units. Our focus
    is to continue to meet all current requirements, while addressing the
    personnel, equipment, and training challenges across the remainder of
    the force. We are in the midst of a comprehensive review of our manning
    and readiness reporting systems and will develop a detailed plan to
    enhance our overall readiness during 2015.
        We are also committed to meet the growing expeditionary
    requirements of our combatant commanders (COCOMs). To meet COCOM
    requirements, the Marine Corps will be required to sustain a D2D ratio
    in the active component force of 1:2 vice a more stable, and time
    proven, D2D ratio of 1:3. The Marine Corps also has some high demand/
    low density units that maintain a current D2D ratio of less than 1:2,
    such as the (VMGR/KC-130) community. These communities are closely
    monitored for training, maintenance, and deployment readiness as well
    as deployment frequency. The Marine Corps will continue to provide
    ready forces to meet COCOM demands, but we are carefully assessing the
    impact of reduced D2D ratios on our training and quality of life across
    all units and occupational fields. What we do know is that the optimal
    size of your Marine Corps to meet the requirements of the Defense
    Strategic Guidance is 186,800 Marines. This optimal size gives the
    Marine Corps the capacity we need to meet current operational
    requirements demand with a D2D ratio closer to 1:3 which supports time
    for home station units to train and maintain. We continue to validate
    and support this assessment. Today, due to fiscal realities, the Marine
    Corps is adjusting its active duty end-strength to reach 182,000
    Marines by 2017. As we continue to downsize, we must emphasize the
    enduring national mission requirement to provide forces that can always
    meet today's crisis response demands.
        Another significant readiness challenge is the growing gap in the
    numbers of small unit leaders with the right grade, experience,
    technical skills and leadership qualifications associated with their
    billets. Specifically, our current inventory of Non-Commissioned
    Officers (NCOs) and Staff Non-Commissioned Officers (SNCOs) is not
    meeting our force structure requirements. The technical, tactical, and
    leadership demands on our NCOs and SNCOs has grown during 13 years of
    OIF and OEF. These Marine combat leaders have proven their mettle. We
    remain committed to fully and properly training them and their
    successors for the rigors of an unstable world with disaggregated
    operations against an asymmetric enemy in a distant and hostile
    environment. This dynamic directly affects our current and future
    training, maintenance, and discipline. We must train and retain
    adequate numbers of SNCOs and NCOs to preclude degraded crisis response
    readiness and ensure combat effectiveness. The Marine Corps' PB16
    military budget funds a fiscal year 2016 end-strength of 184,000 in our
    base budget and supports right-sizing our NCO ranks to provide our
    Marines the small unit leadership they deserve and which our Corps and
    nation need.
                           naval expeditionary force
        We share a rich heritage and maintain a strong partnership with the
    United States Navy. Sea-based and forward deployed naval forces provide
    the day-to-day engagement, crisis response, and assured access for the
    joint force in a contingency. The availability of amphibious shipping
    is paramount to both our readiness and to our overall ability to
    respond. The Marine Corps' requirement for amphibious warships to
    respond, for war plans, and for contingencies remains at 38 platforms.
    The Navy's inventory today is 31 total amphibious warships. When
    accounting for steady-state demands and for essential maintenance
    requirements we are seeing that far fewer platforms are readily
    available for employment. Simply put we have a serious inventory
    problem and a growing availability challenge.
        This is why the Marine Corps fully supports the Secretary of the
    Navy and Chief of Naval Operations' (CNO) efforts to increase the
    inventory and availability of amphibious platforms and surface
    connectors that facilitate our key concepts of operational maneuver
    from the sea (OMFTS) and ship-to-objective maneuver (STOM). The
    President's budget supports key investments in LPD-28, LX(R), and ship-
    to-shore connectors (SSC), and demonstrates our commitment to global
    maritime presence and to our Nation's mandate to sustain an amphibious
    capability that can respond to, deter, deny, and defeat threats on a
    global scale. We appreciate Congress providing a substantial portion of
    funding to procure a 12th LPD, and respectfully request that this
    committee continue to support full funding of that amphibious ship. The
    enhanced mission profiles of these new, improved and much needed
    platforms create operational flexibility, extended geographical reach,
    and surge capabilities for all our COCOMs.
        Naval investments in alternative seabasing platforms expand access
    and reduce dependence on land bases, supporting national global
    strategic objectives and providing operational flexibility in an
    uncertain world. The naval seabasing investments in the Mobile Landing
    Platform (MLP), the Large Medium-Speed Roll-on/Roll-off (LMSR)
    strategic sealift ship, and the (T-AKE) Dry Cargo and Ammunition Ship
    as part of the Maritime Prepositioning Ship Squadrons (MPS), coupled
    with the Joint High Speed Vessel (JHSV), Afloat Forward Staging Base
    (AFSB) and ship-to-shore connectors provide additional lift, speed, and
    maneuver capability to augment, yet not necessarily replace or
    substitute for proven Navy and Marine Corps amphibious combat
    capabilities. Although never a substitute for amphibious warships,
    particularly in a contested environment, these alternative platforms
    will continually complement amphibious ships and can enhance national
    readiness and ability to answer COCOM non-combat demands.
        While the President's Budget moves us in the right direction, it
    will take many years and a sustained effort to address the serious risk
    in the current inventory and availability of amphibious ships. The
    Marine Corps will continue to work closely with the Navy and Congress
    to implement the 30 year ship building plan and to address the current
    amphibious availability and readiness challenges.
    Building the Force of the Future
        As challenging as it has been to prepare Marines for the current
    fight, our force must adapt to the ever-changing character and conduct
    of warfare to remain ready, relevant, and responsive. Innovation and
    adaptability will be required to build the force of the future. For the
    last 14 years, the Marine Corps has applied a small but key percentage
    of our resources to providing Marines what tey need for today's fight.
    While individual Marines are our critical weapons system, we must
    outfit him with modem, reliable and useful gear and equipment. Because
    readiness remains our first priority in meeting our national security
    responsibility, our focus on an unrelenting demand for forces coupled
    with a declining budget has forced the Marine Corps to make difficult
    choices and to reduce investment in modernization in order to maintain
    current and near term readiness. We are consciously, by necessity,
    delaying needed modernization.
                             modernization efforts
        Our declining budget has forced the Marine Corps to make difficult
    choices at the expense of modernization to maintain current and near
    term readiness. In the current fiscal environment, the Marine Corps is
    investing only in essential modernization, focusing on those areas that
    underpin our core competencies. Today, we have placed much emphasis on
    new or replacement programs such as our Amphibious Combat Vehicle
    (ACV), a Joint Light Tactical Vehicle (JLTV), our CH-53K Heavy Lift
    Replacement, and the critical fifth generation F-35 Joint Strike
    Fighter (JSF). At the same time, our modernization resources are also
    necessarily focused on improving capabilities and extending the life of
    current systems in order to fill gaps that can be exploited by today's
    threats.
        In order to balance modernization across the capabilities of the
    MAGTF and ensure a ready and responsive force of the future, our two
    top priorities remain the ACV, to include science and technology
    efforts toward high-water speed capabilities, and the JSF, both of
    which provide the technology required to dominate our adversaries in
    the future. Additionally, our investments in Network On-the-Move
    (NOTM), Ground/Air Task Oriented Radar (G/ATOR), and other additional
    aviation platforms such as the MV-22, CH-53K, and UH-lY/AH-l Z programs
    are vital to the overall combat effectiveness and readiness of our
    future MAGTFs. We are also focused on and investing heavily in
    extending the service life and improving the interim capabilities of
    our legacy systems due to the time required to recapitalize needed
    capabilities while ensuring a smooth transition to future requirements.
        For example, the need for recapitalization of our 42-year old AAV
    is critical and the nation cannot afford to gap this capability. Rising
    annual maintenance costs for the AAV and other legacy systems compete
    for resources against modernization efforts that seek to replace them
    with modem combat capabilities (i.e. ACV). This required allocation of
    precious resources works against our other investment and
    recapitalization efforts. Additionally, for our legacy aircraft
    platforms, the focus is on modernization to make them relevant in
    tomorrow's fight while simultaneously providing a bridge to rearrange
    our aviation recapitalization efforts. Rapid procurement of these new
    systems is critical to solving both our serious current and future
    readiness problems.
        If we do not modernize, we will actually move backwards. Our
    adversaries continue to develop new capabilities exploiting any
    technology gaps associated with specific domains and functions. By
    under-resourcing equipment modernization we will ultimately fall
    behind. Increasing threats, the proliferation of A2/AD weapon systems,
    and the aging of key material capabilities present an unacceptable risk
    to forcible entry operations and our overall combat effectiveness if
    modernization continues to be diminished or halted.
        Modernization and innovation are more than just procurement
    programs. We will re-energize our MAGTF experimentation and test new
    tactics, techniques, procedures, equipment and concepts that will allow
    us to meet every challenge. We are maintaining our commitment to
    Science and Technology, and we continue to look for opportunities to
    expand our efforts in this critical area.
                    concept development and experimentation
        The current and future operating environment will remain volatile,
    unpredictable, and complex. To continue to deliver order from the
    chaos, we anticipate no lessening in the demand for Marine capabilities
    ranging from Amphibious Ready Groups with enhanced Marine Expeditionary
    Units (ARG/MEUs) and Special Purpose MAGTFs for crisis response as well
    as for more Marine Security Guards at our embassies and consulates
    (MCESG). Trends point to greater security challenges to our vital
    national interests almost everywhere. Therefore, as our Nation meets
    these future challenges, it will rely heavily on the Marine Corps to
    remain the ready, relevant, and responsive force of first resort. While
    there will be a degree of consistency in our missions, there is likely
    to be inconsistency in the operating environment, and we must be
    willing to experiment, take risk, and implement change to overcome
    challenges in those varied operating environments (threat, access,
    communications, etc.). As was the case prior to World War II, the
    quality and focus of our concept development, our expansion of science
    and technology, the :frequency and significance of our exercises, and
    our constant experimentation efforts will remain critical to our
    overall readiness, relevance, and indeed our mission success. The end
    state of our efforts to link concepts and doctrine to exercises and
    experimentation will be to develop and nurture the intellectual energy
    and creativity of individual Marines and of units. This will enable the
    Marine Corps to continue to be a leader in both tactical and
    operational innovation.
        A year ago we published Expeditionary Force 21 (EF-21), our Marine
    Corps capstone concept. EF-21 establishes our vision and goals for the
    next 10 years and provides guidance for the design and development of
    the future force that will fight and win in the future environment.
    Expeditionary Force 21 will also inform decisions regarding how we will
    adjust our organizational structure to exploit the value of regionally
    focused forces and provide the basis for future Navy and Marine Corps
    capability development to meet the challenges of the 21st Century.
    Developed in close coordination with the recent update of our maritime
    strategy (i.e. Cooperative Strategy 21 (CS21)), Expeditionary Force 21
    describes how the Marine Corps will be postured, organized, trained,
    and equipped to fulfill the responsibilities and missions required
    around the world. This comprises four essential lines of effort:
    refining our organization, adjusting our forward posture, increasing
    our naval integration, and enhancing littoral maneuver capability.
                              all volunteer force
        Our Marines and civilians are the foundation of who we are and of
    all that we do. We succeed because of our focus on recruiting,
    training, and retaining quality people. People are the primary means
    through which the Marine Corps remains ready and responsive in
    guaranteeing the defense of our great Nation. The resources we dedicate
    to recruiting, retaining, and developing high quality people directly
    contribute to the success of our institution. Thus, our commitment to
    attract, train, and deploy with the best quality Marines must always
    remain at the forefront.
        Today, the Marine Corps does not have the proper level of personnel
    stability or cohesion in our non-deployed units. Having to move Marines
    between units to meet manning goals for approaching often accelerated
    or extended deployment cycles creates personnel turbulence, inhibits
    cohesion, and is not visible in our current readiness assessment tools.
    This personnel turbulence affects our combat readiness and our ability
    to optimally train, retain, and take care of Marines. Moving forward,
    we will improve cohesion by increasing our individual and unit
    preparedness across the force as well as emphasizing consistency of
    leadership and personnel stability across that same force.
    Conclusion
        On behalf of the Marines and Sailors and their families, all of
    whom provide this Nation with its versatile and reliable force-in
    readiness, I thank Congress and this subcommittee for your continued
    interest in and recognition of our operational and fiscal challenges
    and our key contributions to national security. We are proud of our
    reputation for frugality and remaining one of the best values for the
    defense dollar. In these times of budget austerity, the Nation
    continues to hold high expectations of her Marine Corps, and our
    stewardship of taxpayer dollars. The Marine Corps will continue to
    answer the Nation's call to arms, meet the needs of the Combatant
    Commanders and others who depend upon our service, and operate forward
    as a strategically mobile force optimized for forward-presence and
    crisis response. Your continued support is requested to provide a
    balance across all five of our readiness pillars, so we can maintain
    our institutional readiness and our ability to remain responsive . . .
    as your predecessors wisely charged more than 60 years ago, ``to be the
    most ready when the nation is least ready.''

        Senator Ayotte. Thank you, General Paxton.
        We'll now receive testimony from General Spencer, who is
    the Vice Chief of Staff for the United States Air Force.
        Thank you, General Spencer.

      STATEMENT OF GENERAL LARRY O. SPENCER, USAF, VICE CHIEF OF
                     STAFF, UNITED STATES AIR FORCE

        General Spencer. Thank you, Madam Chair, Ranking Member
    Kaine, and Senator Rounds, and distinguished members of the
    subcommittee. Thank you for your continued support of America's
    airmen and their families, and for the opportunity to share the
    Air Force's current readiness posture.
        The United States Air Force is the most globally engaged
    air force on the planet, and our airmen are defending the
    Nation through a wide spectrum of activities, from dropping
    bombs and flying space assets to delivering humanitarian relief
    and protecting the homeland. We remain the best air force in
    the world. But, recent budget cuts, coupled with 24 years of
    combat operations, has taken its toll.
        Our airmen, your airmen, have always been, and will always
    be, the cornerstone of the Air Force. Combatant commanders tell
    us that our airmen continue to perform exceptionally well
    across the globe. However, we are the smallest and oldest air
    force we have ever been, while demand for air power continues
    to grow. This is not a complaint. We're happy that what we
    bring to the table is recognized as indispensable when it comes
    to meeting the Nation's objectives. But, I am concerned. In
    fact, I'm more concerned than I--today than I was when I
    testified last year.
        We have tankers that are, on average, 52 years old; bombers
    that are over 50 years old; and fourth-generation fighters that
    are, on average, 25 years old. In 1991, if we had used the B-17
    bomber to strike targets in Baghdad during the first Gulf War,
    it would have been younger than the B-52, the KC-135, and the
    U-2 are today. We have to modernize to maintain our
    technological advantage, and this is something that we've set
    aside, the last few years. Our potential adversaries have been
    watching us and now know what it takes to create the best air
    force in the world. They are investing in technologies and
    doing everything they can to reduce our current airpower
    advantage.
        Because we have the smallest and oldest air force in
    history, we need all of our airmen to be proficient in every
    aspect of their mission. Unfortunately, our high operations
    tempo has caused our airmen to only be proficient in the jobs
    they perform when they deploy. We simply do not have the time
    and the resources to train airmen across the full range of Air
    Force missions. I'm confident that, with your help, we can
    reverse this trend and regain our readiness. But, we will have
    to make some difficult choices to balance capacity, capability,
    and readiness, all of which have already been cut to the bone.
        Our fiscal year 2016 President's Budget submission aims to
    balance critical operational training and modernization
    commitments, but, even at this level, it will take years to
    recover lost readiness. We have already delayed major
    modernization efforts, cut manpower, and reduced training
    dollars.
        One final point. The capability gap that separates us from
    other air forces is narrowing. That gap will close even faster
    under BCA levels of funding. When sequestration first hit in
    2013, we saw the domino effect it had on our pilots,
    maintainers, weapons loaders, air traffic controllers, and our
    fighters and bomber squadrons. Readiness levels of those
    central to combat operations plummeted. In short, we were not
    fully ready. We cannot afford to let that happen again.
        To quote a young C-17 instructor pilot, ``I am committed to
    defending this Nation anytime and anyplace, but I need the
    training and equipment to be ready to perform at my best.''
    This is critical to answering the Nation's call to fly, fight,
    and win.
        I'd like to thank you all for the opportunity to be here
    today, and for your continued support of your Air Force. I'm
    now happy to take your questions.
        Thank you.
        [The prepared statement of General Spencer follows:]
                 Prepared Statement by General Larry O. Spencer
                                  introduction
        The United States Air Force has never failed to meet any threat our
    Nation has faced and establish an environment that was beyond the
    capabilities of our enemies to resist. Our capabilities of range,
    speed, and agility give our Nation an indispensable and qualitative
    advantage that is unparalleled today and we must retain them going into
    the future. Whether it's opening an aerial port to deliver humanitarian
    aid, flying a single sortie from middle-America to the Korea peninsula
    and back to send a clear message, dropping a bomb, or dropping a
    Brigade Combat Team into the conflict zone--we can reach out and touch
    anyone, anytime, at any place, in a matter of hours, not days. Since
    1947, Americans have been able to sleep soundly knowing that in every
    corner of the globe, the United States Air Force is ready.
        Through technology, ingenuity, and unparalleled training and
    expertise the Air Force provides our Nation and allies more precise and
    effective options. But readiness requires the right number of Airmen,
    with the right equipment, trained to the right level, and with the
    right amount of support and resources, to accomplish what the Nation
    asks us to do. While Airmen have performed exceptionally well in major
    combat operations such as those in Iraq, and Afghanistan, these
    operations come at a price. Today, continual demand for airpower,
    coupled with dwindling and uncertain budgets, leave the force with
    insufficient time and resources to train Airmen across the full range
    of Air Force missions. Proficiency required for highly contested, non-
    permissive environments has suffered, due to our necessary engagement
    in the current counterinsurgency fights.
        We recognize that there are no quick fixes. Even at the level of
    the President's Budget it will take the Air Force years to recover lost
    readiness. Our return to full-spectrum readiness must include the
    funding of critical programs such as flying hours, weapons system
    sustainment, and infrastructure, while also balancing deployment tempo,
    training, and exercises. We must also be technologically superior and
    agile enough to evolve ahead of the myriad of future potential threats.
        However, because of the current restrictive and uncertain fiscal
    environment we have been forced to make difficult choices within an
    incredibly complex security environment. Our current Service readiness
    and capacity are degraded to the point where our core capabilities are
    at risk. To correct this, the fiscal year 2016 President's Budget (FY16
    PB) preserves the minimum capability to sustain current warfighting
    efforts, and places the Air Force on a path toward balancing readiness
    with necessary modernization in order to meet evolving threats.
                      readiness today; readiness tomorrow
        The 2012 Defense Strategic Guidance (as updated by the 2014
    Quadrennial Defense Review) requires healthy and sustainable Air Force
    combat readiness, modernization and recapitalization programs. Since
    passage of the Budget Control Act, the Air Force has been forced to
    trade capacity in an attempt to preserve capability. We are now at the
    point where any further reduction in size equals a reduction in
    capability--the two are inextricably linked. Combatant commanders
    require Air Force support on a 24/7 basis, and the Air Force does not
    have excess capacity to trade away. If asked to accomplish multiple
    parts of the defense strategy, we will have to make difficult decisions
    on mission priorities and dilute coverage across the board. Unless we
    improve readiness levels, our full combat power will take longer to
    apply, will pull coverage from other areas, and will increase risk to
    our Joint and coalition forces.
        The FY16 PB is a step to alleviate some of that risk. It allows us
    to preserve our future readiness, including munitions inventories;
    protect our top three acquisitions programs; and protect investments
    such as the training aircraft system, cyber mission forces and the next
    generation of space systems. Our plan is to reduce risk in high-
    priority areas by accelerating the modernization of aging fleets and
    improving our installations around the country. We are focused on
    capabilities, not platforms--preserving and enhancing the agility and
    flexibility of the Air Force.
    Weapons System Sustainment
        Weapons system sustainment (WSS) is a key component of full-
    spectrum readiness. Years of combat demands have taken a toll across
    many weapons systems. We continue to see an increase in the costs of
    WSS requirements. These costs are driven by factors such as the
    complexity of new systems, operations tempo, force structure changes,
    and growth in required depot-level maintenance on legacy aircraft.
        If sequestration-level funding returns, it will hamper our efforts
    to improve WSS. Depot delays will result in the grounding of some
    aircraft. It will mean idle production shops, a degradation of
    workforce proficiency and productivity, and corresponding future
    volatility and operational costs. Analysis shows it can take up to
    three years to recover full restoration of depot workforce productivity
    and proficiency. Historically, WSS funding requirements for combat-
    ready forces increase at a rate double that of inflation planning
    factors. WSS costs still outpace inflationary growth, and in the
    current fiscal environment, our efforts to restore weapons systems to
    required levels will be a major challenge.
        The longer we fly our legacy aircraft, the more they will break and
    require increased preventative maintenance. We have tankers that are on
    average 52 years old, bombers that are over 50 years old, and fourth
    generation fighters that are an average of 25 years old. If we had kept
    WWII's B-17 bomber, and flown it in Operation Desert Storm 1991, it
    would have been younger than the B-52, the KC-135, and the U-2 are
    today. If we are not able to perform weapons system sustainment on our
    aircraft or modernize them so we can improve upon their speed, range,
    and survivability, we will lose our technological edge and superiority.
    Flying Hours and Training
        Our flying hour program is essential to full-spectrum readiness. If
    sequestration is implemented, it will affect our ability to accomplish
    flying and training requirements and our ability to meet full-spectrum
    operations. Readiness is not just influenced by funding, but also
    ongoing operations. Time and resources used to conduct current
    operations limit opportunities to train across the full-spectrum of
    missions. For example, the operational and combat demands over the last
    decade have eroded our ability to train for missions involving anti-
    access/area denial scenarios. To meet combatant commander requirements,
    we have had to increase our deployment lengths and decrease time
    between deployments, which affect our reconstitution and training
    cycles. Our high operations tempo has resulted in Airmen that are only
    proficient in the jobs they do when they deploy.
        To fix this problem and be able to meet an increasing demand for
    Air Force capabilities in future operations, we need the funding and
    the latitude to balance these rotational and expeditionary requirements
    with adequate full-spectrum training. The additional funding requested
    in the FY16 PB will help us recover flying hour-related readiness due
    to the fiscal year 2013 sequester and put us on a steady path toward
    full recovery.
    Operational Training Infrastructure (OTI)
        Full-spectrum training for combat against a high-end adversary
    requires specific investment and emphasis on an integrated training and
    exercise capability. This includes the availability and sustainability
    of air-to-air and air-to-ground training ranges, fully augmented by,
    and integrated with, virtual training in simulators and with
    constructive models to represent a high-end adversary. This is what we
    call our Operational Training Infrastructure (OTI). Our ability to
    effectively expose our forces to a realistic, sufficiently dense, and
    advanced threat capability cannot be accomplished without our focus on
    OTI.
        OTI becomes critical when you consider that we must expand our 5th
    generation weapon systems. These systems are so advanced that
    challenging our operators in live training environments while
    protecting the capabilities and tactics of these systems is
    problematic. Our approach to OTI will address these training shortfalls
    while maximizing the value of every training dollar.
        In addition to investments in simulators as part of OTI, our ranges
    are used for large-scale joint and coalition exercises that are
    critical to training in realistic scenarios. We intend to sustain these
    critical national assets to elevate flying training effectiveness for
    the joint team and improve unit readiness. The same is true for our
    munitions. The FY16 PB includes funding to addresses the shortfalls in
    our critical munitions programs and to accelerate production and reduce
    unit cost.
    Space Readiness
        Space-based capabilities and effects are vital to US warfighting
    and the Air Force remains committed to maintaining the advantages this
    domain provides. Potential adversaries are developing and fielding
    capabilities to deny us these advantages and are also fielding their
    own space capabilities to support their terrestrial warfighting
    operations. We now recognize that space can no longer be considered a
    sanctuary. In order to deter and defeat interference and attacks on US
    space systems we must improve space domain mission assurance
    capabilities against aggressive and comprehensive space control
    programs.
    Nuclear Readiness
        The FY16 PB strengthens the nuclear enterprise, the number one
    mission priority of the Air Force. The Air Force's intercontinental
    ballistic missiles and heavy bombers provide two legs of the Nation's
    nuclear triad. The FY16 PB funds additional investments across the FYDP
    to sustain and modernize the ICBM force and funds 1,120 additional
    military and civilian billets across the nuclear enterprise as part of
    the Secretary of the Air Force-directed Force Improvement Program.
                                   conclusion
        A ready, strong, and agile Air Force is a critical component of the
    best, most credible military in the world. Air Force capabilities are
    indispensable to deterrence, controlled escalation, and destruction of
    an adversary's military capability . . . as well as development,
    stability, and partnership-building. Today's Air Force provides America
    an indispensable hedge against the challenges of a dangerous and
    uncertain future, providing viable foreign policy options without
    requiring a large military commitment on foreign soil.
        Such a force does not happen by accident; it must be deliberately
    planned and consistently funded in order to be successful. Continued
    investments in Air Force capabilities and readiness are essential to
    ensuring that the Air Force maintains the range, speed, and agility the
    Nation expects. Regardless of the future security environment, the Air
    Force must retain--and maintain--its unique ability to provide America
    with Global Vigilance, Global Reach, and Global Power.

        Senator Ayotte. Thank you, General Spencer.
        In light of the fact that we've had President Ghani here, I
    wanted to, in particular, ask General Allyn and General Paxton
    about what is happening on the ground in Afghanistan. In--you
    know, in particular, I was pleased to hear the President's
    announcement this week that he has decided to leave 9,800
    troops in Afghanistan until the end of the year. However, it
    seems to me that, as we look forward, having spoken to General
    Campbell and others about the situation in Afghanistan, that,
    even after this year, the most prudent course forward would be
    a ground--a conditions-based determination of what we do with
    those 9,800 troops. So, could you speak to that issue for me,
    in terms of where we are in Afghanistan and the needs we will
    have, going forward? You know, and I think one of the things
    all of us took from the President's speech today is, we
    actually have a partner that we can work with. That is
    refreshing.
        So, General Allyn?
        General Allyn. Thank you, Madam Chair.
        I was fortunate to be in Afghanistan with General Campbell
    the first week of February, and I had an opportunity to deploy
    down to be with both of our divisions that are forward,
    providing mission command--one from Kandahar, at Regional
    Command South, Tactical Air Command South (TAC-South), and the
    other one in TAC-East, from the 3rd Infantry Division stationed
    at Bagram. What was very clear to me as they were posturing for
    the potential to have to draw down to the directed numbers by
    the end of the year was that we had increased the ratio of our
    soldiers to contractors to a level that was what I would call
    the ``razor's edge of risk.'' We had contractors doing that
    which soldiers need to do to assure the security of our forces.
    It was really driven by the force manning levels that General
    Campbell was posturing for to accomplish the mission.
        I also had an opportunity to meet with two of the senior
    commanders from the Afghan Security Forces that I had served
    with in 2011 to 2012 in Regional Command East, and I asked for
    their assessment of where they thought the Afghan Security
    Forces were and what gave them concern. They were, overall,
    very optimistic, very determined, and very confident that they
    could weather the battle against the Taliban if they had the
    critical enabling capability that they required from--you know,
    from the United States--and, in specific, some of the--closing
    the gap for them, in terms of their aviation and their close
    air support capability that is not yet fully developed, and to
    continue to mature their sustainment capacity. Both efforts are
    well underway by the joint team that is there on the ground in
    Bagram under General Campbell's leadership. I concur with you
    that the ground that we have been able to regain with the
    partnership between General Campbell and President Ghani is
    very, very inspiring, certainly to us, who have not had that
    experience in the last couple of years, but it's also very
    inspiring to the Afghan Security Forces. Because President
    Ghani has personally gone down to spend time with his forces
    and communicate his intent to enable them to fight and win. So,
    I think it bodes well as we look forward, ma'am.
        General Paxton. Yeah, thank you, Madam Chair. I, too, have
    had the opportunity on many occasions to be over in Afghanistan
    and, just several months ago, with our Marine Expeditionary
    Brigade (MEB) Alpha, who was down in Helmand Province before
    they pulled out. I'd echo what General Allyn said a moment ago,
    in that the conditions for success in Afghanistan have been
    set, both at the tactical level as well as at the strategic
    level. Making events on the ground and the commitment to
    continue there be more conditions-based than time-based is
    always a good thing. I feel good for General Campbell and our
    national leadership that, by making things condition-based, we
    have set ourselves on a path for success over there, and set
    the government as well as the Afghan National Security Force on
    the conditions for success.
        President Ghani committed as much to the Department of
    Defense and the Armed Forces when he was over at the Pentagon
    the other day. So, I think we're in a good trajectory now,
    ma'am.
        Senator Ayotte. Thank you both.
        I wanted to follow up with General Spencer and Admiral
    Howard on the issue of--we're engaged with, obviously, still
    the mission against ISIS, which has involved significant use of
    our fighters that, if we had met probably a year ago, we
    wouldn't have been talking about some of the additional use of
    our fighter force in regard to this fight that we face and
    challenge that we face there. Can you help update the--both of
    you update me on where--what are our challenges, in terms of
    having enough fighters, given that this is sort of a situation
    that we're, on the air, really helping the Kurds and the Iraqis
    on the ground fight the fight? You know, where do you see that,
    in terms of extra push on the force? As we do the
    authorization, what would you like us to think about that, just
    in terms of the current situation on the ground in Iraq and
    Syria?
        Admiral Howard. Thank you, Senator.
        So, as I mentioned in my opening statement, as we maintain
    carriers about--the George Herbert Walker Bush was there, and
    first the fighter size started to fly nontraditional
    Intelligence, Surveillance and Reconnaissance (ISR), but then
    quickly went into strike missions. As we stay committed in
    these endeavors, we will most likely maintain carrier presence
    over there. What we're finding is, we're flying the aircraft at
    a higher operational tempo. So, as we move forward and we
    continue staying engaged in support to the land components, we
    end up flying these aircraft much longer, longer distances, and
    then we end up consuming their readiness. We're seeing that
    play out as we try and extend the life of these fighters,
    particularly the legacy Hornets, from 6,000 hours to 10,000
    hours.
        Then, as we go through and we do maintenance on them, we're
    finding that the additional flight time has created
    deterioration problems that we just weren't expecting. So, as
    Senator Kaine pointed out, it would have been this morning's
    testimony, the more--the higher the OPTEMPO and the more we're
    engaged, the more we're flying, and then the more hours we put
    on these aircraft, and then the longer it is to return them
    back to a flyable status. So, we're clearly committed to the--
    any--the support that we're tasked to provide, but it does
    consume readiness.
        Senator Ayotte. General Spencer?
        General Spencer. Yes. Madam Chair, first of all, I echo
    everything that Admiral Howard had--Admiral Howard said. I'd
    like to--but, let me add a couple of things to give you some
    context.
        Back during Desert Storm, in the Air Force, we had 133
    combat aircraft squadrons--133. We--during Desert Storm, we
    deployed 33 forward, so we had a lot of squadrons left to do
    something else if something came up in the world. Today, we
    have 54 fighter squadrons--54 total. So, I would ask you to
    think back, if we were in Desert Storm today and we deployed 33
    forward. So, that's problem number one.
        The other issue is--and that we've--I assume we'll get
    into, here--is readiness, because a lot of folks assume you
    deploy folks to war and they are as ready as they can get. But,
    that's not the case in a counter insurgency (COIN) fight,
    because they're getting a lot of training, flying and dropping
    smart munitions, but they don't have the sophisticated surface-
    to-air threat that they would have in a more--in a higher-level
    fight. So, part of our challenge is, we are continually
    deploying folks to the current war. We don't keep them back
    home long enough to go out and train on these higher-level
    threats.
        The final challenge I would mention is, we are using up a
    lot of smart munitions, and--which are expensive--and the
    interesting thing about the OCO budget is, overseas contingency
    operations (OCO) allows us to replace smart munitions that have
    already been expended. It doesn't let us project ahead.
        Senator Ayotte. Really?
        General Spencer. So, we--we're always chasing ourselves,
    getting behind in the amount of munitions we have.
        So, to add a couple with Admiral Howard's comments, I
    couldn't agree with you more.
        Senator Ayotte. Thank you.
        I'd like to turn it over to Senator Kaine.
        Senator Kaine. Thank you, Madam Chair.
        Thanks, to the witnesses, for your testimony.
        General Allyn, you said something--I tried to write it down
    fast, and I'm having a hard time reading my handwriting, during
    your testimony, but I think it was, ``We have enough readiness
    for immediate consumption, but not enough for a contingency.''
    Is that basically the thought you were expressing?
        General Allyn. Yes, it is, Senator Kaine. We--for the past,
    you know, in--about 6 months after sequestration, our readiness
    had degraded to about 10 percent of our brigades being ready
    for a global contingency. The next 18 months, we rebuilt that
    to just above 30 percent. But, we have been holding steady at
    30 percent now for about 4 months, because, as fast as we
    generate the readiness, it's being consumed.
        As an example, when the ebola crisis hit----
        Senator Kaine. Yeah.
        General Allyn.--you know, within days, we deployed the
    101st Airborne Division, that was a force training and ready to
    go to Afghanistan, to divert in and provide essential support
    to the U.S. Agency for International Development (USAID) to
    fight and abate the Ebola crisis. We also deployed a Brigade
    Combat Team of the 82nd Airborne Division into Iraq to provide
    the plus-up and advise-and-assist capability that was required
    in Iraq. Their readiness was, you know, absolutely at the top,
    because they had just handed off the Global Response Force
    mission to the 2nd Brigade of the 82nd. We had sort of counted
    on that brigade coming off to provide some surge capacity for a
    number of months, but, instead, you know, a requirement
    emerged, and we met it, just as we always will.
        So, as we've been, you know, being good stewards of the
    resources you are giving us to generate readiness, we are also
    responding to emergent requirements.
        Senator Kaine. Right.
        General Allyn. In 2014, about 87 percent of the emergent
    requirements, we met as an Army, as we will continue to do, but
    it does speak to the--really, the twofold challenge of building
    readiness. You know, we can generate additional readiness, but
    we can't control the demand.
        Senator Kaine. Right. Right. Is that just basic, kind of,
    phraseology, ``We have readiness for immediate consumption, but
    not for a contingency"? Would that be kind of a fair statement
    that all of you from your respective branches would agree with?
        Admiral Howard. So, in particular for the Navy, we look at
    the readiness of the units that we deploy and then the forward-
    deployed units, and then we've always kept a level of readiness
    for the units in order to surge, those that respond to a
    contingency, just as General Allyn described. Right now we're
    at our lowest surge capacity that we've been at in years, and--
    so, we're able to have two carriers out and about, but we've
    only got one in backup. The same with the amphibious ready
    group (ARG). We've got two out and about and one in backup.
        Our goal is to--with this budget, to get us back and
    increase that readiness and meet our own goals of two--having
    two carriers deployed and three ready to surge, approximately
    half the force.
        So, yes, as time has gone on, we have literally consumed
    the readiness, and then the readiness of the forces that are
    next in the wicket.
        Senator Kaine. Great, thank you.
        General Paxton?
        General Paxton. Thank you, Senator Kaine.
        I guess the short answer is, absolutely, we generate
    readiness, but we consume it as fast as we generate it. We, as
    a Corps, are focused primarily on crisis response. As we do
    that, we are mortgaging our future for sustainment and for
    modernization, and we're also reducing the at-home or home-
    station training and availability of units.
        I can give you two examples, if I may, Senator. One is in
    the Africa Command (AFRICOM) area, and one is in the Central
    Command area. In both of those geographic combatant commanders
    today, we have a Special Purpose Marine Air-Ground Task Force.
    We would like to say that is kind of like a MEU, a Marine
    Expeditionary Unit. It is not as sustainable and expeditionary
    ashore, and it certainly doesn't have the power projection and
    sovereign capability that we would like to have coming off of
    an amphibious platform, a ship. But, we generated those two
    capabilities in immediate response to combatant commander
    requests. In the case of AFRICOM, it was to help with some
    security-force arrangements at some embassies, to work some
    train, advise, and assist missions and develop partnership
    capacity. Then, in the Central Command area of responsibility
    (AOR), it was because of specific risks at two embassies, and
    then also to start working on train, advise, and assist
    missions with the Iraqi Security Forces.
        But, in both of those cases, that has now consumed what
    would have been home-station readiness, because it's now
    forward deployed. It has brought us closer to a one-to-two
    depth-to-dwell, which creates stress on the force. It further
    exacerbates the age and the maintenance of our equipment.
    Despite the good work of my shipmate and where the Navy's
    trying to go with capital investment, it highlights the fact
    that we already have a paucity of amphibious ships by
    inventory, and that's also exacerbated by the fact that they
    have maintenance challenges keeping them in the yard. So, we
    can't generate enough sovereign launch-and-recovery capability
    for the Nation that we have to do these things with a smaller
    unit and go what we call ``feet dry'' ashore. So, we consume it
    as soon as we generate it, yes, sir.
        Senator Kaine. General Spencer?
        General Spencer. Yes, sir. The--first of all, a similar
    story from--for the Air Force. The combat air forces that we
    have right now, less than 50 percent are fully spectrum ready--
    less than 50 percent. Let me give you a couple of examples,
    because, again, we're--right now we're just talking about
    combat air forces. We haven't talked about nuclear, we haven't
    talked about ISR, we haven't talked about space. But, let's
    talk about ISR for a second.
        I mean, right now we have been in a position of surge in
    our ISR caps since 2007. That does not define a surge. So, we
    are essentially----
        Senator Kaine. Because nobody ever asks for less ISR.
        General Spencer. That's exactly right.
        Senator Kaine. It just continue--it continues to----
        General Spencer. It continues----
        Senator Kaine. Yeah.
        General Spencer.--it has exploded--the demand has exploded.
    So, we have been staffed, if you will, for 55 cap since 2007,
    flying 65. We've--we surged, that entire time. So, we have
    essentially at our wits' end at the--where we are now, because
    we've got--remotely piloted aircraft (RPA) pilots are that we
    have just worked to the point where we are worried that we--
    whether we can retain them, or not, and whether they will stay.
        Now--so, when we first started ISR, as you know, we did a
    combination of things. We brought in pilots from other
    airplanes, other weapon systems, brought them in, taught them
    how to fly RPAs, and we also created a schoolhouse to train new
    RPA pilots.
        We've now reached the point where the new RPA pilots are
    coming up to the point where they can separate. We have asked
    them all, in a survey, ``Are you going to take the bonus and
    stay?'' Roughly 30 percent say they'll stay. We've already
    reached a point where our pilots can go back and fly other
    weapon systems, and we're telling them they can't go back. So,
    we're asking for volunteers to come back in, we're increasing
    their bonuses. We're asking for Guard, you know, to volunteer.
    We're--we have a series of things we're doing to try to make
    that enterprise healthier, but it's just an indication of what
    the current Ops Tempo has done. I can't--I want to footstop
    that, because General Paxton mentioned it. The Ops Tempo that
    we're under now has now allowed us to bring the--where we are
    down low enough so we can----
        Senator Kaine. Yeah.
        General Spencer.--train and get ready to go again.
        Senator Kaine. Right. Well, I'm over time, but just to say,
    you know, if we have, essentially, a force that's ready for
    immediate consumption, but we don't really have the contingency
    ability, you've just got to look at the world and say, ``So,
    are we in a world without contingencies, or are we in a world
    that is likely to throw some contingencies?'' The answer to
    that is just as plain as everyday's front page. We are in a
    contingency-rich world right now.
        So, thank you, Madam Chair.
        Senator Ayotte. Senator Rounds.
        Senator Rounds. Thank you, Madam Chair.
        Thank you for your service.
        Admiral Howard, a week ago today we had a group of South
    Dakotans in for a meet-and-greet. One of the guys was about my
    age, brought in and was very proud of the fact that in his
    wallet he was carrying a picture that his son had taken at his
    first solo flight in an F/A-18. In doing so, we could see the
    pride. But, he said something that was concerning to me, and
    that was that it was just unfortunate that it was taking
    approximately 18 months for them to reach a certain level of
    readiness, where, if they would have had the parts to keep the
    aircraft in the air, it would have taken normally about 12
    months. It seems to me that, if that anecdotal information
    being shared is accurate, that you're going to have a tough
    time coming up with the pilots, in a regular order of
    operation, just to replace and keep up with the readiness
    necessary for the folks that are working right now in combat
    areas.
        Could you visit a little bit about--number one, is my
    estimate--or is my information accurate, in terms of the
    challenges you've got right now with keeping aircraft in the
    air and operational? Second of all, with OCO funding the way
    that it's set up right now--and I'm going to ask this of all of
    the members here--is there something that we can do, with
    regards to the limitations that we've got, to where we can
    modify OCO somehow so that you can access funds that might
    otherwise be there, but not available for what your immediate
    needs are?
        Admiral Howard. Thank you, Senator.
        Perhaps a slightly different perspective. This gets down to
    that 2013, when we sequestered, we furloughed some of our
    artisans and engineers, and then we created a backlog in our
    aviation depots. So, when we're looking at the throughput of
    those aviation depots, coupled with the aging aircraft, and
    then as we open up those older F/A-18s and discover that, by
    flying them longer, there's more corrosion, that backlog just
    increased. So, we already had the--have and are living with the
    impact of that short period of sequester. We now are in the
    timeframe where we are hiring the artisans as quickly as we
    can, several hundred this year, to help get us to being able to
    assess those aircraft quickly and then repair them as quickly
    as we can.
        This is where OCO has been very helpful. So, we have our
    fundamental aviation maintenance account, and then we've
    plussed-up that maintenance account to help get that throughput
    up to where it needs to be, and to decrease that backlog.
        So, for us, right now the limitations for the depot is not
    the money. The limitation is literally getting the people hired
    and in place; for the people who are new, getting them trained.
    But, there's also another piece to it. I think there's a trust
    factor there, that, when we want to bring people--proud
    civilians in to do all the support for our aircraft, or whether
    it's ships, they have to trust that the work's going to be
    there, that they can live their lives, pay their mortgages, and
    not worry about being furloughed, so that they want to have a
    job with the government.
        So, we know we have a backlog, and we expect to be able to
    clear that up in 18 months. But, all bets will be off if we
    sequester again. Then, you're right, then it gets down to, not
    just, ``Do we have the aircraft for our pilots to train in?"--
    but, when we sequestered last time, I was the Deputy Commander
    of Fleet, and I had the very unhappy job of going down and
    talking to a cruiser community officer (CO) and his chiefs and
    his crew, because we weren't going to be able to get that ship
    underway. We talked about what it meant for their
    qualifications, what it meant for the--their ability to serve
    at sea. If people can't do their jobs, it's an immense
    dissatisfier.
        Thank you.
        General Allyn. Senator Rounds, in terms of the OCO
    flexibility that's required, clearly OCO has been critical for
    us to meet the readiness and the equipment recovery,
    replenishment for our forces that have been deployed in support
    of the countless operational requirements, both emerging and
    known. We've been thankful for that funding. But, as you talk
    about a wider application of OCO in the future, it needs to be
    more flexible. It must be more flexible. Because, otherwise, we
    cannot use it for all the readiness requirements that we have,
    and certainly the year-to-year application of it----
        Senator Rounds. Sir, if I could, would you get us a list of
    what you need the flexibility on that we may be able to look
    at, in terms of OCO funding available?
        General Allyn. Yes, sir, we will.
        [The information referred to follows:]

        General Allyn. The Army, like each of the other services, needs the
    fiscal flexibility to address the uncertainty of funding we are dealing
    with, in a world were instability is creating increased overseas
    requirements. What we really need is sufficient base funding, but where
    feasible, we need broader discretion on the use of already appropriated
    Overseas Contingency Operations (OCO) funds in order to maintain the
    readiness of our formations and to respond to new missions. An example
    is what has occurred in Europe due to the Russian annexation of Crimea.
    This created a demand for the Army to defer sending an active component
    Brigade Combat Team to Kosovo, and instead, we sent it to Eastern
    Europe to deter and assure. To backfill that brigade, which was
    responding to a named operation, we mobilized a National Guard unit to
    go to Kosovo. Current OCO rules do not allow us to use OCO to pay the
    mobilization costs of the National Guard unit, instead we used base
    funding and had to reduce the readiness of other units to pay for those
    costs. Allowing for more flexible use of OCO, for direct and indirect
    impacts to named operations that may not occur in the geographic area
    of the named operation, would greatly improve our readiness.
        Admiral Howard. I have nothing further to add to my response.
        General Spencer. Senator Rounds' question was directed to General
    Allyn, not General Spencer.
        General Paxton. The largest issue concerning flexibility in OCO
    funding is timing. The Marine Corps begins to plan its requirements for
    the OCO budget approximately 18 months before the funding would likely
    be made available. Even with our best forecasting, requirements will
    change during the year of execution, requiring transfers between
    accounts, many of which require Congressional approval.
        Additionally, the planning process for long-term modernization,
    sustainment and upgrade programs requires a lengthy, multi-year
    timeline. Since the OCO budget is developed outside the normal
    Planning, Programming, Budgeting and Execution process, it is difficult
    to use on critical shortfall procurement items in the current year.

        Senator Rounds. Thank you.
        General Paxton. Yeah, thank you, Senator Rounds.
        If I may, two things. Number one, to follow up on Vice
    Chief of Naval Operations' (CNO) comments, when we have a
    challenge with our maintenance and the dollars for
    maintenance--and you used F-18s as an example. We call it RBA,
    Ready Basic Aircraft. Those are the ones that are through the
    upgrades, modernization, and they're ready on the flight line
    to take off. When those aircraft are delayed, either because we
    don't have money for parts, money for engineers, or money to
    actually move the aircraft to the depot, we still have pilots
    who are waiting to fly. So, now we have more pilots than we
    have aircraft. Sometimes, if we have a higher demand signal,
    those pilots may actually go forward. So, the time they have
    available to train to them when they get back is shorter. So,
    you can see the downward spiral that happens, because then you
    have more pilots with a shorter-term time, with less aircraft
    to train on, and then you get in this training readiness spiral
    that goes down.
        If you exacerbate that by the fact that some of those
    flight requirements actually have to come from the deck of the
    ship that you need bounces on carrier calls or that you need
    night vision goggle ops, the minute you perturb the
    availability of a ship or an aircraft, the spiral starts, and
    it's really hard to regain.
        To your second question, on OCO dollars, always helpful.
    We'll all work together to get you examples of how that would
    help. But, I'd just like to be on the record, sir, that the OCO
    dollars are insufficient to the problem we have right now. I
    mean, they are single-year dollars. It's a short planning
    horizon. It's actually the BCA caps and it's the ability to
    forecast across the Future Years Defense Program (FYDP) to
    start long-term modernization programs and sustainment and
    upgrade programs that will eventually allow us to not only
    handle the crisis, but to handle the contingency we need
    because we have enough readiness at home station.
        Thank you, sir.
        General Spencer. Senator, in terms of OCO specifically,
    flexibilities of where you may--might be able to help, I
    already mentioned one. So, there are certain things, like
    munitions, that are after-the-fact. So, we put, in our OCO
    submission, munitions that we used last year, but we can't put
    in OCO submission what we plan to use this year. So, again,
    we're always a year behind.
        Timing is really critical, because if the OCO budget comes
    late in the year, that does a lot of things to us. One, we are
    trying to plan, hoping on the come, not exactly sure what we'll
    get passed. There is actually a law that says you have to
    obligate 80 percent of our own end money by July. So, if the
    money comes late, we've got a problem there that we have to
    work through.
        We're all afraid to death one of these days, if OCO goes
    away, and a lot of the things that are being funded in OCO,
    quite frankly, will end up in our base. How is that going to
    work? You know, in the Air Force, for example, we have several
    bases in the theater right now that we've been told are going
    to be, quote/unquote, ``enduring,'' which means we'll probably
    hang onto those bases. They're being funded by OCO. What
    happens when OCO goes away? How do we get that money into the
    base?
        Finally, as General Paxton mentioned, planning is a really
    big deal, because--particularly in a procurement account. So,
    if we're going to buy a weapon system, if we're going to pay
    for F-35s or do a multiyear for C-130s, it--that's really
    difficult to do if you're trying to do that one year at a time,
    because you don't know what's going to come in the next few
    years. So, to the extent that those type of purchases can--you
    know, I've been told that there's a--there is--that we have had
    a multiyear OCO in the past, or a supplemental. I don't know if
    that's under consideration. But, the real answer for us is if
    we can get that money in the base, that would really be
    helpful.
        Senator Rounds. Thank you, Madam Chair.
        Senator Ayotte. Thank you.
        It would be really helpful to us, especially those of us
    that serve jointly on the Budget and Armed Services Committee,
    if all of you could submit to us what you think, in terms of
    flexibility for OCO, because we don't know how this story ends,
    this year, and just--you know, you're, I'm sure, aware of
    things that happen on the floor on the budget and all that. It
    would be helpful for us to understand that. If the plus-up ends
    up being in the OCO line versus the base budget, what do you
    really need, to do what needs to be done? I know it's not
    ideal. Frankly, there are many of us that want to deal with the
    overall BCA in solving it. I'm still committed to doing that.
    But, you know, we've got to do what we've got to do around
    here. So, just--if you can get that to us, it would be
    helpful--all of the branches--to understand what you really
    need.
        [The information referred to follows:]

        General Allyn. Receiving OCO funding instead of base funding for
    fiscal year 2016 would allow the Army to conduct its missions and
    achieve readiness targets provided that appropriation language and OMB
    interpretation fully allowed OCO dollars to be spent on base
    requirements. However, in the long term, using OCO to circumvent Budget
    Control Act caps would put Army readiness at risk, because steady,
    predictable base funding is the key to long term, enduring readiness.
        Admiral Howard. What we really need is what we have included in the
    fiscal year 2016 Navy budget submission. As we look to the future, the
    Navy will continue to be globally deployed to provide a credible and
    survivable strategic deterrent and to support the mission requirements
    of the regional Combatant Commanders. Global operations continue to
    assume an increasingly maritime focus, and our Navy will sustain its
    forward presence, warfighting focus, and readiness preparations. We see
    no future reduction to these requirements. The fiscal year 2016 Navy
    budget submission addresses the challenges to achieving the necessary
    readiness to execute our missions.
        Overseas Contingency Operations funding is meant to fund
    incremental costs of overseas conflicts such as in Afghanistan and
    Iraq. OCO does not provide a stable, multi-year budget horizon. Our
    defense industry partners need stability and long term plans--not
    short-term fixes--to be efficient and cutting-edge. OCO is dispiriting
    to our force. Our personnel, active, reserve and civilian and their
    families deserve to know their future more than just one year at a
    time.
        The Navy appreciates Congress' continued action to explore
    alternative paths that do not lock in sequestration. Any funding below
    our Navy budget submission requires a revision of America's defense
    strategy. Sequestration would outright damage the national security of
    this country.
        General Spencer. Question. It would be really helpful to us,
    especially those of us that serve jointly on the Budget and Armed
    Services Committee, if all of you could submit to us what you think, in
    terms of flexibility for OCO, because we don't know how this story
    ends, this year, and just--you know, you're, I'm sure, aware of things
    that happen on the floor on the budget and all that. It would be
    helpful for us to understand that. If the plus-up ends up being in the
    OCO line versus the base budget, what do you really need, to do what
    needs to be done? I know it's not ideal. Frankly, there are many of us
    that want to deal with the overall BCA in solving it. I'm still
    committed to doing that. But, you know, we've got to do what we've got
    to do around here. So, just--if you can get that to us, it would be
    helpful--all of the branches--to understand what you really need.
        Answer. The fiscal year 2016 President's Budget supports our
    critical needs to execute the defense strategy, but we made tough
    choices in capacity and capability / modernization. The Air Force does
    not support any reductions to the President's Budget and the short term
    solution of using OCO does not address the long term budgeting
    challenges created by the Budget Control Act (BCA). Further, this short
    term solution does not provide the necessary BCA relief for the other
    Federal Agencies that the Air Force works with such as Homeland
    Security and Department of Energy. Without relief for the other Federal
    Agencies, our partner missions will be at risk. Most importantly, this
    solution does not move us towards a more stable budget environment that
    is critical to long term strategic planning to meet the Defense
    Strategic Guidance and protect the Homeland.
        General Paxton. The largest issue concerning flexibility in OCO
    funding is timing. The Marine Corps begins to plan its requirements for
    the OCO budget approximately 18 months before the funding would likely
    be made available. Even with our best forecasting, requirements will
    change during the year of execution, requiring transfers between
    accounts, many of which require Congressional approval.
        Additionally, the planning process for long-term modernization,
    sustainment and upgrade programs requires a lengthy, multi-year
    timeline. Since the OCO budget is developed outside the normal
    Planning, Programming, Budgeting and Execution process, it is difficult
    to use on critical shortfall procurement items in the current year.

        Senator Ayotte. I wanted to ask, General Allyn, can you
    give us an update on end strength and where we are, in terms of
    numbers, on end strength? How many people have we had to use
    involuntary terminations for in 2014? What's been the status of
    those individuals? You know, are they--are there people that we
    have in combat that we're giving involuntary terminations to?
    Then, you know, one thing I think that's fairly powerful as we
    look at--if we go to sequester, where does that put our end
    strength? I know we've talked about it in the larger committee.
    But, also, what does that mean, in terms of involuntary
    terminations?
        I really want people to understand. I think this committee
    understands very well. In some ways, when we talk about
    sequester, when you talk to the Armed Services Committee, a
    little bit like preaching to the choir, but we want to get this
    word out also to the broader Senate. So, if you could comment
    on the involuntary termination issue, end-strength numbers. I
    would also then ask General Paxton to follow up the same with
    the Marine Corps.
        General Allyn. Yes, Madam Chair. The bottom line is, we are
    at about 498,000 today in the United States Army, headed toward
    a end-of-fiscal-year number of 490,000 and budgeted in the,
    Program Objective Memorandum (POM) to go down to 450,000. To
    give you the broader answer first, to get to 450,000 soldiers,
    as has been directed by our current budget, that will require
    the involuntary separation of 14,000 soldiers. On average--
    that's officers and noncommissioned officers--on average, it's
    about 2,000 per year. Okay? So, fiscal year 2014 was about
    2,100 soldiers. Just over 50 percent of those soldiers served
    over two or more combat tours. So, these are soldiers that
    answered the call multiple times to meet the requirements that
    the Nation had. They were----
        Senator Ayotte. Two or more combat tours.
        General Allyn. Two or more combat tours for 50 percent of
    that--those that we were asking to leave involuntarily. Now,
    first and foremost, this is not a choice the United States Army
    took. This is a budget-driven requirement. So----
        Senator Ayotte. I assume that, if you've done two tours,
    you're not terminating these people because they aren't capable
    of fighting.
        General Allyn. You are absolutely accurate. You asked a
    question, were we really having to separate some soldiers that
    were forward deployed? The answer is yes.
        Let me first let you understand that treating those
    veterans of multiple combat tours with dignity and respect is
    our absolute number-one commitment. Every single officer or
    noncommissioned officer that we asked to involuntarily separate
    was briefed, before the board was held, by a general officer--
    first general officer in the chain of command, and then, when
    the board completed its process and identified those for
    separation, they were briefed again, face to face, as much as
    possible. In a couple of cases, they had to have the general
    officer contact by phone or video teleconference (VTC) with the
    immediate commander present to ensure that we treated these,
    you know, people who had served so courageously with the
    absolute utmost dignity and respect.
        Our objective in notifying people that were forward
    deployed was to give them the maximum time possible to
    transition effectively to the next phase of their life. The
    minimum that we wanted to provide them was 10 months, at least,
    so that they would have an opportunity to take the benefit of
    all of the transition, education, plug them into employment
    advisors through programs like our Soldier for Life Initiative,
    and ensure that we set them up for success, to include
    providing opportunities for mentors from industries around
    their communities that they intend to go back to.
        So, not a choice that we took willingly or voluntarily, but
    we have taken it on, we have ensured the appropriate care of
    every one of our soldiers, and are committed to do so as we go
    forward.
        Senator Ayotte. General Paxton?
        General Paxton. Yeah, thank you, Senator Ayotte.
        Your Marine Corps today is 184,000. We had grown to 202,000
    by some special appropriations and authorizations. That was
    temporary. We knew we were not going to be able to sustain
    that. So, we had started our downward growth, if you will,
    before BCA kicked in.
        Under BCA, we have to be at 182,000 by the end of fiscal
    year 2017. We expect, if full BCA continues, we could very well
    have to go to 175,000.
        To date, we have deliberately not broken faith with
    marines. Almost all of our separations have been voluntary. We
    have had low double digits of majors who were not selected to
    lieutenant colonel, and staff sergeants who were not selected
    to gunnery sergeant, who we did not continue. But, they were
    afforded other venues for separation at that time.
        We do have a concern that if the BCA caps come back and we
    have to go to 175,000, that at some point we could be forced to
    do larger numbers of involuntary termination.
        Senator Ayotte. I don't know if--you know, Admiral Howard,
    I'm not trying to exclude the Navy and the Air Force on this.
    Anything you want to report on this end?
        General Spencer. I would only add that we've--we were on a
    steady decline in manpower, and finally have--we've drawn a red
    line at around 317,000 for active duty, because we just can't
    go any lower. Based on our--the levels of maintenance folks we
    have on our flight lines, fixing our airplanes, launching
    satellites, we've sort drawn a red line and said we can't go
    any further.
        Admiral Howard. So, along with General Spencer, I think the
    Navy and Air Force were on a different journey these last 15
    years. I recall, in December of 2000, when I reported to the
    Joint Staff and then 9/11 happened the following year,
    literally I--we were a Navy of about 14 carriers, 383,000
    people, and I think it was close to 312 ships. We're--we've
    downsized about 67,000 people, and we're about 279 ships today
        The budget we've submitted continues to acquire ships,
    build ships, and we would be looking at being back to 304 ships
    in 2020. But, because we're a capital-intensive force, our
    manning is matched to those ships. So, we would expect to be at
    329,000, and about 57,000 Reserve. But, we took--we reduced our
    force over the last 14 years. So, along with the Air Force,
    we're not trying to get any smaller.
        Senator Ayotte. Thank you.
        Senator Kaine?
        Senator Kaine. On the issue of OCO and flexibility, I'm
    maybe a little bit like a former Governor. We're all into
    flexibility. I like giving folks flexibility.
        But, I would guess that, as long as we're talking about
    readiness, even putting flexibility doesn't necessarily--I
    think, General, you said, it's the caps, not the flexibility.
    Flexibility would be helpful. But, won't there always be a
    tendency, if you have to choose between priorities, to kind of
    short readiness? I mean, you're always going to--you're always
    going to do the day's mission and try to have people as well
    deployed as you can for doing a deployed mission. If you don't
    have enough to choose from, you'll always pick that, and
    probably try to save on the readiness side. It seems like
    that's one of the challenges. So, even if you allow for
    flexibility, it would seem that readiness is always going to be
    somewhat at risk in a capped environment when there aren't
    sufficient resources, ``Well, we can't--we don't want to short
    the folks who are forward deployed during these missions, so
    we'll probably--you know, if we have to save it somewhere,
    we're going to save on the readiness side.''
        So, flexibility, I don't view that as the real solution. I
    mean, it could be helpful, but it's not really going to solve
    the readiness challenge we have, in my view. Am I wrong to look
    at it that way?
        General Paxton. Senator, if I may, I'll start, only because
    we've just had this discussion this morning in the building.
    Although there are some common terminologies and lexicon, each
    of the services has to look----
        Senator Kaine. Yeah.
        General Paxton.--at this in a little different way.
        So, on the part of the Marine Corps, we truly envision
    ourselves as the 9-1-1 force that you--that the American
    public, the American Congress, the taxpayer, they expect us to
    be most ready when everybody else is least ready. We don't have
    a big role or mission in the nuclear triad and things like
    that. We're a rather conventional force, we're a rather small-
    unit force, and we're supposed to be forward deployed, forward
    engaged. So, we fully expect that we're going to generate
    readiness and consume readiness, and, at some point, we will
    take risk in some modernization and we'll take risk in some
    home-station readiness. We think we're at that ragged edge
    right now.
        For example, our aircraft are old, too, anywhere from 22 to
    29 years, and growing. Our amphibious vehicle capability is 42
    years old. So, we're at the point, as General Spencer said
    earlier, that we have to modernize. We, early on, after
    Operation Iraqi Freedom (OIF) and Operation Enduring Freedom
    (OEF), went into this bathtub, and we had to go all in to
    modernize, because the gear was too old.
        So, we feel at risk now for modernization and sustainment.
    But, we're going to continue to give you fight-tonight forces,
    ready forces for the crisis that's at hand, even if we know,
    later on, we may eventually get to the point of, ``Yes, but,''
    that we'll give you several companies, but not a whole
    battalion, we'll give you a squadron with 8 aircraft instead of
    12 aircraft.
        But, each of the other services, at some point, looks at it
    just a little differently. So, that's where the Marine Corps
    is, sir.
        General Spencer. Yes, Senator. You put your finger on
    really what our challenge is, quite frankly, because you said,
    in most cases, we would go to readiness if we had a budget
    issue, a budget concern. The reason we do that is because we
    don't have a lot of choice. We've only got three pots of money.
    We have people, procurement, and readiness. People, you can't
    just send people home. I mean, you know, you--even if--people--
    actually, our military folks were exempt from sequestration,
    but, even if they weren't, that's a long process to reduce.
    Quite frankly, we can't reduce any more. Similarly with
    procurement, those are multiyear purchases that are stretched
    out over many years, involve a lot of money. If you start
    cutting those, your unit cost goes up.
        Senator Kaine. Yeah, you can slow down the next one, but
    you can't----
        General Spencer. That's----
        Senator Kaine.--break the one that you're----
        General Spencer. That's exactly right.
        Senator Kaine.--in the middle of. Right.
        General Spencer. So, then--so, a lot of times, we don't
    have any choice, if we have to find fast money, but to go to
    readiness, because it's essentially Operations and Maintenance
    (O&M) money. But, that's the dilemma, because we--that's where
    our readiness is. So, that's the box we're put in.
        Senator Kaine. Yeah.
        General Spencer. We don't want to do that. We're--all the
    services are obviously a little bit different, but, at least in
    the Air Force's case, as you know, you know, if we get called
    upon, I mean, we've got to be there in hours, not days, weeks,
    or months. So, it's--we have to--readiness is critical for us,
    yet readiness is the only account we can go reach out and take
    money quickly. So, that's the sort of dichotomy we're in.
        Senator Kaine. Indeed.
        Other comments? General Allyn, Admiral Howard?
        General Allyn. I was just going to just reinforce my
    teammates' points, here. But, it really does come down to
    trying to balance concurrent priorities. As has been stated,
    the Army's budget, over 50 percent of it is committed to our
    national treasure, our people, you know, both the military and
    civilian. So, we've got 50 percent of the budget with which we
    wrestle with the dual priorities of readiness and
    modernization. We, in the Army, have actually erred on the side
    of delivering the readiness that's required for the known and
    emerging missions, and taking risk in the mid- to long-term
    with modernization. But, that is a--that's a hard choice, and
    it's a choice that our Chief and our Secretary take, fully
    analyzing, you know, the opportunity costs of doing that.
        It's just a very, very difficult position to be in, and
    one--with the capacity that this Nation has, we shouldn't be in
    that position.
        Senator Kaine. Yeah.
        General Allyn. You know, our soldiers should expect that,
    when they go up against an adversary, that adversary faces an
    unfair fight whenever they come up against the United States of
    America. We are putting that at risk.
        Senator Kaine. Admiral Howard?
        Admiral Howard. Senator, thank you. I just wanted to share
    that, when I was at fleet, when we sequestered last time, as
    General Spencer pointed out, that was the only intermediate
    choices we had.
        Senator Kaine. Yeah.
        Admiral Howard. When you talk about readiness, we had to
    cancel deployments of ships. Now you're not where you need to
    be, and you're not giving the COCOM any forces, let alone ready
    forces.
        Then we had to reduce steaming hours and flying hours,
    which is the training of the piece Senator Rounds brought up.
    We had to take some of the air wings down to tactical hard deck
    to generate the savings to hit that lower target budget--budget
    target. So, there is, in the immediate aftermath of
    sequestration, an impact on the forces and--in the Operations
    and Maintenance (O&M) account and in operations and in training
    dollars.
        Thank you.
        Senator Kaine. Last--just a comment. You had--you mentioned
    the COCOM, and that reminded me of one other thought. We have
    the hearings with the COCOMs, you know, the status hearings,
    during the spring. One of the things I'm really always
    impressed by, and most recently a conversation with General
    Kelly at SOUTHCOM, is the degree to which the COCOMs really
    approach their mission with kind of a whole-of-government
    approach. They're relying on the intelligence community,
    they're relying on the State Department, they're relying on
    Department of Justice, they're relying on the Department of
    Homeland Security (DHS)--especially in the SOUTHCOM, that's
    really important. All these agencies are affected by sequester,
    too, the partners that our COCOMs rely on. They may not be--you
    know, it may not be defense sequester, but they're sequestered
    on the nondefense side, and they have a direct impact on the
    security mission. So, again, there's a lot of compounding
    effects here, and your testimony is good tribute to that.
        Thank you, Madam Chair.
        Senator Ayotte. Senator Rounds.
        Senator Rounds. Thank you, Madam Chair.
        I think it's becoming obvious in the discussion that, as
    you listen to us, we talk about trying to make it--we're trying
    to set it up so that there is a way to skin this cat that's out
    there right now with BCA basically there and in front of us.
    Part of it is to give you as many options as possible in order
    to be able to utilize the funds that we are able to allocate,
    either through the budget and then through the appropriations
    process. I want to make sure that, if we do take a particular
    approach, that it is as readily available to you as possible
    without other strings attached to it. So, you know, we're not
    exactly sure how we skin this cat that's in front of us, but we
    want your help in doing so, and that's the reason for the
    discussion.
        I just wanted to go directly to General Spencer with
    something that you said earlier that I think is just so
    impactful, and that is that, if we would have been going to war
    in 1991, we would have been in the same position as we are
    today with the age of our aircraft; we'd be flying B-17s. You
    know, in fact, if my information is correct, the Department of
    Defense (DOD) currently operates a bomber force that is half
    the size of the Cold War force recommended by its 1993 bottom-
    up review.
        Now, if it's true that advances in sensor technologies and
    precision-guided weapons have helped to offset cuts driven by
    budget reductions, but--in other words, they have the effect,
    though, of acting as a force multiplier--but, that being said,
    reduced readiness levels--and that's what we've been talking
    about here, are the readiness levels--the readiness levels have
    an opposite effect.
        I'd just like to talk a little bit, and I want to give you
    an opportunity to visit a little bit, about the--what happens
    with the--has the combination of reduced readiness and smaller
    force size eroded our global strike advantage? Right now we're
    talking about aircraft that are very, very old, and you've got
    an F-35 that's available right now that you're still trying to
    procure, you've got a tanker that's necessary to be set up and
    operational, but you also have a need to replace, or at least
    to supplement, the B-1 and the B-2. Right now you've got B-52s
    that are doing some of that work, but the Long Range Strike
    Bomber (LRSB) has clearly got to be maintained, as well, or at
    least you've got to be able to procure that in the future. Can
    you talk a little bit about what that is and what's going on
    right now within the Air Force to try to maintain all of those
    goals, and procure and still maintain readiness?
        General Spencer. No, thank you, Senator.
        Again, you've put your finger right on the issues, here.
    You know, the--we've only got 20 B-2s, and if--so, if we have
    to have a long-range penetrating bomber that can get through a
    lot of the--you know, back when the B-52 and the B-1 was built,
    they aren't stealthy, they don't--they won't penetrate some of
    the systems that are out there now, so we have to have that
    capability. Similarly, for our other platforms, as well. The F-
    35, for example, along with the F-22, you know, some of--there
    are other fighters being introduced into the market now, so-
    called 4.5 generation, if you will, that would beat our--I
    mean, the advantage that we have always had, and I think we
    still have, is, our pilots are better trained. But, if you give
    the adversary a better airplane, then that's a real problem.
        So, the faster and the more efficiently we can get to fifth
    generation, the better.
        Senator Rounds. Do you want to talk just a little bit in--
    you made the remark, and then you moved on rather quickly, but
    you're talking about a 4.5, which is out there, which is going
    to, basically, be in a position to where--we don't ever want to
    be in a fair fight, but we want to the advantage to be on our
    side all the time. Do you want to talk about that just a little
    bit?
        General Spencer. Sure, yes. So, the--they are being
    produced, as we speak, developed and produced, a fighter that
    is ahead of our fourth-generation--the F-15, F-16s--it is
    ahead. So, based on the systems they have, we--they would--as
    our Chief said, 4.5 kills a fourth-generation airplane. So,
    that's why it's--and the sense of--we have to modernize our
    fleet, is what I'm saying. The age of our fleet that we have
    now won't--is not sufficient for us in the high-end threats and
    the high-end fights that we are--that we could be involved in.
    So, we--so, if nothing else, to maintain, first, deterrence,
    but then to be able to win if deterrence fails. We want to go
    in--as General Allyn said, we don't want a fair fight. We want
    the best equipment, with the best technology, with the best-
    trained both--maintenance folks, pilots, you name it, space
    operators--we need the absolute best that we can have. So,
    that's really imperative for us to stay on track with our
    modernization.
        Senator Rounds. Thank you, Madam Chair.
        Unless one of the other----
        Sir?
        General Paxton. Thank you, Senator Rounds.
        If I may--I had made the point earlier about how we all
    need a planning horizon. We had aging aircraft in both our F-
    18s, our AV-8Bs and our EA-6s. We knew we were going to have to
    replace them, so we put--we went all in on the F-35, and we're
    in that bathtub right now. So, the monies and the planning that
    is available to us to bring the F-35 to fruition are critical
    for the fight in the future. If we don't--if the BCA kicks in
    and we buy fewer, then you lose the economies of scale, you
    delay the production line, and then our fight-tonight force and
    our fight-tomorrow force are both jeopardized.
        Thank you.
        Senator Rounds. Thank you.
        General Allyn. I would just add, for the Army, the same
    application that General Paxton just talked about for our--
    modernization of our aviation fleet is absolutely the exact
    same dynamic. So, we will not procure the more modern UH-60
    aircraft that our total force needs, we will not modernize the
    AH-64 to the level that it needs to, and our CH-47
    modernization will stop after fiscal year `16. So, it is
    absolutely critical that we stay on this path.
        Admiral Howard. So, we have often used a technological edge
    as a warfighting edge. So, as we've had to meet budget targets,
    we've had to slow modernization down. But, really what that
    gets to is our ability to win in a anti-access aerial-denial
    fight. So, as we slow down our ability to modernize weapon
    systems on ships or on aircraft or the physical platforms
    themselves, it's given potential adversaries an opportunity to
    get closer to us and to start--and that gap in the
    technological edge is starting to diminish.
        Senator Rounds. Thank you.
        Thank you, Madam Chair.
        Senator Ayotte. So, I wanted to--we have--Senator Shaheen
    is on her way for some questions--but when--Admiral Howard,
    when we met in my office, one of the issues that you raised, we
    saw, recently, the attempt by ISIS to expose our men and women
    in uniform in the cyber domain. So, I wanted to get your
    thoughts on, you know, What are the cyber challenges that our
    forces face, and how does all this relate to readiness and our
    posture?
        Admiral Howard, I'd start with you.
        Admiral Howard. Thank you. So, there's two issues. All of
    us--one is the force, writ large--our civilians, our Active,
    and our Reserve. We all actually live and operate in this
    domain. We're in it for our workday, and then, for our sailors
    and Reserve, they're in it when they're off duty. So, for us,
    we have to continue to develop and train our workforce to
    understand that as much innovation and excitement and fun as
    you can have on liberty in this domain, there's vulnerabilities
    in this domain. Because of the robustness of knowledge exchange
    in this domain, the vulnerabilities translate to potential
    operational security issues, which is some of what we saw this
    week.
        So, as--whether they're sailors, Reserves, or civilian, if
    they are out and about on social networks, and identify
    themselves or identify units, that they have to be trained to
    understand operational security in this virtual domain, just as
    they understand operational security in the physical domain.
        The next piece is, there is a more professional cohort when
    you look at the--for us, the information dominance community,
    you look at our enlisted, our IT, and then, for officer,
    informational professionals, cryptologists, intelligence
    officers, and then they are really the heart of our cyber
    warriors and the workforce that we're developing to not only
    defend our networks, but also develop both offensive cyber
    capability, as well. Then, that's--for us, those are the
    components, those are the folks we put together, and then they
    are the ones that work underneath U.S. Cyber Command in
    whatever mission sets they're required to provide.
        General Allyn. Madam Chair, I would just add that, you
    know, in 2013, we had no Army cyber mission teams. Today we
    have 24 that are supporting combatant commanders at the initial
    operating capability, building to over 40, you know, by the end
    of next year. Their training and development is absolutely
    critical.
        But, you highlighted a very critical point, and that is, we
    should be trying to accelerate the elimination of our
    vulnerabilities. Unfortunately, all of us are faced with the
    reality of having to take a multiyear approach to this, because
    of funding limitations. My belief is, this cyber risk is
    accelerating very, very fast.
        General Paxton. Senator, if I may, the--it also shows--to
    General Allyn's point, it shows the dynamic here--I'm sorry--it
    shows the dynamic of the pressure we're under. As the money
    gets tighter--BCA cap, if you will--and as the pressure on end
    strength goes down, we're--we all spend over 50 cents of our
    dollar on our people, the most important weapon system that we
    have. In the Marine Corps, it happens to be about 61 cents on
    the dollar. We have also stood up cyber mission teams and cyber
    support teams, both for the service and for some of the
    geographic combatant commanders--in our particular case,
    Special Operations Command. So, then you get into the tension
    about providing conventional force capability and providing
    cyber capability. It really shouldn't be a tension. You should
    provide both. But, when you're under an end-strength reduction
    and a fiscal reduction, that's hard to do.
        General Spencer. Yes, Senator, and we're similar. We've got
    20 cyber teams, growing to 40, as General Allyn mentioned.
    Because of funding, we've had to stretch that out longer than
    we would--we're comfortable with.
        You know, I was raised, you know, to keep my personal
    business to myself. You know, my daughter puts all of her
    business out on Facebook. I don't really get that.
        [Laughter.]
        General Spencer. But, that's kind of the generation of
    folks that are coming in the military now, that everything they
    do and everywhere they go and everything they eat and everybody
    they talk to is on Facebook. You know, we're realizing now,
    that's a vulnerability. So, all of us have--you know, all of
    the names that were listed by ISIL on their list, we've
    contacted them all and talked to them specifically about these
    sort of social networks, if you will, that they put your--you
    know, your access out there. Unfortunately for us, I mean, you
    can Google any of us, and our whole life history is out there,
    whether we like it or not. But, for a lot of our troops that
    deploy, again, those, you know, Twitter or Facebook, all
    those--they're great social tools, but they also make us all
    vulnerable, and they expose our personal--some of our personal
    information.
        Senator Ayotte. Thank you, I think all three of us can
    relate to that, certainly.
        I wanted to call on Senator Rounds for a brief follow-up
    question, and then I'm going to turn it over to Senator
    Shaheen.
        Senator Rounds. Thank you, and I'll try to make this brief.
    It's just a followup to what the Chairman was asking about a
    little bit.
        In terms of your overseas operation or your downrange
    operations, particularly with regard to ISR, have you seen any
    kind of a degradation with either regard to the cyber
    capabilities or your space capabilities? Anything, in terms of
    the items there that you would like to address or that you see
    as threats to our capabilities, that we should be aware of, in
    terms of things that impact your ability to deliver?
        General Allyn. Well, I think we have to be careful, in
    terms of, you know, just how much we can talk about, there is--
    --
        Senator Rounds. If a simple ``yes'' is there, then----
        General Allyn. There is risk out there in that domain.
        Admiral Howard. Senator, I'm sure you're aware, for the
    Navy, we had, a year and a half ago, multiple simultaneous
    intrusions into our network. So, that really, I think, raised
    our awareness and our focus on defending our networks and
    making sure we mitigate risk in this domain.
        Senator Rounds. Impacted you overseas.
        Admiral Howard. It was simultaneous, and several different
    organizations.
        Senator Rounds. Thank you.
        General Paxton. Yes, sir, there is risk. There has been
    intrusion and threat. We need both the policies and the monies
    to do the training to combat that, sir.
        Senator Rounds. Thank you.
        General Spencer. Senator, I agree, and would offer that we
    could--any of us, certainly the Air Force, would like to come
    and brief you, sort of, one on one, if we could.
        Senator Rounds. Thank you.
        Senator Ayotte. Senator Shaheen.
        Senator Shaheen. Thank you, Madam Chair.
        Thank you all very much for your service and for being here
    today.
        I know this--I don't think the Chair has asked this
    question, though I know she's very interested in it, as well.
    One of the things that I have heard from folks at the
    Portsmouth Naval Shipyard, which, of course, is one of the
    shipyards that we're very interested in, is that if
    sequestration returns, the ability to attract the workers that
    we need for the shipyard is going to be compromised. Right now,
    they're in the process of hiring 700 people. We're seeing a
    whole generation of engineers, technicians, people who have
    real expertise at the shipyard who are retiring. If--can you
    just talk about what the potential challenges are, if
    sequestration returns in 2016, to being able to attract the
    workforce we need to fill our public shipyards?
        Admiral Howard. Yes, ma'am. So, when I was down at fleet--
    this is anecdotal, but--as we sequestered and then we had a
    hiring freeze, and then we ended up furloughing different
    folks, we found, in some areas, that folks who had sufficient
    years decided to retire early, that the potential of not having
    a full year of employment, year to year, was enough for them to
    rethink.
        So, for us, if that happens again and then we have to
    reduce maintenance contracts or make similar tough choices, in
    particular for our shipyards, we have that--a demographic,
    where we have an older cohort that's a substantial part of the
    workforce that might make that decision.
        The next thing is, for the folks who stay, there becomes
    doubt as to--and a lack of trust as to whether they are going
    to have a full year's worth of employment. It's not just the
    pay. There is that component, because they have to support
    their families.
        Senator Shaheen. Right.
        Admiral Howard. But, it's also, they take a lot of pride in
    who they are and what they do as helping generate forces for
    our Navy or as public servants in other areas.
        Senator Shaheen. Is this something that the rest of you are
    seeing in a different way as you're trying to recruit folks?
        General Allyn. Well, I think, ma'am, the impact of the
    furlough across our civilian workers was devastating. It gets
    at this issue of erosion of trust. We've got incredibly
    dedicated workforce, in uniform and in civilian workforce. But,
    there is a limit to, you know, how many times we can keep going
    back and asking them to hang in there with us. We have seen a
    similar case, where some of them that were retirement-eligible
    or could take an early retirement option decided, ``You know,
    this has been a great run. I love serving in the Army, but I'm
    not sure the Army loves me as much as I love it.'' That's a
    terrible feeling for us, who take this on as a profession.
        General Paxton. Senator Shaheen, if I may, just as a
    overview of our civilian workforce, most of us are pretty lean
    in the civilian workforce. Between mil-to-civ conversions and
    then outsourcing and contractors, our civilian workforce has
    been getting smaller and smaller. The furlough and the BCA caps
    had a disproportionate effect on our civilian workforce. So,
    there is a sense of an erosion of trust and confidence, and
    they're really valuable members of the team. When the
    Commandant testified in front of the full committee several
    weeks ago, he said that, in the Marine Corps' case, only 1 in
    10 in civilian workers, civilian in military is the workforce--
    over 90 percent of them work outside of the national capital
    region. So, there's this perception there that maybe the
    headquarters are bloated and there's a lot in Washington. Now,
    they're actually tooth and not tail, and they're actually out
    there doing important things for the service and for the
    Nation.
        The anecdotal story that I bring up is, I went down our
    depot in Albany, Georgia, about a year ago, and this was in the
    aftermath of the furlough. We had worked very hard to keep
    folks there. Some of these folks are working in a very small
    county, a very rural county. The other two or three industries
    in the county, a rubber and tire plant and a golf plant, had
    left. So, the only viable workforce in--major in the area now,
    is--there's one health system and then there's the Marine
    Logistics Depot. When we started to furlough people, there was
    no other place for them to go. Many of them were working on
    equipment where they needed a security clearance. As they went
    from payday to payday without a security clearance, they were
    deathly worried that the creditors would come after them; and
    then, the minute the creditor came after them, even if it was a
    delayed payment in a home mortgage, that would affect their
    clearance, so that, even when the furlough was relieved, we
    couldn't hire them back because then they'd be flagged as a
    security risk. So, there's this horrible downward spiral when
    that happens.
        Thank you.
        Senator Shaheen. Thank you.
        General Spencer. Senator, we have a similar story. We also
    have 96 percent of our civilians that work outside of the
    national capital region, so at our training bases, for example,
    where we train pilots to fly, the entire flight-line
    maintenance operation are civilians, the whole unit. So, if you
    think about the Air Force--as an example, when we sequestered,
    last--or a year and a half or so ago, we stopped flying
    airplanes, we actually put airplanes down, which meant now
    pilots can't train, so they lose their certification over time,
    maintenance folks have nothing to work on, and airplanes--I
    happen to have a '72 Monte Carlo at home, and if you don't
    start that thing about once a week and drive it, it's not any
    good. Airplane--you have to fly airplanes to have them
    efficient.
        So, we had airplanes sitting down. Now they're not going to
    the depot. Now you've got this stackup. You've got--don't have
    airplanes available. As you know, it's going to take X number
    of days to get an airplane through the depot. So, now they back
    up. So, it's not like if sequestration is suddenly lifted, you
    know, everything works well. No. You've got this backlog that
    you have to now push through a funnel.
        The final thing I'll mentioned, that General Paxton touched
    on, is my son, who works for the government--he's a computer
    science guy--he--when we furloughed him, he--and this is
    similar to what I heard from a lot of other civilians--he was
    really frustrated, because--he said, ``I can go work somewhere
    else and make more money. I want to be a part of the
    government.'' But, he said, ``If they're going to--I've got a
    family. And I''--you know, two of my grandkids--``and if every
    time there's budget dispute, they lay me off,'' he said, ``I
    don't know if I could do that for the long term.'' So, it had--
    it took a real toll.
        Senator Shaheen. I very much appreciate what you all are
    saying. I think it's an important reminder for those who say,
    ``Well, you know, we exempted uniformed personnel, and so it
    didn't have the kind of impact,'' that all of you are pointing
    out that it really did. Hopefully, we will act with more sanity
    in this budget cycle.
        Thank you all very much.
        Senator Ayotte. I just have a couple of follow-ups, but,
    since I have my colleague, Senator Shaheen, here, I know she'd
    want me to follow this one up with General Spencer.
        Just wanted to check in on the KC-46As delivery to Pease in
    2018. I know there were a couple of testing delays, but are
    things looking pretty good, on track?
        General Spencer. Yes, Madam Chair. We're on track. As you
    know, we had a couple of concerns, but we are still on track.
    We had some slack built in. Some of--a lot of that slack's been
    taken up now. But, as we stand today, we're still on track. We
    still feel good about the schedule.
        Senator Ayotte. Excellent. Appreciate that. We appreciated
    General Welsh's recent visit to Pease, as well. That was
    terrific, and I know it meant a lot to those in our Guard and
    those that are part of the 157th Air Refueling Wing. So, please
    pass our gratitude on.
        Senator Shaheen. Thank you, Madam Chair. We like to tag
    team on this issue whenever possible.
        [Laughter.]
        Senator Ayotte. I just have a couple of follow-up
    questions.
        One, General Spencer, I had a question about the joint
    terminal attack controller (JTAC) training, because recently it
    was brought to our attention, a memo that was dated February
    25th, 2014, signed by the Commander of the 18th Air Support
    Operations Group, ASOG, Commander. The memo relates to JTAC
    training. The issue raised in the memo are problems with ground
    force commander coordination, airspace deconfliction, and nine
    line errors. The Commander also writes that an increasing lack
    of live-fly close air support (CAS) training opportunities and
    funds for temporary duties (TDYs) have eroded overall JTAC
    proficiency across the 18 ASOG. The Commander notes that
    continued decrease in the amount of live-fly CAS controls
    available to unit JTACs; and to the credit of the Commander, he
    intends to offset that decline with using simulators. So, can
    you give me a sense of what's happening with the JTAC training,
    and especially live-fly CAS training, and where we are with
    that, and just an update on how the JTAC training is going?
        General Spencer. Yeah. First, Madam Chair, I have to
    apologize. I haven't seen that letter, so I would like to go
    back and take a look at it and give you a more--give you a
    better response----
        Senator Ayotte. Sure.
        General Spencer.--so I can get the specifics. I'm actually
    going down to Pope Air Force Base on Monday to talk to some of
    our----
        Senator Ayotte. Okay. Well----
        General Spencer.--JTACs----
        Senator Ayotte.--we're happy to get it for you, and we'll
    be happy----
        General Spencer. Okay. So, if----
        Senator Ayotte.--if you want to take it for the record and
    get back----
        General Spencer. So, if I could, I would like to give you--
    --
        Senator Ayotte. Absolutely.
        General Spencer.--make sure I give you a good response on
    that.
        [The information referred to follows:]

                joint terminal attack controller (jtac) training
        Question. I just have a couple of follow-up questions. One, General
    Spencer, I had a question about JTAC training because recently, it was
    brought to our attention a memo that was dated February 25, 2014,
    signed by the commander of the 18th Air Support Operations Group, ASOG
    Commander, and the memo relates to JTAC training. The issues raised in
    the memo are problems with ground force commander coordination airspace
    deconfliction and nine line errors, and the commander also writes that
    an increasing lack of live fly CAS training opportunities and funds for
    T.D.Y. have eroded overall JTAC proficiency across the 18 ASOG. The
    commander notes that continued decrease in the amount of live fly CAS
    controls (available unit) JTAC, and to the credit of the commander, he
    intends to offset that decline with using simulators. So can you give
    me a sense of what's happening with the JTAC training especially live
    fly CAS training and where we are with that and just an update on how
    the JTAC training is going.
        Answer. The 18th Air Support Operations Group (18 ASOG) is trained,
    combat mission ready and has certified personnel deployed down range.
    Regarding JTAC training, while we anticipate simulation to become a
    more significant element of our overall training program, we recognize
    that live-fly training will remain an essential tool for our overall
    combat readiness. By design, the actual amount of live-fly close air
    support controls for JTACs is planned to steadily decline over the
    years and transition to a more balanced combination of live-fly events
    and simulators. The Air Force is a contributing member of the Joint
    Staff J6 led Joint Fire Support Executive Steering Committee (JFS ESC).
    The JFS ESC produces an Action Plan which focuses analytical efforts
    and solution recommendations to assist Services and Combatant Commands
    in providing enhanced, jointly integrated, interoperable and cost
    efficient JFS capabilities to the warfighter. We collaborated with the
    JFS ESC to develop and field a Joint Terminal Control Training and
    Rehearsal System that provides a realistic, modular, upgradeable and
    scalable Joint Combat Air Support training / rehearsal simulation
    system. Simulation is already becoming a fundamental part of JTAC
    training. In fact, simulation is better than live-fly training in many
    areas. For example, simulation can permit more complex mission
    scenarios with more simulated aircraft involved resulting in a
    significant cost savings. The 18 ASOG is scheduled to receive a JTAC
    Dome simulator in the summer of 2015.

        Senator Ayotte. No problem. Appreciate that very much.
        The other question that I had for you was, you know, about
    what's happening at Nellis. Can you confirm for me whether the
    Air Force has made a decision to close the A-10 Division at 422
    Test and Evaluation Squadron at Nellis? If so--I mean, yes or
    no. I don't know if you're making that decision or where things
    are.
        General Spencer. Yeah, that--again, I'm a deer in the
    headlights on that one, as well. You--close the squadron?
        Senator Ayotte. Yes.
        General Spencer. No, I--again, I'll have to follow up with
    that, because I--
        Senator Ayotte. Then why don't I give you a follow-up
    question--
        General Spencer. Okay.
        Senator Ayotte.--on that one, too.
        General Spencer. Okay.
        Senator Ayotte. That's pretty specific.
        [The information referred to follows:]

                          a-10 squadron at nellis afb
        Question. The other question that I had for you was you know about
    what's happening at Nellis, can you confirm for me whether the Air
    Force has made a decision to close the A-10 division at 422nd Tests and
    Evaluation Squadron at Nellis. If so, it would be yes or no, I don't
    know, if you're making that decision or where things are.
        Answer. Yes. The FY16 PB divests the A-10 division at the 422nd
    Tests and Evaluation Squadron in fiscal year 2016. However, because of
    the prohibition on the divestiture of A-10s contained in the fiscal
    year 2015 NDAA, the Air Force will not be divesting A-10s at Nellis AFB
    at this time.

        Senator Ayotte. I wanted to thank you, Admiral Howard. You
    and I talked about this when we met in person, and that is on
    the maintenance projects at the Portsmouth Naval Shipyard.
    Frankly, you know, I want to commend the Navy for meeting and
    exceeding its capital investment requirements across all the
    shipyards. The thing that you and I talked about was the P-266
    project at Portsmouth. I know I was very happy with your
    answer, and you're very focused on seeing that go forward. So,
    thank you for that.
        Admiral Howard. Yes, ma'am. Thank you.
        Senator Ayotte. Terrific.
        Not to keep you all too much longer, but there was one
    question that I just wanted to follow up since I had you all
    here, because I think it's important. You know, we spent a lot
    of last year talking about how are we going to address sexual
    assaults in the military. Having all of you here today, I think
    I'd be remiss if I didn't ask you how things were going, where
    is the status of--what's the status of the legislation that we
    passed, and how do you perceive the implementation of that
    legislation in your branches, and--give us an update on how
    things are going and where you see we can help some more.
        General Allyn. I'll start, Madam Chair.
        First of all, we have made significant headway in
    eliminating the threat and the presence of sexual assault and
    sexual harassment in the military. Most promising is that
    reporting is up. Our soldiers are reporting over 90-percent
    confidence that, if they report an incident, that the chain of
    command is going to take the right actions, both to protect the
    person that is--has been assaulted, as well as to ensure
    accountability of those who perpetrate the alleged assault.
        So, we are continuing a rising level of reporting. We are
    seeing a reduction in the incidences of assaults. Both
    promising. But, we still have work to do, particularly in
    eliminating the risk and the perception of retaliation by our
    soldiers inside our formations. So, our sergeant major of the
    Army has initiated an effort called ``Not in My Squad,''
    because the confidence level that we see at the battalion level
    and above is very high, but the incidents are occurring at the
    company level and below. So, he is bringing forward a group of
    staff sergeants from across our total force to get their input
    on how do we improve both ownership of resolving this threat to
    our trust and our dignity and respect in our formation, and
    accountability to ensure that every soldier, every leader, is
    doing everything they can, not only to prevent these acts, but
    to prevent even the perception of any--retaliation of any type.
        We talked a bit ago about social media and the impact that
    that has. What we're seeing is, the most significant level, and
    the hardest to defeat, is the retaliation--the social
    retaliation by peers and others that's occurring in social
    media. So, we are arming our leaders with the tools that they
    need and the training to understand how to attack this part of
    the spectrum that is somewhat new to most of us, but,
    unfortunately, not new to our soldiers.
        Admiral Howard. Thank you, Senator.
        I'd like to, if I may, refer some of this to the report,
    but some of it to the conversations I've had with our sailors
    as I've traveled as Vice Chief. So, when I do my all-hands
    calls, I talk about this issue, about the RAND survey, and then
    ask them for their thoughts. Then, in particular, in San Diego,
    I was able to sit down with a group of 40 women who represent
    all the different communities on our ships, from commanding
    officers to the medical officers to engineers.
        The--from the RAND survey, we understand that prevalence
    has decreased for both men and women. But, you asked, more
    specifically, what changes have we made, some of it based on
    law, that really has made a difference. The feedback I'm
    getting, which seems to be buttressed by the results of the
    survey, is, first of all, having Naval Criminal Investigative
    Service (NCIS) be the first one on scene to investigate sexual
    assault seems to be bring an objectivity to the whole process.
    So, that is an important change that--you know, I think all of
    the services are committed to professional investigation when
    there's an incident.
        The--in our case, bringing in victim legal counsel--this is
    the person who's the--who helps the victim through the
    process--that person is making a big difference for our sailors
    and their trust in the--
        Senator Ayotte. That's music to my ears, because that was
    my piece, and I'm glad to hear that.
        Admiral Howard. I actually just sat down with one of our
    first Victim's Legal Counsels. She's in Rota, Spain. She talked
    a lot about both her and the Sexual Assault Response
    Coordinator (SARC) and what their presence meant to the Victims
    throughout the process.
        The other is, for the--for us--for the training, the
    bystander intervention. I've heard from our sailors, both men
    and women, and then it bears out in the metrics, that this
    training that we put together, the scenario-based training,
    really felt--empowered them to be able to take care of their
    shipmates. Then, when you look at the results of the RAND
    survey, that when our sailors saw something, nine out of ten of
    them took action. The training works. They understand the
    importance of taking care of shipmates, whether, when you see
    something, you go to help your shipmate, you help your shipmate
    make a report through another process, or you report it
    yourself. When I've spoken, particularly to the women, they say
    the training is very effective, but that the results are even
    more impressive. So, thank you for all of that.
        General Paxton. Thank you, Madam Chair.
        I would echo--and I think the Secretary of Defense was on
    record as saying--in the subject of Sexual Assault Prevention
    and Response (SAPR), we have had almost unprecedented focus and
    significant success and accomplishments. We're not, as General
    Allyn said, anywhere near where we want to be, need to be,
    should be, but we're going to continue the focus. In the case
    of the Marine Corps, we've had almost 1,000 fewer documented
    cases of unwanted sexual contact. That's about a 30-percent
    reduction, so pretty significant.
        The two pieces to your specific question that I'd like to
    highlight, if I may, Senator--number one is, there's over 70
    pieces of legislation that have either been enacted or
    proposed, and it's going to take us a while to work with them.
    I would echo what the VCNO said. We have several documented
    cases where the victim's legal counsel office--or officer was a
    big help, both in comfort to the potential victim and then in
    the adjudication and the defense. But, we have also had cases,
    too, where we have now introduced a fourth lawyer into what was
    a three-lawyer equation, where you had a prosecutor, a
    defender, and a judge. You know much better than I, ma'am. But,
    we're going to have to work through that, because some of these
    cases will be challenged, and you would hate for the one out or
    the one each to perturb the goodness of the whole system.
        The last piece, if I may, Senator, is just to highlight the
    centrality and the criticality of the commander in all this.
    We're very appreciative of the work by the committee to keep
    the commander involved. Because whether it comes to bystander
    intervention, NCO leadership, legal accountability, you have to
    have the commander there.
        So, thank you.
        General Spencer. Madam Chair, similarly, we--because we all
    work together on this problem to share lessons learned, and
    working together to try to solve this problem. It's similar,
    the Air Force. Our prevalence is down by 25 percent, our
    reporting is up by 61 percent. So, we think that's all in the
    right direction. We've done a lot of work, as you know, through
    special victim's counsel, things to make sure victims are taken
    care of, make sure that commanders have the tools they need to
    prosecute if someone is found guilty.
        Our big push right now is on prevention, preventing this
    from happening in the first place. So, we've done several
    things. About a month ago, we had a Sexual Assault Prevention
    Summit. We brought in everyone from E1 all the way up to wing
    commanders. We brought in experts around the country, brought
    in the Center for Disease Control. We spent a whole week diving
    into this issue. The good news was, the answer was yes, you can
    prevent it, but it takes a lot of study, a lot of understanding
    the crime and to have things that specifically get at it.
        Just two weeks ago, I was down in North Carolina, in the
    Research Triangle. I met with folks from University of North
    Carolina and from Duke who are also working on this crime in
    their colleges--local colleges--have a lot of great ideas.
    We're partnering with them. In fact, they're on their way now
    to Sheppard Air Force Base to work with some of our trainees
    there. So, we're--this is something--I can promise you, this is
    something I--we all work on. I know I work on it every day.
    We're not going to stop until this is fixed.
        Senator Ayotte. Thank you. We're not going to stop, either.
    So, you know, I think this is something we--we did tremendous
    pieces of legislation and worked on this collectively in a
    bipartisan fashion in the last Congress. Now you've got, as
    General Paxton really pointed out, a lot of implementation of--
    you know, to get this right. I really appreciate what I hear
    most from all four of you, which is understanding the
    importance of this and the commitment that we need, you know,
    every day to get this right, and to work together on it. So, I
    appreciate your giving me an update on that. I look forward to
    continuing to work with you, all of you, on this issue.
        Thank you all for being here today and for what you do for
    the country.
        [Whereupon, at 4:21 p.m., the hearing was adjourned.]

        [Questions for the record with answers supplied follow:]
                  Questions Submitted by Senator Kelly Ayotte
                                  hollow army
        1. Senator Ayotte. General Allyn, what does a hollow Army look
    like?
        General Allyn. A hollow Army is characterized by prolonged and
    disproportionate investments across manpower, operations and
    maintenance, modernization, and procurement without corresponding
    adjustments to strategy. If we have too little of anyone of these, the
    Army won't be ready when called upon.
        Specifically, a hollow Army is one that appears capable on the
    surface, but is unable to adequately meet national objectives without
    assuming an extremely high amount of risk. We accept a greater
    likelihood of forfeiting the decisive edge we expect our Soldiers to
    retain when we face an adversary in combat . . . we create an
    opportunity for adversaries to experience a ``fair fight,'' which we
    should never permit given our National capacity.

        2. Senator Ayotte. General Allyn, what warning signs should we look
    for when we are coming dangerously close to a hollow Army?
        General Allyn. A hollow Army is characterized by prolonged and
    disproportionate investments across manpower, operations and
    maintenance, modernization, and procurement without corresponding
    adjustments to strategy.
        By this measure, the Army is not hollow. However, we are beginning
    to see the warning signs. The Army today is able to produce only enough
    readiness to meet requirements--and we can only achieve this because of
    the extra funding made available by the Bipartisan Budget Act (BBA).
    The result has been a steady erosion of readiness across the force.
    Underfunding readiness not only reduces training, but the maintenance
    of our equipment as well. This is evidenced by a gradual decrease in
    equipment readiness. Because we are underfunding modernization, we risk
    our qualitative edge. Our equipment has continued to age, becoming less
    reliable and less survivable as the technological sophistication of our
    adversaries is increased. Finally, the underfunding of our
    installations impacts Soldier and Family quality of life and
    ultimately, retention. We've consistently deferred critical
    sustainment, restoration, and modernization projects, creating
    substandard living conditions on many of our bases. If sequestration
    levels of funding continue, we will have a hard time maintaining the
    balance between manpower, readiness, and modernization. That is a
    template for a hollow force.

        3. Senator Ayotte. General Allyn, would a return of defense
    sequestration in fiscal year 2016 result in a hollow Army?
        General Allyn. Not immediately, but the necessary actions to meet
    sequestration level funding requirements would keep the Army out of
    balance in terms of manpower, operations and maintenance,
    modernization, and procurement for several years--until at least fiscal
    year 2023. Without a major change in national strategy to account for a
    smaller force with reduced capability, the Army will likely experience
    a period where it is indeed hollow.
                             marine corps readiness
        4. Senator Ayotte. General Paxton, in your prepared statement, you
    writes that ``approximately half of the Marine Corps' home station
    units are at an unacceptable level of readiness in their ability to
    execute wartime missions, respond to unexpected crises, and surge for
    major contingencies.'' What are the primary reasons for this reduced
    readiness?
        General Paxton. Resource shortfalls in available personnel and
    needed equipment at the unit level remain the principal detractors to
    achieving the level of readiness home station units need to execute
    wartime missions, respond to unexpected crises, and surge for major
    contingencies. The Marine Corps' principal concern going forward is the
    recovery of full spectrum readiness of our home station units and the
    reconstitution of the whole-of-force after over a decade of
    unprecedented sustained conflict.
        The Marine Corps excels at meeting current operational requirements
    in support of the geographic combatant commanders. To maintain the high
    readiness of our forward deployed and forward engaged units, we
    globally source personnel and equipment from our home station units--
    the ready force. Ultimately, readiness comes at a cost and the high
    readiness of our forward deployed and forward engaged forces comes at
    the expense of our home station units' readiness.
        Further compounding the recovery of full spectrum readiness for
    home station units is the paucity of available amphibious shipping
    essential to unit level training. Although Service-level training is
    protected through the future years defense plan, home station training
    enablers (primarily simulation systems and ranges, and operationally
    available amphibious ships) will steadily degrade due to inadequate
    sustainment, recapitalization, and modernization. Without appropriate
    funding, lower equipment maintenance levels will begin to quickly
    degrade those essential equipment pools, leading to degradation in
    training and readiness. Any reduction in amphibious ship maintenance
    will directly limit operationally available amphibious warships and
    erode readiness. Eventually, the equipment needed at home station will
    wear out; when it does, our Marines will lose associated training and
    therefore the proficiency necessary to keep these units ready to
    respond. Budget Control Act funding levels may force the Marine Corps
    to choose between having its home station units being either well-
    equipped or well-trained. Training home station units to standard is
    necessary since these units constitute the ready force that would
    immediately respond to unforeseen crises or major contingencies.

        5. Senator Ayotte. General Paxton, which type of Marine units are
    having the most readiness challenges?
        General Paxton. Approximately half of Marine Corps' home station
    units are insufficiently resourced to achieve those readiness levels
    needed to execute wartime missions, respond to unexpected crises, and
    surge for major contingencies. Using Marine aviation as an example in
    this era of fiscal austerity, Marine Corps operational requirements
    have increased while the overall number of Marine aircraft for tasking
    and training has decreased. Approximately 80 percent of Marine aviation
    lack the minimum required Ready Basic Aircraft to train to the minimum
    readiness levels. Lack of procurement (future readiness) and aging
    legacy aircraft negatively impact aircraft availability for training
    and meeting operational demands. A significant training and warfighting
    requirement gap of RBA exists. Shallow procurement ramps (not buying
    aircraft fast enough) directly increase both the cost and complexity of
    maintaining legacy systems beyond their projected life. Marine aviation
    is 106 aircraft short of the training requirement or 158 aircraft (10-
    squadron equivalent) short of the wartime formations. Out of 52 fully
    operational capable squadrons, 13 are deployed and 8 are preparing to
    deploy. Of the remaining 31 squadrons, 22 are below the minimum
    training level required to go to combat in the event of a contingency.
    The majority of the aircraft deficit is caused by insufficient aviation
    depot repair capacity and throughput. Our aviation depots have not
    fully recovered from the turmoil caused by the last sequester. Marine
    aviation is not sufficiently ready now; another sequester would prevent
    any opportunity to recover readiness.

        6. Senator Ayotte. General Paxton, how can Congress best help with
    these readiness challenges?
        General Paxton. The Marine Corps' current resource level represents
    the bare minimum at which it can meet the current Defense Strategic
    Guidance. This budget allows the Marine Corps to protect near-term
    readiness, but does so at the expense of long-term modernization and
    infrastructure, threatening an imbalance across the five Pillars of
    Readiness--high quality people, unit readiness, capacity to meet
    commanders' requirements, infrastructure sustainment, and equipment
    modernization. An extended imbalance among the Pillars leads to
    conditions that could hollow the force and create unacceptable risk for
    our national defense.
        Congress' continued support, and specifically support of the fiscal
    year 2016 President's Budget request, will be critical to ensuring our
    ability to fulfill our commitments as outlined in the Defense Strategic
    Guidance. Further, an end to both the threat of a sequester and to the
    caps imposed by the Budget Control Act would allow the Marine Corps to
    begin to address some of the readiness imbalances and would introduce
    much-needed budget stability to allow for effective long range
    planning.
                               optimal army size
        7. Senator Ayotte. General Allyn, setting aside the budget-driven
    Army endstrength reduction currently being implemented, based on
    combatant commander requirements, what size of an Army do we really
    need? Active Component? Guard? Reserve?
        General Allyn. Assuming our planning assumptions are correct, the
    minimum end strength the Army requires to fully execute the 2012
    Defense Strategic Guidance (DSG), and answer the current demands of the
    Combatant Commanders is 980,000 Soldiers, including 450,000 in the
    Active Army, 335,000 in the Army National Guard, and 195,000 in the
    Army Reserve. At these levels, all three components will be smaller
    than the pre-2001 force.
        However, much like the Chief of Staff and the Secretary, I am
    concerned that our 2012 DSG assumptions may prove to be incorrect. The
    2012 DSG makes a number of optimistic assumptions regarding the number,
    duration, location, and size of future conflicts. Today, we see
    requirements and operational environments that were not forecasted in
    the 2012 DSG. These include Russian aggression in Europe, the rise of
    ISIL, and the rapidly changing security environment in Eastern Asia.
    All of these developments challenge our assumptions and elevate our
    strategic risk. It is my military judgment that, based on increasing
    world instability, we should reconsider currently programmed reductions
    in Army endstrength.
                             impacts of budget cuts
        8. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, please describe how defense sequestration,
    combined with continuing resolutions, have had a lasting and negative
    impact on your Service's readiness.
        General Allyn. The readiness of the Army today is insufficient to
    support the national security objectives outlined in the guiding
    strategic documents and specified within Combatant Commander
    operational plans. Reduced funding coupled with sustained demand for
    Army forces results in fewer Army units available for contingency
    response and at lower levels of readiness. The specific readiness
    levels of units and the ability of the Army to execute its Title 10
    requirements are classified; however, the causes and implications of
    the Army's degraded readiness are clear--over a decade of focus on
    counterinsurgency operations jeopardizes the Army's assured dominance
    to conduct Decisive Action in support of Unified Land Operations (DA/
    ULO). This degraded ability to provide sufficient ready forces to
    achieve those objectives outlined by the President has resulted in
    increased risk for the Nation.
        Army readiness is approaching a tipping point. The combined effects
    of the Budget Control Act of 2011 (BCA), fiscal and end-strength
    reductions, and over a decade of conflict have suppressed the Army's
    ability to build readiness across our formations. While the Bipartisan
    Budget Act of 2013 (BBA) provided additional readiness funding,
    continued improvement requires multi-year consistent and predictable
    funding designed to build Army readiness beyond counter-insurgency
    towards decisive action in support of unified land operations.
    Sequestration will not provide sufficient funding to man, equip,
    sustain, and train units to the appropriate readiness levels and places
    our Soldiers at risk when responding to unforecasted contingency
    operations. The use of continuing resolutions wreak havoc on Army
    readiness, modernization, and manpower. It makes long term planning
    difficult. As a result, we are forced to train sporadically, and the
    materiel and equipment we buy costs more and takes longer to acquire.
        Admiral Howard. Sequestration, the Continuing Resolution in fiscal
    year 2013, and a decade of combat operations have created maintenance
    backlogs that have prevented us from getting ships back to the Fleet on
    time and aircraft back on the flight line. We continue our efforts to
    rebuild the workforce in our public depots--both at shipyards and
    aviation Fleet Readiness Centers--and reduce the number of lost
    operational days, but it will take years to fully recover our
    readiness.
        General Paxton. For the last few years the Department of Defense,
    along with all other federal departments and agencies, has had to
    operate in an uncertain fiscal environment shaped by sequestration
    threats, BCA caps, and the near certainty of starting every fiscal year
    under a continuing resolution. Against this chaotic background the
    Marine Corps has been forced to make extremely difficult fiscal
    decisions that directly impact day-to-day operations. The recent budget
    cuts and the looming threat of sequestration have been particularly
    difficult to absorb. Today, approximately half of the Marine Corps'
    home station units are at an unacceptable level of readiness.
    Investment in the future is less than what is required, and
    infrastructure sustainment is budgeted below the Department of Defense
    standard. The Marine Corps has significantly reduced many of the
    programs that have helped to maintain morale and family readiness
    through over a decade of war. Additionally, the deployment-to-dwell
    ratio is being maintained at a very challenging level. The operating
    forces are deploying for up to 7 months and returning home for 14 or
    less months before redeploying. These are some of the damages to date
    caused by sequestration and lower funding levels.
        The fiscal year 2016 President's Budget is the bare bones budget
    for the Marine Corps that can meet the current Defense Strategic
    Guidance. The budget prioritizes near-term readiness at the expense of
    modernization and facilities. Another round of sequestration would
    force the Marine Corps to significantly degrade the readiness of our
    home station units, which is the Marine Corps' ready force to respond
    to crises or major combat operations. The fiscal challenges we face
    today will be further exacerbated by assuming even more risk in long-
    term modernization and infrastructure in order to maintain ready forces
    forward. This is not sustainable and degrades our capacity as the
    Nation's force-in-readiness.
        Annual continuing resolutions, some lasting several months, will
    further complicate these concerns. The delay in receipt of funds,
    combined with the uncertainty over when and how much will finally be
    appropriated, can wreak havoc on contract award timelines and our
    participation in training exercises, and put us at risk of accruing
    additional costs in the long run. Furthermore, because CRs only fund
    agencies at prior year levels, critical programs may not be sustained.
        General Spencer. The Air Force has sought to protect readiness
    accounts under sequestration. Despite that, fiscal year 2013
    sequestration has had a long-lasting negative impact on Air Force
    readiness. Prior to April of 2013, readiness levels were already low,
    predominantly due to constant global demand combined with a 20+ year
    steady decline in force structure. In 2013, as a result of
    sequestration, we were forced to ground 31 flying squadrons, cancel 8
    exercises, and significantly curtail 8 more. Additionally, maintenance,
    repair, and upgrades to operational training ranges had to be deferred,
    degrading our ability to support high-end combat training.
    Individually, the training and professional development lost as a
    result of sequestration can never be recovered. Institutionally, it has
    taken 2 years to recover readiness to a point where still less than
    half of our fighter and bomber squadrons are full-spectrum ready. This
    is well short of Defense Strategic Guidance requirements. Restored
    funding will assist in re-building readiness, but the Air Force will
    also need relief from the current ops tempo and time to regain
    capabilities lost as a result of sequestration.

        9. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, if defense sequestration returns in fiscal year
    2016, can we expect the negative readiness effects to last for many
    years?
        General Allyn. Yes. If sequestration levels of funding continue,
    the Army will be out of balance until at least fiscal year 2023 and
    will require at least 3 years thereafter to return to a state of full
    readiness, albeit with a much smaller Army.
        Admiral Howard. Yes. Under sequestration there is no path to full
    readiness recovery to execute the required missions of the Defense
    Strategic Guidance (DSG). A return to sequestration in fiscal year 2016
    would necessitate a revisit and revision of the defense strategy. The
    required cuts would force us to further delay critical warfighting
    capabilities, reduce readiness of forces needed for contingency
    responses, further downsize weapons capacity, and forego or stretch
    procurement of force structure as a last resort. While sequestration
    has caused significant near-term impacts, a return to sequestration in
    fiscal year 2016 would create further serious problems that would
    manifest across the years and be difficult from which to recover.
        Assuming a stable budget and no major contingencies for the
    foreseeable future, I estimate that we will not recover from the
    maintenance backlogs until 2018 for Carrier Strike Groups and
    approximately 2020 for Amphibious Ready Groups. Sequestration would
    derail these readiness goals.
        General Paxton. Yes, the deleterious effects of another sequester
    would further compound the turmoil caused by the last sequester from
    which we still are trying to recover. We have yet to fully appreciate
    the cuts that have been made to date; however, sequestration has a
    chaotic effect on the force during a time of extraordinary challenges.
    Sequestration does not fund the optimally designed force of 186,800
    active component required to meet the strategy. Sequestration prevents
    the Marine Corps from generating ready forces to meet operational
    requirements now and into the future. Sequestration equates to less
    force capacity; we would not have what is needed to fight in a major
    war. Essentially, all operational units would be committed for the
    war's duration with no relief and we would have very little left for
    crises that would occur in other parts of the world. Home station unit
    readiness and investments in infrastructure and modernization will
    continue to suffer as limited resources are prioritized to protect the
    near-term readiness of deployed units in harm's way. A return to
    sequestration-level funding with a force of 175,000 active component
    would equate to high risk. At this lower resource level, our units that
    deploy to combat would not be as well trained and would be slower
    arriving. This means that it will take longer to achieve our objectives
    and the human cost would be higher. This is what we mean when we say
    high risk.
        General Spencer. Yes. Individually, the training and professional
    development that would be lost as a result of sequestration can never
    be recovered. Readiness growth takes time and resources, readiness
    develops momentum slowly. Additionally, readiness in a small force can
    be lost very quickly when time and resources are not available.
    Institutionally, under the Balanced Budget Act, it took 2 years to
    recover readiness to a point somewhere near the pre-sequester level.
    Even so, still less than half of our fighter and bomber squadrons are
    currently full-spectrum ready. We can expect the same or worse for the
    foreseeable future if sequestration returns.

        10. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, how long will it take to recover?
        General Allyn. Under sequestration, the Army will not be able to
    bring its manpower, operations and maintenance, modernization, and
    procurement expenditures into balance until at least fiscal year 2023
    and will require at least an additional 3 years thereafter to return to
    full readiness. Meeting Combatant Commander requirements will force
    tough decisions about how much ``surge capacity'' we retain, and how
    little dwell time between deployments our units continue to absorb.
    Increased demands from Combatant Commanders will elevate stress on the
    force and the risk to meet contingency response requirements.
        Admiral Howard. The fiscal year 2016 Navy budget submission is
    designed to continue our readiness recovery, reset the force and
    restore our required contingency operations capacity by 2020 while
    continuing to provide a sustainable forward presence. However, under a
    return to sequestration in fiscal year 2016 and beyond, there is no
    path to full readiness recovery to execute the required missions of the
    Defense Strategic Guidance (DSG). A revision of the defense strategy
    will be necessary.
        General Paxton. We have yet to fully appreciate the cuts that have
    been made to date by sequestration. A return to BCA-level spending
    would further delay readiness recovery. Another sequester would
    exacerbate the fiscal challenges we already face today and force
    significant challenges upon the Marine Corps. The months-long sequester
    of 2013 adversely impacted the aviation depots leading to the release
    of artisans whose skills have not been replicated, leading to
    maintenance backlogs and today's degraded operational readiness. The
    specter of another sequester, especially one that is more than just
    months-long, would only lead to compounding the deleterious effects
    brought about by the 2013 sequester. The time needed to recover
    readiness would exponentially exceed the duration of sequestration, for
    an experienced and proficient generation does not grow overnight.
    Today, approximately half of Marine Corps' home station units are
    insufficiently resourced to achieve those readiness levels needed to
    execute wartime missions, respond to unexpected crises, and surge for
    major contingencies. There is no recovery under sequestration. It would
    take many years to recover readiness once sequestration ends.
        General Spencer. The Air Force's current plan calls for a recovery
    to 80 percent readiness by the end of 2023. However, this plan was
    contingent on full Presidential Budget (PB) 2016 funding, Overseas
    Contingency Operations funding moved to baseline, and a reduction of
    operations tempo to allow for a 1:4 deployment-to-dwell level. Recovery
    is likely to be delayed at least 5 years if sequestration returns in
    fiscal year 2016.
                                 unfunded needs
        11. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, what is the greatest need for your Services in
    respect to rebuilding readiness?
        General Allyn. The Army's greatest need is budget certainty.
    Building proficient and ready units requires a well-synchronized
    training plan supported by available manpower and ready equipment.
    Without certainty in funding, it is impossible to fully develop and
    source a training plan beyond the short term. Further, a lack of budget
    certainty prevents the Army from developing a modernization plan
    because we are uncertain how much or how long funding will continue to
    enable fielding of modernized capability.
        Admiral Howard. Time and stable budgets are the most critical
    elements of Navy readiness recovery. A decade of combat operations and
    the resulting high operational tempo require a period of time for
    reset. With the additional impact of the Continuing Resolution and
    sequestration in fiscal year 2013, we have experienced significant
    delays. Further budget uncertainty will create additional setbacks to
    restoring our readiness.
        The fiscal year 2016 Navy budget submission is balanced to continue
    on a path towards readiness recovery while sustaining the most critical
    procurement and modernization necessary to achieve a ready Navy in the
    future. The Navy unfunded priority list forwarded by the Secretary of
    Defense reflects the additional procurement and modernization funding
    that would improve future readiness with respect to Navy's ability to
    execute the Defense Strategic Guidance. However, none of those
    requirements are a higher priority than the balanced approach offered
    in our fiscal year 2016 budget submission.
        General Paxton. The Marine Corps views rebuilding readiness through
    the lens of institutional readiness. Institutional readiness consists
    of five pillars: (1) Capability and Capacity to Meet Combatant
    Commander Requirements, (2) Unit Readiness, (3) High Quality People,
    (4) Infrastructure Sustainment, and (5) Equipment Modernization.
    Currently, institutional readiness is out of balance. Achieving and
    sustaining balance across these pillars now and into the future is
    essential to rebuilding readiness. Balanced institutional readiness
    leads to the whole-of-force reconstitution after over a decade of
    unprecedented sustain conflict to meet current and future requirements.
    A budget that supports required end strength and equipment
    recapitalization and modernization is an essential component leading to
    balanced institutional readiness.
        General Spencer. The Air Force needs both time and resources to
    rebuild readiness. Currently, time is our greatest need to recover
    readiness. However, time available to train (generate readiness) is
    severely limited by ongoing rotational deployments. The next
    significant limitation to readiness growth is skilled manpower for
    maintenance and operations. In short, after years of force reductions,
    we have a supply-demand mismatch. Two possible solutions exist: reduce
    the number/length of deployments to sustainable levels or increase the
    Air Force capacity to meet rotational demand to permit readiness
    growth. On the resource side, any defense authorization below PB levels
    will prevent full recovery of readiness.

        12. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, what additional necessary capability are you
    lacking in the fiscal year 2016 budget?
        General Allyn. The Army's unfunded priorities list was provided
    directly to Congress by the Department of Defense on March 27, 2015.
        Admiral Howard. PB-16 provides the minimum funding required to meet
    the missions articulated in the Defense Strategic Guidance and
    Quadrennial Defense Review. However, Navy had to accept risk in naval
    warfare systems' modernization, aircraft procurement, and air and
    missile defense capabilities to meet fiscal constraints. There are
    three warfare areas that could benefit from additional resources: 1)
    improve sensors and systems to defeat current and emerging air-to-air
    warfare and anti-ship cruise missile threats; 2) increase strike
    fighter, intelligence, surveillance and reconnaissance (ISR), and
    logistic aircraft capacity; and 3) improve undersea warfare sensors and
    fire control systems. A summary follows:

          Air-to-air Radio Frequency (RF) Kill Chain kits provide
    our aircraft the ability to counter sophisticated digital weapons and
    combat systems proliferated around the world today.
          Destroyer (DDG) combat system modernization will increase
    our capacity to meet Combatant Commander Ballistic Missile Defense
    (BMD) and Naval Integrated Fire Control-Counter Air (NIFC-CA) warfare
    needs (to defeat advanced missiles and strike/fighter aircraft).
          Surface Electronic Warfare Improvement Program (SEWIP
    Block II) will provide radar and communications signal intercept, and
    defeat anti-ship cruise missiles, enabling surface ships to operate in
    an anti-access environment.
          Submarine towed arrays are the most important sensors in
    our undersea warfare enterprise. Current inventory is inadequate to
    reliably meet global demand.
          Our legacy strike fighters (F/A-18A-D) are reaching end
    of life faster than planned due to use and wear. Improving the
    inventory of F/A-18F and F-35C aircraft will help reconcile a near term
    (2018-2020) strike fighter inventory capacity challenge, and longer
    term (2020-2035) strike fighter model balance within the carrier air
    wing.
          An additional MQ-4C (TRITON) would increase our capacity
    to respond to projected worldwide Combatant Commander ISR demand.
          C-40A aircraft fulfill a maritime logistics requirement,
    and provide short-notice high-priority cargo and passenger missions
    globally. Two additional aircraft will bring the fleet to the minimum
    wartime requirement of 17 aircraft to support execution of Combatant
    Commander operational plans.

        General Paxton. In addition to the fiscal year 2016 President's
    Budget request, the Department of Defense has submitted to Congress a
    consolidated list of the Services' unfunded priorities. The Marine
    Corps portion of this list totals $2.1 billion. Additional requirements
    include funding to enhance aviation readiness ($1.5 billion), funding
    for additional investments in critical training and weapon systems such
    as Networking on the Move, Javelin, and the Infantry Immersion Trainer
    ($412 million), and for high-priority construction projects ($167
    million). These requirements do not supersede those laid out in the
    fiscal year 2016 President's Budget request.
        General Spencer. In the event congressional funding exceeds the
    level requested in the FY16 PB, the capabilities the Air Force would
    seek to acquire using the additional resources are identified in our
    fiscal year 2016 Unfunded Priorities List (UPL). Readiness is the
    highest priority on the UPL; this includes munitions, training,
    simulators, ranges, vehicle support, and equipment. The next priority
    is modifications for legacy fleets and programs supporting Combatant
    Commander requirements.
                           army brigade combat teams
        13. Senator Ayotte. General Allyn, if sequestration returns, what
    will specifically happen to the readiness of our Army Brigade Combat
    Teams?
        General Allyn. Sequestration will reduce the resources available
    for training and maintenance of units thereby reducing the readiness
    levels of our Brigade Combat Teams (BCTs). Under sequestration, the
    Army will struggle to maintain sufficient readiness to meet all of its
    current known requirements. The lack of funding and the need to
    dedicate resources to units filling current requirements will result in
    a degradation of readiness in every other unit, eliminating the Army's
    ability to rapidly respond to a contingency or other crisis. We will
    have fewer BCTs ready to respond to emerging crises and unforecasted
    demands.

        14. Senator Ayotte. General Allyn, General Odierno recently
    testified that ``The unrelenting budget impasse has also compelled us
    to degrade readiness to historically low levels. Today, only 33 percent
    of our brigades are ready, when our sustained readiness rate should be
    closer to 70 percent.'' What is the primary reason for this degraded
    readiness: insufficient training, manning, or poorly maintained
    equipment?
        General Allyn. Generally, four factors drive unit readiness:
    availability of Soldiers, availability of equipment; equipment
    serviceability; and unit training. Currently, Soldier availability and
    training are the leading factors of degraded readiness. The combined
    effects of sustained demand for Army capabilities, fiscal reductions,
    and the friction associated with re-organizing of Brigade Combat Teams
    (BCT) and the associated downsizing of the force, impact Soldier
    availability and the training time needed to restore proficiency.
    Unpredictable funding creates an additional, preventable level of risk
    to deliver ready forces.

        15. Senator Ayotte. General Allyn, if sequestration continues, what
    percent of units would have degraded readiness?
        General Allyn. If sequestration continues, the Army will only be
    able to build sufficient readiness to meet current known requirements.
    All other units will experience varying levels of degradation in
    readiness, ranging from significant to severe.
                        combat training center rotations
        16. Senator Ayotte. General Allyn, can you elaborate on how many
    Combat Training Center (CTC) rotations would be cut if sequester were
    to occur in fiscal year 2016?
        General Allyn. The Combat Training Centers (CTCs) continue to be
    our Army's premier training venue. If sequester occurs in fiscal year
    2016, the Army does not plan on cutting any of the scheduled rotations.
    The Army recognizes the value of a CTC rotation to a Brigade Combat
    Team not only in terms of maneuver training, but training in processes
    such as deployment, field maintenance, mission command, and leader
    development--training that cannot be accomplished at home station. As a
    result, the Army has elected to accept risk in home station training
    and readiness in order to preserve the ability to train these complex
    skills. However, the cuts imposed on home station training (HST) as a
    result of the sequester will result in many units arriving at the CTC
    in a degraded state of readiness--which means they will depart the CTC-
    experience less ready than a fully resourced HST model delivers.
                            public shipyard workers
        17. Senator Ayotte. Admiral Howard, Admiral Greenert has testified
    that to address the workload to be completed in our public shipyards,
    the Navy will need to fund an additional workforce up to 33,500 Full
    Time Equivalent (FTEs) workers by fiscal year 2017. Secretary Sean
    Stackley stated that shipbuilding is critical to our security. If
    sequestration were to occur, how would that impact this Navy plan?
        Admiral Howard. If sequestration returns in fiscal year 2016, it
    will force deep cuts to the Navy Operation and Maintenance account,
    impacting our ability to hire the public shipyard workforce needed to
    properly maintain and modernize our existing fleet of nuclear powered
    aircraft carriers and submarines. The resulting shortfall in shipyard
    capacity would drive delays in maintenance completion, negatively
    impacting the readiness of our forces, particularly those needed for
    contingency response, and diminish the ability to achieve platform
    expected service life. Ultimately, this puts our ability to provide the
    forces to support Combatant Commander requirements at risk.
        It is also likely that continued sequestration would force us to
    forego or stretch procurement of ships and submarines. This would slow
    our progress toward achieving the 306-ship force required by the 2012
    Force Structure Assessment and driven by the Defense Strategic
    Guidance. In addition, the resulting disruptions in the ship design and
    construction phases would have significant consequences for the health
    and sustainment of the shipbuilding industrial base, which relies on
    stability and predictability to cost effectively build the future
    fleet.

        18. Senator Ayotte. Admiral Howard, how crucial are these new hires
    to the Navy's readiness recovery?
        Admiral Howard. Increasing the size of the workforce to meet the
    workload demand in the public shipyards is critical to ensure our ships
    and submarines receive required maintenance after many years of high
    operational tempo, achieve expected service life, and are modernized to
    keep pace with the evolving threat. Most of the work in the public
    shipyards involves nuclear-powered submarines and aircraft carriers,
    and there is very limited private sector capacity for this type of
    highly technical work. As a result, any shortfall in the public sector
    workforce capacity results in maintenance delays and deferrals,
    ultimately impacting Navy's ability to provide ready forces.

        19. Senator Ayotte. Admiral Howard, what is the work that will
    drive this demand?
        Admiral Howard. The increasing workload in the public shipyards on
    our nuclear-powered ships is driven by a combination of midlife
    availabilities on our legacy ship classes and the first docking
    availabilities on our newer ship classes. Those include Engineered
    Overhauls on Los Angeles Class submarines, Engineering Refueling
    Overhauls on Ohio Class submarines, Extended Docking Selected
    Restricted Availabilities on Virginia Class submarines, and Planned
    Incremental Availabilities (PIA) and Docking PIAs on Nimitz Class
    aircraft carriers. The volume of this anticipated work is a function of
    these regularly scheduled yard periods and the growth work that has
    accumulated as a function of a decade of high tempo combat operations.

        20. Senator Ayotte. Admiral Howard, which shipyards will require
    this additional workforce?
        Admiral Howard. All four public shipyards (Portsmouth, Norfolk,
    Puget Sound, and Pearl Harbor Naval Shipyards) require additional
    personnel to meet the projected workload in fiscal year 2016 and beyond

        21. Senator Ayotte. Admiral Howard, how will the increased need
    affect each of the four public shipyards?
        Admiral Howard. Each public shipyard has unique requirements, based
    on their projected workload in fiscal year 2016 and beyond. The
    President's Budget for fiscal year 2016 supports these important
    increases, which began in fiscal year 2015. The total manpower levels
    by shipyard in fiscal years 2014-16, including both Direct and
    Reimbursable funded Full-Time Equivalents (FTEs), are as follows:

    ----------------------------------------------------------------------------------------------------------------
                                                                                                    FY14 to FY16 FTE
                  Shipyard                  FY14 FTE Total     FY15 FTE Total     FY16 FTE Total       Difference
    ----------------------------------------------------------------------------------------------------------------
    Norfolk.............................              8,917              9,433              9,732               +815
    Pearl Harbor........................              4,341              4,628              4,765               +424
    Portsmouth..........................              4,601              4,855              5,023               +422
    Puget Sound.........................             11,122             12,560             13,283             +2,161
    ----------------------------------------------------------------------------------------------------------------
        TOTAL...........................             28,981             31,476             32,803             +3,822
    ----------------------------------------------------------------------------------------------------------------

                         amphibious warships shortfall
        22. Senator Ayotte. Admiral Howard, of the current inventory of 31
    amphibious warships, how many are prepared to embark marines and deploy
    right now?
        Admiral Howard. We currently have two Amphibious Ready Groups
    deployed with assigned Marine Expeditionary Units. We maintain at least
    one additional Amphibious Ready Group for contingency response.
    Additional ships are capable of embarking Marines and/or their
    equipment and deploying as Amphibious Task Force (ATF) Lift. While
    specific numbers vary based on operational cycles, the total number of
    ships available for ATF Lift do not meet the full requirement of the
    Combatant Commanders.

        23. Senator Ayotte. General Paxton, what is the Marine Corps'
    requirement for amphibious warships?
        General Paxton. The Chief of Naval Operations and the Commandant of
    the Marine Corps have determined the force structure to support the
    deployment and employment of 2 MEBs simultaneously is 38 amphibious
    warfare ships. Understanding this requirement, in light of fiscal
    constraints faced by the nation, the Department of the Navy has agreed
    to sustain a minimum of 33 amphibious warfare ships. However, COCOM
    demand is more realistically defined at about 54.
        It should be noted that, the 33 ship force accepts risk in the
    arrival of combat support and combat service support elements of the
    MEB, but has been determined to be adequate in meeting the needs of the
    naval force within today's fiscal limitations. This inventory level
    also provides the needed capacity for a forward presence and a MEB/
    Expeditionary Strike Group (ESG) to respond to a crisis or contingency
    within 25 days.

        24. Senator Ayotte. General Paxton, what is the impact of the
    shortfall?
        General Paxton. The Chief of Naval Operations and the Commandant of
    the Marine Corps have determined the force structure to support the
    deployment and employment of 2 MEBs simultaneously is 38 amphibious
    warfare ships. Understanding this requirement, in light of fiscal
    constraints faced by the nation, the Department of the Navy has agreed
    to sustain a minimum of 33 amphibious warfare ships. However, COCOM
    demands are more realistically defined at about 54.
        Shortfalls in amphibious warship inventory have multiple negative
    effects. The 33 ship force accepts risk in the arrival of combat
    support and combat service support elements of the MEB, but has been
    determined to be adequate in meeting the needs of the naval force
    within today's fiscal limitations. This inventory level also provides
    the needed capacity for a forward presence and a MEB/Expeditionary
    Strike Group (ESG) to respond to a crisis or contingency within 25
    days. Shortfalls also negatively affect our ability to train.
    Conducting amphibious operations with our joint services is not just a
    matter of putting Marines on Navy ships. Those units must have the
    opportunity to operate with each other during their workup to establish
    relationships, tactics, techniques, procedures, and build
    interoperability.
                        air force mobilization authority
        25. Senator Ayotte. General Spencer, Congress recently provided a
    new mobilization authority to give increased access to the Reserve
    components. To date, how many times has the Air Force made use of this
    new authority and what, if any, impact has this had on the readiness of
    Active component units?
        General Spencer. The Air Force has utilized 12304b to mobilize
    approximately 1350 airmen across a variety of mission sets in support
    of fiscal year 2015 Combatant Commander requirements. 12304b has
    primarily been used by the Air Force for pre-planned missions in
    support of a Combatant Commander when there is no other authorized
    mobilization authority (12302) available. The impact on the readiness
    of the Active Component is unknown at this time as the requirements
    filled by these mobilized reservists would have otherwise gone unfilled
    if the Reserve Component was not made available by mobilization. In
    other words, the Air Force did not have sufficient capacity in its
    Active Component force to fill all requirements levied upon it by the
    Combatant Commanders.
        If the Air Force could change one aspect of the new authority it
    would be to relieve the Service of the requirement to provide prior
    notification of the use of 12304b in the ``J-Books'', and allow the
    service submission of the Program Objective Memorandum (POM) to OSD as
    sufficient notification. Due to the timing of the ``supplemental'' J-
    Book submission, the Air Force is not able to utilize the new authority
    for pre-planned Combatant Commander missions paid for out of the
    supplemental budget and still allow sufficient notification to the
    Reserve Component members to manage their employer and personal lives
    with enough time to deploy.

        26. Senator Ayotte. General Spencer, please provide deployment-to-
    dwell figures for Active and Reserve component units for each mission
    design series (MDS), i.e. type of aircraft, for 2012, 2013, and 2014.
        General Spencer. With a view towards regaining readiness by 2023,
    the Air Force manages our Combat Air Forces (CAF) fighter/bomber fleet
    at a 1:4 Deploy-to-Dwell (1:5 Mob-to-Dwell). All other MDS' are managed
    at 1:2 Deploy-to-Dwell (1:5 Mob-to-Dwell). Specific MDS' are listed
    below.

    ----------------------------------------------------------------------------------------------------------------
            Combat Air Forces MDS             Component             FY12               FY13               FY14
    ----------------------------------------------------------------------------------------------------------------
    B-1.................................             Active              1:2.0              1:2.0              1:1.5
    B-2.................................             Active                N/A                N/A                N/A
    B-52................................             Active              1:2.5              1:3.7              1:3.6
    A-10C...............................             Active              1:2.2              1:2.3              1:2.0
    A-10C...............................                ANG             1:20.0                N/A                N/A
    A-10C...............................               AFRC             1:30.0                N/A              1:7.5
    F-15C...............................             Active             1:17.6              1:7.3              1:4.4
    F-15C...............................                ANG             1:39.6                N/A                N/A
    F-15E...............................             Active              1:3.4              1:2.9              1:3.3
    F-16C+/CM...........................             Active              1:8.3              1:2.8              1:5.6
    F-16C+/CM...........................                ANG             1:14.6             1:22.7             1:21.5
    F-16C+/CM...........................               AFRC                N/A                N/A              1:8.6
    F-16CJ..............................             Active              1:4.2              1:2.9              1:2.8
    F-16CJ..............................                ANG              1:8.2                N/A              1:4.3
    F-22................................             Active              1:6.4              1:7.0              1:1.6
    HC-130..............................             Active              1:1.1              1:2.8              1:2.0
    HC-130..............................                ANG                N/A             1:18.1                N/A
    HC-130..............................               AFRC             1:12.3                N/A              1:6.4
    HH-60...............................             Active              1:1.5              1:2.6              1:2.5
    HH-60...............................                ANG              1:7.9             1:10.3                N/A
    HH-60...............................               AFRC              1:7.1                N/A              1:7.0
    ----------------------------------------------------------------------------------------------------------------

    CAF NOTES:

        1.  N/A means no contingency deployment for that MDS during that
    time frame.
        2.  CAF Deploy-to-Dwell ratio based on deployment of lead UTCs for
    each MDS.
        3.  Dwell is average for each CAF MDS deployment during specified
    fiscal year.
        4.  We do not track dwell for Low Supply/High Demand weapon systems
    such as E-3, E-8, EC-130H, RC-135, U-2, and SOF aircraft (includes
    Battlefield Airmen). Dwell is managed by individual crew position and
    can vary widely within a single unit.

    ----------------------------------------------------------------------------------------------------------------
           Mobility Air Forces MDS            Component             CY12               CY13               CY14
    ----------------------------------------------------------------------------------------------------------------
    C-17................................             Active              1:1.7              1:2.1              1:2.2
    C-17................................                ANG              1:6.3              1:6.9              1:7.5
    C-17................................               AFRC              1:7.5             1:10.3             1:11.4
    C-5A/B/C............................             Active              1:2.3              1:4.7              1:5.3
    C-5A/B/C............................                ANG              1:3.8              1:4.5              1:5.2
    C-5A/B/C............................               AFRC              1:5.4              1:6.2              1:6.7
    C-5M................................             Active              1:5.1              1:4.5              1:4.2
    C-5M................................               AFRC              1:5.6             1:13.2             1:11.0
    KC-135..............................             Active              1:2.4              1:3.2              1:2.6
    KC-135..............................                ANG              1:5.7              1:6.0              1:6.5
    KC-135..............................               AFRC              1:5.2              1:5.3              1:6.8
    KC-10...............................             Active              1:2.2              1:2.6              1:2.3
    KC-10...............................               AFRC              1:5.9             1:10.0             1:13.1
    C-130H..............................             Active              1:3.3              1:2.7              1:3.3
    C-130H..............................                ANG              1:7.1             1:11.8             1:10.1
    C-130H..............................               AFRC              1:8.1             1:12.5             1:11.1
    C-130J..............................             Active              1:2.0              1:2.1              1:2.2
    C-130J..............................                ANG              1:57*             1:18.7              1:7.6
    C-130J..............................               AFRC              1:6.9              1:5.1              1:6.9
    ----------------------------------------------------------------------------------------------------------------

    MAF NOTES:

        1.  * ANG units in transition from C-130H to C-130J.
        2.  MAF Deploy-to-Dwell: Ratio of time aircrews are on missions
    away from home supporting SECDEF-directed contingency taskings and
    TRANSCOM/HHQ-validated taskings vs. time at home station.
        3.  MAF Deploy-to-Dwell Calculation: Line qualified available
    aircrews divided by taskings minus one.
                                Equipment Reset
        27. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, what is the current status of our retrograde and
    reset efforts from Iraq and Afghanistan, and what equipment shortfalls
    would we face if we were forced to surge in the next 12 months?
        General Allyn.
    Afghanistan Retrograde:
        United States Forces-Afghanistan reported that as of 28 March 2015,
    there were 86,900 pieces of Rolling Stock (RS) and 810,000 Twenty-Foot
    Equivalent Units (TEU) of Non-Rolling Stock (NRS) in Afghanistan that
    includes both supply and ammunition stocks. Of this equipment, about
    3,700 pieces of RS and roughly 1,250 TEUs of NRS belong to the Army. By
    the end of 2015, the current plan is to reduce these totals by
    approximately 25 percent from their current values through either
    retrograde, redeployment or divesture efforts. The vast majority of
    non-Army equipment is Contractor Managed, Government Owned (CMGO)
    equipment that will be divested of in Afghanistan. The Army currently
    plans to retrograde a total of about 2,900 pieces of RS and 1,000 TEUs
    of NRS and divest all remaining equipment.
        Equipment shortfalls due to a surge would be contingent on the size
    and scope of the operation. The Army has Army Prepositioned Stocks
    (APS) and equipment strategically located in or near the theater of
    operation to support several contingency plans that may potentially
    mitigate equipment shortfalls and reduce strategic deployment of unit
    equipment.
    Iraq Retrograde:
        There are currently no major retrograde operations on going in
    Iraq. We are utilizing our Kuwait based APS equipment to support
    CENTCOM operations in Iraq.
    Reset:
        The Army programmed to reset 841,000 major end items returning from
    Afghanistan in fiscal year 2015. However, 84,600 of those items are
    still required to support the Resolute Support Mission (RSM) and will
    be reset once they are no longer required for operations.
        Depending on the type of units and equipment required for a surge,
    the Army's programmed equipment Reset schedule may be delayed until the
    equipment is no longer required for operations and is again available
    for Reset.
        Admiral Howard. Navy is resetting both ships and our ground Navy
    Expeditionary Combat Command (NECC) forces.
        Reset of material readiness in carriers, surface combatants and
    amphibious ships, after over a decade of high tempo combat operations,
    requires $2.6B across the FYDP. The majority of the work should be
    completed by the end of fiscal year 2018. Some reset work will continue
    at lower levels through fiscal year 2020 because some of these
    platforms require the availability of a drydock to conduct lifecycle
    maintenance to achieve their expected service life (drydock maintenance
    is normally on an eight year cycle). The Navy OCO request for fiscal
    year 2016 includes $557M for this work.
        Navy capacity to surge ships for contingency response remains
    constrained until this work is completed.
        Retrograde for NECC equipment has been successfully executed with
    only a small percentage remaining (currently in transit). With OCO
    ($62M), Navy's fiscal year 2016 budget request supports reset
    requirements for all NECC Mine Resistant Ambush Protected (MRAP) and
    Medium Tactical Vehicle Replacement (MTVR) vehicles, including
    communications gear and improvised explosive device defeat system
    installations.
        NECC forces could support a surge if required, but would be
    accepting risk related to the inventory of tactical vehicles until
    reset is completed in the beginning of fiscal year 2017. Upon
    completion of remaining equipment reset, NECC will be fully postured to
    support contingency response requirements when necessary.
        General Paxton. As a result of the continued support of Congress
    via OCO appropriations, the Marine Corps has been executing an
    aggressive ground equipment reset strategy to repair and return our OEF
    equipment to the Operating Forces as rapidly as possible. All Marine
    Corps equipment was withdrawn from Afghanistan in December 2014, and as
    of April 2015, all equipment has been returned to CONUS. To date, the
    Marine Corps is approximately 60 percent reset-complete and anticipates
    reset completion in fiscal year 2017.
        Our reset effort is helping in two key ways; (1) Providing an
    opportunity to repair, replace or recapitalize war-torn equipment
    slated to remain in our inventory; and (2) producing positive readiness
    impacts for some of our key high-demand/low-density equipment items.
    For example, we expect to see measureable readiness increase in many of
    our radar, satellite communications and motor transport systems.
        The Marine Corps is optimized and resourced for global crisis
    response, and we give priority to the equipping needs of deployed
    forces. To address equipping shortfalls in non-deployed units, the
    Marine Corps is undertaking a deliberate effort to right-size and
    balance our ground equipment inventory to support our future force
    structure and ensure equipment is optimally aligned to requirements.
    This ``ground equipment optimization effort'' will support
    reconstitution to properly scaled and balance force by fiscal year
    2017.
        General Spencer. After years of effort, major Air Force retrograde
    actions are nearing completion. Still engaged in combat, the Air Force
    has leaned its footprint and is positioned to support its Afghanistan
    enduring commitment equipment levels. Regarding reset actions, we still
    face significant work ahead to realize a complete reset of equipment
    after years of sustained combat operations. Major Air Force weapon
    systems do not have typical one-time ``reset'' requirements. Our major
    aircraft and engines are sustained on an ongoing basis. Sustainment
    requirements are driven by various timing criteria including aircraft/
    engine cycles, life-limited parts, flying hours, etc. Such on-going
    sustainment activities underpin readiness. Our major reset areas such
    as aircraft procurement, ammunition and missile procurement, aerospace
    ground equipment, support equipment, basic expeditionary airfield
    resources, and vehicles continue to remain a high priority for the Air
    Force. However, depending on the nature of a surge, we would most
    likely exacerbate existing munitions shortfalls Air Force wide. Cross
    leveling between combatant commands would be required and could create
    risk to other operational plans. If the committee would like
    additional, more finite detail, we would be happy to provide a
    classified briefing upon your request.
                                Naval Readiness
        28. Senator Ayotte. Admiral Howard, in your written statement, you
    note that the Navy has only been able to keep one Carrier Strike Group
    and one Amphibious Readiness Group in the heightened readiness
    posture--just one third of the requirement. What have been the
    consequences of that shortfall?
        Admiral Howard. CSGs and ARGs deliver a significant portion of our
    striking power, and we are committed to keeping, on average, three
    additional CSGs and three additional ARGs in a contingency response
    status, ready to deploy within 30 days to meet operation plans
    (OPLANs). However, if sequestered, we will prioritize the readiness of
    forces forward deployed at the expense of those in a contingency
    response status. We cannot do both. We will only be able to provide a
    response force of one CSG and one ARG. Our current OPLANs require a
    significantly more ready force than this reduced surge capacity can
    provide. Less contingency response capacity would mean higher
    casualties as wars are prolonged by the slow arrival of naval forces
    into a combat zone. Without the ability to respond rapidly enough, our
    forces possibly could arrive too late to affect the outcome of a fight.

        29. Senator Ayotte. Admiral Howard, is the Navy considering forward
    deploying any additional carriers to make up for the lost presence
    under the Optimized Fleet Response Plan?
        Admiral Howard. The Navy continuously evaluates how best to
    position our naval forces overseas to meet evolving security
    environments, but we have no plans to forward deploy additional
    carriers at this time.
        While carrier presence varies slightly from year to year, our
    overall carrier presence will increase from fiscal year 2015 to fiscal
    year 2016. Seven month deployments under OFRP are a sustainable goal
    that balances our requirement to generate ready forces, provides
    forward presence, gets us to stable maintenance cycles, and enables us
    to respond to contingencies.

        30. Senator Ayotte. Admiral Howard, how, if at all, is the Navy
    used to meet NATO missions?
        Admiral Howard. The Navy provides support to a wide range of NATO
    missions. Specific rotational requirements are identified through the
    Global Force Management Allocation Plan (GFMAP). Additionally, other
    forces are offered in a ``Notice to Move'' (NTM) status. These forces
    are offered formally to NATO to be available within 30 days of an
    incident.
        Specific examples of Navy support to NATO include:

          Surface combatants support to Operation Atlantic Sentry,
    which provides for the Ballistic Missile Defense (BMD) of Europe. This
    persistent presence is a gateway for future endeavors, including Aegis
    Ashore, and establishing an organic NATO BMD capability.
          We provide surface combatant and Maritime Patrol Aircraft
    support to Operation ACTIVE ENDEAVOR, the U.S.-NATO counter-terrorism
    operation.
          Surface combatants provide presence in the Black Sea
    under NATO auspices. For example, USS Vicksburg is currently the
    command ship for Standing NATO Maritime Group 2 (SNMG-2) which provided
    presence in the Black Sea for nearly the whole month of March. SNMG-2
    began operations in January, 2015, and will conclude this June.
          Commander, Naval Forces Europe is dual-hatted as a NATO
    Joint Force Command, Naples, coordinating NATO operations in Kosovo.
    Commander, SIXTH Fleet is also dual-hatted as Commander, Naval Striking
    and Support Forces NATO, in Lisbon, Portugal.
          We actively participate in NATO exercises: BALTOPS,
    TRIDENT JUNCTURE, MARINER, and MANTA. Additionally, we conduct bi-
    lateral exercises such as Joint Warrior, to strengthen our
    interoperability and tactics with our NATO partners.

        Port visits and Distinguished Visitor embarks, such as USS Theodore
    Roosevelt's recent visit to the United Kingdom and embarks of senior
    government officials from UK, Finland, Sweden, France, and Greece, also
    deepen ties with our NATO partners.

        31. Senator Ayotte. Admiral Howard, how does that affect the
    carrier presence that is required for combatant commander missions?
        Admiral Howard. NATO has not requested carrier presence in fiscal
    year 2016, and Navy is not sourcing any NATO carrier presence in the
    SECDEF-approved fiscal year 2016 Global Force Management Allocation
    Plan.
                            Training and Simulation
        32. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, in 2013, training simulation accounts were
    severely cut due to sequestration, yet they can provide significant
    cost savings where trainees and long-term servicemembers can learn
    lessons that don't cost thousands of dollars each time a mistake is
    made. How do each of your Services plan to integrate simulators into
    your readiness and training agenda?
        General Allyn. Live, Virtual, Constructive, and Gaming capabilities
    are integral components of the Army Training Strategy. Use of
    simulations is integrated into Army training in two ways. First,
    simulations are specified in our Unit Training Models and units use
    virtual, gaming, or constructive simulations to execute building-block
    training events. Units move progressively from simulations based events
    to ``live'' events. Similarly, in Army schools, specific simulations
    are required in executing Programs of Instruction. Second, Commanders
    routinely use simulations to enhance their training. For example, units
    train Mission Command using simulations to reduce lower-echelon unit
    participation to save on operations and maintenance dollars. Further,
    aviation units use the Aviation Combined Arms Tactical Trainer (AVCATT)
    to practice aviation missions in a virtual environment prior to
    expending flying hours.
        Admiral Howard. Navy has long recognized the criticality of
    integrating Modeling and Simulation (M&S) technology into Navy's
    training and readiness plans. M&S technology is a ``readiness
    enabler'', and supports Navy's mission to man, train and equip our
    forces.
        As a result, Navy formally established the OPNAV Simulator Training
    Requirements Group (OSTRG), which reviews investment plans for
    simulator, Fleet Synthetic Training (FST) and Live, Virtual, and
    Constructive (LVC) Training, Joint National Training Capability (JNTC)
    programs, and assesses current capabilities and limitations. OSTRG
    leverages the Fleet Training Integration Panel (FTIP), and meets bi-
    annually to achieve cross-community, multi-mission synthetic training
    integration, and proposes live training events for simulator-based
    training. Individual platform and integrated simulator/training
    requirements are codified in Naval Training System Plans. Furthermore,
    Warfare Area Simulator Master Plans, updated during bi-annual FTIP
    symposiums, formulate capability-based requirements and acquisition
    strategies to expand simulator training. These plans consider legacy
    systems as candidates for modernization and reflect the development of
    a full range of simulators to support synthetic training. The OSTRG and
    its members focus on cost-effective solutions and leverage new
    technologies to meet readiness performance standards.
        Since PB-14, OSTRG and FTIP members worked to develop the first
    OPNAV Simulator Master Plan (OSMP). The goal of the OSMP is to provide
    ready, responsive, and adaptive forces at tactical and operational
    levels, through a training continuum that balances simulated and live
    training events to improve warfighting readiness while reducing Total
    Ownership Cost. The OSMP translates validated and Fleet-approved
    integrated training requirements into integrated simulator training
    roadmaps; and prioritizes and recommends sourcing solutions for Navy's
    simulator, FST and LVC training requirements in support of both
    platform and warfare area readiness.
        General Paxton. There is no doubt that simulators provide a unique
    opportunity to provide realistic training opportunities that offset
    some of the costs associated with real-world training. These systems
    allow for varied training experiences, can minimize ammunition usage,
    and decrease logistical costs. In fact, the Commandant's Planning
    Guidance for 2015 specifically states that development and use of
    simulators remains a high priority for the service.

            ``We will continue to support the fielding of systems that
            enhance our proficiency and safety in operating weapons and
            equipment. Our investment in training systems will reflect the
            priority we place on preparing for combat and be fully
            integrated with training and readiness standards. I expect all
            elements of the MAGTF to make extensive use of simulators where
            appropriate.''
                                        -Gen. Joseph Dunford

        However, as with other modernization efforts, we have had to defer
    some simulator development initiatives in order to prioritize near term
    readiness. We are currently funding simulator development and testing
    through individual system programs and supporting contracts. Due to the
    programming cycle, Fiscal Year 2018 will be the first opportunity to
    fund enduring integrated simulator capability.
        Specifically, the Marine Corps Training and Education Command's
    (TECOM) Modeling and Simulation (M&S) Master Plan, Squad Immersive
    Training Environment (SITE), as well as the Live, Virtual,
    Constructive-Training Environment (LVC-TE) identify service
    requirements for simulators and simulations. These requirements are
    being addressed by TECOM. In conjunction with this we are continuing
    our efforts to integrate aviation systems with ground simulations to
    provide opportunities to conduct training that tests the full structure
    and capabilities of the Marine Air Ground Task Force (MAGTF).
        General Spencer. The Air Force uses aircrew simulators in most
    cases to augment or supplement live fly training as simulators cannot
    replace all live fly training. We focus most of our simulator effort on
    providing training in emergency procedures, contested and degraded ops,
    mission rehearsal and area denial, all items that are best suited for
    training in a controlled and secure virtual training environment.
    Simulators are an integral part of the Air Force readiness training
    objectives. Without high fidelity aircrew simulators readiness would
    quickly be reduced to unacceptable levels.

        33. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, what cost savings can the Services leverage from
    using simulation technology when preparing our Armed Forces?
        General Allyn. The Army maintains a large variety of training
    simulators allowing units to train at basic skills such as
    marksmanship, driving, tank gunnery, and aviation. Some are networked
    to several others allowing battalion task forces to simulate large
    scale maneuvers at reduced cost and equipment OPTEMPO.
        These training simulators save the Army money when compared to live
    training as they require less operations and maintenance funds (e.g.
    tank track, ammunition, etc.). However, the cost of acquiring and then
    maintaining simulators offsets a considerable amount of these savings--
    these systems are costly. Simulators are used to provide baseline and
    some sustainment skills, and to rehearse complex actions in order to
    reduce risk to Soldiers. Ultimately, however, Soldiers must execute
    their training in a ``real-world'' environment--such as with live-fire
    exercises. While simulations are vital in building Soldier, Leader, and
    unit proficiency, they cannot replicate the complexity and critical
    human factors that arise in live, combined arms maneuver exercises
    against a thinking adversary.
        Admiral Howard. The Navy continues to explore simulation technology
    opportunities to ultimately reduce operations and maintenance costs
    while sustaining, or improving, force readiness. Simulators are
    integrated into individual and team training, both as part of formal
    courses of instruction and crew preparation for at-sea operations.
    Simulator investments play a pivotal role in improving training
    proficiency and delivery. Life cycle costs of simulation are less than
    the overhaul, and preventive/corrective maintenance of the tactical
    equipment. Simulation can prevent personal injury as well as weapons
    damage, saving thousands of dollars as well as damage to personnel
    readiness.
        Simulators normally operate at a fraction of the cost of
    operational equipment (e.g. operation of aviation simulators are
    normally 1/10 or less the cost of actual aircraft flying cost). In
    addition, simulators do not wear out or break high-valued equipment
    during routine training. This applies to all levels of training where
    simulators can be used. In some cases, lower fidelity devices can
    perform a large percentage of training tasks lowering total procurement
    cost of a training system.
        General Paxton. There is no doubt that simulators provide a unique
    opportunity to provide realistic training opportunities that offset
    some of the costs associated with real-world training. These systems
    allow for varied training experiences, can minimize ammunition usage,
    and decrease logistical costs. In fact, the Commandant's Planning
    Guidance for 2015 specifically states that development and use of
    simulators remains a high priority for the service.

            ``We will continue to support the fielding of systems that
            enhance our proficiency and safety in operating weapons and
            equipment. Our investment in training systems will reflect the
            priority we place on preparing for combat and be fully
            integrated with training and readiness standards. I expect all
            elements of the MAGTF to make extensive use of simulators where
            appropriate.''
                                        -Gen. Joseph Dunford

        However, as with other modernization efforts, we have had to defer
    some simulator development initiatives in order to prioritize near term
    readiness. We are currently funding simulator development and testing
    through individual system programs and supporting contracts. Due to the
    programming cycle, Fiscal Year 2018 will be the first opportunity to
    fund enduring integrated simulator capability.
        Specifically, the Marine Corps Training and Education Command's
    (TECOM) Modeling and Simulation (M&S) Master Plan, Squad Immersive
    Training Environment (SITE), as well as the Live, Virtual,
    Constructive-Training Environment (LVC-TE) identify service
    requirements for simulators and simulations. These requirements are
    being addressed by TECOM. In conjunction with this we are continuing
    our efforts to integrate aviation systems with ground simulations to
    provide opportunities to conduct training that tests the full structure
    and capabilities of the Marine Air Ground Task Force (MAGTF).
        General Spencer. First and foremost, our number one priority is to
    sustain and enhance force readiness. We use simulation technology to
    maintain, sustain, enhance, supplement, and in some cases, replace
    training conducted in a live environment. The use of simulation
    technology may or may not result in direct cost savings, but should
    result in a more ready force. Therefore, we do not have an additional
    cost savings estimate beyond those that have already been programmed
    and budgeted.
        Training is a key to force readiness and training for combat and
    other operational missions is an extremely complex endeavor.
    Sophisticated threat systems and advanced operational capabilities are
    driving an increased emphasis on the use of simulation technologies
    (Live, Virtual, and Constructive-Operational Training (LVC-OT)
    capabilities). As threat environments become more dense and more highly
    contested, our ability to simulate them in the live training
    environment is becoming increasingly difficult. Additionally, our fifth
    generation weapon systems are so advanced that challenging them in the
    live training environment while protecting their capabilities and
    tactics from exploitation is likewise becoming more and more
    problematic.
        LVC-OT capabilities address these issues by providing solutions for
    increasing the value of live operational training, and simulating the
    live environment using concurrent, high-fidelity, networked training
    systems. Leveraging simulation technology significantly improves our
    readiness at a cost that would be otherwise unaffordable. We are
    working diligently to maximize the value of every training dollar by
    optimizing our LVC-OT capabilities.

        34. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Allyn, if sequestration does occur, will training
    simulators be cut similarly to the 2013 sequestration?
        General Allyn. The Army will seek to optimize its investments in
    training by balancing operational training investments, institutional
    investments, and simulations investments. All three areas will be
    impacted significantly by sequestration much as they were in 2013.
        Admiral Howard. A return to sequestration in fiscal year 2016 would
    necessitate a revisit and revision of the Defense Strategic Guidance.
    Required cuts will force us to further delay critical warfighting
    capabilities, reduce readiness of forces needed for contingency
    response, further downsize weapons capacity, and forego or stretch
    procurement of ships and submarines as a last resort. We will be unable
    to mitigate the shortfalls like we did in fiscal year 2013 because we
    are still recovering from operating account shortfalls that were
    deferred to later years in the fiscal year 2013 FYDP. Our PB-16 budget
    represents the minimum funding necessary to execute the defense
    strategy. Sequestration impact to training simulators would come if we
    had to stretch or eliminate building new facilities or reduce training
    associated with generating ready forces in order to husband dollars.
        General Paxton. Despite the unique training opportunities afforded
    by simulation systems, such opportunities would, as with all training
    efforts across the Marine Corps, be affected by a sequester in fiscal
    year 2016. The fiscal year 2016 President's Budget request represents
    the bare minimum at which the Marine Corps can meet the current Defense
    Strategic Guidance. The Marine Corps would be forced to reduce or delay
    home station operations and maintenance activities in order to protect
    near-term readiness, forward deployed forces, and our capacity to meet
    COCOM demands under sequestration. Though no decisions have been made
    regarding specific reductions under an fiscal year 2016 sequester,
    advanced skills training and service level exercises would likely be
    scaled back accordingly, along with advanced training technologies,
    simulation systems training, and related activities. We would also
    assume additional risk in our modernization accounts, reducing the
    amount of investment funding available to develop and procure new
    systems.
        General Spencer. In 2013 due to sequestration, the Air Force was
    required to make several reductions in simulator operations and
    support. While we did not remove simulators or completely shut down
    simulator operations, the Air Force cancelled large virtual exercises,
    reduced travel funding for units not co-located with a simulator, and
    curtailed simulator sustainment funding. We don't yet know the specific
    training areas that will be impacted by any future sequestration
    actions. During any sequestration, the Air Force will balance training
    resources to meet fiscal constraints.
                           Combatant Commander Demand
        35. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, what are the current mitigation plans and
    strategies to meet combatant commander demand until full readiness is
    recovered?
        General Allyn. The Army currently meets the majority of combatant
    commander requirements for forces. The Army has identified a ceiling to
    the Joint Staff that identifies an upper limit for overall demand that
    still permits Service readiness recovery. Above this ceiling,
    additional requirements would put service readiness recovery at risk.
    In the Global Force Management process, the Army identifies which
    additional requirements would be above the ceiling, the risks to
    sourcing those requirements, and risk mitigation plans. For planned
    requirements, these mitigation options include cancelling or delaying
    modernization programs and taking risk in services and infrastructure.
    For unplanned or contingency requirements, mitigation requires
    balancing between repurposing units from other missions, meeting
    deployment timelines, and the overall readiness of deploying units.
        Admiral Howard. While we continue to source to capacity, the
    reality is we do not have sufficient force structure to meet all
    Combatant Commander (CCDR) demand. CCDRs must mitigate risk through
    judicious employment of allocated forces.
        Risk is mitigated through the Global Force Management Allocation
    Plan (GFMAP), by allocating forces to the highest priority missions,
    and in coordination with the CCDRs, Joint Staff, and other Services, to
    ensure global mission requirements are executed at an acceptable level
    of risk.
        General Paxton.

          For the Marine Corps to create dwell time necessary to
    build the institutional readiness our nation requires from its 911
    force both now and in the future, we will have to change how we provide
    forces to meet Geographic Combatant Commander (GCC) requirements.
          In the near term, your Marine Corps will be ready to
    respond to the nation's call; however, our capacity to respond may be
    severely diminished.
          By reducing the capacity, but not the capabilities of our
    forward deployed MAGTFs, we can create some trade space in personnel
    and resources necessary to improve institutional readiness.
          Reductions in unit capacity alone may be insufficient to
    improve D2D significantly and more importantly to optimize unit
    readiness. While requiring further study, anticipate each element of
    the MAGTF will require uniquely tailored solutions.
          By tailoring the MAGTF to the specific capabilities
    required by the Combatant Commanders, we can create the opportunity for
    the Marine Corps as a Service to regain readiness from over a decade of
    conflict. These readiness and recovery efforts will further allow the
    Marine Corps to provide a ``ready force'' to support the operations
    across ROMO.

        General Spencer. The Air Force is currently meeting combatant
    commander rotational demand with ready forces, and they are performing
    exceptionally well in Operations RESOLUTE SUPPORT and INHERENT RESOLVE.
    Unfortunately, this has come at the cost of likely sourcing the demands
    of the Defense Strategic Guidance with unready forces. We have
    successfully mitigated risk to rotational requirements at the expense
    of our broader National Military Strategy. We simply cannot mitigate
    all of the risk at our current capacity.

        36. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, have you established milestones or metrics to
    track the rebuilding of the readiness?
        General Allyn. Yes. The Army has developed a combination of metrics
    to evaluate our readiness recovery and force generation efforts. Those
    metrics consist of, but are not limited to, deploy-to-dwell ratios;
    aggregate demand for Army forces, including deploy-to-dwell, theater
    committed, or prepare to deploy units; combat training center unit
    preparedness results (or other major training event); and minimum
    floors of full spectrum readiness. By examining these and other
    variables, the Army accurately tracks readiness progress toward
    healthy, sustainable force generation levels.
        Admiral Howard. Yes. Navy measures our current and projected
    operational output through the Fleet Response Plan Operational
    Availability (FRP Ao) metric. This measures ``presence delivered'' and
    ``contingency response capacity'' against a standard of sustainable
    levels of presence and the most demanding Combatant Commander
    Operational Plan for contingency response capacity. The CNO recently
    discussed the FRP metric of 2+3 Carrier Strike Groups (CSGs) as our
    goal which reflects a sustained global presence of 2 CSGs and 3 ``ready
    to respond'' within about 30 days. Across most of the Fleet, Navy will
    continue to be challenged through this year, particularly for
    contingency response capacity, and then slowly begin to recover FRP Ao
    levels through FY 2020 across the force.
        Because our depot maintenance challenges are among the most
    critical aspects underpinning our readiness recovery, we are monitoring
    the hiring plans and output of both aviation depots and shipyards
    closely, adjusting as needed. We are investing not only in staffing,
    but also in workforce development, to achieve these goals.
        General Paxton. Yes. Service-level readiness systems and processes
    are informed by, and inform, the Chairman's Readiness System that
    codifies readiness reporting and assessment used to track the degree to
    which readiness is recovering or decaying.
        Our metrics to monitor manning, equipment, and training levels, and
    assessment process provides near-term analysis of readiness of the
    Marine Corps' ability to execute operational plans and portend
    readiness to resourcing linkages.
        The full weight of the Budget Control Act would preclude the Marine
    Corps from meeting its full statutory and regulatory obligations, and
    adequately prepare for the future. Under sustained sequestration for
    forces not deploying, the fuel, ammunition, and other support necessary
    for training would be reduced thus inhibiting our ability to provide
    fully-trained Marines and ready units to meet emerging crises or
    unexpected contingencies. We would see real impacts to all home station
    units, then our next-to-deploy and some deploy forces . . . this
    constitutes the internal decay, the beginnings of the hollow force we
    have fought so hard to avoid.
        Prior to the onset of sequestration and operational requirements
    supporting the New Normal, the Marine Corps was on a trajectory to
    reconstitute to a ready force by 2017. Regrettably, this is no longer
    the case. We have not fully recovered from the turmoil caused by the
    last sequester. Full recovery is frustrated by the specter of another.
    Another sequester would prevent any opportunity to further recover
    readiness.
        General Spencer. The Air Force has employed a readiness recovery
    model that assesses the five key ``levers'' of Air Force Readiness
    (deploy-to-dwell ratio, and four resource levers--flying hour program,
    critical skills availability, access to training resources, and weapons
    system sustainment). Additionally, the model provides an analytical
    assessment of 20 leading indicators of readiness to provide a detailed
    understanding of the range of possibilities for resourcing and ops
    tempo over the planning horizon. This methodology helps quantify two
    key readiness realities; the readiness generation process takes
    resources and time. While one lever cannot fix the problem
    independently, a shortfall in any single lever can create a severe
    readiness problem. Our readiness metrics are tracked through the Joint
    Service system called Defense Readiness Reporting System. This system
    communicates commanders' observations, concerns, metrics, and
    approaches to their combat readiness, from the field back to the
    headquarters staff. The aggregate findings from the field are shared
    with our legislators through the Quarterly Readiness Report to
    Congress. With that understanding, our requirements to achieve 80
    percent readiness by the end of 2023 are PB-level funding of programs
    that support the four resource levers, in combination with improved
    deploy-to-dwell ratios for our force; through 2023.

        37. Senator Ayotte. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, if sequester does happen, how many years would
    full readiness recovery be delayed, and how would you respond to the
    needs of combatant command?
        General Allyn. Under sequestration, the Army will not be able to
    bring its manpower, operations and maintenance, modernization, and
    procurement expenditures into balance until at least FY23 and will
    require at least an additional 3 years thereafter to return to full
    readiness. In short, the nation would be accepting considerable risk
    for no less than 7 years.
        In order to meet the priority needs of combatant commands, the Army
    would focus resources on deploying units and decrement training
    resources for units not deploying. This will increase the risk for
    contingency operations and weaken overall leadership experience across
    the Army, but will ensure we can meet Combatant Commander near term
    requirements.
        Admiral Howard. Under sequestration there is no path to full
    readiness recovery to execute the required missions of the Defense
    Strategic Guidance (DSG). Our PB16 budget submission represents the
    bare minimum necessary to execute the DSG in the world we face. A
    return to sequestration in fiscal year 2016 would necessitate a revisit
    and revision of the defense strategy.
        In the short term, the required cuts would force us to further
    delay critical warfighting capabilities, reduce readiness of forces
    needed for contingency responses, further downsize weapons capacity,
    and forego or stretch procurement of force structure as a last resort.
    While sequestration causes significant near-term impacts, it would also
    create serious problems that would manifest themselves after 2020 and
    would be difficult to recover from. For example, even assuming a stable
    budget at PB-16 levels and no major contingencies for the foreseeable
    future, we estimate that Navy will not recover from the maintenance
    backlogs that have accumulated from the high operational tempo over the
    last decade of war and the additional effects of the fiscal year 2013
    sequestration until approximately fiscal year 2018 for Carrier Strike
    Groups and approximately fiscal year 2020 for Amphibious Ready Groups,
    more than five years after sequestration in fiscal year 2013.
        As we did in fiscal year 2013, if sequestered in 2016 and beyond,
    Navy will deliver ready forces forward to meet the highest priorities
    of the Combatant Commanders. Some lower priority deployments may have
    to be cancelled and contingency response capacity will continue at
    reduced levels.
        General Paxton. We are not able to fully assess the impact of a
    sequester or BCA funding levels. One of the greatest challenges with
    this current environment is the constant change and resultant
    uncertainty. We are providing our best estimates for all aspects of our
    Title X responsibilities, but we do know that we will have fewer units
    resulting in less capacity and high deployment to dwell ratios
    (Organize).
        There will be reduced time to train, as well as reduced assets
    available for training (such as fuel, ammunition, and equipment
    readiness) (Train).
        Reduced equipment availability and legacy equipment not on par with
    the modern battlefield (AAVs, 4th generation aircraft, outmoded radars
    and C4I) (Equip).
        Over time, sequestered budgets will prevent the Marine Corps from
    meeting Combatant Commanders' requirements at an acceptable deployment
    to dwell ratio and prioritize training resources toward next to deploy
    units, leading to a less-ready force.
        With respect to our response to a major contingency, all of the
    Marine Corps' operational units would be fully committed with no
    capacity for rotation of forces. Bottom line, those units directed to
    the operation would remain until the mission is complete regardless of
    the duration.
        In the near term, your Marine Corps will be ready to respond to the
    nation's call; however, our capacity to respond will be severely
    diminished.
        By tailoring the MAGTF to the specific capabilities required by the
    Combatant Commanders, we can create the opportunity for the Marine
    Corps as a Service to regain readiness from over a decade of conflict.
    This readiness and recovery model would allow the Marine Corps' home
    station units to be the ready force that would respond to unforeseen
    crises and major contingencies.
        General Spencer. The Air Force is committed to meeting Combatant
    Commander requirements for all aspects of Air Power projection. To that
    end we are performing exceptionally well in Operations RESOLUTE SUPPORT
    and INHERENT RESOLVE. If sequester were to return, we would likely
    continue to perform at high levels in support of these and similar
    operations, to the further detriment of overall full-spectrum
    readiness. Under sequester funding levels, our recovery rate to achieve
    80 percent readiness by the end of 2023 would slow significantly;
    delaying this goal by at least 5 years. Finally, Combatant Commander
    requirements extend well beyond counterterrorism and counterinsurgency
    efforts and the Air Force is committed to supporting Combatant
    Commander needs were we to go to war with a near-peer adversary in a
    high-end fight. We would have insufficient ready forces to meet that
    demand and the requirements of the Defense Strategic Guidance.
                  Special Purpose Marine Air-Ground Task Force
        38. Senator Ayotte. General Paxton, in December 2014 testimony,
    General Dunford testified that approximately 50 percent of Marine Corps
    units at home station were in a degraded state of readiness due to
    personnel and equipment shortfalls. He further noted that this lack of
    readiness is due, in part, to the increased requirements from the
    unexpected Special Purpose Marine Air Ground Task Force (MAGTF) crisis
    response teams in U.S. Central Command (CENTCOM) and U.S. Africa
    Command (AFRICOM). Did the Force Structure Review Group consider the
    Special Purpose MAGTF crisis response team requirements when
    determining the optimal number of forces required? If not, how will
    this new--and potentially enduring--requirement affect the Marine
    Corps' ability to meet personnel tempo goals and readiness requirements
    as the size of the force continues to decline?
        General Paxton. No, the Force Structure Review Group did not
    consider the SPMAGTFs for CENTCOM or AFRICOM when it was originally
    convened. However, the 186,800 force was designed to optimally fulfill
    a crisis response capability which these units are performing. In a
    fiscally constrained environment below 186,800, since we are committed
    to maintaining near term readiness and crisis response, the enduring
    requirement for these units will negatively affect the readiness of
    home station units which are preparing for contingency response in
    support of Major Combat Operations (MCO). If we were fully funded at
    the optimal 186,800 personnel end strength we would be able to fulfill
    our crisis response capability and improve our preparedness for
    contingency response because the increased dwell time built into this
    end strength allows sufficient time to train, equip, and man home
    station units.

        39. Senator Ayotte. General Paxton, what is the Marine Corps doing
    to ensure we're not `robbing Peter to pay Paul' when you remove
    capabilities and readiness from Marine Expeditionary Forces to stand up
    Special Purpose MAGTFs?
        General Paxton. The current construct of a three-ship Amphibious
    Ready Group (ARG) and a Marine Expeditionary Unit (MEU) remains
    America's preeminent crisis response force providing deterrence and
    decision space across the range of military operations. However,
    amphibious war ship inventory and operational tempo constrain the
    number of ARGs available to support Combatant Commanders. In a changing
    security environment, forward deployed and forward engaged Special
    Purpose MAGTFs are employed to provide crisis response, security, and
    theater cooperation capabilities as required by the Combatant
    Commanders. Special Purpose MAGTFs are intended to fill the crisis
    response gap when the paucity of operationally available amphibious
    warships precludes the allocation of ARG/MEUs to the Combatant
    Commanders.
        The Marine Corps' top resourcing priority remains those forward
    deployed and forward engaged Marines and Marine units, especially those
    in harm's way. To protect the readiness of those forward deployed and
    forward engaged units--such as Special Purpose MAGTFs and Marine
    Expeditionary Units--personnel and equipment are resourced from home
    station units subordinate to the three Marine Expeditionary Forces.
    Home station units constitute the ready force that would surge to
    unforeseen crises and major contingencies. The Marine Corps is
    committed to generating ready forces to respond to all operational
    requirements, while working to ensure all Marine Expeditionary Forces
    are capable of executing missions. However, another sequester would
    prevent any opportunity to recover the readiness our Nation deserves
    and lead to creating a hollow force we have fought so hard to avoid. In
    a major conflict, resource shortfalls resulting from sequester-level
    funding would increase the timelines needed to achieve our objectives
    thus elevating the likelihood of mission failure and greater loss of
    life.

        40. Senator Ayotte. General Paxton, with approximately 50 percent
    of home station units, which are needed to respond to major crises,
    being declared ``not ready'', what is the Marine Corps' plan to restore
    these units to readiness?
        General Paxton. Home station units constitute the ready force that
    would respond to unforeseen crises and contingencies. As the Nation's
    ready force, the Marine Corps will continue to generate ready forces to
    meet current operational requirements, work to recover full spectrum
    readiness for home station units, and protect those aspects of
    institutional readiness that allow for the reconstitution of the whole-
    of-force after over a decade of unprecedented sustained conflict.
    Personnel shortfalls at the unit level are a principal detractor to
    recovering readiness. Actions taken to help restore home station unit
    readiness include manning assignment policies that improve (1) leader-
    to-led ratios, especially among the Noncommissioned Officer and Staff
    Noncommissioned Office grades; (2) required unit personnel fill levels
    essential for combat effectiveness, (3) seek to employ the force at a
    1:3 deployment to dwell ratio (optimum) in the future, and(4) optimized
    readiness across the entire unit life cycle versus only the pre-
    deployment training period. The Marine Corps regularly examines
    balancing the requirements to meet current operational requirements
    against operational tempo that promotes readiness restoration of home
    station units.

        41. Senator Ayotte. General Paxton, what specific risks are the
    Marine Corps taking by having a total force less than the optimal force
    of 186,000?
        General Paxton. A discussion of required force structure to meet
    U.S. national security requirements must be viewed from the lens of the
    five pillars of readiness. At PB16 funding levels, the Marine Corps
    meets current crisis and contingency response force levels, but with
    some risk. We will meet the nation's requirements, the question is, how
    well can we prepare those troops for deployment? In order to make
    continuous and long term readiness a reality, we have to be able to
    train personnel and perform maintenance on equipment. Right now, we
    have about a 1:2 deployment to dwell ratio. That is, Marines are
    deployed for 7 months and home for 14. This allows a proper unit
    rotation to ensure that each time a unit deploys they are fully ready.
    If we are forced to take further cuts, that level will decrease closer
    to 1:1.5 or 1:1. What this means is that units have less time between
    deployments to conduct the required training prior to their next
    deployment.
                          Joint Light Tactical Vehicle
        42. Senator Ayotte. General Allyn and General Paxton, how important
    is the Joint Light Tactical Vehicle (JLTV) program to the readiness of
    each of your Services?
        General Allyn. Joint Light Tactical Vehicle (JLTV) fielding will
    substantially improve Army readiness by closing capability gaps in the
    Army's light tactical vehicle fleet. Tactical mobility is a vital
    ground combat force enabler and enhances the effectiveness of combat
    and sustainment forces. The current High Mobility Multi-purpose Wheeled
    Vehicle (HMMWV) is not suitable in the current environment as armoring
    initiatives have overweighed the chassis, limiting its mobility.
    Additionally, the HMMWV lacks the requisite on-board power to support
    the current mission command systems. Current trends in military
    operations require forces to continue to develop expeditionary
    capabilities across the range of military operations. The JLTV provides
    the mobility Soldiers need, with the protection and on-board power
    needed in the future operating environment. The Mine-Resistant Ambush
    Protected (MRAP) vehicles used in Iraq and Afghanistan lacked the
    cross-country mobility JLTV will provide. MRAP's size and weight
    limited Army operations to road networks making our Soldiers' movements
    predictable and easier to target. JLTV will allow our Soldiers more
    flexibility for off-road operations, reducing their exposure to
    Improvised Explosive Devices and ambushes. This added mobility coupled
    with the increased protection integrated into the JLTV design reduces
    our Soldiers' risk. Finally, JLTV is designed to enable the integration
    of our current and future mission command. This will enable commanders
    to see the battlefield and synchronize combat power to enable mission
    success. The Army plans to prioritize early fielding to Infantry
    Brigades and Special Operations Forces.
        General Paxton. The JLTV is a central pillar of our ground combat
    and tactical vehicle modernization plan and critical to readiness of
    Marine Corps forces to deploy and to be employed in any clime and
    place. The JLTV program, and the capability it will provide, is second
    only in importance to our amphibious mobility modernization within our
    vehicle portfolio. JLTVs will replace the portion of HMMWVs that are
    most at risk; those that perform a combat function and are most likely
    to be exposed to enemy fires. Those vehicles are assigned predominately
    to Ground Combat Element and Direct Support Logistics units, and
    perform mission roles as Heavy Weapons (Machine Guns) and Anti-Armor
    (TOW and Javelin) Weapons carriers and critical command and control and
    tactical logistics functions.
        Initially, we will procure and field 5,500 JLTVs between fiscal
    years 2017 and 2022, to replace the highest risk portion of our 18,000
    vehicle HMMWV fleet. In addition to providing protection equivalent to
    the base MRAP All-Terrain Vehicle (M-ATV), the JLTV will restore off-
    road performance and payload to the light vehicle fleet that was lost
    when `frag kit' armor was installed on HMMWVs during Operation Iraqi
    Freedom. Frag kit armor does not protect against the underbody IED
    threat, a major vulnerability of the HMMWV, and the reason why it could
    not be used in recent combat operations. The JLTV will support the most
    demanding missions, including Joint Forcible Entry and crisis response
    operations from the sea. The JLTV will be transportable externally by
    CH-53 helicopter and will be capable of being stored and transported in
    the spaces formerly occupied by HMMWVs aboard amphibious and maritime
    prepositioning ships and surface connectors, such as the LCAC. JLTV
    competitive prototypes have also demonstrated fuel efficiency equal to
    a similarly equipped HMMWV, while moving, and a 20 percent less fuel
    use when at idle.
        We are pleased with the performance of the JLTV program and the
    three highly competitive vendors, AM General, Lockheed Martin, and
    Oshkosh Defense, working with us during the program's Engineering, and
    Manufacturing Development (EMD) phase. We look forward to working with
    our U. S. Army partners later this summer as the JLTV program prepares
    for its Milestone C decision and the selection of one of the EMD
    vendors to produce JLTV, beginning in fiscal year 2016.

        43. Senator Ayotte. General Allyn and General Paxton, as the JLTV
    program ramps up, how will existing HMMWV (Humvee) vehicles be
    reallocated?
        General Allyn. As the four JLTV variants (Heavy Gun Carrier, Close
    Combat Weapons Carrier, General Purpose, Utility/Shelter Carrier) are
    fielded to units, the Army will reallocate the most modern HMMWVs
    across all Army Components to replace older model HMMWVs. The Army will
    then divest those older model HMMWVs.
        General Paxton. Our intent is to replace the entire HMMWV fleet.
    Between 2017 and 2022 we will procure the first of the 5,500 JLTV's to
    replace the aging and overburdened HMMWV fleet. These 5,500 will
    fulfill a portion of the overall requirement we have for roughly
    818,000 vehicles. JLTVs will replace the portion of HMMWVs that are
    most at risk; those that perform a combat function and are most likely
    to be exposed to enemy fires. Those vehicles are assigned predominately
    to Ground Combat Element and Direct Support Logistics units, and
    perform mission roles as Heavy Weapons (Machine Guns) and Anti-Armor
    (TOW and Javelin) Weapons carriers and critical command and control and
    tactical logistics functions.
        The current Ground Combat Vehicle Strategy (GCTVS) outlines our
    plan to replace the remaining HMMWV fleet with JLTV, however we will
    need to make investments in the ACV during the 2020's to ensure that
    this platform remains prepared to carry us into the future. By
    sequencing our JLTV buy around the peak years of the ACV program, and
    modernizing a portion of our AAV fleet we will be able to achieve our
    long range goals within the projected limits of future budget
    restrictions. However, if the budget is fully sequestered in fiscal
    year 2016 or beyond, it will jeopardize both the timing and resources
    required to undertake this strategy and greatly affect our ability to
    achieve our requirements in both vehicle fleets.

        44. Senator Ayotte. General Allyn and General Paxton, after JLTV is
    fully implemented, how many HMMWV's will remain in each Service's
    inventory?
        General Allyn. The JLTV begins fielding in fiscal year 2018. Based
    on Force Structure projections for that year, fielding 49,099 JLTVs
    will leave 67,301 HMMWVs distributed across the Total Army.
        General Paxton. Our intent is to replace the entire HMMWV fleet.
    Between 2017 and 2022 we will procure the first of the 5,500 JLTV's to
    replace the aging and overburdened HMMWV fleet. These 5,500 will
    fulfill a portion of the overall requirement we have for roughly
    818,000 vehicles. JLTVs will replace the portion of HMMWVs that are
    most at risk; those that perform a combat function and are most likely
    to be exposed to enemy fires. Those vehicles are assigned predominately
    to Ground Combat Element and Direct Support Logistics units, and
    perform mission roles as Heavy Weapons (Machine Guns) and Anti-Armor
    (TOW and Javelin) Weapons carriers and critical command and control and
    tactical logistics functions.
        The current Ground Combat Vehicle Strategy (GCTVS) outlines our
    plan to replace the remaining HMMWV fleet with JLTV, however we will
    need to make investments in the ACV during the 2020's to ensure that
    this platform remains prepared to carry us into the future. By
    sequencing our JLTV buy around the peak years of the ACV program, and
    modernizing a portion of our AAV fleet we will be able to achieve our
    long range goals within the projected limits of future budget
    restrictions. However, if the budget is fully sequestered in fiscal
    year 2016 or beyond, it will jeopardize both the timing and resources
    required to undertake this strategy and greatly affect our ability to
    achieve our requirements in both vehicle fleets.
                                   __________
                    Questions Submitted by Senator Tim Kaine
                 Sequestration--Second and Third Order Effects
        45. Senator Kaine. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, in multiple hearings we have heard testimony from
    the Service Chiefs on some of the negative effects of sequestration-
    level budget caps. In fiscal year 2013, the Services took varied
    approaches to implement sequestration cuts. The Army cancelled major
    training exercises, the Air Force grounded aircraft, and the Navy
    deferred maintenance. Deferring costs into future years can create
    second and third order negative such as creating training and readiness
    deficits and the loss of capabilities. We have not heard many details
    about these second and third order effects. Additionally, because of
    the focus on counterinsurgency (COIN) training to prepare for
    deployments to Iraq and Afghanistan, our military now has an entire
    generation of officer and enlisted personnel who have never conducted
    full-spectrum training. If sequestration remains in fiscal year 2016
    and the Services again halts training for pilots, while they will
    continue to be paid, if they cannot fly--not only will they lose
    proficiency--but their morale suffers and can either lead them to leave
    the military or lead to behavior and family problems. Can each of you
    provide examples of the inefficient use of resources, such as time
    lost, increased long-term costs, and the second and third order
    problems those conditions create for training and readiness deficits?
        General Allyn. If we return to sequestration in fiscal year 2016,
    the Army will experience increased risk through degraded readiness to
    both our organizations and our installations.
        Reductions to individual training and education will create a
    backlog that will take years to correct and create gaps at critical
    points in leader development--especially mid-career officers and NCOs.
    Unit training for approximately 80 percent of the Force will be
    curtailed, impacting basic warfighting skills and readiness posture,
    and inducing shortfalls across critical specialties such as aviation
    and intelligence. The Army will generate fewer Brigade Combat Teams
    (BCTs) to the readiness levels required to support rapid combat
    deployment as we balance the readiness levels of BCTs with other
    critical enablers such as Combat Aviation Brigades and Combat
    Sustainment Brigades. The remaining BCTs will be resourced only to
    minimum Individual/Crew/Squad levels. This will stretch the time
    required to flow forces into a war-fighting theater, allowing our
    adversary more time to prepare and inevitably leading to greater U.S.
    casualties.
        From an installation perspective, our Army is still feeling the
    effects of sequestration in fiscal year 2013 when over 3.2 billion
    dollars of requirements were deferred to fiscal year 2014, to include
    significant Military Construction (MILCON) and Sustainment, Restoration
    and Modernization (SRM) projects. As you know, sustaining facilities is
    more cost effective than restoring them and our data shows that for
    every 1 dollar we purportedly `save' on sustainment we incur 1.33
    dollars of costs in restoration. By 2013, the Army already had a total
    restoration backlog of over 15 billion dollars. At current levels of
    funding, it will take approximately twenty-six years (2039) to return
    all of our installations to standard. A return to sequestration will
    only exacerbate this delay in providing our Soldiers and their Families
    with the mission essential facilities their selfless service warrants.
        Likewise, a return to sequestration will compel the Army to defer
    vehicle maintenance. Under sequestration in fiscal year 2013, commands
    reduced OPTEMPO to make additional resources available to address the
    deferred maintenance workload. Additionally, the Army reduced the
    maintenance requirements from ``10/20 standards'' (all routine
    maintenance is executed and all deficiencies are repaired) to a Fully
    Mission Capable (FMC) plus safety standard, decreasing the quantity of
    reliable and deployable equipment.
        Admiral Howard. Ship and air depot maintenance backlogs are good
    examples of the second and third order effects of sequestration. The
    impacts of the growing ship depot maintenance backlogs may not be
    immediately apparent, but will result in greater funding needs in the
    future to make up for the shortfalls each year and potentially more
    material casualty reports, impacting operations. For aviation depot
    maintenance, the growing backlog will result in more aircraft awaiting
    maintenance and fewer operational aircraft on the flight line for
    squadrons training for deployment. This will lead to less proficient
    aircrews, decreased combat effectiveness of naval air forces, and
    increased potential for flight and ground mishaps.
        In addition, sequestration in fiscal year 2013 led to decreases in
    the workforce and overall productivity in the depots/shipyards due to
    hiring freezes at a time when the Navy should have been increasing the
    workforce to meet a growing workload and replace normal attrition.
    These outcomes were further exacerbated by workforce overtime
    restrictions which prevented recovery of production schedules. A third
    order effect was an increase in workforce attrition from accelerated
    retirements or pursuit of other employment. While difficult to measure
    motivation, the anecdotal evidence suggests that furloughs, lack of
    overtime and an uncertain future were key contributors to an increased
    loss of experienced workers. The end results were delayed and more
    costly shipyard maintenance availabilities, and aviation depots were
    unable to execute the necessary workload to keep the required numbers
    of aircraft on the flight line.
        General Paxton. A return to sequestration--or to BCA caps--would
    exacerbate current fiscal challenges and force us to assume greater
    risk in our capacity to meet long-term operational requirements. The
    Marine Corps' current resource level represents the bare minimum at
    which it can meet the current Defense Strategic Guidance. Though we are
    committed to generating ready, forward deployed forces, at BCA levels
    we will accept significantly greater risk in the next major theater
    war. This is a ``one major combat operation,'' reduced-capacity force;
    essentially, we would be all in with no rotations, no surge capacity,
    and significantly reduced pre-deployment training. There would also be
    significant reductions in aviation and ground combat units, further
    reducing our available infantry battalions. Coupled with recent
    reductions in critical combat support capabilities such as artillery,
    tanks, and amphibious assault vehicles, such reductions would result in
    wars that last longer and extract a higher human cost.
        At BCA levels we would be unable to meet our ongoing operational
    commitments and would forgo participation in many of our planned
    security cooperation exercises. Though we intend to preserve the Guam/
    DPRI effort as much as possible, a sequester would lengthen the
    timeline for completion.
        In terms of lasting implications, sequestration caps would also
    require us to adopt massively inefficient business and operational
    practices that end up costing much more over the long term. For
    instance, delaying modernization in order to protect near-term
    readiness greatly risks driving up acquisition costs. Any interruptions
    during program acquisitions--schedule slips, loss of efficiencies, and
    potential Nunn-McCurdy breaches--would ultimately increase total
    program costs. Deferred modernization would have implications for our
    equipment maintenance programs as well. We would be forced to sustain
    legacy systems longer than planned, and to shift focus away from
    cheaper, more efficient green technologies, toward older, more
    inefficient and expensive technologies. We would also reduce regular,
    scheduled maintenance on ground equipment (such as depot-level vehicle
    overhauls) as a further near-term cost saving measure. However, the net
    result of this combination of obsolete technology and reduced
    maintenance will drive up operations and support costs over the long
    term.
        We would see similar effects to our facilities. Long-terms
    infrastructure standards would be reduced, resulting in a score of Q3
    or ``Poor'' on the Facility Conditions Index. Base operating functions
    such as utilities and services would be depressed to minimum levels,
    and energy efficiency projects would be eliminated. Over time the
    cumulative effects of deferred or canceled maintenance will accelerate
    the deterioration of buildings and drive up long term costs.
        Finally, the return of sequestration would have costly implications
    for our workforce, particularly personnel at our maintenance centers.
    Because our depots are required to plan around the Services'
    maintenance funding levels, cuts to their maintenance budgets require
    corresponding reductions in staffing levels at the depots. This risks
    the accumulation of a maintenance backlog that must be worked down with
    (more costly) overtime. It also jeopardizes the retention of depot
    skilled artisans, thus permanently reducing our throughput/surge
    capacity. Our aviation units are experiencing these effects firsthand.
    The fiscal year 2013 sequester forced mass layoffs at aviation depots,
    which are now struggling to meet maintenance demands for our aircraft.
    The number of aviation assets available for training and missions has
    thus been reduced, and the readiness of our aviation units has dropped
    accordingly.
        General Spencer. Meeting the current and expanding demand for
    forces against a shrinking capacity has required the Air Force to make
    extraordinary choices in order to continue to supply air power.
    Examples of this problem manifest themselves in areas like remotely
    piloted aircraft (RPA) manning, fighter pilot manning, and maintenance
    support to flight operations. RPA pilot numbers are decreasing and RPA
    pilot training has been significantly constrained since 2007 due to the
    requirement to utilize RPA instructors for surge combat operations and
    not to conduct student training. The reduction of Air Force fighter
    cockpits limits the capacity to season junior fighter pilots, delays
    matriculation, and limits the experience level of our future fighter
    pilot leaders. Finally, reductions and limits to total Air Force
    manning have resulted in a lack of experienced aircraft maintenance
    expertise needed to keep aging legacy aircraft flying and to bring new
    weapons systems to active duty. Second and third order effects include
    an RPA community that is losing operators faster than it can train
    replacements, and a 5-year decline in the acceptance of the pilot
    retention bonus. There are no short-term solutions for these
    shortfalls. Full Presidential Budget (PB) 2016 funding, Overseas
    Contingency Operations funding moved to baseline, a reduction in
    deployment requirements, and time are necessary to develop the
    experienced Airmen required to repair Air Force readiness.

        46. Senator Kaine. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, what kind of impact would not only stopping basic
    training proficiency, but losing the opportunity to conduct advanced
    training, and what kind of impact that would have on our future
    generation of leaders?
        General Allyn. As codified in Title 10 US Code (Subtitle A, PART
    II, Chapter 39, Section 671), Soldiers may not be deployed without
    completing basic training. Initial Military Training (basic combat
    training and initial skills training) transforms volunteers into
    Soldiers with the requisite warfighting and technical skills to
    positively contribute to their unit. Without this foundational,
    institutional training, Soldiers would require burdensome, time-
    consuming training at their first unit of assignment. Additionally,
    standardization of initial training, when conducted at first unit of
    assignment, would be extremely difficult to ensure and lead to an
    increased risk of casualties in the event of a contingency. Delaying or
    halting the various advanced training courses offered to mid-career
    leaders will create a significant gap in professional development. This
    gap will force the Army to choose between placing leaders in positions
    of increasing responsibility without the appropriate level of
    professional education or delaying their promotion until such a time as
    the training can be completed.
        Admiral Howard. Stopping basic training proficiency and pre-
    deployment advanced training would gravely impact the Navy's mission.
    We continually operate in a rotational deployment cycle, and the
    Combatant Commanders expect deployed Navy units to be ready to execute
    any core mission when and where directed. Therefore, full spectrum pre-
    deployment training is paramount.
        If we return to sequestration, growing numbers of future leaders
    would develop experience gaps at key stages in their careers. Although
    Navy will prioritize pre-deployment training, sequestration will slow
    the training cycle. Non-deployed units will conduct advanced training
    ``just-in-time'' to complete deployment certification, and their post-
    deployment training to sustain readiness may not be funded. This
    reduces the total number of training opportunities at each career
    level. Joint partner participation in our certification exercises would
    also likely be reduced, and other cancelled or down-scoped advanced
    training exercises would limit the quantity and quality of additional
    training opportunities beyond pre-deployment certification.
        General Paxton. We are able to meet our current training
    requirements. However, in order to make continuous and long term
    readiness a reality, we have to strike the right balance between
    deployment for operations and training time here at home. Right now, we
    have about a 1:2 deployment to dwell ratio. That is, Marines are
    deployed for 7 months and home for 14. This allows a proper unit
    rotation to ensure that each time a unit deploys they are fully ready.
    If we are forced to take further cuts, that level will decrease closer
    to 1:1.5 or 1:1. What this means is that units have less time between
    deployments to conduct the required training prior to their next
    deployment.
        More specifically, home station readiness is at risk when personnel
    and equipment are sourced to protect the readiness of deployed and
    next-to deploy units. This is a logical decision when validated
    operational requirements exceed resource availability. Home station
    units are expected to be in a higher state of readiness since the
    Marine Corps is charged to be the Nations' force in readiness. The way
    they preserve this readiness is through training. By way of example, 5
    of the last 6 infantry battalions assigned to Marine Expeditionary
    Units were not prepared until 30 days before deployment. This is
    sufficient for planned deployments, but becomes problematic and
    dangerous as conflicts extend or the need to respond to unexpended
    crises arises.
        To the point about our future leaders, it is essential that we have
    the ability not only to train leaders in tactical and technical skills
    at Professional Military Education (PME) courses, but also that those
    leaders have an opportunity to train with their subordinates during
    unit training. Cuts to either facet damage long term leadership
    development because leaders do not get the individual development they
    require and subordinates are not provided the opportunity to learn
    through interaction with seasoned and effective leaders. This creates a
    compounding downward spiral of competence and experience that we can
    ill afford.
        General Spencer. The loss of both basic and advanced training is
    reflected in the steady decline of overall Air Force readiness. The
    reality is that our current generations of Air Force Airmen have been
    heavily involved in low intensity or counter-insurgency conflicts for
    the past 14 years. Our Air Force, to include our leadership, is better
    than it has ever been at close air support, mobility, and special
    operations in low intensity operations. However, this has come at the
    expense of full spectrum readiness and the ability to fully support the
    Defense Strategic Guidance. For example, by 2012, 10+ years of
    cumulative skill atrophy have driven B-1 crews to routinely train for
    low-level attack missions at double the desired tactical altitude as a
    result of insufficient training proficiency and readiness. Simply put,
    the B-1 community sacrificed a distinct tactical and operational
    advantage due to fundamental aircrew safety and readiness concerns. A
    similar example exists in every Air Force community. Lost training has
    extended the matriculation of our future Air Force leaders. Lost
    opportunities to train and practice our ``high-end fight'' garner gaps
    of experience in our future leaders and insert unseen risk resulting in
    errors that will be swift and catastrophic.
                        Path to Full-Spectrum Readiness
        47. Senator Kaine. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, several of the Military Services have identified
    2020 or 2023 as a target to restoring full-spectrum proficiency and
    address the degraded state of non-deployed readiness. Meanwhile, the
    Navy has an optimized fleet response plan to achieve consistent and
    long-term presence around the globe. In the event sequestration could
    be avoided--could each of you please describe in specifics how you plan
    to restore full-spectrum readiness and what the end-state looks like?
        General Allyn. The Army's readiness recovery goal is to build
    readiness for current operations and ensure enough operational depth is
    ready to sustain larger contingency operations.
        The Army's ``get-well'' date is heavily influenced by two factors:
    demand for Army forces and funding availability. Assuming no change to
    current global demand and the fiscal year 2016 President's Budget (PB)
    funding levels are sustained, the Army forecasts achieving fiscal
    balance no earlier than fiscal year 2017 and returns to proficiency no
    earlier than fiscal year 2020. However, any increase in demand or
    reduction in funding will extend this recovery period. Fundamentally,
    we deliver full spectrum readiness through a combination of fully-
    resourced Home Station Training, culminating in a unit's successful
    completion of a decisive action Combat Training Center rotation. If
    fully resourced at current force levels, it would take two years to
    cycle all our active Brigade Combat Teams through this training
    regimen.
        Admiral Howard. The Optimized Fleet Response Plan (OFRP) is the
    Navy's framework for readiness recovery. It is a disciplined process
    which preserves the time necessary to conduct required maintenance and
    modernization of our capital-intensive force. It also protects the time
    to conduct full spectrum training. Multiple lines of effort are being
    aligned to deliver the full readiness impact of OFRP. Achieving the
    desired end-state first depends on restoring the capacity of our
    shipyards and aviation depots. Our success will result in completion of
    maintenance and modernization on schedule; ready units that are
    available at sustainable levels from year-to-year to support Combatant
    Commander global presence requirements; and additional operational
    availability providing full contingency response capacity that is
    routinely sustained until the next maintenance cycle begins.
    Furthermore, to sustain full-spectrum readiness over time we must
    continue on a stable path to procure new platforms and ordnance, while
    also modifying existing platforms at a pace that sustains our
    warfighting advantage.
        General Paxton. Should sequestration be avoided and its deleterious
    pecuniary effects put aside, the Marine Corps recognizes that non-
    pecuniary actions and time would be required to restore full spectrum
    readiness. The Marine Corps is the Nation's ready force, a force
    capable of responding to crises and contingencies anywhere around the
    globe at a moment's notice. To fully reconstitute the whole-of-force
    after over a decade of sustained unprecedented conflict and fiscal
    challenges, the Marine Corps would continue taking actions that address
    readiness concerns across the Future Years Defense Plan. Those actions
    include: (1) Balance readiness between deployed and home station units.
    Forward deployed and engaged units will remain a priority for
    resourcing. However, to help lessen the burden of high operational
    tempo and improve overall readiness, the Marine Corps will employ
    deployment-to-dwell ratios that improve home station unit readiness.
    Personnel shortfalls at the unit level are a principal detractor to
    recovering readiness. Actions taken to help restore home station unit
    readiness include manning assignment policies that improve leader-to-
    led ratios, especially among the Noncommissioned Officer and Staff
    Noncommissioned Office grades; ensuring required unit personnel fill
    levels essential for combat effectiveness are protected; and that
    readiness recovery is optimized across the entire unit life cycle
    versus only the pre-deployment training period. (2) Reconstitute the
    force to New Normal and upcoming challenges. To meet current
    requirements and preserve readiness recovery, the Marine Corps will
    continue to mature its capstone concept and vision for designing and
    developing the force now and into the future. (3) Equipment Reset.
    Ground equipment supporting Operation Enduring Freedom has retrograded
    to the U.S. Much of this equipment has completed the required post-OEF
    repairs and subsequently has been redistributed to units. The Marine
    Corps is on track to complete repair and redistribution of all OEF war-
    torn equipment in fiscal year 2017.
        For the Marine Corps, full spectrum readiness equates to Service-
    wide capability of operating, effectively and efficiently, across the
    range of military operations, and achieving mission objectives at any
    time or place. All Marine Corps units would be capable of responding to
    a broad spectrum of conflict scenarios. Full spectrum readiness allows
    the service to meet current and future requirements. Full spectrum
    readiness entails the ability to simultaneously meet (1) current
    operations supporting the Combatant Commands, (2) emergent crises and
    major contingencies, (3) the demands of the institution that underpins
    the ability to effectively and efficiently fulfill the Service's
    statutory and regulatory obligations.
        General Spencer. The Air Force is the smallest in its history and
    lacks the capacity to meet both the rotational Combatant Commander
    requirements and the required dwell time necessary to train in-
    garrison. With FY16 PB funding and a transition to deployment cycles
    that allow sufficient time to build and maintain full-spectrum
    readiness, the Air Force will be able to build readiness in the short,
    medium, and long term. Short term improvements will be derived from
    executing a robust flying hour program that emphasizes full-spectrum
    training. Mid-term gains are expected from accomplishing delayed
    maintenance and upgrades to weapon systems and support equipment. Long-
    term gains will come from investments in our Airmen. It takes time to
    recruit and train our Airmen to be journeymen, supervisors, and leaders
    who are ready to execute the full-spectrum of missions required of our
    Air Force. If 80 percent readiness is achieved by the end of 2023, the
    result will be a highly capable Air Force, able to meet the two largest
    pillars of the Defense Strategic Guidance with ready forces.
             Sequestration Relief for Other U.S. Security Agencies
        48. Senator Kaine. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, the new National Security Strategy released last
    month, states that our national security relies on more than just the
    work of Department of Defense (DOD). Sequestration is having as harmful
    an impact on our diplomatic and international development tools,
    Homeland security, law enforcement, and intelligence activities as
    well. Would you agree that we should provide sequestration relief to
    DOD and all the non-DOD contributors to our national security like the
    State Department, the Intelligence Community, the Department of
    Homeland Security, and the Department of Justice to name a few?
        General Allyn. There are several instruments of national power that
    we commonly refer to as ``DIME'' which stands for diplomatic,
    information, military, and economic. We are only one component of
    this--the remaining agencies provide the bulk of the other national
    capabilities. We believe that only through a whole-of-government
    approach can our national security objectives be met.
        As such, it is our belief that even if sequestration relief were
    provided to the Department of Defense, the nation's ability to achieve
    its objectives would remain at risk without funding relief across the
    whole-of-government.
        Admiral Howard. The Navy continues to oppose sequestration for the
    entire federal budget because it implements harmful automatic cuts with
    no regard for priority. The Navy is globally deployed to provide a
    credible and survivable strategic deterrent and to support the mission
    requirements of the regional Combatant Commanders. In executing our
    operations, the Navy relies on joint and interagency support from other
    DoD and non-DoD organizations. Any negative impacts to the
    organizations we partner with can have an impact on our ability to
    execute operations and the Defense Strategic Guidance. A return to
    sequestration would jeopardize the Navy's readiness and damage our
    national security.
        General Paxton. ``While I do not dispute that national security is
    a whole-of-government effort, I cannot authoritatively comment on the
    potential impact of sequestration on any organization, other than the
    U.S. Marine Corps.''
        General Spencer. Yes. Non-DoD agencies should be similarly
    considered for relief from sequestration. Any increase in defense
    spending should be matched at some level for the non-defense
    discretionary spending that contributes to our national security.

        49. Senator Kaine. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, if sequestration-level budget caps remain in
    fiscal year 2016, how would you characterize the impact of lost
    capability or capacity from these other agencies to meet the
    requirements of our Nation's security needs?
        General Allyn. The Army, and indeed the Department of Defense,
    cannot solely defend national security or meet the nation's strategic
    objectives in a way consistent with our values. The military is only
    one of the instruments available to the nation for achieving its
    objectives and securing its interests. Loss of capability and capacity
    in these other areas would certainly make our job more difficult and
    hinder the Nation's ability to meet its security objectives.
        Admiral Howard. The Navy continues to oppose sequestration for the
    entire federal budget because it implements harmful automatic cuts with
    no regard for priority. The Navy is globally deployed to provide a
    credible and survivable strategic deterrent and to support the mission
    requirements of the regional Combatant Commanders. In executing our
    operations, the Navy relies on joint and interagency support from other
    DoD and non-DoD organizations. Any negative impacts to the
    organizations we partner with can have an impact on our ability to
    execute operations and the Defense Strategic Guidance. A return to
    sequestration would jeopardize the Navy's readiness and damage our
    national security.
        General Paxton. ``While I do not dispute that national security is
    a whole-of-government effort and that sequestration could have an
    impact on the ability of other government organizations, I cannot
    authoritatively comment on the potential impact of sequestration on any
    organization, other than the U.S. Marine Corps.''
        General Spencer. The Air Force relies heavily on the support of
    both DoD and non-DoD entities and will find it difficult to complete
    its mission if our agency partners lose capability or capacity. The
    support we receive through these relationships extends to all domains
    and strengthens our ability to conduct full-spectrum operations in
    support of our national interests.

        50. Senator Kaine. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, in your view, what would be the impact of
    sequestration-level budget cuts to Federal support services commonly
    used by soldiers, sailors, airmen, marines, and their families?
        General Allyn. The Army collaborates and coordinates with non-DoD
    agencies such as the Department of Agriculture, Health and Human
    Services, American Red Cross, Department of Labor and the Department of
    Veterans Affairs to achieve common Soldier and Family readiness goals.
    Non-DoD services and programs are an integral part of the Soldier and
    Family readiness system. Therefore, the readiness of Soldiers and
    Families who use non-DoD programs will inevitably be impacted by any
    reduction in outside agency programs or services.
        From a strictly Army standpoint, Soldier and Family programs would
    be unavoidably impacted if we are funded at the Budget Control Act
    levels. We can protect the highest priority programs such as
    Exceptional Family Member Program, Survivor Outreach Services, Child
    and Youth Programs, Family Advocacy, and Financial Readiness for
    Soldiers and Families. However, there will be increased risk to
    programs such as spouse employment, Army OneSource, library services,
    and Family and Morale, Welfare and Recreation programs. Reductions will
    affect staffing, operating hours, and range of services, resulting in a
    potential degradation to readiness, resiliency, and quality of life.
        Admiral Howard. Sequestration in fiscal year 2016 would have
    serious impacts to readiness overall. Because our Sailors are our most
    important asset and we must invest appropriately to keep a high-caliber
    all-volunteer force, we would try to minimize the impact to Sailor
    support, family readiness, and education programs. However, other
    support services may need to be reduced or delayed because of the
    significant funding reductions, which could negatively impact their
    morale and readiness. Furthermore, across-the-board sequestration cuts
    to non-DOD organizations such as the Consumer Financial Protection
    Bureau and the Department of Labor may also negatively impact the
    support services to our people.
        General Paxton. It is unclear how sequestration would affect the
    budgets and programs of other Federal programs. In regard to Marine
    Corps quality of life programs used by Marines and their families,
    recent budget reductions have already caused curtailment of many non-
    core programs, such as Family Care, Family Readiness, and Semper Fit
    and Recreation. We are currently protecting core programs, such as
    Behavioral Health, Sexual Assault Prevention, and Wounded Warrior care,
    as well as support services for Marines returning from Afghanistan and
    transitioning out of the Marine Corps. However, under prolonged
    sequestration-level budget cuts, even these programs could be put at
    risk.
        Fundamentally, sequestration will exacerbate the challenges we have
    today including readiness of our Marines and their families including
    impacting the five pillars of readiness: high quality people, near unit
    readiness, capability and capacity to meet combatant commanders'
    requirements, infrastructure sustainment, and modernization. We have
    maintained near-term readiness at the cost of our long-term
    investments. The Budget Control Act has presented many readiness
    challenges and a sequestered budget would further exacerbate readiness
    issues.
        General Spencer. Under constrained budgets and impending
    sequestration, if not repealed, it is becoming more challenging to
    maintain diverse quality of life programs and services at adequate
    levels. The Air Force is committed to ``Taking Care of People'' and
    strives to maintain installation services and family programs to help
    build and maintain ready, resilient Airmen and their families. To help
    mitigate budget impacts, the Air Force has prioritized Airmen and
    family support programs from an enterprise-wide perspective. Our
    fitness, child and youth care, food services, and some family support
    programs (outdoor recreation, libraries, youth centers, etc.) are
    programmed to continue in the FY16 PB request. Funding below the PB
    request will force commanders to make difficult decisions to prioritize
    these support activities against operational and mission requirements.

        51. Senator Kaine. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, in your view, do reductions to federal support
    services hurt education and health care in local communities and
    ultimately risk the quality of life and readiness of our servicemembers
    and their families?
        General Allyn. Through DOD funding, the Army is maintaining a
    viable Voluntary Education Program IAW DoDI 1322.25 requirements. If
    funding to non-DOD Agencies (community and state schools) were reduced,
    it could have some impact on Soldier education by increasing costs not
    covered by the DOD programs.
        Members of the Army and their families live and work in the
    communities surrounding our installations. While some members of the
    military live on installations with access to DoD schools, an
    increasing number (880 percent of dependent Servicemembers children) do
    not. Instead, they use public or private education in the local
    community. Our members have access to military healthcare facilities in
    many locations but we still rely on local private and public sector
    healthcare services to augment our capabilities. Degradation of
    healthcare or education services within a community would impact the
    quality of life and readiness of our service members and their
    families.
        Admiral Howard. Since the majority of our Sailors and their
    families live in the local communities surrounding the installations,
    if local community services are negatively impacted by reductions, our
    Sailors and families will likely share the same consequences with the
    local community. We have no data or feedback from regions or
    installations to substantiate negative impact on local community
    services.
        General Paxton. In specific regard to military and family quality
    of life support programs, we have taken cuts in areas of Family Care,
    Family Readiness, and Semper Fit and Recreation. As we move forward, we
    will evaluate our programs and develop a plan with a bias toward
    decentralizing decision-making and resource allocation. Funding will
    focus on sustainment of core readiness and higher headquarters
    requirements, such as Behavioral Health, Sexual Assault Prevention, and
    Wounded Warrior care. Marines and their families have and may be
    impacted by reductions in noncore programs due to accessibility of
    programs, establishment or increase of fees to use resources (e.g.,
    youth programs, pools, etc.), and hours of operations (e.g., fitness
    facilities). However, the Marine Corps has made all efforts to find
    savings without resulting in direct impacts to our Marines and families
    and those impacts being minimal in areas of noncore programs. Funding
    reductions that impact support services do risk Marine and family
    quality of life and readiness, but it is not clear the impact on
    education and health care in local communities.
        General Spencer. Federal support services for education and health
    care, combined with Air Force programs, comprise the package of
    services that military families rely upon. Funding reductions for these
    programs result in less support to service members and their families.
    Many Air Force members and their families rely on public education and
    medical services available through local communities so reductions in
    federal support to these services adversely affect quality of life for
    service members.
                     Aircraft Maintenance Throughput Issues
        52. Senator Kaine. Admiral Howard and General Paxton, with the
    delay of the F-35, legacy aircraft like the F/A-18 Hornet A and D
    models, must undergo service-life extension programs (SLEP) to cover
    the gap in aircraft coverage. In addition to sequestration-level budget
    caps, there have been reports of obsolescent parts, a shrinking to non-
    existent vendor industrial base, maintenance backlogs, and higher than
    planned failure rates as the aircraft age. Could you please explain how
    even if Congress were to give you additional funding, it may not fix
    the aircraft maintenance throughput issues, and how you either need
    relief from sequestration, decreased op-tempo, or more people?
        Admiral Howard. The Fiscal Year 2016 President's Budget request
    provides funding to align F/A-18A-F depot throughput to projected
    capacity.
        To improve F/A-18 depot capacity, the Department is attacking the
    major barriers to production--manpower and material. This includes an
    aggressive hiring and training plan for artisans and engineers, and
    improved parts availability and staging for high flight hour (HFH)
    maintenance events based on common repair requirements. Additionally,
    the Navy has collaborated with Boeing in identifying several areas to
    improve overall depot throughput, such as employing Boeing Engineering
    Support and incorporating Super Hornet modifications at its Cecil Field
    facility. The strategy is proving successful as depot production levels
    are improving, but requires time to fully mature. With the requested
    funding, and under this plan, the Department anticipates continued
    improvement in depot throughput to meet annual production requirements
    by fiscal year 2017 and full recovery by fiscal year 2019.
        A return to sequestration in fiscal year 2016 is a recurring
    concern as the Department requires a stable budget to meet these
    objectives. Sequestration and the compound effects of the 2013
    government shutdown drove manning shortfalls for both artisans and
    engineers and hampered the Navy's ability to respond to unplanned work
    found during HFH inspections. Any further reductions in the depot
    maintenance, engineering and contractor support budgets will impede the
    depot throughput improvement strategy. Moreover, a return to
    sequestration will affect recent initiatives including the F/A-18E/F
    service life assessment and extension programs (SLAP/SLEP). Current
    efforts for Super Hornet SLAP/SLEP include fatigue life analysis,
    stress predictions, and inspection and modification development. These
    analyses will inform future work and ensure material kits are developed
    to better support life extension efforts, but are required prior to the
    first aircraft reaching its 6,000 hour limit, expected in CY2017. A
    return to sequestration would have a compounding effect that will
    further increase risk in our strike fighter inventory management
    strategy and reduce the availability of warfighting assets.
        General Paxton. The Marine Corps, along with all of the other
    services, is facing with issues with our current aircraft and keeping
    them relevant and ready while transitioning to new airframes in each of
    our aviation communities. The specter of sequestration-level budget
    caps frustrates the Marine Corps movement towards recovery and will
    reintroduce many of the problems from the first round of sequestration.
    Our Aviation Depots were not protected and we experienced a loss of
    skilled artisans and personnel. We are still rebuilding the workforce
    that we lost. It is critical that we do so to improve the throughput
    issues experienced with the SLEP and other engineering challenges we
    are experiencing with all of our type/model/series of aircraft: CH-53E,
    AV-8B, MV-22, H-1, and the more widely recognized F/A-18A-D. If given
    any additional funding, we would protect and grow manpower at our
    Depots to help with our Current Readiness challenges and increase our
    throughput.
        In the near term, we are pursuing commercial alternatives as
    additions to our Depots to also increase throughput. This will directly
    translate to increased current readiness for all of our type/model/
    series of aircraft. We would continue to invest in our current fleet of
    aircraft to ensure their relevance on the battlefield as we continue to
    upgrade every aviation community. Finally, we would continue to fund
    our vital transition plan by purchasing more new aircraft in our
    current programs to complete our transitions sooner and divest of our
    current fleet faster, helping our Future Readiness.
        The Marine Corps stands behind the fiscal year 2016 President's
    Budget and the Marine Corps' Unfunded Priorities List. This will help
    us keep all of our aircraft relevant and ready while continuing to
    build our F-35 fleet in addition to our other transitioning platforms.
    A return to sequestration would only exacerbate our issues with our
    aircraft, their modernization, and the SLEP programs necessary to make
    our way to aircraft like the F-35, CH-53K, and all other transitioning
    airframes.
                              Simulation Training
        53. Senator Kaine. General Allyn, Admiral Howard, General Paxton,
    and General Spencer, the Chief of Nacal Operations' (CNO) Navigation
    Plan from 2015-2019 calls for focus on critical afloat and ashore
    readiness, including the ``developing and fielding of live, virtual,
    and constructive training, to provide more realistic training at a
    reduced cost.'' For example, there is a 3-D software program called the
    Multipurpose Reconfigurable Training System ( MRTS) that enables a
    sailor to view and access all parts of an engine found aboard Virginia
    class submarines. The Marine Corps uses combat convoy simulators at
    their bases in Quantico, California, North Carolina, Hawaii, and Japan.
    If we are unable to reverse sequestration, how can the Services
    leverage simulators to maximize full-spectrum training proficiency in
    the face of fiscal constraints?
        General Allyn. The Army currently has the appropriate mix of live,
    virtual, and constructive training. The three complement each other
    allowing Soldiers to practice basic skills and in some cases to
    practice complex maneuvers prior to live execution. It is important to
    remember that virtual and constructive training cannot replace live
    training. Simulation allows for greater repetition and practice, but
    does not qualify a Soldier or unit as trained.
        While simulations do save some training dollars, they are not a low
    cost solution. Simulating training requires complex and maintenance-
    intensive systems. The Army will always seek to optimize its
    investments in training resources, but there must be balance as some
    skills cannot be practiced in a simulator and units must execute live
    training to be proficient.
        Admiral Howard. There remains a fine balance between the
    requirement for live, hands-on training and the complementary training
    capability provided by simulation. But even in a fiscally constrained
    environment, Navy is making the necessary investments to effectively
    leverage the live, virtual and constructive (LVC) training continuum to
    deliver more cost effective and higher quality training than live
    training alone can provide. New platforms, such as LCS, use simulation
    as the focus of their training, saving some of the expense of underway
    training operations, while we continue to invest in the Fleet Synthetic
    Training (FST) program, linking multiple Navy units, U.S. Joint Forces,
    and partner nations across the globe to practice operationally relevant
    scenarios. Current and planned investments will support our future
    training needs while continuing to improve the overall quality of
    tactical training.
        Leveraging the successes we have achieved with FST and its
    connected tactical ship and aviation trainers, we are also applying
    simulation more frequently to maintenance training. The MRTS cited in
    your question is a good example. We are creating a virtual Virginia
    Class Submarine diesel engine room with considerable savings versus an
    alternative brick and mortar solution.
        General Paxton. There is no doubt that simulators provide a unique
    opportunity to provide realistic training opportunities that offset
    some of the costs associated with real-world training. These systems
    allow for varied training experiences, can minimize ammunition usage,
    and decrease logistical costs. In fact, the Commandant's Planning
    Guidance for 2015 specifically states that development and use of
    simulators remains a high priority for the service.

            ``We will continue to support the fielding of systems that
            enhance our proficiency and safety in operating weapons and
            equipment. Our investment in training systems will reflect the
            priority we place on preparing for combat and be fully
            integrated with training and readiness standards. I expect all
            elements of the MAGTF to make extensive use of simulators where
            appropriate.''
                                        -Gen. Joseph Dunford

        However, as with other modernization efforts, we have had to defer
    some simulator development initiatives in order to prioritize near term
    readiness. We are currently funding simulator development and testing
    through individual system programs and supporting contracts. Due to the
    programming cycle, Fiscal Year 2018 will be the first opportunity to
    fund enduring integrated simulator capability.
        Specifically, the Marine Corps Training and Education Command's
    (TECOM) Modeling and Simulation (M&S) Master Plan, Squad Immersive
    Training Environment (SITE), as well as the Live, Virtual,
    Constructive--Training Environment (LVC-TE) identify service
    requirements for simulators and simulations. These requirements are
    being addressed by TECOM. In conjunction with this we are continuing
    our efforts to integrate aviation systems with ground simulations to
    provide opportunities to conduct training that tests the full structure
    and capabilities of the Marine Air Ground Task Force (MAGTF).
        General Spencer. The Air Force is committed to ensuring force
    readiness in the most effective manner. Our combat and mobility
    communities, each have unique assets and therefore, different
    solutions. Some events/sorties can be replicated in the virtual world,
    while others cannot. In addition, for both communities, live training
    encompasses more participants than merely the aircrew. Maintenance,
    logistics, and airfield operations functions, to name a few, are active
    participants of the total flying activity and must be used every day to
    ensure combat power is available when and where the nation needs it.
    Current aircrew simulators do not exercise the entire logistical chain.
        Air Combat Command utilizes simulators as an integrated component
    of a daily comprehensive live and virtual training construct. In
    conjunction with a command-wide realignment of the Ready Aircrew
    Program (RAP--the annual training specification) that occurred in 2010-
    2011, simulator training now constitutes 27 percent of total fighter
    RAP training, 40 percent of B-1 RAP training, and 50 percent of Command
    and Control, Intelligence, Surveillance and Reconnaissance RAP
    training. Given the quality and capacity of the combat simulators,
    there are not additional events/sorties that could be transferred to
    the virtual environment.
        Air Mobility Command (AMC) offset over $700 million in live fly
    hours in fiscal year 2014 through the employment of Live, Virtual, and
    Constructive (LVC) capabilities. AMC has established a Distributed
    Mission Operations capability with networked connectivity for C-17s
    with other MAJCOMs and Joint partners to allow for expanded training
    opportunities in more realistic environments. AMC will expand upon
    current capabilities by connecting tanker (KC-10, KC-135, and KC-46)
    and additional airlift assets (C-130s and C-5s) over the next 5 years.
    In addition, AMC is pursuing a networked, virtual air refueling
    capability for their tanker and airlift systems to allow for additional
    migration of refueling training to the simulators (initial capability
    in fiscal year 2018).

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2016 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                           WEDNESDAY, APRIL 22, 2015

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

                    REFORM OF THE DEFENSE ACQUISITION SYSTEM

        The subcommittee met, pursuant to notice, at 2:39 p.m. in
    room SR-232A, Russell Senate Office Building, Senator Kelly
    Ayotte (chairman of the subcommittee) presiding.
        Committee members present: Senators Ayotte, Ernst, Kaine,
    and Heinrich.

                 OPENING STATEMENT OF SENATOR TIM KAINE

        Senator Kaine [presiding]. If I can get everyone's
    attention. We are in the middle of six votes. We just cast vote
    two. I am going to go ahead and get the hearing started.
    Senator Ayotte and I will ping pong a little bit, as will
    committee members. But if I could have the witnesses take their
    seats and bring you all in, the meeting of our subcommittee is
    now called to order.
        This is a Senate Armed Services Committee (SASC) Readiness
    and Management Support Subcommittee hearing on the very
    important topic of defense acquisition system reforms. It is a
    matter that is deeply important to all committee members. I
    know that the chairman of the committee, Senator McCain, has a
    keen interest in this, and you will see us taking it up not
    only in Readiness but in the larger committee.
        I am very honored to work with Senator Ayotte together on
    the Armed Services Committee and this particular subcommittee.
        You are the key executives, service acquisition executives,
    who say grace and have control over this very, very important
    part of what we do. I certainly know from close family and
    friends in the military how much they rely upon the
    acquisitions that you make to help them perform their missions.
    So this is about a process of understanding reforms that are
    already underway. We do not need to do things that get in the
    way or cut across efforts that the Service and the Department
    of Defense (DOD) are already working on.
        But we do know that there are a number of challenges in the
    management of acquisition programs. How do you develop the most
    technologically advanced solutions to some of our challenges,
    complex weapons systems, under both the constraints of budget
    with sequester and other budget constraints and also with a
    diminishing defense industrial base? Consolidations and other
    activities in the broader economy are shrinking that base.
        How do we balance risks? We want to try to promote
    flexibility and speed but also try to balance some of the
    financial risks that can come with flexibility and speed, and
    what is the right balance there?
        What is the right level of oversight either by the
    Secretary of Defense's (SecDef's) office of the Service
    branches or by Congress over the Services themselves?
    Appropriate oversight is needed. Excess oversight slows us down
    and impedes our effectiveness.
        Then a huge issue that I feel--and I talk to my own people
    about in northern Virginia and elsewhere. What is the right way
    to make sure we have the best acquisition workforce within the
    DOD? This is a huge issue. I as Governor once faced a challenge
    of taking a massive organization, our State's department of
    transportation, that had been built up to be basically project
    providers and project managers, but over time the industry
    changed and what they really needed to be was contract managers
    for outside organizations doing a lot of the work. The skill
    set is not exactly the same. You have got to have the right
    skill set to manage acquisition programs, and that is also
    complicated by furloughs and sequesters and some of the
    budgetary constraints we are under.
        So you are grappling with all of those things, and we want
    to hear about them.
        As I said, Chairman McCain has repeatedly made plain that
    he knows that we can improve acquisition programs and we have
    to do it. You will not find a more passionate advocate against
    the foolishness of sequester than Chairman McCain, but he
    always says we are going to do our best job of convincing
    others to release foolish budgetary ideas like sequester if we
    do our best job of convincing everybody that when we have the
    resources, that we are going to use them in the best possible
    way in acquisition programs and elsewhere.
        So how do we get a system that is more agile that keeps up
    with the accelerating pace of technological change? How do we
    continue progress that you have already made as a result of the
    Weapon Systems Acquisition Reform Act of 2009 that the DOD is
    doing?
        So there is ongoing debate about the various role of
    different Governmental agencies, and we are looking forward to
    hearing from you what the appropriate level of oversight is.
        With that, I want to go ahead and move forward. Chairwoman
    Ayotte will be here presently. She was going to cast one more
    vote and come, and then as I say, you will see us moving back
    and forth. But this is the opening of a discussion on a matter
    that I think is going to play some importance as we work this
    month and next on the National Defense Authorization Act (NDAA)
    for this year. I thank the chairwoman for calling this hearing.
    Thank you for attending. I would like to ask each of you to go
    ahead and give your opening statements. Maybe I can just begin
    with Secretary Shyu.

     STATEMENT OF HON. HEIDI SHYU, ASSISTANT SECRETARY OF THE ARMY
               FOR ACQUISITION, LOGISTICS, AND TECHNOLOGY

        Ms. Shyu. Chairman Ayotte, Senator Kaine, and distinguished
    members of the Subcommittee on Readiness and Management
    Support, thank you for this opportunity to provide comments on
    our collective efforts to make the defense acquisition process
    more effective and responsive to our national security needs.
        Defense acquisition is a highly risk-averse, compliance-
    based process with a checklist mentality that has become unduly
    cumbersome. Prior to my service to the Government, I spent 33
    years working in the defense industry. I would like to provide
    you some insight and share some of my program management
    experience in industry and compare and contrast that to that of
    a Government Program Manager (PM). I was able to develop a
    sophisticated radar system in record time with authorities that
    simply a Government PM does not have. So I would like to expand
    upon that.
        When I was in industry, I controlled my budget. The
    Government PM, on the other hand, does not really control his
    or her budget. On an annual basis, there is budget perturbation
    that occurs without regard to program impacts. So it is very
    difficult to sustain a program based on an annual basis it is
    perturbing.
        I had the ability to hold reserve budget at my level to
    mitigate unanticipated risks. There is no way you will have 100
    percent visibility on all potential risks that could happen in
    the life of a program. But I was able to pivot. Within the
    Government, you are unable to hold a reserve budget because it
    is deemed early to need.
        The requirements--we fully understood the requirements that
    are desired, and we were able to do the trade space to identify
    its impacts of performance versus cost versus schedule versus
    technical risks. On the Government side, what I have seen
    requirements are derived or changed without the full knowledge
    of cost, schedule, of technical risk to the program.
        Let us talk about stakeholders. In industry, the functional
    staff--that means engineering, finance, manufacturing,
    contracts, you name it--are actually incentivized to help the
    PM to achieve the cost, schedule, and budget. In the
    Government, there are many, many stakeholders. They are all
    stovepiped with different interests directly impacting
    programs. So what happens is, however, none of them are
    responsible for program cost, schedule, and performance. Just
    the PM.
        Let us talk about tests. When I was in industry, I was able
    to coordinate testing plans with the testers. In the
    Government, an operational tester can add additional tests
    without consideration of programmatic impacts.
        Documentation. I was able to move fast because I can tailor
    documentation to my program needs. In the Government, there is
    an extensive amount of mandatory documentation that you have to
    compile before you can go through a milestone.
        Senator Ayotte. Let the record show she showed a pile with
    her hands.
        [Laughter.]
        Ms. Shyu. Taller than me.
        Financial incentives. I am able to hire employees,
    incentivize them to work overtime with overtime pay, with stock
    options, with bonuses. I do not have such flexibility within
    the Government.
        Hiring. I used to get very upset in industry when it took
    me a month--when the human resource person took a month to hire
    somebody. Here I am delighted we can hire the person in 8 to 9
    months.
        So I think the best way I can talk about the process that
    we have in industry versus the Government, I would give you an
    analogy that is simple to understand. Over here, I have an
    acquisition bus. The PM, as you know, is in the front. That is
    bus driver. All of the stakeholders within the Army, as well as
    the Office of the Secretary of Defense (OSD) and Cost
    Assessment and Program Evaluation (CAPE) and Comptroller and
    Congress, by the way, is on this bus. Everybody on this bus has
    a separate steering wheel and a brake, but no acceleration
    pedal.
        So what happens when a program gets into trouble? The best
    analogy I can give is the bus is turned upside down. So what
    happens in industry? Everybody would jump in to bail out the
    program manager because you are bleeding cash. There is a
    financial incentive to reduce loss. So everybody helps out the
    program manager. You will throw the best and brightest across
    the company to help out.
        In the Government, what I have seen the 4 and a half years
    of being in the Government, they will shoot out the windows,
    the tires, and the kneecap of the bus driver. Why? It is an
    opportunity to actually take the program manager's money and
    use it for their stovepipe purpose.
        So compared and contrasted to, it is so starkly different.
    So it is this fundamental lack of program manager authority
    that is commensurate with the responsibility, as well as the
    failure to properly align the various stakeholders?
    responsibilities for the program's success that has contributed
    most heavily to the critical shortcomings in the acquisition
    process in my opinion.
        I urge Congress to empower the PMs with authority needed.
    Help them guide the program successfully to completion in a
    manner that is similar to industry, which I could move very
    rapidly. More documentation does not enable agility.
        So, Mr. Chairman, members of the subcommittee, thank you
    for your steadfast and strong support of the outstanding men
    and women of the United States Army, Army civilians, and their
    families. I look forward to your questions.
        [The prepared statement of Ms. Shyu follows:]

                 The Prepared Statement by the Hon. Heidi Shyu
                                  introduction
        Chairman Ayotte, Senator Kaine, and distinguished Members of the
    Subcommittee on Readiness and Management Support, thank you for the
    opportunity to address the committee on reform of the Department of
    Defense (DOD) acquisition system. Having acted as the Army Acquisition
    Executive since 2011, following 33 years in the defense industry, it is
    a privilege to offer my perspective on the unique challenges facing
    defense acquisition.
        Acquisition reform has proven elusive. From 1960 to this decade, at
    least 27 major studies of defense acquisition, all proposing various
    reforms, have been conducted by the Department, the Congress, the White
    House, think tanks, and each of the individual services. Nearly each
    effort has attempted to define legislative solutions, create new
    processes and propose additional oversight to challenges that are, in
    many respects, endemic to defense acquisition.
        The objectives of reform are all too familiar: tackling cost and
    schedule growth in our acquisition programs, addressing unrealistic
    program requirements, streamlining a process that is bureaucratic,
    ponderous and slow, and addressing the need for a skilled and
    professional acquisition workforce. However, there are limits to what
    acquisition reform can achieve based on certain enduring realities of
    our business. The first is that the defense acquisition system is full
    of inherent technical risk. We design, develop and integrate novel
    technologies in unique ways unknown in commercial business. Second,
    unlike the private sector, the incentives and responsibilities of
    various Government stakeholders in the acquisition system are diffuse
    and often inconsistent. Third, prior efforts at reform have mostly
    resulted in greater oversight, added bureaucracy and the associated
    prolixity of statutes and regulations, slowing down the process
    substantially.
        While we must continue to improve on our past record, the reality
    is that there are no easy fixes that allow us to deliver incomparable
    warfighting capabilities while eliminating all sources of risk. The
    need for oversight must be weighed against the need for flexibility of
    our acquisition processes. As the Department has recently emphasized,
    our desire to reduce risk must be balanced by the need to maintain our
    technological advantage. Most importantly, we must recognize that
    improved acquisition outcomes depend on mutual accountability among the
    various stakeholders that affect the success of our programs. These
    considerations cannot be overlooked as we work together to craft a more
    responsive and effective acquisition system.
                        empowering our program managers
        During my time in the defense industry, I saw firsthand the agility
    and empowerment that program managers are given to do their difficult
    jobs. The largest single difference in Government, which also accounts
    for the proliferation of studies directed at these issues, rests in the
    sheer number of stakeholders that influence Department acquisition
    programs. While program managers are accountable for program outcomes,
    they are only nominally in control of their programs--the program
    manager is subject to the influence of many other organizations with
    discrete authorities and priorities. As we embark on another reform
    effort, we must acknowledge the program manager's reliance on
    programmers and budgeting teams to plan and execute program resources,
    and on the requirements developers for achievable system requirements.
        Too often, previous efforts at reform have attempted to engineer
    the decision-making process by adding layers of oversight to avoid
    repeating past mistakes. Stakeholders are thus incentivized to
    legitimatize their role in the process rather than add value to
    acquisition programs. Effective reform must ensure a common vested
    interest in program success, with an emphasis on mutual accountability
    for program managers, functional oversight stakeholders, and other
    Service components who play a role in acquisition.
        Over the past 60 years, nearly every acquisition reform study has
    emphasized the need for technically feasible requirements that trade
    off desired capabilities to meet cost and schedule constraints.
    Requirements which are not achievable within cost, schedule, and
    technical realities are doomed for failure before the acquisition
    process even begins. In industry, this process is dynamic and fostered
    by the company's financial incentive to meet cost and schedule
    objectives. Our requirements generation process often develops in
    isolation, based on operational desires removed from engineering and
    resource constraints. The results are requirements based on ideal
    aspirations versus ``good enough'' operational utility. To improve
    program outcomes, we must also address the requirements process, which
    mostly takes place well before a program is started.
        These ingredients for program success are not currently in the
    program manager's control. However, these aspects of the process must
    be considered as changes are made to our processes affecting program
    managers.
                         stable and predictable funding
        Despite our efforts to improve acquisition, budgeting decisions
    outside of the acquisition process can greatly disrupt prudent planning
    to achieve cost efficiencies and incentivize contractors. Our budgets
    are subject to numerous factors outside the program manger's control,
    including Congressional authorization and appropriation, and Department
    and Service funding prioritizations. Furthermore, the threat of
    sequestration continues to disrupt the Department's overall budget
    process, with the resulting changes having effects on the industrial
    base.
        In industry, a program manager controls his or her own budget, and
    is able to hold reserve funds to account for unexpected risks. In our
    process, program managers have little such control despite evidence
    that stable funding has a directly proportional effect on program
    health and performance. A management reserve account for program
    managers would provide some buffer against the annual funding
    perturbations common to our programs.
                             reducing documentation
        Previous efforts at acquisition reform have generated numerous
    documentation requirements in an attempt to ensure effective oversight.
    I am encouraged by Congress and the Department having the shared
    intention to make headway on the documentation burden this fiscal year.
    The Department and Congress have collaborated on efforts to identify
    redundant and duplicative documentation requirements that stem from
    statutory requirements over several years. Statutory callouts of
    particular types of documentation, such as manpower estimates, has led
    to the generation of standalone documents which must be created and
    staffed separately. This creates additional, unneeded documentation
    since the substantive information is already adequately captured in
    existing documents such as the acquisition strategy.
        The Department submitted seven legislative proposals which will
    address the examples cited above and others, and proposes some revised
    language to clarify existing misinterpretations. Additionally, these
    proposals recast certain oversight stakeholders as advisors to the
    acquisition decision-maker, and emphasize the overall streamlining of
    the decision making process. This will avoid further dispersion of
    responsibility and authority over acquisition, and help balance
    oversight needs with the need to maintain flexibility and agility in
    the process. When we align incentives towards program success, we can
    preserve the ability to move fast while maintaining effective
    oversight--as seen in classified programs.
        The Department is also undertaking its own reforms to improve
    internal acquisition processes, most notably the introduction and
    implementation of Better Buying Power, now on its third iteration. As
    part of this initiative, the Army is leading a cross-Department of
    Defense team to identify and eliminate unproductive paperwork. On
    average, program managers across the Department are required to develop
    more than 40 separate documents and reports for program milestone
    reviews. The review and approval of these documents can take up to 18
    months, adding significant time to acquisition programs. The cross-
    departmental team will formulate recommendations to reduce unnecessary
    or low-value-added documents, while still providing sufficient
    oversight of key program decisions. As finite resources, the time and
    attention of program managers are best utilized to manage programs
    effectively versus oversight compliance, and I support the recent
    efforts that recognize the need to balance effective oversight with
    flexibility in the acquisition process.
                          people and talent management
        Lastly, the acquisition community must have the ability to attract,
    train, and retain a qualified workforce, both uniformed and civilian.
    Originally recommended by the Packard Commission and inaugurated by
    Congress via the Defense Acquisition Workforce Improvement Act (DAWIA),
    a professionalized acquisition workforce is perhaps the largest factor
    within the process that contributes to success. Such a workforce is
    necessary to balance the technical demands of developing sophisticated
    weapons systems while exercising the business judgment needed to ensure
    value received for public resources. The Army requires access to an
    experienced and energetic workforce of systems engineers, logisticians,
    contracting personnel, and many other critical skill sets essential to
    ensuring successful acquisition execution.
        Again, I draw on my industry experience for an idea of best
    practices. Industry is better able to attract and quickly hire the
    necessary technical expertise to successfully execute high risk
    programs, offering financial incentives and awards to its high-
    performing employees in the form of overtime pay, stock options, and
    bonuses. Such financial incentives are often unavailable for Government
    program managers. The Government hiring system is laborious and slow,
    and our ability to attract talent has diminished due to hiring freezes
    and furloughs.
        I thank Congress for the tools and resources provided to date, and
    I fully support the intent to make permanent the Defense Acquisition
    Workforce Development Fund (DAWDF) and the expedited hiring authority.
    I propose that more flexible talent management tools are needed,
    particularly those that will allow us to assess critical skill sets
    within our workforce and promote accountability.
                           role of the service chiefs
        Under the current system, the Service chiefs hold no formal role
    within the acquisition process, but still exercise significant
    authority over the capabilities ultimately developed and procured.
    Numerous studies have already examined the need for achievable and
    affordable requirements, as well as stable and predictable funding for
    program success, thus, the Service chiefs are well-positioned to
    address the most urgent and influential issues that ultimately affect
    acquisition success.
        The operational knowledge and leadership possessed by the Service
    chiefs are invaluable to the type of tradespace analyses typically done
    in industry: an examination of capability gaps against projected
    resources and overall priorities, which can then be used to generate
    achievable requirements and ensure protection of the resources needed
    to meet those gaps. The Service chiefs can also engage in the larger
    strategic decisions about what capabilities the Army needs and what
    resources should be put against those needs, balancing the overall
    readiness and training requirements of the force at large. These are
    essential roles that Service chiefs can execute without modification to
    existing authorities.
        I do not believe that Service Chiefs require greater decision-
    making authority regarding program decisions, such as technological
    maturity, production readiness, risk mitigation planning, and
    industrial base considerations. The Service Chiefs rarely have the
    technical expertise or industry experience to make such decisions.
    Service Chiefs, and their significant operational expertise, is best
    leveraged on requirements and the overall priority given to our
    acquisition efforts.
                                   conclusion
        I am heartened by the committee's stated interest in making the
    acquisition process better serve our Army and ultimately our Soldiers.
    Acquisition reform cannot focus only on oversight of program managers
    or revamping the decision-making process, but must address how the
    system manages risk. We must collectively continue to work to ensure
    that the requirements for what we procure are informed by cost,
    schedule, and performance tradeoffs as well as technical risks, and
    accept that some risks cannot be eliminated entirely.
        The security challenges of tomorrow will be met with the equipment
    we develop, modernize, and procure today. We cannot allow our own
    process to hinder the agility we so desperately need to maintain our
    operational overmatch. I applaud the committee for expressing interest
    in relieving our burdens and streamlining the process. We should
    measure success by our ability to deliver to the Warfighter the
    capabilities needed to accomplish the mission, and despite all of our
    current challenges, we continue to field the best equipment to the best
    Army the world has ever known.
        Madam Chairman, Members of the Subcommittee, thank you for your
    steadfast and strong support of the outstanding men and women of the
    United States Army, Army Civilians, and their Families. I look forward
    to your questions.

        Senator Kaine. Thank you, Secretary Shyu.
        Secretary Stackley?

    STATEMENT OF HON. SEAN J. STACKLEY, ASSISTANT SECRETARY OF THE
             NAVY FOR RESEARCH, DEVELOPMENT AND ACQUISITION

        Mr. Stackley. Yes, sir. Senator Kaine, Senator Heinrich,
    thanks for the opportunity to appear before you today.
        Let me start by saying that I concur wholly with Secretary
    Shyu's characterization of the challenges particularly that the
    program manager faces inside of our acquisition system. Now, I
    would provide a slightly different perspective in terms of how
    we are going about dealing with some of these challenges.
        First, it cannot be lost on this subcommittee that as we
    talk about acquisition and the need for improvement, that in
    fact we deliver extraordinary capability to our warfighter
    today. The challenge is that we do so at great cost, and it is
    a cost which is proving increasingly difficult for the Nation
    to bear.
        Foreseeing the budget challenges of our current day,
    Secretary Gates gave guidance and warning back in 2010
    remarking, given America's difficult economic circumstances and
    perilous fiscal conditions, military spending on things large
    and small can and should expect closer, harsher scrutiny. As a
    matter of principle and political reality, the Department of
    Defense cannot go to America's elected representatives and ask
    for increases each year unless we have done everything possible
    to make every dollar count.
        Shortly after Dr. Carter, who was then the Under Secretary
    of Defense, issued his directive on how we buy what we buy,
    which today we know as Better Buying Power.
        So today in building our budget, every program, things
    large and small, is subject to answering four most basic
    questions. What will it cost to buy it? What will it buy us in
    performance? What can we afford? What can we do to make it more
    affordable? Simply put, we must change the cost equation.
        We have gone about adhering to this by using five basic
    principles.
        First, get the requirements right. Requirements definition
    is the most critical phase in determining the outcome of a
    major weapon systems program. Requirements that are well
    informed by a thorough assessment of technical feasibility and
    a realistic cost estimate are inherently at lower risk of
    overrun or delay during execution.
        Two, because today our Services' requirements exceed our
    budgets, the Department of the Navy has made affordability or a
    cost requirement alongside performance in defining a system in
    order to drive capability trades needed to reduce the cost of
    our programs. Properly define and seamlessly transition from
    requirements to design to build, test, and field to do so
    within agreed budgets and schedules based on realistic
    estimates necessitates total alignment between requirements and
    acquisition, and it all begins with getting the requirements
    right.
        Second, perform to a stable plan. Our most successful
    programs are underpinned by stable requirements, stable
    designs, and stable budgets. Stability translates into
    predictable, reliable performance, unit cost reduction,
    improved material purchasing and workforce planning, retention
    of the skilled labor, and the ability for industry to invest in
    facility improvements, all resulting in more efficient
    production and a more affordable program. Further, program
    stability enables the use of multiyear procurements to further
    reduce the cost of our acquisitions. Alternatively,
    uncertainty, delay, or changes to requirements or the budget or
    the acquisition plan all destabilize a program ultimately
    leading to cost growth and schedule delay.
        Third, in Secretary Gates' words, make every dollar count.
    It is essential that we pursue efficiencies by procuring at
    efficient rates, leveraging investments across multiple
    programs, maximizing competition, employing open architectures,
    reducing overheads and bureaucracy, and sustaining a constant
    effort to pursue cost reductions, and change practices that
    would meaningfully reduce program cost or risk without
    substantively impacting key requirements regardless of what
    phase the program is in. In short, return to the basics of what
    our systems should cost.
        Fourth and most importantly, build a skilled and
    experienced acquisition workforce. To meet our objectives, we
    must be smart buyers and, two, tough customers, and to be so,
    we must possess a skilled and experienced acquisition
    workforce. The Department, with strong support from Congress,
    is taking measures to strengthen this workforce, and we must
    stay the course. This is the single most important fundamental
    in achieving strong performance in defense acquisition.
        Fifth, foster a healthy industrial base. In the end,
    improvements to acquisition rely upon performance by industry.
    The critical skills, capabilities, and capacities inherent to
    our weapon system developers inarguably underpin our dominant
    military position. Accordingly, in the course of considering
    policy to improve acquisition, the effect of such policy on the
    industrial base must be closely weighed. From research and
    development to production, implicit to each of these principles
    we must pick up the pace. Time is money, and time is stripping
    much-needed capability from the hands of our sailors and
    marines. We demonstrated the ability to accelerate capability
    in response to urgent needs. The Mine-Resistant Ambush
    Protected Vehicle (MRAP) was a great example. Production
    increased 100-fold in a year's time, saving countless lives
    while meet the most urgent need of the warfighter. While the
    rules and process may differ, we need to bring a similar sense
    of urgency to major program acquisition to deliver a capability
    not at the speed of bureaucracy but at the speed of technology.
    We must pick up the pace.
        In closing, I would like to return to Secretary Gates'
    remarks at the Eisenhower Library. What is required going
    forward, he said, is not more study, nor do we need more
    legislation. It is not a great mystery what needs to change.
    What it takes is the willingness to make hard choices. In order
    to remain the most capable military in the world, we will
    always face hard choices. Making the right choices--that
    returns me to the need for a highly skilled, experienced
    acquisition workforce.
        Thank you, Mr. Chairman--Senator Kaine and Senator
    Heinrich, for the opportunity to appear before you today. I
    look forward to your questions.
        [The prepared statement of Mr. Stackley follows:]

                Prepared Statement by the Hon. Sean J. Stackley
        Madam Chairwoman, Senator Kaine, and distinguished members of the
    subcommittee, thank you for the opportunity to appear before you today
    to address acquisition reform initiatives. The acquisition process, as
    difficult as it is, produces the most capable military weapon systems
    in the world, by far. This achievement is only made possible by the
    combined efforts of the Congress, the nation's industrial base, the
    Department of Defense's (DOD's) acquisition workforce, and, of course,
    our men and women in uniform who test, train, deploy, and ultimately
    take these weapons to war. The great challenge before us all is to
    produce the needed capability at a more affordable cost, and at a pace
    that preserves the technological edge that our military has possessed
    for nearly three-quarters of a century. The Department of the Navy
    (DON) is committed to meeting that challenge and these remarks are
    provided in that context.
        To consider what improvements could be made in acquisition today,
    it is important to understand the environment in which it operates.
    Within the DON, we are responsible to the warfighter and taxpayer to
    manage and execute upwards of $60 billion per year for Navy and Marine
    Corps development and procurement. Clearly, our first priority is to
    meet the needs of our Sailors and Marines deployed around the world
    today, fighting today's war. At the same time, we are also responsible
    to bring forward significant advances in capacity and capability that
    the Navy and Marine Corps will rely upon to maintain naval superiority
    well into the 21st century. This must be accomplished in an environment
    characterized by constrained budgets, increasing system complexity,
    limited competition, a shrinking industrial base operating within a
    tough economy, and increasingly burdensome requirements associated with
    the administration, oversight, and reporting of our major weapon
    systems programs. It is also important to understand the essential
    nature of weapon systems procurement--neither the DOD nor the defense
    industry exercises a classic role of buyer or seller in the free-
    enterprise system. As a result, it can be difficult to attract new
    entrants into a unique, high-entry-cost, and often less understood
    market in the U.S. And finally, this large Government bureaucracy that
    envelops Defense acquisition discourages risk and thwarts rapid or even
    timely delivery when, in fact, the very nature of weapon systems
    development is risky, and the very pace oftechnology and of the threat,
    demand a faster, appropriate response. Given this environment, which is
    not prone to agility, primary emphasis must be placed on the need for
    experienced, knowledgeable acquisition professionals who know how to
    work in the unique defense marketplace, who understand the technical
    dimensions of extraordinarily complex systems, and who can navigate the
    bureaucracy and produce excellent outcomes in spite of it all.
        With the above in mind, history and experience have demonstrated
    that programs succeed when they adhere to basic principles: (a) get the
    requirements right; (b) perform to a stable plan; (c) make every dollar
    count; (d) rely on an experienced acquisition workforce; and (e) foster
    a healthy industrial base.
                         getting the requirements right
        Arguably, requirements definition is the most critical phase in
    determining the successful outcome of a major weapon systems program.
    Requirements that are underpinned by a thorough assessment oftechnical
    feasibility and a realistic cost estimate are inherently at lower risk
    of cost or schedule overrun, or performance shortfalls, during program
    execution. Conversely, the preponderance of `failed programs' can trace
    their undoing to poor understanding of the technical requirements
    (including what are often referred to as `derived requirements'), cost,
    and risk intrinsic to such programs' operational requirements. Our
    mandate--to properly define and seamlessly transition from requirements
    to design, to build, test, field, and sustain and to do so within
    agreed budgets and schedules based on realistic estimates--necessitates
    unity of purpose and unity of action between the Requirements and
    Acquisition organizations each step along the way. And it all begins
    with and hinges upon getting the requirements right.
        Expert knowledge is required to understand the link between
    operational requirements and technical requirements; and the
    development, design, and production challenges that must be overcome to
    achieve these technical requirements; and the time and resources that
    will be required. This expert knowledge should be the inherently
    Governmental responsibility assigned to the Acquisition Workforce
    (AWF). Accordingly, it is critical that the acquisition arm, which will
    be accountable for delivering to the technical requirements defined for
    a weapon system, is embedded in the requirements definition process to
    provide the Department its best assessment of technical feasibility,
    cost, and risk in the course of defining those requirements.
        Understanding the cost and risk of a program's requirements are
    not, however, sufficient. As Secretary Gates remarked in his speech at
    the Eisenhower Presidential Library in 2010, ``Without exercising real
    diligence, if nature takes its course, major weapons programs will
    devolve into pursuing the limits of what technology will bear without
    regard to cost or what a real world enemy can do.''
        Accordingly, because today our Services' requirements exceed our
    budgets, the DON has directed that cost--or more appropriately,
    affordability--must be defined alongside, and managed with the same
    discipline and rigor, and if need be, drive tradeoffs across such
    traditional requirements as the speed, power, range, or payload of a
    weapon system.
        The DON has designed its acquisition process, commonly referred to
    as the Navy Gate Review process, to ensure there is no gap between the
    Requirements and Acquisition organizations so that the Navy understands
    the relationship between requirements, technical feasibility, and cost.
    The process requires the Navy/Marine Corps operational requirements
    leadership and acquisition leadership to agree, and repeatedly affirm
    that agreement throughout the development, acquisition, and sustainment
    of a system. A misalignment between requirements and acquisition is
    always costly and sometimes fatal--inducing unnecessary costs
    associated with redesigning, retesting, schedule delays, and even
    cancellation. The DON uses Gate Reviews to eliminate that misalignment
    early in a program, and to check alignment regularly.
        Each `gate' is co-chaired by the Service Chief or senior military
    requirements officer and Service Acquisition Executive (SAE). In all,
    there are six gates. The first three are chaired by the Service Chief
    (co-chaired by the SAE) and ensure that warfighter requirements are
    well understood and can be translated into technical requirements that
    the acquisition community can affordably achieve in the commercial or
    defense marketplace. The last three gates are chaired by the SAE (co-
    chaired by the senior military requirements officer) and ensure the
    technical specification, statement of work, and Request for Proposal
    have accurately translated the warfighter's requirements into an
    acquisition approach that is executable, affordable, and agreeable
    across acquisition and requirements leadership.
        Within the Department of the Navy, this acquisition method
    reinforces the authority and strengthens the ability of the Service
    Chiefs to set and manage operational requirements, to realistically
    budget for these requirements, and oversee execution pursuant to their
    responsibility to man, train and equip the force. Likewise, it
    reinforces the authority and strengthens the ability of the SAE to
    manage the technical requirements, to construct the acquisition
    strategy to achieve these requirements, and oversee execution pursuant
    to his/her responsibility to the Service Chief to deliver the
    warfighting capability on-cost, on-schedule and within performance
    parameters.
                          performing to a stable plan
        Good acquisition outcomes are more probable when a Program Manager
    can manage to a plan with a foundation of stable requirements,
    technical baselines, and budgets--which is an expected benefit of the
    Gate Reviews described above. Alternately, instability causes added
    cost in rework/time, and a chronic inability to accurately estimate
    program costs. Perpetual instability produces an historical record of
    higher-than-necessary cost estimates which, in tum, are used as
    baselines to estimate future programs which, in tum, are used to inform
    budget submissions--establishing a repeatable cycle of spiraling, self-
    fulfilling cost growth.
        Good examples of program stability that enable performing to a
    stable plan, include the DDG51, Virginia-class, F/A-18E/F, MV-22
    Osprey, Mobile Landing Platform, and Next Generation Enterprise Network
    (NGEN). In each case, the Navy/USMC made strong efforts to establish
    well-defined and stable requirements that allowed industry to more
    accurately understand the Government's requirements, and then produce
    cost-effective proposals. Program stability also permits the use of
    additional cost-saving contracting measures not available where
    stability is absent, such as multi-year contracting and shorter
    construction cycles.
        A chronic counter to program stability, however, is the
    bureaucratic environment in which Program Managers operate. In this
    context, the 'bureaucracy' is viewed by the Program Manager as the
    accrued effects of individual stakeholders across the broad Government
    who have, or believe they have, a role derived from the myriad of
    regulations and policies embodied in the FAR, DF AR, FMR, DOD 5000,
    Services 5000, JCIDs, etc., in decision-making, administering or
    overseeing some element of that program.
        In pushing the boundaries of science and technology to deliver
    leading edge capability, the risk, complexity and cost of our weapon
    systems have grown significantly. The response has been decades of
    well-intended legislation, regulation, and policy designed to reverse
    cost trends and avoid past mistakes. The result being that Program
    Managers spend increasing amounts of their time fighting back the
    destabilizing effects of an increasingly bureaucratic oversight system
    that is too risk-averse, and less time performing to a stable plan. The
    unplanned, unpredictable, and often intrusive bureaucracy the Program
    Manager faces undermines his or her ability and therefore,
    accountability, to execute a plan too often interrupted or modified by
    well-meaning individuals outside of the chain-of-command, who may have
    positional authority, but otherwise are not themselves responsible,
    accountable or incentivized to ensure a Program Manager is successful.
    Further attempts to improve Program Manager accountability should be
    mindful of this reality.
        Budget instability destabilizes programs and reduces the likelihood
    a Program Manager can control program outcomes. The great uncertainty,
    delay (Continuing Resolutions), and frequent changes to budgets through
    the annual authorization and appropriations process counter our efforts
    to effectively execute to a plan. Sequestration, alone, threatens to
    undo all of the Department's gains in productivity brought about by
    `Better Buying Power' initiatives. A timely, predictable defense budget
    (ultimately, a multiple year budget) would directly increase the
    productivity of Defense acquisition; provide needed stability to the
    industrial base; and improve both Government and industry's ability to
    manage outlay risk and invest in R&D, facilities, and people. It would
    also reduce Government deadline pressures to meet artificial
    obligations or expenditure benchmarks that impact effective contract
    negotiations. Reducing these pressures would allow the time necessary
    to achieve the best deal for the Department.
        Budget stability is also critical for managing through challenges
    in program execution. There is a compelling need to establish a
    Management Reserve (MR) account to address the execution risks inherent
    to every major program. Absent an MR account, each program is left to
    establish and protect its own MR, which at best, results in inefficient
    resource allocation. At worst, those programs unable to provide for
    such reserve within the program's budget suffer program breakage as
    funding shortfalls emerge in the course of program execution. An MR
    account to be administered by the Services could be established with
    unobligated funds and be used by the Services to address individual
    program risks or urgent needs that have emerged in an execution year.
                           making every dollar count
        As stated earlier, the DON's requirements exceed the DON budget.
    While it is left to the budget cycle to balance the two, it is
    essential that, corporately, efficiencies are achieved by procuring at
    efficient rates, leveraging investments across multiple programs, and
    maintaining year-to-year stability in programs. In short--making every
    dollar count.
        Program by program, the DON remains committed to competition--at
    the prime and subcontract level--through early prototyping, spiral
    development, open architectures, fixed price contracts, and effective
    use of incentive fees. Competition or competitive rivalries can take
    many forms. Head-to-head competition is not appropriate for everything
    the Department buys, nor is it always an available option, but in
    almost all cases, it is a Program Manager's best friend.
        The DON has successfully applied multiple and various forms of
    competition, beginning with competing against the budget itself--
    ensuring each dollar spent is necessary to meet a requirement. Beyond
    that, the DON has recently applied direct, full and open competition to
    major programs to include Next Generation Jammer, Consolidated Afloat
    Network Enterprise System (CANES), NGEN, Presidential Helicopter, and
    Amphibious Combat Vehicle (1.1). Taken together, the savings generated
    relative to pre-award independent cost estimates have been significant
    and allowed the Department to direct those savings to increase
    procurement where we fall short of the warfighting capacity
    requirement.
        In cases where there is a fragile and limited industrial base, the
    DON has competed profit between two primes; competed quantity; competed
    different solutions which satisfy the same requirement; combined
    acquisitions in a competitive manner; and tied successful cost-
    proposals in limited competitions to anticipated additional quantity.
    Various competitive forms have allowed the Department to make every
    dollar count.
        Open architecture has proven to be a necessary component to achieve
    repeatable and sustained full and open competition and to level the
    competitive field, allowing small business to compete head-to-head with
    large business. The DON's previous open architecture success in the
    Submarine Acoustic Rapid COTs Insertion Program established a business
    model that has been replicated in other DON programs, including AEGIS
    Combat System modernization, F/A-18, Littoral Combat Ship, Air and
    Missile Defense Radar, CANES, NGEN, and MK 48 Torpedo Programs, to name
    a few. The DON's experience with open architecture has emphasized an
    important principle that affects acquisition reform--DON ``ownership''
    of the system interfaces/protocols/definitions is necessary for
    success, placing added emphasis on the need to hire and retain
    outstanding technical talent.
        Further, there is a need to ensure that total ownership cost,
    including energy considerations, carries weight in the formulation of
    major acquisition strategies and source selection criteria. These
    fundamentals are emphasized in Department policy, including policy that
    emphasizes program decisions that favor DON corporate interests, though
    such policy may at times appear at odds with individual program
    preferences.
        The Program Manager is expected to execute within the framework of
    established requirements and budget. During execution, it is important
    to sustain a constant effort to pursue cost reductions and bring
    forward recommended changes to specifications, scope, requirements,
    policy, acquisition strategy, or management practice that would
    meaningfully reduce program cost or risk without substantively
    impacting key requirements--regardless of what phase the program is in.
    The DON's Program Managers are tasked, not merely with understanding
    the basis of estimate for their programs' costs, but equally or more
    importantly, to understand what drives those costs and to formulate a
    strategy to reduce those costs in accordance with the program's best
    estimate of its ``should cost''--again, making every dollar count.
             relying on an experienced acquisition workforce (awf)
        An experienced Acquisition Workforce is the single-most important
    fundamental in achieving strong, repeatable performance in Defense
    acquisition. GAO has reported that ``the principles and practices that
    programs embrace are determined not by policy, but by [Program
    Managers'] decisions.'' The business of Defense acquisition consists of
    tens of thousands of individual decisions made daily--requirements,
    technical, contracting, financial, supply, etc.--and the more
    experienced and qualified the AWF, the better the decisions. The best
    acquisition outcomes are produced by the most experienced acquisition
    people--in technical knowledge and business acumen. As the
    Undersecretary of Defense for Acquisition, Technology and Logistics
    (USD(AT&L)), Frank Kendall, stated to the Senate Homeland Security and
    Governmental Affairs Subcommittee on Contracting Oversight on April 30,
    2014: ``Maybe we've been changing the wrong things. Defense acquisition
    is a human endeavor, and my view is that we have focused too much on
    organizational structures, processes, and oversight mechanisms, and not
    enough on providing people with the skills and the incentives they need
    to be successful.''
        The AWF requires highly-educated and highly-skilled professionals
    in the following areas: Scientists & Engineers; Contracts Officers;
    Program Managers; Cost Estimators; Financial Managers; Logistics
    Managers; Auditors; Acquisition Attorneys; Information Technology
    Professionals; and Construction Engineers and Architects. It requires
    highly talented and dedicated military and civilians who are the
    ``Special Forces'' of the federal civilian workforce. To recruit and
    retain the best and brightest for this work so that the DOD AWF becomes
    the premier technical and business workforce in the world, requires
    changes to human resource authorities, accommodations, and
    compensation.
        The idea of building and retaining a highly capable AWF as the
    cornerstone of improving the Defense acquisition system is not new.
    Indeed, echoing similar findings of the Blue Ribbon Defense Panel in
    its report to the President in July 1970, Dr. Ron Fox states:

            ``Were there a more attractive Government career in DOD
            acquisition management, it would then be possible to minimize
            the conflicts associated with frequent turnover of military
            personnel and widespread military retirements to industry,
            while preserving the rights of individuals to careers in
            acquisition management. The basic goal of any legislative
            remedy must be achieving and maintaining outstanding competence
            and integrity to the Defense acquisition system.''

        The same statement is true for the civilians who make up the AWF.
        The professional Acquisition Workforce, however, is increasingly
    difficult to sustain. The AWF operates in a human capital system that
    was not designed with the 21st century professional employee in mind.
    It is archaic and lacks agility to hire and retain an elite workforce.
    Further, the A WF remains subject to the same undistributed Government
    personnel reductions as with any other part of the federal workforce
    and, today, is operating in the shadow of the FY 2013 furlough and FY
    2013 Government shutdown. The prospect of the same scenario looms in
    the current budget cycle. None of these facts are attractive to
    prospective hires or the current acquisition professionals the
    Department must retain.
        Congress has recognized the Department's need for a large, robust,
    highly qualified AWF, and provided much-needed legislative relief with
    the passage of Section 852 in the 2008 National Defense Authorization
    Act (NDAA) and Section 219 in the 2009 NDAA, and support for the
    Department's desire to expand the Acquisition Demonstration Project to
    more of DOD's AWF. These provisions, which have been amended several
    times, provide helpful authorities for AWF hiring, training, and
    retention, as well as budget authority dedicated to rebuilding the
    Department's in-house Science and Engineering foundation. These
    provisions are important and the DON is grateful to the Congress for
    their support. But for the 21st century AWF, more agility will be
    needed to hire and retain quality people with elite skills.
                      fostering a healthy industrial base
        In the end, improving acquisition outcomes relies upon performance
    by industry, so it is appropriate to understand the issues affecting
    industry's performance. Industry needs experienced engineers, skilled
    tradesmen, capital to invest, and fair opportunities for stable
    production and repeatable profits over the long-term. On the other
    hand, Defense acquisition needs sustained competition, repeatable cost
    performance, and repeatable product performance.
        The difficult reality is today's defense industrial base is
    fragile, less competitive, has limited U.S. growth opportunities, and
    continues to face an uncertain defense and national budget environment.
    The result is a somewhat smaller, less competitive defense industrial
    base comprised of large consolidated prime integrators with multiple
    tier suppliers. The primes are often compelled to invest outside of
    defense to maximize shareholder value. Without more stability and
    predictability in defense budgets, there is less defense market
    investment and innovation, and less product affordability without more
    companies in the market to improve competitive pricing.
        Attracting new entrants into the defense industrial base to offset
    the loss of innovation and competition has proven challenging as well.
    Barriers to entering the defense market remain chronically high as the
    overhead cost of entering and operating in a unique, uneven, and overly
    bureaucratic market discourages prospective entrants--both large and
    small commercial compames.
        These industrial base (and supply chain) realities come at a time
    when Combatant Commanders, via the requirements process, need and
    expect the Defense acquisition enterprise to respond with significantly
    more speed, agility, and innovation. No longer are the small, rogue
    non-state actors the only ones able to supply warfighting units with
    material capability faster than the U.S. Defense acquisition system can
    respond. Even a country the size of China can now produce capability
    seemingly much faster than its U.S. counterpart because, in part, it is
    unburdened by
        U.S. Defense acquisition laws, regulations, and policies. The
    unfortunate mismatch is that warfighters are expecting the acquisition
    system to respond at the speed-of-technology at a time when agile and
    more affordable medium and small businesses find it increasingly
    difficult to penetrate the Defense acquisition bureaucracy.
        As our industrial base and its supply base continue to undergo
    reshaping as a natural response to U.S. and global economic conditions,
    it is vital that weight be given to these factors when considering any
    new legislation or policy affecting Defense acquisition.
                                 final thoughts
        Defense acquisition is a large enterprise of complex,
    interdependent systems-of-systems, engineering disciplines, procurement
    rules, budget rules, organizations and processes. Oversight and
    governance of the enterprise is necessary and is expected, but it is
    crucial to strike the right balance in order to achieve affordable
    outcomes. The penalty for too much oversight is ever-increasing costs
    and impediments to execution that have no ceiling. The penalty for too
    little oversight is the costs and risks of rework for unforced errors.
    Oversight and governance requirements have added multiple layers of
    prescriptive processes, authoritative organizations and extensive
    reporting and documentation requirements. In short, the sheer size and
    overlapping nature of the bureaucracy runs counter to objectives of
    efficiency, productivity, and performance.
        Lessons learned from highly successful programs highlight that the
    right balance is attainable by applying the fundamental disciplines
    already known and available to each Program Manager (like those
    expressed here), then exposing the products of that discipline to
    simplified oversight by an appropriate but limited number of highly
    experienced managers, engineers, and business executives who serve at
    the Service Secretariat and OSD levels in policy oversight capacities.
    The fundamentals expressed in this statement have proven to produce
    successful acquisition outcomes. The DON recommends the subcommittee
    work with USD(AT &L) in the current effort to identify and roll back
    legislation that has produced unnecessary and redundant, regulatory and
    reporting burdens on Program Managers which have the effect of
    thwarting the steady application of these fundamentals.

        Senator Kaine. Thank you, Mr. Secretary.
        Secretary LaPlante?

     STATEMENT OF HON. WILLIAM A. LaPLANTE, ASSISTANT SECRETARY OF
                     THE AIR FORCE FOR ACQUISITION

        Dr. LaPlante. Senator Kaine, Senator Heinrich, thank you
    for holding the hearing.
        I too endorse strongly my colleagues here, both the bus
    analogy, as well as everything that Mr. Stackley said. It is an
    honor to be here with them today. These are two remarkable
    public servants. They are actually role models for a lot of
    folks in the Government, as well as in academia and industry,
    and they are exactly the kind of people that we need in the
    Government. So I just want to call them out.
        This is an important hearing. We have a solemn duty to the
    taxpayer and the warfighter to get this right. But this is a
    well-studied topic. I was on the Defense Science Board. At one
    point we had a moratorium against doing acquisition reform
    studies. It lasted for about 2 years, but then we got back into
    it again. It is important that this ground, though, be looked
    at and continually improved. I welcome what this committee is
    doing, as well as its counterpart in the House, to help us
    here.
        I want to mention one thing about agility. Senator Kaine,
    you mentioned agility as a fundamental issue that we are trying
    to get. I had the privilege of co-chairing a study on
    adaptability and agility for Secretary Gates back in 2010. What
    you fundamentally find out in agility and adaptability is the
    metric is speed. Speed is the fundamental metric. If you do
    things fast, do it fast, failing fast is better than doing
    things slow that may or may not succeed.
        The second thing you can do if you cannot do it very fast,
    if it is a modular type approach laid to a big platform, then
    build in hooks, build in open architectures, ability for you to
    pivot as the threat changes, as technology changes, as the
    warfighter learns things. So agility has to be fundamental to
    how we do acquisition. So I am a very strong believer in that.
    I think it echoes what my colleagues here have said.
        I also think I am going to spend a few minutes here in the
    opening remarks just the level-set everybody. In science, it is
    usually good to get definitions on the table because a lot of
    times you find out people are not talking about the same thing.
    So if you bear with me, I am going to go through a few
    definitions and come back to this issue of people.
        So, first, let us take your plain, generic acquisition
    program. Most of the time what the means is we have three
    phases to that program. We develop it. We procure it, and then
    we sustain it. Now, in the Government for the complex weapons
    systems that we deal with, we do not have the luxury--we wish
    we did--to go to a parking lot and buy something off the
    parking lot. We have to develop it. We have to pay industry to
    do the research and development. That means get to a mature
    design, get the test articles done, do the developmental
    testing where you learn where the problems are, get ready for
    production, get all ready to go. That is the first phase. That
    is Research, Development, Test, and Evaluation (RDT&E) money.
    The skill set for that is usually a very sophisticated, deep
    understanding of engineering.
        The second phase is procurement. You are now in the
    production line. There it is usually a different color of
    money, different type of contracting, typically a fixed-price
    type contracting. There you are after learning. You are after
    cost reductions.
        Then the third phase. The third phase is sustainment.
    Actually it turns out most people believe, who have looked at
    it, 70 percent of the lifecycle cost of the program is actually
    in the sustainment. So what you do in that first phase or that
    second phase, even if it might be a little bit more expensive,
    might actually save you money if you think it through for the
    third phase. Now, what is sustainment? Sustainment is about
    performance-based logistics, understanding the depots,
    understanding how we spend our operations and sustainment. I
    have found in my time in the Government that you can have an
    expert in sustainment, 20-25 years, and you can have an expert
    in acquisition, 20-25 years, I have not found hardly one person
    who is an expert in both.
        Okay, so that is just the standard three-phase acquisition.
    What else are we not talking about? Services. The Department of
    Defense last year spent $156 billion in the acquisition of
    services. Services can be anything from cutting the lawn to
    launching our most precious national security payloads into
    space. Those are all services. Different skill set. Right?
    Totally different skill set. Different management.
        Okay. Then the third category, which Secretary Stackley
    mentioned. He mentioned MRAPs, rapid acquisition. Over the last
    15 years, we have had a proliferation of rapid acquisition
    offices. Most of them are responding to rapid urgent
    operational needs (UONs) we call it. That is a totally
    different model as well. Usually it is an 80 percent solution.
    Usually the sustainment part is often put aside. Very different
    skill set. Very different contracting.
        So imagine what all of that has in common. Very little,
    except one thing: people. The experts you need in each part of
    that system have to be customized to where they are. That is
    what you were getting at, Senator, right at the beginning about
    your experience. So that is important to this, is the people.
        So I just want to make sure we are all level-set on that
    because oftentimes when I hear people talking about
    acquisition, I am not sure which phase or which aspect they are
    talking about.
        There are promising signs. There are good things going on
    that should be built upon. I am always a believer in looking at
    what is going well and building upon it. The Better Buying
    Power initiatives that Secretary Carter announced that
    Secretary Kendall initiated is paying off. The ``should cost''
    savings that all three of our services are having are real and
    they are incredible. They are not cost avoidance. People
    sometimes say it is cost avoidance. No. Very specifically, they
    are real savings. That is paying off.
        We also do have outreach to nontraditionals. We are running
    experiments in the Air Force with non-traditional ways to bring
    in academia or small businesses. Open architectures, which I
    mentioned earlier, for adaptability are a great way to bring in
    non-traditional companies and players into our system. We are
    trying things in the Air Force. I know the other Services are--
    outside the acquisition 5000, doing something that is called
    ``other transactional authority.'' We are doing an experiment
    next month on one of our systems to try to get folks under
    contract within a week if they impress us with one of their
    algorithms. So there are lots of these little experiments going
    on that I think we need to watch, pay attention to, encourage.
        I would just look forward to working with the committee as
    we work on this. Thank you very much.
        [The prepared statement of Dr. LaPlante follows:]

                   Prepared Statement by Dr. William LaPlante
                                i. introduction
        Chairman Ayotte, Ranking Member Kaine and distinguished members of
    the Subcommittee, thank you for the opportunity to discuss reform of
    the defense acquisition system. Modernizing our weapons systems is
    paramount to the success of the Armed Forces. The Air Force Acquisition
    Enterprise is exceptionally capable and we are aligned to deliver the
    world's best and most advanced weapons and other capabilities both now
    and in the years to come.
        I'd like to start by commending the United States Senate Permanent
    Subcommittee on Investigations for their October 2014 report, Defense
    Acquisition Reform: Where Do We Go From Here? This compilation of
    essays from a comprehensive range of defense acquisition professionals
    has been crucial to our own internal studies and reviews on what
    actions to take as we move forward. Particularly, the report from Dr.
    Paul Kaminski, currently the Chairman of the Defense Science Board and
    Chairman and CEO of Technovation among other Boards, and previously the
    Under Secretary of Defense for Acquisition, Technology & Logistics and
    a retired Air Force officer, speaks to me. He simply states that ``No
    combination of statutes, regulations and policies can ensure that major
    weapons systems are delivered on time, at a reasonable cost, and
    provide the needed capability. The acquisition system depends upon good
    people making good decisions involving complex issues.'' This
    declaration helps us shape the context of the improvements we
    continuously challenge ourselves to seek: They will not happen
    overnight, they require a cohesive team in agreement of the desired
    outcomes, and we need the collective thrust of the enterprise
    initiatives and sufficient stable funding to support the people as they
    turn the change from idealism to reality.
        I would also like to highlight House Armed Services Committee
    (HASC) Chairman Thornberry for his recently introduced acquisition
    legislation. Among other things, the legislation would streamline many
    of our processes and improve efficiency of the acquisition system. The
    Department of Defense, in conjunction with the Services, provided input
    to Chairman Thornberry's legislation, which generally complements the
    Better Buying Power (BBP) initiatives and supports reducing unnecessary
    bureaucracy and red tape.
        Congress has been a terrific partner in helping us achieve greater
    acquisition successes. Of note, the Competition in Contracting Act
    (CICA) of 1984 which stressed competition, and was further accentuated
    by Weapon Systems Acquisition Reform Act's (WSARA) emphasis on life
    cycle competition and prototyping to reduce development risk,
    contributed to many of our successes. The 1990 Defense Acquisition
    Workforce Improvement Act, which established qualification standards
    for the workforce, as well as the more recent National Defense
    Authorization Act for Fiscal Year 2011 Defense Exportability Features
    (DEF) to improve our ability to increase foreign military sales, also
    helped us get where we are today. These laws are all examples of
    improvements to the process aided by Congressional direction.
        However, as Dr. Kaminski states, laws upon laws will not improve
    the acquisition process. While we believe these laws were created with
    the best intentions, as our processes increase in complexity, many of
    the statutory requirements continue to grow, resulting in duplicative
    and often overly cautious requirements whose burdens outweighed their
    values.
        We have made tremendous improvements in recent years to our
    acquisition system; although, we still have work to do. Since my
    nomination as Assistant Secretary of the Air Force (Acquisition), I've
    challenged the acquisition community to achieve five priorities: Get
    programs right, increase transparency to external stakeholders, own the
    technical baseline, continue our efforts on BBP, and build our systems
    towards a future Air Force. All of these initiatives contribute to a
    stronger, cost conscious acquisition community. Within the Air Force
    and Department of Defense, initiatives including the Acquisition
    Improvement Plan (AIP) (2009), Better Buying Power (BBP) 1.0 (2010),
    BBP 2.0 (2012), Bending the Cost Curve (2014), and now BBP 3.0 (2015)
    also contributed to our successes.
        We are far from reaching our fullest potential. We agree with the
    GAO's conclusion in their February 2015 report, DOD Should Streamline
    Its Decision-Making Process for Weapon Systems to Reduce
    Inefficiencies, which stated that the DOD can eliminate many reviews
    and information requirements that are no longer necessary, and
    streamline processes so that decision makers only review the most
    essential information. While we always ensure our Air Force programs
    receive appropriate oversight from external stakeholders, fewer
    documentation requirements would allow our Program Managers (PMs) to
    devote more time to managing programs, rather than completing
    duplicative and overly burdensome paperwork. With more time devoted to
    actual program management, costs and schedule could improve without
    sacrificing technical performance.
        The Air Force is committed to the Integrated Life Cycle Management
    (ILCM) of its weapon systems. To that end, we must address product
    support equities during every phase of the life cycle for all our
    programs. In order to ensure product support equities are in the
    forefront of our acquisition process, we have established a new Deputy
    Assistant Secretary (DAS) for Logistics and Product Support, SAF/AQD,
    working directly for SAF/AQ. This office is headed by an SES, two-Star
    equivalent, life cycle logistician with extensive experience in the
    sustainment community.
        The establishment of SAF/AQD properly aligns Logistics and Product
    Support oversight across the Air Force ILCM enterprise. As you are
    aware, 10 USC 2337 mandates that all weapon system programs be
    supported by a Product Support Manager (PSM) reporting directly to the
    PM. The PSM's primary responsibility is to plan and develop the weapon
    system product support strategy. The Air Force has implemented PSMs in
    all of its Acquisition Category I and II program offices, and they are
    accomplishing excellent work. Our PSMs are integral members of the
    program office team and are directly advising the PM on logistics and
    product support issues.
        Prior to the establishment of SAF/AQD, SAF/AQ lacked a senior
    logistics and product support advocate. SAF/AQD fills that gap and
    ensures SAF/AQ staff has a Senior Executive Service level logistician
    advocating for logistics and product support equities, as well as
    subject matter experts providing policy and oversight to our PSMs in
    the field. Additionally, SAF/AQD has the responsibility for ensuring
    the Air Force complies with all statutory depot maintenance
    requirements. This will ensure that SAF/AQ will fully consider ILCM for
    each of our weapons systems, including decisions that affect the future
    viability of our organic depots.
        The Air Force's commitment to improve acquisition of our major
    programs is paying off. In 2013, the Air Force had no Nunn-McCurdy
    breaches. In 2014, the AF's sole Nunn-McCurdy breach was to the AWACS
    Block 40/45 program. This breach did not occur due to poor program
    performance, but to a reduction in the quantity of aircraft from 31 to
    24 that was driven by the fiscal constraints resulting from the Budget
    Control Act. In fact, total program costs for the AWACS Block 40/45
    program went down, but the reduction in quantity drove our unit costs
    above the Nunn-McCurdy threshold. Furthermore, the Air Force has had no
    Nunn-McCurdy breaches in 2015.
        We have a number of initiatives underway to lead us into the next
    era of acquisition excellence:
        One of my initiatives is to ``Own the Technical Baseline (OTB).''
    OTB is essential to our future and means the Government program team,
    independent of the prime contractor, has the wherewithal to make proper
    decisions to achieve successful acquisition outcomes. A few examples
    include a deep understanding of system and subsystem designs and
    architectures; the ability to conduct end-to-end performance models of
    the system combined with a continuous technical effort to update and
    validate system models using testing and engineering data; and the
    ability to understand and actively mitigate technology and system
    integration risks. In some ways, our emphasis on OTB seeks to overcome
    the residual undesirable effects of the acquisition workforce
    downsizing during the 1990's ``acquisition reform'' era. This was a
    time when there was significant outsourcing of Government capabilities
    and decision making to the prime contractor with a ``thin'' Government
    program office.
        A related initiative is to build the future Air Force by
    reinvigorating development planning (DP) and experimentation. Put
    simply, DP is a range of activities to understand the Air Force's
    future warfighting needs and reconcile those with available and
    potential capabilities, concepts, and emerging technologies. DP will
    result in a credible body of knowledge to inform strategic decisions
    and guide future capability developments. The umbrella of DP includes
    requirements analysis, cost versus capability trades, modeling and
    simulation, rapid prototyping (both virtual and hardware), and
    experimentation. Experimentation is absolutely critical because it
    provides a means for technologists and operational personnel to
    conceive and co-evolve new capability concepts along with the doctrine
    to effectively implement them. Experimentation will enable us to
    rapidly and efficiently explore uncertain futures whether emanating
    from the emergence of disruptive technology, new capabilities using
    existing systems and technologies in a new way, or the evolution of
    security threats from anywhere across the globe. Historically, the Air
    Force is credited with using DP and experimentation to drive innovation
    and plan its future; we are going back to our roots to re-establish
    this across the enterprise to produce truly innovative capabilities.
        Affordability, which is an Office of the Secretary of Defense (OSD)
    initiative, challenges Air Force Core Function Leads to look at each
    program and determine if the Air Force can afford it throughout its
    lifecycle. Affordability is different in that we look at our entire
    portfolio across at least 30 years and evaluate if we will allocate
    resources far longer than the typical five year outlook. If a program
    is determined to be unaffordable, we restructure, we re-scope, or we
    cancel it. We are still in the early stages of this initiative, but we
    believe it is a strong approach in controlling costs and suppressing
    our appetites for what we cannot afford.
        We are also encouraging programs to make often difficult trades in
    cost and capability. Where can a program reduce or eliminate a
    requirement without impacting the warfighter's capability, in order to
    save costs? These questions are never easy, but they force us as a team
    to determine where we are willing to decrease some functionality to
    save costs without sacrificing capability, and enable the Air Force to
    be strategically agile and deliver capabilities on time.
        The Air Force also remains committed to Should Cost, which was
    first introduced in BBP 1.0. Should Cost is a management tool designed
    to proactively target cost reduction and drive productivity
    improvements into programs. I am pleased to announce that the Air
    Force's FY14 Realized Savings were $1.4 billion. While that is a
    tremendous start, I continue to challenge all Program Executive Offices
    (PEOs) and PMs to seek out additional Should Cost opportunities,
    reaping as much as possible from our current portfolio.
        While we have found good success in containing cost in recent
    years, we have been challenged in our efforts to improve schedule
    performance. This is a priority for Air Force Acquisition. Our root
    cause analysis of the growing development cycle times we are
    experiencing points to the following primary contributors:
    Underestimation of technology risk, underestimation of software
    development and integration complexity, testing challenges and delays,
    and contracting delays. We are applying lessons learned to our new
    programs to avoid repeating the same miscalculations. To correct for
    this trend we are pursuing two strategies: Continued emphasis on sound
    program execution practices and implementation of Strategic Agility and
    Adaptability principles.
        Emphasis on sound program execution is not a concept exclusive to
    good day-to-day program management or effective execution reviews. To
    be sure, these are important; however, it also requires that we
    initiate programs with sound acquisition strategies, fixed, well-
    defined and affordable requirements, properly resourced program
    baselines, and deliberate measures to mature critical technologies and
    to reduce technology and program risks.
        Strategic Agility and Adaptability principles are foundational to
    the Air Force Strategy released last summer. The emphasis is on
    fielding systems more rapidly and building resilient systems that are
    inherently resistant to predictive failure. Hallmarks of agility/
    adaptability are: Modular systems, the use of block upgrade approaches
    to system fielding, and the use of open system architecture designs.
    These techniques help to shorten development cycle times, allowing for
    increased performance beyond legacy systems with the rapidly fielded
    ``A-model'' design of the system. Such systems are designed for later
    modular upgrades/enhancements (block upgrades) to the initial baseline
    design. The Air Force has identified Advanced Pilot Trainer (T-X) and
    Joint Surveillance Target Attack Radar System Recapitalization as
    strategic agility pilots that will utilize these approaches, much as
    Long Range Strike Bomber is already doing.
        The Air Force has been on an upward trend in competition the last
    two years, with an increase from 36.8 percent in fiscal year 2012 to
    43.5 percent in fiscal year 2014. Early fiscal year 2015 results
    indicate a probable leveling of the rate of improvement. Air Force
    major impediments to improvement in competition include the lack of re-
    procurement data for our aging weapons systems and the extent of
    country directed foreign military sales (FMS) procurements. The Air
    Force continues to explore opportunities to enhance competition by
    exploring cost effective acquisition of technical data, potential
    breakouts of component parts, or encouraging more subcontract
    competition. I expect Program Executive Offices to seek competition at
    every opportunity and have recently instituted quarterly reports on
    competition status of upcoming program contracting awards. This
    initiative resulted in reporting and tracking of 120 weapon system
    requirements totaling $60 billion, with approximately 85 percent of
    this value planned for competitive award over the next 3 years. Since
    the initiative began, we project approximately $2.17 billion has
    shifted to the competitive environment, with more requirements moving
    closer to transition in the fiscal year 2016 timeframe. For example,
    our new Evolved Expendable Launch Vehicle (EELV) space launch strategy
    allows for competition between United Launch Alliance and new entrants
    to the EELV program as soon as the commercial launch companies can be
    certified for national security launches. This strategy should help to
    control costs and ensure multiple sources for critical launch
    capabilities.
        In 2014, Air Force leaders initiated the Bending the Cost Curve
    (BTCC) Initiative to address the escalation in weapon system costs and
    development times. To accomplish this BTCC amplifies the Better Buying
    Power principles by encouraging innovation through active engagements
    with Industry and the acquisition workforce to identify, evaluate, and
    implement transformational reforms. Unlike Better Buying Power, which
    is a broader set of practices and techniques for the workforce to
    employ, ``Bending the Cost Curve'' is a targeted initiative to
    encourage innovation and active industry partnerships to improve the
    way we procure our systems and to drive down cost. What began as a
    series of discussions with industry has evolved into an ever growing
    set of targeted actions aimed at addressing the most critical
    challenges within the acquisition process.
        There are three things that differentiate BTCC from other
    acquisition reform efforts pursued in the past: a robust and proactive
    collaboration with industry, a focus on prompt, tangible actions, and
    an emphasis on measurable results. I believe that by being able to
    achieve our goals, we needed an improved dialogue with industry, so we
    can better understand how processes, procedures, and some of the
    choices we make can inadvertently contribute to rising costs, the
    stifling of innovation, and slow processes.
        Ensuring a clear and unambiguous chain of authority has been a
    focus of the Air Force for some time. We ensure streamlined Air Force
    management structures characterized by short, clearly defined lines of
    responsibility, authority, and accountability. Acquisition execution
    responsibility and authority flows from Mr. Frank Kendall, the Defense
    Acquisition Executive, to me, as the Service Acquisition Executive
    (SAE), to the PEO straight to the accountable PM. Close program
    schedule monitoring in the acquisition strategy allows us to ensure no
    one outside the acquisition execution chain exercises decision-making
    authority on programmatic matters. Our PMs know they are accountable
    for credible cost, schedule, and performance reporting and analysis to
    the MDA, and have responsibility and authority to accomplish objectives
    for the total life cycle of the program.
        PMs assigned to Major Defense Acquisition Programs (MDAP) sign
    tenure agreements for four years or the closest milestone. This tenure
    may be tailored based on the PEO's recommendation in order to
    accommodate the particular needs of the program, such as significant
    milestones, events, or efforts. The PM is held accountable since his or
    her tenure does not end until those unique requirements or efforts are
    accomplished, which also affects their performance reports used for
    promotion and future assignments. In the unfortunate event of a Unit
    Cost Breach, there is an assessment of the current management team to
    ensure they are qualified to lead the program going forward. IAW 10
    U.S.C. 2433 and 2433a, for Major Defense Acquisition Programs, the
    Secretary submits to Congress recertification that the management
    structure for the program is adequate to manage and control program
    acquisition unit cost or procurement unit cost. The same management
    review takes place prior to recertification of Major Automated
    Information Systems experiencing critical changes IAW 10 U.S.C. 2445c.
        BBP 3.0 reinforces current Air Force efforts. To ensure the
    Enterprise is not getting in the way of PM accountability, we have
    performed a review of all acquisition documents and the organizations
    outside the acquisition execution chain who review them for
    coordination and approval. We are following the accountability and
    responsibility of the BBP 3.0-specified action to re-validate the need
    for organizations to coordinate or approve the documents. This
    revalidation, which I will personally approve upon completion, can
    potentially streamline the number of individuals and organizations in
    the approval process; thereby, reducing unnecessary schedule delays. In
    addition, we are automating the document review process using the
    Electronic Coordination Tool (ECT), which allows us to control review
    times. We currently use ECT to route a program's acquisition strategy
    for review and will systematically load other acquisition documents
    into ECT.
        Contractor accountability is dependent on contract type and clauses
    spelled out in each contract. Contractors are held monetarily
    accountable by absorbing overruns on fixed contracts. Contractors can
    also lose out on incentives built into contracts for failure to
    deliver. The PMs provide a Contractor Performance Assessment Report
    (CPAR), which is essentially the contractor's report card. The CPAR
    assesses a contractor's performance and provides a record, both
    positive and negative, on a given contract for a specific period of
    time. Each CPAR is based on objective facts and is supported by program
    and contract management data. CPAR results are a component for
    evaluating contractors during source selection for others contracts. We
    are taking the CPAR further by instituting the Superior Supplier
    Incentive Program (SSIP) mentioned in BBP 3.0 at the Air Force level,
    which is a public accountability rating for contractors. We provided
    SSIP ratings for industry partners earlier this year and will update
    the ratings in the June timeframe.
        The Air Force is committed to streamlining the acquisition process
    to remove non-value added bureaucratic and administration requirements.
    We continuously review the requirements for all of our SAE Oversight
    Reviews to ensure we are not putting too much of a burden on the PEO
    and PM and taking away from their responsibility to manage the
    execution of the program. From these reviews we have eliminated any
    mandatory requirement to pre-brief the headquarters staff and SAE. We
    have also looked at the possibility of combining reviews when it makes
    sense and is appropriate. We have eliminated any requirement for PMs to
    travel to the Pentagon for briefings, and conduct most of our meetings
    via VTC. That eliminates travel time and expenses, and reduces the time
    required by the PM to devote to the review. We have also taken
    advantage of the statutory and regulatory requirements to conduct
    annual Configuration Steering Boards (CSBs) by encouraging programs, in
    addition to covering the required areas for CSBs, to bring forward any
    other program issues or concerns that would benefit from a discussion
    by the SAE and CSB members. Another area we have addressed is to ensure
    that all members of our Oversight Reviews are prepared to resolve
    issues at meetings rather than merely discussing the issues without
    resolution. We have accomplished this by establishing timelines that
    allow the briefings to be reviewed at least a week prior to the meeting
    and ensuring that feedback from the Headquarters staff is provided back
    to the SAE, PEO and PM for their awareness in preparation for the
    meeting.
        With regard to program documentation, we annually review the
    documentation requirements for programs nearing Milestone reviews. We
    have developed a document coordination matrix that identifies the
    organizations that need to be included in the coordination and approval
    process for every information/document requirement. The annual review
    ensures that the list of organizations needed to coordinate and approve
    does not grow beyond those organizations that have a statutory or
    regulatory responsibility for the information contained in any
    document. This practice has helped expedite our coordination process
    where we have a current goal of achieving Headquarters Air Force
    coordination/approval within 30 days of receipt of the document.
        Where it is appropriate, I am a strong advocate for delegating
    acquisition authority to the lowest possible level. Not only does it
    create efficiencies, but it also empowers our leadership. Existing
    policies and processes for planning and executing acquisition programs
    provide multiple opportunities for the Service Chiefs to be involved in
    managing acquisition programs and to vector programs towards meeting
    cost, schedule, and performance targets. My regular interactions with
    General Welsh, including Quarterly Acquisition Program Reviews and Key
    Acquisition Program updates, provide him insight into how acquisition
    strategies and solutions are meeting the requirements of the
    operational forces and improve his ability to attest to requirements
    affordability and reduce program requirements. Further, we are working
    with OSD (AT&L) to delegate Milestone Decision Authority to me on
    Acquisition Category ID programs where appropriate, which will increase
    our efficiency and streamlining requirements.
        Executing these priorities and in indeed, all of our efforts to
    achieve and maintain acquisition excellence depend on the abilities of
    our acquisition professionals to solve problems, manage complexity and
    exercise sound judgment in concert with the requirements and budget
    communities. So we've adopted the same continuous improvement
    philosophy to our acquisition workforce.
        This is not a new focus for us. The Air Force has been a leader in
    managing its professional acquisition workforce, with an Acquisition
    Professional Development Program that predates the Defense Acquisition
    Workforce Improvement Act of 1990 (DAWIA).
        The Air Force deliberately develops military and civilian
    acquisition professionals according to well defined career path models
    which serve as a guide for professional experience opportunities,
    education, and training. These career models provide ample opportunity
    and experience for acquisition professionals at all ranks, and provide
    a defined path to greater rank and responsibility within the
    acquisition workforce.
        In 2002, we made a major enhancement to our talent management
    processes with the implementation of formal processes for ``Force
    Development.'' The development of acquisition workforce members is
    enhanced by the use of Career Field Development Teams consisting of
    senior leaders from within each Career Field. Using published career
    path models as a guide, the Development Teams (DTs) provide tailored
    developmental guidance to individuals based on their past record of
    training, education and experiences. This action gives them a specific
    path or vector for greater progression and opportunity in the Air
    Force. The DTs also nominate officers and civilians for developmental
    education, including Professional Military Education, and identify
    military and civilian candidates for command and Materiel Leader
    positions within the acquisition workforce.
        The Air Force also has established career field management teams at
    the Headquarters Air Staff level that provide strategic direction and
    daily oversight of the career fields, as well as managing the
    Developmental Team process. Under this Air Force construct, each
    acquisition career field is under the functional management and
    oversight of a senior functional leader at the Assistant Secretary of
    the Air Force or Headquarters Air Force level. Talent management is a
    major responsibility of our general officer/Senior Executive Service
    level senior functional leaders as well as my Military Deputy and
    Principal Deputy.
        The creation by Congress of the Defense Acquisition Workforce
    Development Fund (DAWDF) in the fiscal year 2008 NDAA represents a
    landmark improvement in our ability to develop and continually improve
    the capabilities and professionalism of our acquisition workforce.
    DAWDF enabled us to accelerate rebuilding the acquisition workforce
    after drawdowns in the `90s, and it has finally put significant, stable
    funding behind the training and development programs established under
    DAWIA. Thanks to DAWDF, we've been able to address training gaps more
    quickly, and we are enjoying increased training throughput capacity
    that has eliminated bottlenecks in the Defense Acquisition University
    courses that our members depend on for professional certification and
    currency. As a result, we've been able to increase our DAWIA
    certification rates significantly, from 49 percent at the end of fiscal
    year 2010 to 73 percent in December 2014.
        We've also used DAWDF to address professional currency needs and
    gaps in acquisition technical training, building application skill
    courses at the Air Force Institute of Technology that complement and
    build on the foundational certification training provided by DAU.
    Examples include courses in Cost Estimating, Test and Evaluation,
    Developmental Planning, Human Systems Integration, Technical and
    Manufacturing Readiness, as well as project management and business
    acumen. DAWDF has also enabled us to build a robust Tuition Assistance
    program focused on acquisition professionals, enabling them to further
    their education in acquisition-related fields--a tool for increasing
    professionalism as well as retention.
        An original focus of DAWDF was to grow and rebuild the acquisition
    workforce. The Air Force aggressively used DAWDF to accelerate growth
    hiring under our Acquisition Improvement Program and achieved the
    Secretary of Defenses growth target in 2012. Through the combination of
    growth hiring, insourcing and position re-coding, our workforce has
    grown from 24,417 in fiscal year 2008 to 34,404 at the end of fiscal
    year 2014. We continue to protect and sustain that growth (an increase
    of over 1500 positions) over the Future Years Defense Program. An
    important and related initiative that promises to improve acquisition
    manpower management long term is our partnership with the Air Force
    Deputy Chief of Staff for Manpower, Personnel & Services to develop
    manpower models that improve our ability to predict the current and
    future manpower requirements for acquisition program offices.
        Our retention is generally very strong, but we have challenges in
    certain hard-to-fill locations and shortage career fields. We've
    secured DAWDF funds to offer retention incentives (e.g., Student Loan
    Repayment and Retention Allowances) to our civilian acquisition
    professionals when/where needed (e.g., mid-grade contracting officers
    and engineers). We continue to use DAWDF to improve recruiting
    capabilities at our acquisition centers and to ensure adequate numbers
    of recent college graduates are hired to renew the force. We've been
    able to extend our outreach and increase the availability of recruiting
    incentives (like Student Loan Repayment) to attract and retain talent.
    Overall, our reliance on DAWDF is increasing as O&M budgets shrink, and
    I strongly support initiatives to make DAWDF permanent.
        While we are devoting considerable attention to developing business
    acumen, critical thinking and technical skills across the acquisition
    workforce, senior leader succession planning is a special focus. With
    the assistance of the Air Force Materiel Command and Air Force Space
    Command as well as my Military Deputy and Principal Deputy, I am
    directly involved in the management of all Key Leadership Positions and
    the talent management activities related to the assignment of qualified
    PMs and Deputy Program Managers to our ACAT I and II programs. Our
    recommendations are approved by the Chief of Staff and Secretary of the
    Air Force. Our Materiel Leader and Senior Materiel Leader qualification
    process incorporates additional acquisition-specific standards and is
    fully integrated with the Chief of Staff's Command Screening Board used
    to screen candidates for operational group and wing command billets.
        The Air Force has implemented several steps in recent years to
    improve PM tenure. Most recently, we updated our Materiel Leader/Senior
    Materiel Leader assignment polices to mandate MDAP PM/DPM tenures of 4
    years or the milestone closest to 4 years. In addition, we've charged
    our PEOs with the responsibility to provide the Chief of Staff and the
    Service Acquisition Executive a recommended tenure, based on the
    particular needs of the program, at the time DPM candidates are matched
    to a program.
        Following Mr. Kendall's OSD leadership under BBP, we've identified
    key leadership positions and ensured we have rigorous processes for
    qualifying and selecting candidates to fill these roles. I believe we
    have the processes, tools and resources in place to ensure members of
    the acquisition workforce are fully qualified to meet their
    responsibilities. And I can tell you that senior acquisition leaders in
    the Air Force consider their talent management responsibilities one of
    their most important duties.
        As part of our efforts to improve the hiring process and reward top
    performers for their performance, with OSD (AT&L) support, we're
    working to expand the Acquisition Personnel Demonstration Project
    (``Acq Demo'') which brings pay and performance management
    flexibilities, to the major acquisition centers and contracting
    organizations. This personnel system has been shown to facilitate more
    flexible hiring and pay setting, incentivize performance through
    contribution-based compensation, and promote retention of a high-
    performance workforce. SAF/SB (Small Business) and the 11th Contracting
    Squadron at Joint Base Andrews transitioned in 2014. Four additional
    organizations are scheduled to transition during fiscal year 2015, and
    more in fiscal year 2016. I strongly support making ``Acq Demo'' and
    Expedited Hiring Authority permanent--these authorities have been very
    valuable improvements to our hiring process for acquisition
    professionals.
        I would also like to note that the GAO ``sustained'' protest rate
    for the Air Force has been consistently low. In FY14, our sustained
    rate was less than half of 1 percent (.044). Although we cannot totally
    preclude bid protests, we have implemented major initiatives which have
    been successful in reducing them. We enhanced our training for source
    selections, and ensure the entire team receives extensive training
    prior to evaluation of proposals. We emphasize the selection of proper
    evaluation criteria and ensure proper documentation throughout the
    source selection process, to ensure the decision is well-supported and
    can withstand scrutiny. We increased our oversight at various stages of
    the acquisition, and selectively offer Extended Debriefings to
    unsuccessful offerors for the more complex, higher-value contracts.
    These debriefings provide greater transparency to the underlying
    factors and conclusions than the traditional debriefings. I believe
    these efforts to date have been instrumental in reducing our sustained
    protest rate.
                                 ii. conclusion
        In conclusion, I hope I have been able to convey to you some of the
    tremendous improvements we have been able to make to the acquisition
    system, although, we still have work to do to reach our fullest
    potential. I will continue to challenge the acquisition community to
    achieve the five priorities I discussed earlier: Get programs right,
    increase transparency to external stakeholders, own the technical
    baseline, continue our efforts on BBP, and build our systems towards a
    future Air Force. I continue to appreciate the support Congress has
    provided the acquisition community and look forward to working with
    this Subcommittee to ensure that we reach our highest goals.

        Senator Kaine. Excellent.
        We are going to stand in a quick recess so Senator Heinrich
    and I can--I have not voted in number three. Senator Heinrich,
    I am not sure you have either. We will stand in recess, and we
    will likely start back up with questions. I suspect the
    chairwoman will likely arrive first because I think she has
    voted. Senator Ernst, you just voted on the second or third?
        Senator Ernst. Actually it was the third.
        Senator Ayotte. If you would like to begin with questions.
    We just finished opening, and Senator Heinrich and I have to go
    vote. So we will do that and return. Great. Thank you all.
        Senator Ernst. Thank you everyone for being here. I
    appreciate it. A lot of activity on the floor today.
        First, I will go ahead and get started. I will go back and
    review some of the information that you have given already
    today.
        But, first, to Secretary Shyu, if you would please, I have
    been looking into a number of different areas regarding program
    and project management. This is an issue that we had actually
    discussed in visiting with the Government Accountability Office
    (GAO) last week in the Homeland Security and Governmental
    Affairs Committee. For years, the GAO has categorized the
    Department of Defense's program management as high risk. It
    shows up year after year on the infamous list with still very
    large problems and processes that need to be fixed and
    improved. What specific steps are you taking to improve program
    management at DOD, and is there any way that we as legislators
    can assist in that process?
        Ms. Shyu. What we do to ensure the skills of our Program
    Managers are adequate, we actually have different levels of
    courses that Program Managers have to take.
        The other thing that we do--there is actual structure. So
    you do not jump in as early level being the most senior Program
    Manager. There is different lower level program management than
    the senior level Program Managers. So within the acquisition
    process, we actually do train our Program Managers.
        They are mostly military with some civilians also as
    Program Managers, but primarily the ways that we train them are
    from Defense Acquisition University (DAU) courses that they
    take. Also, internally we bring them up for assignments into
    the Pentagon so they can sit and listen and see, observe how
    programs are being reviewed. So there are many different ways
    we are actually training our Program Managers.
        Senator Ernst. I appreciate that.
        Then any comments from either of you gentlemen?
        Mr. Stackley. I would simply add I was a career Navy
    officer. My last job in the Navy was as a Program Manager.
    Course training is interesting, but the greatest experience you
    get is on the factory floor, rolling up your sleeves, being
    hands on the project. That is irreplaceable when it comes time
    to actually be in charge of a major weapon system. So we are
    ensuring that in our pipeline for program management the first
    tour coming out of grad school will be an industrial tour so
    they can get that hands-on experience and continually put it to
    work as they climb the ladder and become more competitive for
    the program management.
        I sit on the panels. I review the panels, and I approve the
    Program Managers. I will tell you it is very competitive. We
    have stellar Program Manager candidates, civilian and military.
    The challenge we have got is depth and breadth to fill that
    base that needs to be there for the overall acquisition
    workforce.
        Senator Ernst. Very good.
        Secretary?
        Dr. LaPlante. Thank you, Senator.
        I would add to that that the best indicator of whether a
    Program Manager is going to be successful at a program is
    whether they have been successful before at a program. So what
    we have to do is do what Secretary Stackley said, which is give
    them experience early so that they can, in a safe environment,
    learn the ropes so that when they get up to the bigger
    environment, they have already been a Program Manager.
        When I came into this job 2 years ago, I came in from
    academia and Federally Funded Research and Development Centers
    (FFRDC) community. The stereotype I had heard ringing in my
    ears, particularly in the Air Force, was that we would take
    pilots and switch them from being a pilot one day and they
    could go in and be a Program Manager. That was kind of a
    stereotype, but I was surprised at what I found. The average
    acquisition professional running a program in the Air Force has
    17 years of acquisition experience. They start as a second
    lieutenant and they go up to 17 years. They have actually
    experienced more than 17 because they have done a tour
    somewhere else to give them experience.
        The second thing is they are competitively selected, the
    same thing as Secretary Stackley said in the Navy. We always
    can do better, but I was shocked at how different I saw the
    Program Managers and the Program Executive Officers (PEOs),
    which is one level above it, which is typically 25 years of
    acquisition experience.
        I also do not understand when people say, well, there is
    not an acquisition career field for the military. My military
    deputy, Lieutenant General Ellen Pawlikowski, is an acquisition
    professional. She is now going to be a four-star Air Force
    Material Command (AFMC) commander next month, the top of her
    game. There is a career path. So I think that maybe they are
    not explaining the situation as well as we could. There are
    challenges there, but there is a lot of attention put into
    training our Program Managers.
        Thank you.
        Senator Ernst. Yes, and I appreciate that very much.
        You mentioned there are different ways to gain experience,
    whether it is on a factory floor, actual hands-on experience,
    whether it is civilian courses. I was just going to jump in and
    mention an identifier or Military Occupational Specialty (MOS).
    I do recognize that it takes a lot of time developing those
    skills.
        But at the same time, it seems that the DOD has had some
    significant trouble in keeping Program Managers. Once they gain
    that skill, they seem to move on into other areas. What can we
    do to improve that, keep those people that have gained those
    skills in that area in program management?
        Mr. Stackley. I think we all have some comments to that
    one.
        Let me first describe that. Yes, you are correct. In terms
    of a military career path, when you reach Program Manager for a
    major weapon systems program, you are a senior O6. In order to
    continue on, you either need to be promoted or you might have
    some runway left in your career to move on to a graybeard type
    of position.
        What we are exploring is how do you, in fact, retain those
    senior military to stay past that Program Manager position.
    What would encourage them? In fact, it takes an appeal,
    frankly, to an individual's--it is a patriotic appeal. Now,
    that you are at the peak of your career, now that you are at
    the height of your experience, and now that you have completed
    your major command tour, we are going to ask you to go ahead
    and continue on to serve because we need your experience. We
    need to continue that experience in military in uniform in the
    Government. That is a challenge. So what we are trying to
    identify is are there opportunities that would make it less of
    a challenge, make it more attractive for an individual, post
    major command, to continue to serve.
        Senator Ernst. Are there any specific suggestions?
        Mr. Stackley. I can just give you one example. So I know
    the Naval Academy and I believe West Point has a similar
    program where they actually take on senior O6s and put them in
    a permanent military position. In that case, it is as an
    instructor, but what they are able to do is continue to accrue
    benefits that come with military service, and in certain cases
    in the past, what you have had is O6s that actually gain
    benefits beyond their rank by continuing to serve. In certain
    cases, it is non-monetary. In other cases, it is monetary
    benefits. So we are trying to see what makes sense, work with
    the Service Chiefs and see if there is a program in the making
    there that makes for select individuals, not across the board,
    but select individuals that you want to retain for the long
    haul.
        Senator Ernst. Very good.
        Yes, ma'am.
        Ms. Shyu. I would like to expand upon that. I absolutely
    concur with Sean.
        I will give you a couple examples that actually happened.
    For example, it is actually the senior O6 that runs the more
    complex, what is called the Acquisition Category (ACAT) 1D
    programs. We have had very senior O6's retire, then come back
    in as GS-15, and also be a Program Manager. So that is a way we
    can entice them to come back even after they retire as a great
    Program Manager to hiring them back in as a civilian.
        The other thing is a lot of the outstanding Program
    Managers get promoted to program executive officers to run an
    entire PEO. So this is a way they can then mentor all the PMs
    underneath a PEO.
        Dr. LaPlante. I would just add to that. One thing that when
    I came into Government that even though intellectually I knew
    it, but what broke my heart was seeing the people like we were
    just talking about--let us say a very, very talented senior O6
    or in some cases a one- or a two-star who the country has
    invested 30-35 years in, has incredible knowledge--retire. It
    just breaks your heart.
        So programs like what Sean was mentioning about perhaps the
    academies--now, one question there is, okay, let us say you get
    on the academies. Can they still be a Program Manager? You
    know, that is a question.
        I have another case right now, which I do not want to give
    the specifics on because we are still working it. Clearly we
    have a star. We have an absolute star in one of the most
    important programs you could imagine. We are trying to keep
    this person as a highly qualified expert, the Highly Qualified
    Expert (HQE) program. I am hoping it will work. But what you
    find even with the HQE program is it is not nearly as easy to
    do as you might think, and then you still know that you are
    going to have to appeal to the patriotism of this individual
    and their family to take this job and stay as a civilian. We
    may pull it off; we may not.
        But we have got to do something about that because you
    would not do that outside. You take your best program managers
    and put them on your hardest programs. You do not sit there and
    say, wow, they are at the peak of their game, go find another
    job, thank you very much. So we need to figure out a way to do
    this.
        Thanks.
        Senator Ernst. I would agree. Really bottom line, we need
    to make sure that we are working with these programs to make
    sure that our taxpayers are, of course, getting the best bang
    for their buck as they can while making sure that our service
    men and women have exactly what they need through these
    programs.
        Do you find that a number of these qualified, wonderful
    individuals are being drawn away into private industry? Are the
    benefits and salaries that they might receive as a GS-15
    competitive with what they would see in the private industry?
    No. I think I knew the answer to that before asking.
        But we have invested a lot of time, energy, money in these
    individuals to make sure they are appropriately trained. It
    would be nice to use that expertise in these programs and the
    management. Secretary, any thoughts there?
        Ms. Shyu. You are absolutely right. I think the example we
    have had is we have some great colonels, senior colonels, who
    did not make it to the GO level. That does not mean they are
    not great because there is a pinnacle. Very few get selected to
    the GO, but they are outstanding program managers with lots of
    years experience. So we have had the opportunity to hire them
    back. So we have done a pretty good job of hiring back. Again,
    this is because they want to serve. They can make a lot more
    money in industry. I can tell you that from experience, being
    there.
        Senator Ernst. Yes.
        Ms. Shyu. It is because their heart is in the services.
    They want to continue to serve. So that is where we leverage
    their desire to continue to serve and bring them back as a
    civilian and keep them in the program management side.
        Senator Ernst. Fantastic.
        Mr. Stackley. I cannot add too much except to say that
    there is no single solution here. Secretary LaPlante described
    flag potentials. We have 18 acquisition flag officers in the
    Department of the Navy, and those are the best and brightest.
    We have a number of post-major command Program Managers that
    are continuing to serve. They have been enticed and they are
    continuing to serve. We found the right job for the right
    individuals because they love to serve. As Secretary Shyu
    described, we have others that in fact retired and have come
    back as a civilian and are civilian program managers. Again, it
    is a great win-win for the Department and the individuals.
        Then there is the larger number that after they complete
    their major command, they move on. They move on. Then what we
    look to do is, frankly, we look to have them to continue to
    serve except in a different capacity out of uniform and see if
    those skills can continue to contribute to what we are doing in
    acquisition, which is trying to develop and field the best
    weapons we can for our sailors and marines.
        No single solution. It is a case-by-case basis, and we work
    with the individuals. One thing about the acquisition workforce
    is you get to know all of your Program Managers personally and
    you work with them to find the right best fit for that
    individual and what the Department needs.
        Senator Ernst. Great. Thank you.
        Dr. LaPlante. I have just a couple, two quick things. The
    Highly Qualified Expert program I think is potentially one we
    could use more.
        Second is the program called IPA--it is a personnel
    assignment, Interagency Personnel Assignment. My experience is
    we are using it much less than we used to, and I have views
    why. So there are flexibilities like that that we can
    investigate to bring highly qualified people in.
        Remember during World War II there was the ``dollar a year
    men'' is what they were called, very wealthy people. I heard a
    recent term for them called ``post-economic people'' that come
    into the Government. Of course, we all want to be post-
    economic. But we have to do something to get the highly
    motivated, talented people in this country to get into the
    Government.
        Thank you.
        Senator Ernst. Thank you. Again, I just want to reiterate
    thank you very much for being here today. We do have some
    challenges out there with acquisition. We want to make sure
    that we are retaining good qualified people in that program
    management. Whatever we can do to benefit our taxpayers is
    greatly appreciated, as well as making sure that we are
    protecting our men and women in uniform. So I thank you again.
        I turn the floor back over to the chair.
        Senator Ayotte [presiding]. Well, thank you, Senator Ernst,
    for holding down the fort, and thank you, Senator Kaine, for
    doing the same. As you know, we are voting on the floor.
        I want to thank all of our witnesses for being here.
        I am just going to submit for the record my opening
    statement and just go right to questions for all of you.
        [The opening statement of Senator Ayotte follows:]

                   Opening Statement of Senator Kelly Ayotte
        Good afternoon everyone. This hearing of the Subcommittee on
    Readiness and Management Support will come to order.
        The subcommittee meets today to receive testimony on the state of
    the defense acquisition system and to discuss necessary reforms. I
    would like to thank the Ranking Member, Senator Kaine, for his support
    on this very important issue.
        We are joined this afternoon by the three Service Acquisition
    Executives: The Honorable Heidi Shyu, the Assistant Secretary of the
    Army for Acquisition, Logistics and Technology; the Honorable Sean
    Stackley, Assistant Secretary of the Navy for Research, Development and
    Acquisition; and the Honorable William A. LaPlante, Assistant Secretary
    of the Air Force for Acquisition.
        I would like to thank each of you for your efforts to acquire the
    best equipment, supplies, and services for the men and women in uniform
    from your respective service.
        The purpose of this hearing is to discuss reform of the defense
    acquisition system. This topic could not be more important.
        When our troops deploy to war, we have a responsibility to provide
    them the very best equipment. That is what our troops deserve and their
    loved ones expect.
        When our acquisition system fails to deliver the best possible
    equipment in a timely manner, tragically, the costs are often measured
    in the lives of our troops.
        Providing the best weapons and equipment to our service members can
    be the difference between our troops returning home safely or not at
    all; and the difference between our forces achieving victory or
    suffering defeat.
        Reform of the acquisition system is necessary to maintain America's
    technological and military dominance. The current, inadequate
    acquisition system is leading to the erosion of America's defense
    technological advantage, which the United States could lose altogether
    if the Department continues with business as usual.
        We know that the growing national security threats to our country
    require that we end defense sequestration once and for all and base our
    defense spending on the threats we face and the military we need--not
    arbitrary budget caps.
        But if we are going to convince skeptics that we must spend more on
    defense to protect our country against growing threats, the Pentagon
    must simultaneously redouble its efforts to end wasteful acquisition
    programs and unacceptable cost overruns. Every dollar wasted on an
    acquisition program is a dollar we don't have to provide our troops the
    equipment they need.
        If the Department's calls for increased defense spending is going
    to have credibility with the American people and their representatives
    in Congress, the Department must strive to be better stewards of the
    tax dollars it is given.
        Much has been done. But by most accounts, despite countless
    studies, plans, and reports--and some progress--the Pentagon's
    acquisition system remains broken.
        We see too many cost overruns and too many schedule delays. We see
    too many instances in which taxpayers dollars are poured into programs
    that are never fielded. The taxpayers justifiably expect better. We can
    and must do better.
        To address these problems, the Committee has solicited input from
    industry associations, defense suppliers, and acquisition experts. I
    would like to request unanimous consent that those responses be a part
    of the hearing record.
        It is also appropriate that we hear from the services. The
    Subcommittee is interested in your assessment of the reform measures
    adopted over the last several decades and your views on the need for
    further improvements to the defense acquisition system.
        In particular, the subcommittee is interested in your
    recommendations on how your Service can: control costs; increase
    competition; innovate in a much different industrial environment than
    existed in the Cold War, access commercial technology; achieve
    accountability for results; streamline the process; and improve the
    acquisition workforce.
        I look forward to hearing our witnesses' assessment of these
    issues, and I would now like to call on our Ranking Member, Senator
    Kaine, for any opening remarks. Senator Kaine . . .

        I wanted to ask a question about lessons that we have
    learned from prior acquisition failures. Each of the services
    have had their share of programs plagued by major cost
    overruns, schedule slippages, and performance shortfalls. For
    example, we have seen important programs like the Air Force's
    evolved expendable launch vehicle managed badly resulting in a
    270 percent unit cost growth.
        We have had the Expeditionary Combat Support System (ECSS).
    I am not picking on the Air Force, but that is another Air
    Force one. That increment one program took over 9 years and
    expended over $1 billion before it was canceled and shut down.
    We never had an acquisition program baseline on that one.
        Another example. The Marine Corps ground air task-oriented
    radar program has seen 175 percent growth in research and
    development costs and 151 percent unit cost growth. An expert
    panel chartered by the Navy last year found that the program
    cannot achieve its current reliability requirements within the
    program's planned cost and schedule and that the requirements
    do not reflect Marine Corps operational needs.
        We can go on and on. As you know, there are too many
    examples like that where our constituents say to us, listen, we
    want to defend the Nation. We want to support our military, but
    you all better address these issues.
        So rather than getting updates on each of those, would you
    each share with the subcommittee what you have learned from
    your Service's acquisition failures and tell us how those
    lessons are informing your efforts to improve how your service
    conducts acquisition going forward.
        Dr. LaPlante. I can start with at least one of the examples
    you said representing the Air Force. You asked me at my
    confirmation hearing--you may not remember this--about ECSS.
        Senator Ayotte. You have a better memory than me.
    Apparently I have been on this program----
        Dr. LaPlante. No. It is a good one to be on because it is a
    great----
        The Air Force has done this process that I think is really
    a useful thing. They started it 2 years ago. I cannot take
    credit for it. But it was, you know, when you have an accident,
    a crash, there is a safety investigation. Remember we had this
    last year with the F-35. We are doing the same thing when we
    have an acquisition crash. So the first one that was done was
    an independent review of the ECSS program, the one you
    mentioned. The second one was a small business program that had
    a problem.
        I will just tell you what the lessons learned from ECSS.
    The Senate Armed Services Committee has also studied ECSS.
        First of all, to make a long story short, I think it is one
    of the reasons why the position that Peter Levine has been
    nominated for was created, was to prevent things like ECSS.
        The lessons learned on that came down to about six root
    causes, and they are very fundamental: not understanding the
    data of the business system that you were talking about using;
    not doing the business processes, because the whole reason you
    do an IT system modernize is you are trying to modernize your
    business processes. You are supposed to change your culture.
    That was not done. The analogy that the reviewer of this report
    did for ECSS said imagine like it is like the Big Dig in
    Boston. If you have been to Boston, maybe you know this.
    Remember for many years it was if you went into the airport up
    there. Well, the easiest part of doing probably that project
    was going to a map and drawing a line and saying would it not
    be great to have a tunnel from here to here. That is the
    vision. That is the `to-be.' That was done in ECSS.
        Here is the part that was not done. What do we have today?
    What is the traffic using today? What do the cars look like?
    What is the volume? That is the data. How are the users using
    the system? Here is most important. What is the transition
    plan? How are we going to get workers to work in the next 5
    years while we build this thing? The today and the transition
    plan were not done. So these are fundamental errors.
        What we did in the Air Force after this report is we took
    those same lessons learned and went with our Deputy Chief
    Management Officer (DCMO), the new position, and went program-
    by-program and said do we have any of those same root causes.
    When we started to see them, we were addressing them.
        So it was a big learning experience, and I would recommend
    anybody who has not read that report--it has been provided to
    Congress. Very interesting reading.
        The second one--I will not go into any more detail--was a
    personal beacon that we had a failure. It was actually a small
    business and it came down to--I am going to over-summarize it--
    systems engineering. The Government program office did not do
    the systems engineering on that. It was something we call the
    technical baseline. We are trying to build back into our
    program offices the ability to be a smart buyer. So those are
    two examples I will bring up.
        Senator Ayotte. Thank you.
        Mr. Stackley. Yes, ma`am. I am going to go back to about a
    decade ago where there were a number of major programs in the
    Department of the Navy that had significant failures in terms
    of cost and schedule performance. It brought to light, as you
    did the forensics on each of these, that we failed in step one
    of the process which is understanding the requirements and what
    we refer to as getting the requirements right. So this is not
    challenging the operational requirement. This is when you set
    the operational requirement having acquisition right side by
    side and identifying that in order to meet this performance, it
    is going to require this level of technology. Here is the risk
    that goes with it. Here is the cost that goes with it. So when
    you lock down the requirement, you understand maturity,
    feasibility, cost, and risk, and then you hold that firm as you
    move forward in the program.
        So with that in mind, we basically went back and rewrote
    our acquisition governance process to a thing that we call the
    ``gate review process'' where today the requirements in the
    acquisition community are lockstep, side by side, around the
    table in each step of a program, starting with the definition
    of the requirement, moving from that definition of the
    requirement to transition to specifications to a request for
    proposal right down to contract award and execution of the
    contract so that there is no separation between requirements
    and acquisition throughout the process. You keep control over
    not just the requirements but also the cost and schedule to
    meet those requirements.
        So we have found that to be a very effective process. The
    partnership that exists today between myself, the Chief of
    Naval Operations (CNO), and the Commandant--I would say that we
    are inseparable when it comes to end to end from requirements
    to delivering the requirements in terms of the budget. This has
    been a learning experience going back to some major failures
    perhaps 10 years ago, and we are continuing to improve as we
    go.
        Ms. Shyu. So based upon my background--by the way, I have
    had 33 years in the defense industry before coming to the
    Government in the last 4 and a half years. I was a PM back in
    industry as well. So I have lots of experience actually
    designing, developing, producing products.
        So based upon my experience, when I have seen a failed
    program, I have seen unrealistic requirements. The requirements
    were set not by what Sean had talked about, namely it was not
    necessarily informed by technical risks, by cost and schedule
    realism. So if the requirements said that I want to have this
    capability and nobody challenges, that becomes the
    requirements. Then they are lobbed over to the acquisition
    community, go design, develop something that meets this goal.
    Every contractor will say, yes, I can do it. Right? I can do it
    until you are pregnant. That is what happens.
        So one of the things you have got to do up front is do the
    trade space. What are the requirements you desire? What type of
    technology can actually give you that performance, and what is
    the cost associated with that? What is the schedule it will
    take to develop it? You got to go through that entire trade
    space before you lock down on requirements and say, yes, I want
    to get going on this program. On the Army side, I do not see
    that being done very well.
        The second piece I want to talk about is realistic
    schedule. Just because somebody dictated you are going to
    produce this next year, engineering does not always follow what
    you dictate. So if you set an unrealistic schedule up front,
    you are just setting yourself up for failure. I have seen that
    on a program in which it squished the milestone because
    somebody somewhere said I want this by this date. So you work
    backwards into the art of possible. Well, if that was your end
    goal and worked backwards in a development program that has
    high risk, you are doomed to failure, and I have seen that
    happen.
        The third thing, really important, stable budget. If you
    hack away at the program budget on an annual basis, your
    baseline is constantly moving. You are standing on quicksand.
    How on earth do you build a foundation of a program if your
    every single year is changing.
        Three biggest things that impact stability of our program.
        Senator Ayotte. Thank you all. That is excellent.
    Appreciate it.
        I want to turn it back to Senator Kaine for any follow-up
    questions he has.
        Senator Kaine. Thank you all.
        I understand that Senator Ernst asked some questions about
    the talent workforce, you know, PM. I do agree. All of you said
    that that is absolutely key to this. I will not ask questions
    about that, but I think that is important.
        As we are looking at reform, the Better Buying Power
    initiative is already about reforms. We do not want to do
    reforms that are overlapping, just creating more documentation
    requirements. We would like to do reforms or be part of reforms
    that are streamlining requirements so that they find that sweet
    spot between enough oversight to avoid problems but not so much
    as to get in the way of agility and timing.
        What advice would you have for us as we are looking at
    drafting a National Defense Authorization Act (NDAA) on what we
    ought to be doing to try to find that sweet spot?
        Mr. Stackley. Sir, I am going to go back to my opening
    statement and the quote from Secretary Gates with regard to we
    do not need more studies and we do not need more legislation. I
    mean that in the most respectful manner. We have a tremendous
    amount of oversight, process, a minefield of rules and
    regulations that we are trying to navigate.
        With regard to a sweet spot, I think we have paved over the
    sweet spot. If it is possible, as you review this, to delay
    some of the rules and regulations, this framework that we
    operate in--Secretary LaPlante described the Big Dig. Let me
    give you a different view of the Big Dig. I am going to guess,
    Senator, that you have driven in and around Boston.
        Senator Ayotte. I sure have.
        Mr. Stackley. So asking what the sweet spot is is like
    asking how would you fix traffic in downtown Boston. What would
    you do to the roads? After hundreds of years of trying to
    improve the roads by adding more roads, they realized that it
    only gets ?worser? the more you try to make it better. So they
    decided that you cannot drive through Boston. You have got to
    get, in this case, under it. That is what gave us the Big Dig.
    So $10 billion and a decade later, it is much improved, but it
    was not by trying to straighten out the roads in Boston.
        So I would start by trying to figure out how do you roll
    back to Goldwater-Nichols. I mean, it was actually a pretty
    good starting place, and since then we have added 20-plus years
    of--30 years almost of additional rule and regulation in how to
    improve things. It has made it harder, but it has not
    necessarily made it better.
        Senator Kaine. Secretary LaPlante?
        Dr. LaPlante. Yes. I mentioned in my opening remarks that
    we did a study on adaptability and agility. What we did on the
    Defense Science Board is we looked at cases in the Department
    of successes and in industry successes and failures. The ones
    that were successes all had a few things in common, which was
    interesting, maybe by accident. They all were relatively small,
    small activities usually protected by leadership.
        The F-117, the stealth fighter. We interviewed Paul
    Kaminski, who was the colonel at the time who ran that program.
    Paul said it was a small functional team, about 7 to 8 people.
    They could make decisions. They were protected by leadership.
    They had a lot of things that Heidi Shyu talked about in her
    opening. They controlled the budget, the requirements. They
    were allowed to fail, and they were left alone. But they were
    held accountable.
        Whenever we went around and said what was this successful
    here, it all had the same characteristics, very highly skilled.
    What I see when I see those activities going on in the Defense
    Department, I see they are either there because the leader is
    protecting them. They are hiding and nobody knows they are
    doing this great stuff. Or they are highly classified.
        So something tells me we know to do this. If it has those
    characteristics, if we can streamline the way that Sean
    describes, we can be successful. I do not believe you can scale
    these things. I do not believe you can take something that is
    really highly agile, mobile delivering things and make it three
    times as big because then it will be slow. I think you can
    multiply those models. So we do know how to do it. There are
    success stories in the Department, but they all have those
    characteristics.
        Thank you.
        Senator Kaine. Secretary Shyu?
        Ms. Shyu. So number one, streamlined oversight. I can tell
    you coming from industry and coming to the Government was mind
    boggling to see the layers of oversight that you have. Also my
    Program Manager will have to--to get to a milestone decision,
    one of our major programs, the PM will drag through into the
    Pentagon 31 separate times to give briefings to various
    stakeholders. It does not happen in industry because you cannot
    afford that. So there are things that we are doing to ourselves
    within the Government that just does not make any sense. It
    slows you down. Increased bureaucracy does not enable you to be
    agile.
        The other second thing is there is mutual accountability in
    industry. Namely, when I was a PM and then moved on to become
    Director and Vice President, while I was managing multiple
    programs, on the monthly operations review you would report to
    the President. If I am short 12 engineers, this is why I am red
    on my program, I need your help, he does not just beat me up.
    He turns to the VP Engineering and says what are you doing
    about it. So there is mutual accountability here. That does not
    happen inside the Pentagon. We are just beating the crap out of
    the PM while everybody else has a steering wheel and a brake.
    So mutual accountability is very important.
        Nobody makes things better just because you filled out 79
    documents. So you can spend your time managing the program or
    you can spend your time filling out documents.
        Senator Kaine. Can I ask one more question, Madam Chair, or
    do you have a question that you want to ask?
        Senator Ayotte. I definitely do, but go ahead.
        Senator Kaine. How about each of you just brag? What is an
    acquisition program you are engaged in right now that you
    really think is doing great and that you want to brag about?
    Because, yes, we talked about problems, but you have got some
    that you think are going well. So that is just an opportunity
    for each of you. What is going great and why? Try to be quick.
        Mr. Stackley. I am going to tell you one you already know
    about. Virginia. Virginia is going great. Why? One, stability.
        Senator Ayotte. We like that.
        [Laughter.]
        Senator Kaine. Yes, that is right. That is one we can both
    agree on.
        Mr. Stackley. The program has stability. It has stability
    and it has got a quality team that is running it. When you put
    those two together, it has got the support of the Department of
    Defense. So everybody is pulling in the same direction on the
    Virginia program. Everybody is pulling in the same direction.
    That is not the case in all programs.
        Senator Kaine. Even with a little friendly competition to
    drive it ahead, as each side shows that their module is
    fantastic.
        Mr. Stackley. They pulled faster.
        So there is something that comes with stability and quality
    leadership and getting the alignment of the organization all
    pulling in the same direction that drives success.
        Senator Kaine. Secretary Shyu, Secretary LaPlante?
        Ms. Shyu. I will give you the Paladin Integrated
    Management, the PIM program. Why? We had an outstanding program
    manager who just drove this program through. This is what you
    need. You need tenacity to succeed in this job, and you need
    God to be on your side.
        On top of that, we had congressional support to help us
    protect the budget because otherwise, our programs are just
    vulnerable to be hacked away on the budget on an annual basis.
        Senator Kaine. Great. Thank you.
        Dr. LaPlante. I am very proud of our munitions portfolio in
    the Air Force. A lot of the preferred munitions that are being
    used right now in the fight, a lot of them are done by our guys
    in the Air Force. At the big picture level, they have carved
    out about half a billion dollars in ``should cost'' savings. A
    lot of them bought back more weapons, things that are being
    used in the fight today. I am very proud of them.
        A specific program I want to call out, though, is something
    called Small Diameter Bomb II. It has got a tri-mode seeker,
    all-weather weapon. Think of it as something that will go
    against highly moving targets in all weather with very low
    collateral damage. This program was initiated--very
    interesting. It was initiated in about 2009-2010 right when
    Weapons System Acquisition Reform Act (WSARA) legislation had
    come into play, right as the Better Buying Power initiative. So
    I was very interested in looking at this program. It is going
    to a milestone C in the next couple weeks. Milestone C is where
    you make the decision to go to full-rate production.
        Here is the thing. The program has come in under the cap.
    It was fixed-price development. Very unusual. It is coming in
    under that cap. The cost per weapon is coming in about $60,000
    cheaper than the objective requirement which is the stretch
    goal. What it is is what my colleagues said. The requirements
    were not changed. There was singular focus by the contractor.
        Here is the fascinating thing for us acquisition nerds. The
    Milestone C took about 6 months/8 months longer than we
    expected. How did they come in under the ceiling? Because
    everybody thinks time is money. Well, it turns out, you know,
    if you have worked in industry and outside, you know that
    actually you cannot take engineers and charge to a project that
    they do not have work to do. So this contractor, maybe because
    it was a fixed-price contract, maybe not--but I would like to
    find out--actually took the engineers off when they stopped
    flight testing to fix their problems. So even though the
    schedule slipped a little bit, we still came under the ceiling.
    Really remarkable. It is going to be a great weapon.
        Thank you.
        Senator Ayotte. I have some additional questions. So I am
    going to start this, but then we have a vote on the floor that
    we have to be back in 4 minutes. So if you do not mind, I might
    recess and then come back.
        But I am going to have the staff give you out--all of you
    have touched upon this, but maybe not all of the details are
    correct on this, but it is pretty close. You know, I heard from
    each of you that we do not need more layers. What we need to do
    is eliminate some of the layers. I mean, it is crazy. Look at
    this. I do not know how anyone could work through this process.
    Truthfully, in many ways, if you have that many layers, it
    actually does, as you have already touched upon, eliminate
    responsibility because you can pass it on to the next layer
    versus having people just take responsibility for the area of
    oversight rather than layering.
        So I think one of our goals in this acquisition reform is
    actually to streamline and to actually make this a more
    efficient yet accountable system for all of you and for us so
    that we know who to hold accountable. You know, we are making
    our contractors jump through so many hoops that I worry that we
    are going to stop not only the contractors that work in this
    space, but I am hoping that we can better attract some new
    folks that are more on the high-tech side that we need in terms
    of innovation of new products who are not normally used to
    operating in this type of space.
        So any thoughts you have on how we can streamline this,
    which I think will be good news for all of you, but also make
    it just a better system. I think that is our goal in this
    markup.
        Mr. Stackley. We have been working on streamlining this
    since this flowchart was started. I actually have a pocket
    version that I break out----
        [Laughter.]
        --to show people that this is the problem.
        Senator Ayotte. You really need reading glasses for that
    one.
        [Laughter.]
        Mr. Stackley. I had a conversation with the CNO about 6
    weeks or so ago, and we talked about the Service Chief's role
    in acquisition. He asked me can you lay out how a bill becomes
    a law. In other words, how does a requirement become a weapon.
        Senator Ayotte. It reminds me of Schoolhouse Rock.
        Mr. Stackley. When you take this and up in the upper left-
    hand corner is where the Service Chief signs off on a
    requirement. At that point in time, he believes he just made a
    decision, not recognizing that what he as the Service Chief
    decided was necessary to meet his statutory responsibilities to
    man, train, and equip the force then has to be agreed upon by
    literally hundreds of individuals who do not have
    accountability to man, train, and equip the force.
        So how to improve upon this? We are working with the
    Service Chiefs to be able to come back to you all to describe
    some things that we believe can be done. It might not delay
    this, but what it should not do is strip away the Service
    Chief's authority when he says I need this capability, I am
    putting this money against it to deliver to the warfighter to
    meet our responsibility.
        Senator Ayotte. So I will have to interrupt for a minute so
    I can go and vote. But let me just say this, that I think that
    working together on this, it is the Service Chief getting what
    the Service Chief needs for his or her Service, but also there
    will be more accountability for the Service Chief. But that is
    okay if it is not a morass that no reasonable person could
    actually make their way through in terms of the layers here.
        So I am going to run and vote, and we will take a quick
    break and come back and we will reconvene. Thanks.
        [Recess.]
        Senator Ayotte. I know that I had a chance to hear from
    Secretary Stackley on his take on this whole thing, but
    anything that any of the other Secretaries wanted to add, I
    would be happy to receive.
        Dr. LaPlante. I was mentioning during the break that I
    think it was the first time I saw as exhibit A where somebody
    did this was Jack Gansler who did a Defense Science Board (DSB)
    study on urgent operational needs in 2009. He showed this
    chart, and he said ``exhibit A.'' That is all I need to say. We
    cannot do rapid acquisition with it.
        The next year, on our adaptability study, we showed the
    same chart and said ``exhibit A.'' But then what we did--and I
    think others have done this--they have taken--they have gone to
    non-defense industry and they have said what is your version of
    this chart. It is, of course, much, much simpler than this. I
    would recommend as a way to go is look at the work where people
    have done that, where they have taken and they said how in the
    commercial world do they make this realization. People have
    done that and said why can we not make it more like that.
        Senator Ayotte. Well, they have used process like the Lean
    Process that can be used in companies to be able to look
    through each step and eliminate steps that are unnecessary.
        Ms. Shyu. So I will say we absolutely need to streamline
    the processes, but enable us to tailor it. That is what we do
    in industry when we are designing, developing programs. We have
    a standard engineering process that you have to go through, but
    we allow the Program Manager the flexibility to tailor it. If
    it does not apply to my program, I can axe it off. It does not
    apply. Just focus on the piece that is relevant to what you are
    doing. The tailoring does not exist. This is why we have dumb
    things we end up doing like you go to go through corrosion--if
    it does not matter if it is a software program.
        Senator Ayotte. Right. Thank you.
        I wanted to ask a question about foreign military sales
    (FMS). With regard to contracting for foreign military sales,
    it seems that the U.S. Government is, in essence, negotiating
    on behalf of foreign Governments against U.S. defense
    companies. That is done by imposing the same standards,
    auditing, and regulations, what we would do if the U.S.
    Government were using taxpayer dollars to buy a U.S. product.
    After working to negotiate a better deal on behalf of the
    foreign taxpayer, in reality then we add as much as 8 to 10
    percent markup for U.S. Government services and transaction
    costs. These cost dollars then go to subsidizing money, I
    guess, back into the DOD, not to maintaining the industrial
    base. Given that foreign sales are intensely competitive, is
    the foreign military sales contracting process really in the
    best interest of the United States and the long-term health of
    the defense industrial base?
        You know, one of the challenges I think we are facing is as
    we spend less on defense, we want to maintain our industrial
    base and, where appropriate, we want to allow them to engage in
    foreign military sales. Obviously, anything that infringes on
    our National security interests, that is really where the focus
    needs to be from our perspective on regulation and the
    Department of Defense. But things that do not do that we can
    sell to our partners, it seems to me it benefits us because it
    helps keep our companies robust.
        So can you help me understand this process? Because I
    learned more about it the other day, and I was somewhat
    surprised by the fact that we would be pushing back on our
    companies on prices on behalf of foreign Governments and
    wondered whether that was the best use of DOD time when the
    market itself would adjust any kind of exorbitant prices that
    the buyer was willing to pay.
        Mr. Stackley. Ma`am, I will start and ask my colleagues
    here to join in.
        First, when it comes to foreign military sales, it is a
    win-win. It is a win-win-win. It helps our industrial base. It
    helps our international partners, and that helps us from the
    standpoint of security and affordability of our programs. So it
    is in our best interest to foster increased foreign military
    sales, particularly now that you see our defense spending
    flattening out. So particularly our major defense contractors,
    they are in pursuit of increased foreign military sales, and we
    are supporting that to the extent that we can.
        When it comes to the mechanics of the foreign military sale
    itself, that foreign country looks to us to protect their best
    interest in the sale.
        Senator Ayotte. Why?
        Mr. Stackley. Because they do not sit down at the table to
    negotiate with industry.
        Senator Ayotte. It is the strangest thing I have ever heard
    because usually in a buyer-seller relationship, why would we
    negotiate on behalf of taxpayers in other countries? That is
    what I am trying to understand. I understand our interests in
    making sure that we are not engaging in foreign military sales
    that could undermine technology and interests that we want to
    remain protected, but I guess I do not understand why we are
    negotiating for them when we are dealing with scarce dollars
    and we could be better focusing our resources on oversight of
    our own taxpayer dollars.
        Mr. Stackley. In almost all cases, the thing that is the
    subject of the foreign military sale is something that we are
    producing for our own military.
        Senator Ayotte. Right.
        Mr. Stackley. So quite often, they are either buying off of
    our contract or an extension of our contract. So there is a
    single negotiation that typically is taking place associated
    with this product line, and then if it is Australia buying F-
    18s, for example, they are going to work off of our pricing for
    the F-18. We strive for a singular effort when it comes to
    negotiating.
        Senator Ayotte. So it never happens that they are just
    doing an add-on to our contract. So it never happens that they
    independently want something that we are not at the moment
    procuring?
        Mr. Stackley. There are going to be some exceptions where
    they might be ahead of us in terms of procurement, but those
    are--
        Senator Ayotte. You understand why conceptually I am having
    a difficulty with this in the sense that some of the feedback I
    have heard is that we often push our companies, but we are not
    pushing our companies on behalf of our own taxpayers. It is on
    behalf of our foreign partners, which I am all for our
    partnerships with our allies. It is just that usually would be
    the role of that Government doing this. I am just trying to
    understand why that is necessary.
        Mr. Stackley. There is a separate avenue called direct
    commercial sale where that other country could go direct to the
    vendor to procure the item. Then you start to get into security
    issues in terms of releaseability, but that is an alternative.
    What they look for is they look to stay as compatible with the
    U.S. version as possible for interoperability purposes, and if
    we are in production and we are procuring, they want to get as
    close to the same deal that we get with industry as possible.
        With regard to a surcharge----
        Senator Ayotte. What if they did not get the same deal? How
    does that hurt us? Like what if they are willing to pay more
    but we are not because we are negotiating on behalf of
    taxpayers. How does that undermine our interests?
        Mr. Stackley. Okay.
        Senator Ayotte. I am just being honest. I just want to
    know. I am trying to figure out how that undermines our
    interests.
        Mr. Stackley. The process starts with the foreign military
    sales customer identifying what their requirement is, and if
    the requirement matches something that we are currently
    procuring, then what we do is we put side by side what the
    requirement is versus what we procure and whether or not it is
    releaseable to them as is.
        Senator Ayotte. Which is important.
        Mr. Stackley. If it is not, there will be some deltas. If
    there is something that they want, they might want their own
    missile integrated into an aircraft, that type of thing, then
    those are further deltas. But we have a baseline in terms of
    the cost of the item.
        Senator Ayotte. So if they want their own missile
    incorporated into an aircraft or some other piece of technology
    and yet that is not what we want, we would actually still,
    though--we would be the ones trying to negotiate the best price
    for that delta as well. Correct?
        Mr. Stackley. If it is being done over here. We do a
    pricing check in terms of pricing as provided by industry.
        Senator Ayotte. It is hard for me to get my head around.
        Dr. LaPlante. I think you are asking good questions about
    exactly what the----
        Senator Ayotte. We are in a scarce resource environment,
    and so I want to understand where is the best use of our
    resources. You know, our number one job is to protect U.S.
    taxpayers. That is what I am trying to get at.
        Dr. LaPlante. I think one thing. When I see companies going
    the FMS route versus direct military sale--they can do direct
    military sale--what they are usually getting for that is they
    are getting the Government expertise, the Government-furnished
    equipment. For example, if the Government buys a radar that
    would be put on it, they are getting the Government's benefits.
    Right? What comes with air worthiness, sometimes when you are
    buying an airplane, you want to make sure that the U.S. Air
    Force, U.S. Navy have certified it for air worthiness. So they
    are getting these kind of--think of them as Government
    services. But what they also get with that is all the joy of
    contracting with the U.S. Government as well. The contracting
    officers, who are trained to do their job as contracting
    officers for a fair and reasonable price for using things--and
    so that is the dilemma that you are seeing here.
        If it was a direct military sale, then the Government is
    not involved. Once the Government gets involved, then we have
    to do all the things that the contracting officers are trained
    to do. I think that is what you are getting at.
        Senator Ayotte. Yes. I think it is worth considering
    whether every step needs to be followed through with the
    contractor. Like it would be a U.S. contractor versus--with
    taxpayer dollars a purchase here versus a purchase there.
        I also wanted to ask about--New Hampshire has, of course,
    many small- and medium-sized defense suppliers who do some
    incredible work. Obviously, especially on our small- and
    medium-suppliers, the sequestration effect is even greater
    because they cannot necessarily reallocate in a way because
    they are a small supplier. Many of them, unfortunately, I think
    are going out of business.
        So I wanted to get your perspective as we look at the
    impact on small suppliers. Have you had a situation with where
    we are in the fiscal climate toward having to go toward more
    sole suppliers or foreign suppliers for critical components?
        Ms. Shyu. I will talk about that one. We do look at the
    industrial base and not just on the first tier. We look at the
    impact on the second tier and potentially the third tier as
    well because the first tier guys will tell us our production
    rate has gone down to half of what it used to be and here is
    the impact that I am worried about to small businesses.
        So we have had multiple workarounds. For example, one
    program that we had had a supplier that builds transmissions
    that was really going bankrupt. So what happened, the prime
    actually floated money financially to help this company to keep
    going until they could get a buyer. So that is one example of
    what happened.
        In another situation we had, we worked with another company
    that built a very unique product for the Army. But we already
    have a 7-year supply of that product. So we got lots of
    inventory just sitting on the shelf. We do not need to buy
    more. But we told the small company, hey, you got to diversify.
    You cannot have one egg in this basket. Right? That is very
    risky. So over a period of 2 years, this particular supplier
    went from 90 percent dependent upon the Army down to 50 percent
    because that person diversified into the commercial space.
        So those are a couple of real-life examples that we have
    experienced the last couple years.
        I will say one third thing to give you one other example.
    So when we have had congressional plus-ups, what we have done,
    as an example, is look at the second tier, what is also
    potentially vulnerable, and taken some of the congressional
    plus-up money to fund the second tier to make sure that we have
    the base at a minimal, sustainable rate.
        Dr. LaPlante. I think there is a tactical like near-term
    aspect to this and then there is the strategic. The tactical
    near-term is a focused effort all the time in every program to
    see are you maximizing opportunities for small business.
        Senator, you mentioned New Hampshire. One thing you learn
    about small business--they say all politics is local. All small
    businesses--it is kind of a local thing. In other words, the
    small businesses that we have around Hanscom Air Force Base up
    in New England tend to be the type that work on command and
    control applications because that is what we do up there.
    Contrast that with Maxwell where we have a lot of information
    technology (IT) small businesses. What we are finding is doing
    a lot of regional roundtables with small business to customize
    and open up opportunities for them is the way to go as opposed
    to a wide sweep. Our small business numbers are up, but it
    takes a lot of work.
        The strategic comment I would make is I think this is why
    open and modular systems are really important. I really want to
    make sure people understand that. As we build our platforms
    with open and modular systems where the standards are open
    standards, then there is no reason that small business should
    not be a competitor for a sensor, an algorithm, as we refresh
    them every 1 to 2 years. That is the benefit of going to open
    systems as opposed to a prime where the system is closed, which
    is traditionally the way we do it. We need to get small
    business into the open system market is what I believe.
        Mr. Stackley. I would simply add that the comments that
    Secretary Shyu made regarding what happens with regard to cash
    flow and how we have to fill in the cash flow when we have
    delays for a continuing resolution or in the case of
    sequestration, things of that nature, working either directly
    through use of things like advanced procurement, which we get
    in our contracts, or with a large defense contractor.
        However, what I have found is small businesses are not on
    the radar screen for most of our Program Managers. So what we
    need to do is put it on the radar screen. So each program has a
    Deputy Program Manager, and so each Deputy Program Manager in
    the Department of the Navy has been assigned a responsibility
    to be the small business advocate for all things associated
    with his program. So to have a watch on the health of his
    second tier, lower tier small businesses that are directly
    affected when we have ebb and flow in terms of cash on a
    program and also when we change our production rates or if we
    are going to shut down production and go into a sustainment
    mode to understand not just your prime, not just your major
    subcontractors, but what is happening down at that small
    business level because quite often they are not just unique.
    Quite often they are the sole source. In fact, your question,
    have you seen vendors go out of business, the answer is yes, we
    have. We have had to go offshore as a result because the
    manufacturer in the United States was ``one of'' and we have
    had to go offshore to replace that company.
        Senator Ayotte. Excellent.
        Before I conclude the hearing, is there anything that, as
    we look at this markup and trying to improve our ability to
    perform with the dollars we have--and, you know, we talked
    about this, but anything that you feel like we did not ask you
    that you want to make sure that we are focusing on?
        Dr. LaPlante. I think one specific thing is the Defense
    Acquisition Workforce Development Fund (DAWDF) for the
    acquisition workforce has been very, very useful for us. All of
    us are suffering from when the acquisition workforce was
    decimated in the 1990s. With the DAWDF and other tools, we have
    gotten the workforce back up from levels to kind of almost
    where it needs to be. So that is really important for us to
    continue to do that. So I would just call that out.
        Thank you.
        Mr. Stackley. I am going to pound that point. You asked
    about failures, what have we learned from certain failures.
    This dates back to WSARA in the 2008-2009 timeframe. One of the
    more noted failures in the Department of the Navy was the
    Littoral Combat Ship (LCS) program and how it got out of the
    starting blocks. One of the things that came out of that was
    the lack of oversight on that program, right down to the deck
    plates. So you trace that. Well, what drove that? Well, the
    fact was that the acquisition workforce had been drawn down in
    terms of size to the extent that we were stretched too thin.
        So in terms of the Department of the Navy, setting out a
    strategic plan for the size and shape of its workforce and
    Congress--you know, basically putting the weight of Congress
    behind that as reflected in WSARA and the Defense Acquisition
    Workforce Development Fund, we have, in fact, modestly restored
    our workforce to where we believe it needs to be in order to
    support our programs going forward. That is under threat today
    because of the budget picture.
        So here we are today talking about what we have done to
    improve and the criticality of the acquisition workforce. Today
    that exact acquisition workforce is under the gun in this
    budget environment and threatens to go back to where it was pre
    WSARA. So that is a concern for us. You have provided
    incredible support in this regard in the past, and we look
    forward to that continued support.
        Ms. Shyu. So I absolutely concur with my colleagues,
    protecting the acquisition workforce, because I see a bimodal
    distribution in our workforce. We are going to have a lot of
    senior folks that are going to be retiring in the next 5 years,
    and then we will get into even deeper trouble because we do not
    have a skilled workforce. Right now there is significant
    pressure in reducing the civilian workforce because the force
    structure is coming down. So I have a significant concern on
    that side.
        The other piece is I will say WSARA provided the sound
    system engineering. What we do need to understand is what
    happens is the interpretation of the law from this side of the
    Hill to the other side of the Hill--what happens? We
    reinterpret the meaning of the language and it becomes much
    more onerous. So if there is anything that you guys take away,
    allow us to do tailoring to expedite, to enable our agility.
        Thank you.
        Senator Ayotte. Thank you.
        Well, thank you all. I appreciate everything are doing, and
    we look forward to working with you. Thanks for your important
    focus on this issue. Thank you.
        [Whereupon, at 4:12 p.m., the subcommittee adjourned.]

        [Questions for the record with answers supplied follow:]
                  Questions Submitted by Senator Kelly Ayotte
                          attracting talent to defense
        1. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, as you know, the sophistication and pace of
    development of foreign and commercial technology have increased in
    recent years. Much of the innovation taking place today is coming from
    commercial firms that do not do business with the Department of Defense
    (DOD) because they believe the barriers and impediments to quick
    innovation are too burdensome. In contrast, DOD's acquisition processes
    tend to be much less innovative, more inflexible, and too slow to
    deliver new capabilities when needed. Do you have any ideas on how to
    tap the talent and innovative spirit of nontraditional suppliers (like
    some in Silicon Valley) to reinvigorate our military technology base?
        Ms.Shyu. The Army is committed to attracting and harnessing
    innovative solutions and capabilities for Soldiers. This priority must
    always be balanced with other goals of the defense acquisition system
    that impact its responsiveness and speed, such as the need for proper
    oversight of taxpayer resources, fairness, and transparency.
        Notwithstanding these considerations, the Army is taking deliberate
    steps to ensure that it has access to commercial innovation needed to
    maintain dominant warfighting capabilities. For instance, the Army uses
    innovative contracting methods and partnerships to access non-
    traditional suppliers in support of needed capabilities in several
    warfighting areas, like munitions and cyber security. Other Transaction
    Authorities (OTA), industry consortia, and Cooperative Research and
    Development Agreements enable DOD and the Army to more quickly access
    companies that provide commercial technologies of interest and
    incentivize them to do business with DOD.
        For example, Army Science and Technology uses the Ground Vehicle
    System (GVS) OTA to focus on vehicle and robotics technology research,
    development, test and evaluation projects. The GVS OTA mechanism
    facilitates collaboration and innovative technology development with
    industry, academia, and other Services and allows us to leverage
    Industry Research and Development Funding. The OTA mechanism allows a
    wider base of industry and academia partners to develop more rapid
    responses to DOD Warfighter requirements. Specifically, the Army is
    using this OTA for our Modular Active Protection Systems and Combat
    Vehicle Prototyping programs, among other efforts.
        The Army is also utilizing cooperative research and development
    agreements (CRADAs) as a technology transfer mechanism to promote
    industry and academia collaboration with the U.S. Army Research
    Laboratory (ARL). ARL currently has 72 active CRADAs with industry.
    Collaborative alliances and the Army Open Campus Initiative are
    additional mechanisms used by the Army science and technology community
    to foster collaboration with academia, small business, industry, and
    other Government agencies.
        Moreover, the Army continues to rely on innovative companies, such
    as Silicon Valley firms. For example, the Army Research Laboratory is
    collaborating with the Palo Alto Research Center on the development of
    high power deep ultraviolet lasers. Additionally, the Army is pursuing
    CRADAs with both HP and WindRiver (part of Intel) to explore how to use
    software defined networking (allowing usage across large bandwidth) in
    the dynamic tactical environment that the Army faces. In another
    example, the Army is working with Cisco in the experimentation and
    testing of cyber capabilities.
        To increase partnership between the department and technology
    leaders, the Secretary of Defense announced the creation of the
    department's first permanent office in Silicon Valley as well as a plan
    to provide venture capital to tap into developing technology for use
    across the Army and DOD.
        Mr. Stackley. The DON, through the Office of Naval Research, has
    effectively used Broad Agency Announcements for research topics to
    encourage small and large companies to share and develop their ideas
    and new or improved technologies. For small businesses, the DON has
    effectively used the Small Business Innovation Research (SBIR) and
    Small Business Technology Transfer (STTR) program to encourage small
    businesses to share and develop their new or improved technologies. To
    encourage small business participation in our programs, the DON has
    assigned each Deputy Program Manager the responsibility to be the small
    business advocate for all things associated with the program.
        Dr. LaPlante. The Air Force and DOD must continuously strive to
    increase access to and collaboration with nontraditional suppliers.
    Expanding and encouraging the use of Other Transaction Authorities,
    Cooperative Research and Development Agreements, Open Challenges, and
    Small Business programs are flexible and potentially faster processes
    to tap the innovative talent of nontraditional vendors. The Air Force
    is always on the lookout to find the leading edge technologies often
    found in nontraditional vendors. We recently partnered with
    nontraditional defense companies, Applied Minds and Stottler Henke
    Associates, to develop innovative space operations solutions, building
    an immersive visualization environment tool and using artificial
    intelligence to aid satellite communications. It's true, our capability
    development paradigm is inadequate. To the extent that our current
    policies and regulations can be modified to change the paradigm from
    large, complex programs rife with crippling interdependencies to
    programs with simple, severable components, open architectures, and
    more distributed participation, we will enact those changes.

        2. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, please describe any steps you believe are necessary
    to eliminate the barriers and impediments for greater participation by
    nontraditional suppliers to provide new and advanced technologies for
    weapon systems.
        Ms. Shyu. The Army is working with the Office of the Secretary of
    Defense to increase participation by nontraditional suppliers. First,
    the Army is utilizing consortium arrangements and other transaction
    authorities to acquire new capabilities. These arrangements allow the
    Government easier access to vendors that provide emerging commercial
    innovation, but may not be experienced in working with the Government.
        Second, as part of the Department's Better Buying Power initiative,
    the Army is currently participating in Department-wide efforts to
    identify barriers to the adoption and use of commercial technology for
    military systems. This study will facilitate recommendations to improve
    the incorporation of commercial off the shelf technology from
    nontraditional contractors. A related area of focus is designed to
    improve the process for technology insertion into our current weapon
    systems. This allows the Army to more quickly leverage commercial
    innovation as opposed to waiting until the overall system is
    modernized. Moreover, the Army is also investing in modular open
    systems architecture. Open architecture standards and modularity opens
    the market to more companies with cutting edge capabilities that may
    not traditionally compete for development of a full system.
        Finally, to increase partnership between the department and
    technology leaders, the Secretary of Defense announced the creation of
    the department's first permanent office in Silicon Valley as well as a
    plan to provide venture capital to tap into developing technology for
    use across the Army and Department of Defense. The Army is looking
    forward to working through these new initiatives to leverage new
    technologies that make us faster and better connected. These steps are
    the first of many to improve our ability to adopt the cutting edge
    technologies that will enable our information dominance into the
    future.
        Mr. Stackley. To encourage further opportunity and greater
    participation by nontraditional suppliers, the DON recommends that the
    Congress work with the Undersecretary of Defense for Acquisition,
    Technology and Logistics to identify and roll back legislation that has
    produced unnecessary, and redundant regulatory and reporting burdens on
    contractors. Additionally, a timely, predictable defense budget would
    improve both government and industry's ability to manage outlay risk
    and invest in R&D, facilities, and people.
        Dr. LaPlante. Intellectual property concerns and burdensome
    acquisition processes often make doing business with the Air Force and
    DOD unattractive to nontraditional suppliers. There are policy and
    authority adjustments that can help to reduce and eliminate some of
    these barriers and impediments. For example, the Air Force is
    establishing a Small Business Innovation Research (SBIR) direct to
    Phase II pilot program to provide full and immediate research and
    development support to small businesses with mature technologies and
    concepts. This will reduce the number of associated low dollar, short
    duration Phase I contracts issued, expedite technology transition, and
    achieve a higher return on investment. In addition, the Air Force
    Research Laboratory Center for Rapid Innovation will use this new
    authority to establish a Strategic Innovation component of the SBIR
    program to generate innovative, game-changing concepts. Expanding and
    encouraging the use of Other Transaction Authorities, Cooperative
    Research and Development Agreements, Open Challenges, and Small
    Business programs are flexible and potentially faster processes to tap
    the innovative talent of nontraditional vendors.
                 combatting terrorism technical support office
        3. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, are you familiar with the Combatting Terrorism
    Technical Support Office (CTTSO)? Have you examined what the CTTSO does
    to see if there are lessons that could be applied to your service's
    acquisition processes?
        Ms. Shyu. Yes, the CTTSO provides a forum for interagency and
    international users to discuss mission requirements to combat
    terrorism, prioritize requirements, fund and manage solutions and
    deliver capabilities. The Army is actively involved in several CTTSO
    subgroups, to include Chemical, Biological, Radiological, Nuclear and
    Explosives; Explosive Ordnance Disposal; and Tactical Operations
    support. Through the sub-group work, the CTTSO can deliver capabilities
    to the community through rapid research, development, test, and
    evaluation. The Army's participation in CTTSO allows us to leverage
    this multi-disciplinary community to acquire and field capabilities to
    the Soldier. As an example, the Joint Program Executive Office for
    Chemical and Biological Defense (JPEO-CBD) collaborates with CTTSO to
    advance programs such as the Dismounted Reconnaissance Sets, Kits, and
    Outfits package, which allows Soldiers to perform dismounted assessment
    of weapons of mass destruction suspect areas not accessible by military
    vehicles. JPEO-CBD also collaborates with CTTSO on the Ebola Portal, an
    online bio-surveillance resource consisting of collaborative tools,
    event watch-boards, disease monitoring, and geographic information for
    use during the Ebola outbreak in West Africa.
        Mr. Stackley. The CTTSO uses an approach that is very similar to
    DON's existing use of Broad Agency Announcements (BAAs) through the
    Office of Naval Research (ONR). The DON, through ONR, has effectively
    used BAAs for a wide range of research topics to encourage small and
    large companies to share and develop their ideas and new or improved
    technologies. Additionally, for small businesses, the DON has
    effectively used the Small Business Innovation Research (SBIR) and
    Small Business Technology Transfer (STTR) program to encourage small
    business innovators to share and develop their new or improved
    technologies. To encourage small business participation in our
    programs, the DON has assigned each Deputy Program Manager the
    responsibility to be the small business advocate for all things
    associated with the program.
        Dr. LaPlante. I am familiar with the Combating Terrorism Technical
    Support Office; however, I have not specifically examined their
    approach to acquisition. I will work with the Assistant Secretary of
    Defense for Special Operations and Low-Intensity Conflict to determine
    if there are any lessons learned or processes that can be applied to US
    Air Force acquisitions.
                        wartime acquisition work-arounds
        4. Senator Ayotte. Secretary Shyu, during the early years of the
    Iraq and Afghanistan wars, difficulty was encountered in getting the
    deployed units specifically-needed equipment due to lengthy and
    complicated acquisition processes. As a result, the Army implemented
    several rapid acquisition programs to help mitigate required equipment
    delays to our warriors in harm's way. Such programs, like the Rapid
    Equipping Force (REF) and the Soldier Enhancement Program (SEP), have
    been highly successful with equipment procurement to the field in a
    timeframe as short as 90 days. What can we learn from the success of
    these rapid acquisition programs to improve more traditional service
    acquisition processes?
        Ms. Shyu. Rapid acquisition processes are highly effective in
    providing deployed units with warfighting capabilities on an urgent
    basis under certain conditions. Our experience confirms that these
    processes work best where the requirement calls for low-risk, available
    technologies, where minimal development or integration is required to
    field these capabilities to Soldiers, and where the acquisition
    supports a small scale deployment of Soldiers with a focused mission,
    as opposed to fielding equipment to the entire Army. Under these
    conditions, the Army's rapid acquisition processes can be extremely
    effective. Accordingly, REF requirements development will continue
    under the authority of the Training and Doctrine Command. PEO Soldier
    will execute REF acquisition functions, which will maintain the REF's
    responsive speed while ensuring appropriate oversight of REF efforts.

        5. Senator Ayotte. Secretary Shyu, does the Army plan to retain
    these rapid acquisition programs in the coming years? Why or why not?
        Ms. Shyu. The Soldier Enhancement Program (SEP) has been in place
    since 1989. So as long as Soldiers and Combat Developers continue to
    identify commercial or non-developmental items for potential Soldier
    use, SEP will continue to provide an important function in the Army's
    equipping efforts. The Army has also decided that the Rapid Equipping
    Force (REF) capabilities must continue as an enduring process.
    Accordingly, REF requirements development will continue under the
    authority of the Training and Doctrine Command. This maintains a
    wartime capability for rapid response by providing resources for unique
    or emerging requirements through REF ``10-Liner'' requests while
    helping to identify potential enduring capabilities. PEO Soldier will
    execute REF acquisition functions, which will maintain the REF's
    responsive speed while ensuring appropriate oversight of REF efforts.
                            audit/oversight balance
        6. Senator Ayotte. Secretary Stackley, your testimony states: ``The
    penalty for too much oversight is ever-increasing costs and impediments
    to execution that have no ceiling. The penalty for too little oversight
    is the costs and risks of rework for unforced errors.'' How do we
    achieve the right oversight balance? How do we avoid erecting
    unnecessary ``impediments to execution'' and also avoid ``unforced
    errors''? How can the audit and oversight processes be organized so
    that we have neither too little nor too much oversight?
        Mr. Stackley. Oversight and governance requirements have added
    multiple layers of prescriptive processes, authoritative organizations,
    and extensive reporting and documentation requirements. The DON rewrote
    its acquisition governance process, commonly referred to as the Gate
    Review process, to ensure there is no gap between the Requirements and
    Acquisition organizations so that the DON understands the relationship
    between requirements, technical feasibility, and cost. The process
    requires the Navy/Marine Corps operational requirements leadership and
    acquisition leadership to agree, and repeatedly affirm that agreement
    throughout the development, acquisition, and sustainment of a system.
    The DON uses Gate Reviews to eliminate any misalignment between
    requirements and acquisition early in a program, and to check alignment
    regularly; and, to keep control over requirements as well as the cost
    and schedule to meet those requirements.
        Each `gate' is co-chaired by the Service Chief or senior military
    requirements officer and the Service Acquisition Executive (SAE). In
    all there are six gates, with the first three chaired by the Service
    Chief (co-chaired by the SAE) and ensure warfighter requirements are
    well understood and can be translated into technical requirements that
    the acquisition community can affordably achieve in the commercial or
    defense marketplace. The last three gates are chaired by the SAE (co-
    chaired by the senior military requirements officer) and ensure the
    technical specification, statement of work, and Request for Proposal
    have accurately translated the warfighter's requirements into an
    acquisition approach that is executable, affordable, and agreeable
    across acquisition and requirements leadership. The DON is confident
    that this Gate Review process provides the right balance of oversight.
        The DON recommends that that the Congress work with USD(AT&L) in
    the current effort to identify and roll back legislation that has
    produced unnecessary and redundant regulatory and reporting burdens on
    Program Managers which have the effect of thwarting the steady
    application of these fundamentals.
                 role of the office of the secretary of defense
        7. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, there have been concerns raised about defense
    acquisition that there is a lot of duplicative oversight within Office
    of the Secretary of Defense and the services. The process is said to be
    providing very little insight or help to program managers and has
    evolved into a series of burdensome and time-consuming boxes to check
    on the way to actually buying something. What should the proper role
    and division of responsibility be between the military service chiefs
    and secretaries, the Office of the Secretary of Defense, and defense
    agencies and entities charged with overseeing acquisition programs?
        Ms. Shyu. OSD oversight provides significant expertise and
    independent evaluation on the Department's major programs. Importantly,
    USD(AT&L) interfaces on behalf of the Army's major programs with OSD
    Cost Analysis and Program Evaluation and the Director, Operational Test
    and Evaluation. This relationship supports our efforts to successfully
    guide critical programs through the test and evaluation process and
    ensures that cost estimates are accurate and realistic at program
    initiation. Additionally, OSD plays an important role in adjudicating
    cross-Service issues on joint programs. This independent and external
    perspective ensures that the Department maximizes its limited resources
    across all three Services.
        The Service Chiefs possess significant operational insight and
    expertise that benefits the Army's equipping efforts. As
    representatives of the Warfighters' needs, the Service Chiefs have a
    critical role to play in validating and prioritizing requirements. This
    role is especially important during times of decreased budgets, such as
    now, when the Department must make the right investment decisions with
    limited resources. However, there are no additional authorities
    necessary in order for the Chiefs to continue to execute this valuable
    role in the acquisition process.
        Mr. Stackley. The Service Chief sets requirements and allocates the
    necessary resources to meet these requirements. It is the role and
    responsibility of the acquisition system to meet these requirements. As
    such, the DON's experience is that the greater role/involvement by the
    Service Chief in the acquisition process, the greater likelihood of
    successfully meeting the requirements within the resources provided.
    The DON's Gate Review process strives to achieve total alignment
    between requirements, resources, and acquisition by establishing shared
    responsibility for oversight and decision-making via a structured
    milestone process co-chaired by the CNO or CNO representative and the
    Assistant Secretary of the Navy (RD&A).
        Separately, USD(AT&L) and his OSD staff have an oversight role that
    is important for program management and they add value in that role.
    The Military Services are best suited to manage programs and the day to
    day business of the programs under their cognizance while allowing OSD
    insights and abilities to check the program as it proceeds.
        Dr. LaPlante. The Better Buying Power 3.0 ``Emphasize acquisition
    chain of command responsibility, authority and accountability''
    initiative is driving an analysis of the important, but supporting
    role, of staff oversight in the Office of the Secretary of Defense
    (OSD) and Services. The Office of the Under Secretary of Defense
    (Acquisition, Technology & Logistics) (OUSD(AT&L)) is conducting a
    review of the accountability and responsibility of individuals within
    OSD. The review is identifying all the touch points an acquisition
    document experiences enroute to the Milestone Decision Authority (MDA)
    for approval. The review is considering the accountability of the
    reviewers and the contribution that these reviews provide in order to
    identify potential streamlining to the current review process and
    emphasize Program Manager (PM), Program Executive Officer (PEO), and
    Component Acquisition Executive (CAE) authority.
        Additionally, the Air Force is conducting a similar review of the
    accountability and responsibility of all individuals throughout the Air
    Force who review acquisition documents prepared for MDA or OSD
    approval. The Service leadership is considering the accountability of
    the reviewers and the contribution these reviews provide in order to
    identify potential streamlining to the current process and emphasize
    PM, PEO, and CAE authority.
        Once these reviews are accomplished, the proper role and division
    of responsibility between the military service chiefs and secretaries,
    OSD, and defense agencies charged with overseeing acquisition programs
    should be apparent and enable a clear picture of any needed changes in
    responsibilities.

        8. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, are you in favor of giving the service chiefs an
    increased decision making role in the acquisition process? If so, how
    would you structure that role so that it complements, not competes,
    with the Service Acquisition Executive?
        Ms. Shyu. Under the current system, the Service chiefs hold no
    formal role within the acquisition process, but still exercise
    significant authority over the formulation of Service requirements and
    the allocation of funding necessary to successfully develop and field
    programs. Achievable and affordable requirements, as well as stable and
    predictable funding, are crucial to program success. The operational
    experience and leadership of Service Chiefs are invaluable to
    generating and stabilizing achievable requirements and protecting the
    resources necessary to achieve these capabilities. Additionally, the
    Service Chiefs are ideally positioned to make the larger strategic
    decisions to balance the overall readiness requirements of the current
    force with the resources necessary to modernize equipment for the
    future force. In addition, the Service Chiefs can play a greater role
    in promoting the qualifications, expertise and capability of the
    acquisition workforce, comprised of both military and civilian
    acquisition professionals. The Service Chiefs can execute these
    critical roles without modification to existing authorities with
    maximum effect on acquisition outcomes.
        I do not believe that Service Chiefs require greater decision-
    making authority regarding acquisition decisions, including such areas
    as technical risks, development schedules, industrial base
    considerations or production readiness. These areas, which are
    typically addressed in formal acquisition decisions, would not benefit
    from greater involvement by Service Chiefs. The Service Chiefs do not
    typically have the technical expertise or industry experience to make
    such decisions. Rather, we should leverage the significant operational
    expertise of the Service Chiefs to define and stabilize realistic
    requirements and resources to execute our acquisition efforts.
        Mr. Stackley. The Service Chief sets requirements and allocates the
    necessary resources to meet these requirements. It is the role and
    responsibility of the acquisition system to meet these requirements. As
    such, the DON's experience is that the greater role/involvement by the
    Service Chief in the acquisition process, the greater likelihood of
    successfully meeting the requirements within the resources provided.
    The DON's Gate Review process strives to achieve total alignment
    between requirements, resources, and acquisition by establishing shared
    responsibility for oversight and decision-making via a structured
    milestone process co-chaired by the CNO or CNO representative and the
    Assistant Secretary of the Navy (RD&A).
        Separately, USD(AT&L) and his OSD staff have an oversight role that
    is important for program management and they add value in that role.
    The Military Services are best suited to manage programs and the day to
    day business of the programs under their cognizance while allowing OSD
    insights and abilities to check the program as it proceeds.
        Dr. LaPlante. The Chief of Staff of the Air Force's (CSAF) current
    role in Air Force acquisition is appropriate. Existing policies and
    processes for planning and executing acquisition programs provide
    multiple opportunities for the Service Chiefs to complement and be
    involved in acquisition to vector programs towards meeting cost,
    schedule, and performance targets. Regular interactions between the
    CSAF and the Service Acquisition Executive (SAE) today are effective
    and sufficient in providing feedback to the Acquisition community and
    vectoring based on USAF priorities. These interactions provide the CSAF
    insight into how acquisition strategies and solutions are meeting the
    requirements of the operational forces. This insight also improves the
    CSAF's ability to attest to requirements affordability and reduce
    program requirements, allowing for the potential to improve program
    cost or schedule in a manner consistent with desired operational
    capability.
        In the USAF, the Secretary and the CSAF are ultimately accountable
    for the USAF Acquisition process and outcomes. They have delegated
    specific responsibilities to key leaders, and hold them accountable for
    their outcomes, assuring that the requirements, acquisition, and budget
    processes are clearly defined and include integrated reviews that
    enable cohesive coordination across all areas. For example, USAF Review
    Boards (AFRBs), Acquisition Strategy Panels (ASPs), Air Force
    Requirements Oversight Council (AFROCs), and Configuration Steering
    Boards (CSBs), provide oversight forums with representation from the
    requirements, acquisition, and budget communities.
        In addition, CSAF holds regular meetings with the SAE, most notably
    Quarterly Acquisition Program Reviews (QAPR) and Key Acquisition
    Program updates. These engagements afford the CSAF opportunities to
    advise the SAE on important matters where warfighting requirements and
    priorities associated with capability gaps have the potential to affect
    acquisition strategies and other acquisition efforts. The CSAF's
    involvement in the acquisition process is critical in order to ensure
    military needs are met.
                             acquisition workforce
        9. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, what are the biggest challenges your service faces
    in improving the professionalism of the acquisition workforce; in
    particular those supporting the acquisition of major weapon systems?
    Are there certain skills that you believe need more emphasis than
    others such as program management, contracting, or engineering?
        Ms. Shyu. Over 50 percent of the Army Acquisition Workforce (AAW)
    will be eligible to retire within 10 years. Combined with an average
    annual attrition rate of approximately 8 percent, the Army is quickly
    losing invaluable institutional knowledge and demonstrated acquisition
    skills. Additionally, since 2012, we have experienced a relative
    slowdown in overall hiring, particularly in the hiring of college
    graduates, due to budgetary and manpower constraints. We currently
    average less than 100 new graduate hires per year under the age of 26.
    This means that we risk losing an opportunity for the future workforce
    to be coached and mentored by those with the greatest depth and breadth
    of experience.
        Within this context, we must remain focused on recruiting,
    developing, and retaining individuals with critical acquisition skill
    sets in order to provide the Army essential capabilities for continued
    success. The Army must ensure it has the appropriate depth and
    expertise within critical functional areas, to include software
    engineering, contracting, and systems engineering. To that end, the
    Defense Acquisition Workforce Development Fund provided under Section
    852, USC 10, is a critical and necessary enabler to maintain a trained
    and professional workforce.
        I am also working to strengthen our pipeline of future acquisition
    leaders by equipping them with the requisite capabilities and
    qualifications to assume positions of greater responsibility through
    investments in leader development and talent management. To this end,
    we have instituted a civilian talent management process benchmarked
    from industry to identify high performing/high potential talent early
    and provide them with varied experiences to develop breadth and depth
    to meet our future leader needs. We have also initiated work to
    establish stronger professional qualification requirements for all
    acquisition specialties. We are working to strengthen the technical
    proficiency of Program Managers responsible for managing Major Defense
    Acquisition Programs by incorporating technical criteria into our
    accessions and Central Selection Program Manager slating guidance. By
    developing competent and innovative future acquisition leaders, we will
    build capacity and capability for the Army enterprise.
        Mr. Stackley. A major challenge the Navy faces is retaining our
    acquisition professionals after a considerable investment in their
    development. Sequestration, workforce reductions, pay and hiring
    freezes, pay systems (GS vs. pay for performance), and military
    turnover are all challenges facing the acquisition workforce. The Navy
    is focusing professional development efforts on critical technical and
    business skill sets in program management, contracting and engineering.
    The permanent continuation of the Defense Acquisition Workforce
    Development Fund (DAWDF) will be critical to our ability to stay the
    course and continue to develop a skilled and experienced acquisition
    corps. For example, the Navy has used DAWDF to hire 1,590 entry and
    associate level employees over the past five years in order to bring in
    the right talent for the workforce of the future. To expand the
    workforce's professional education, the Navy established the
    ``Understanding Government-Industry Relationship'' course for current
    Program Managers and Deputy Program Managers and a Master of Science in
    Contract Management curriculum for the Contracting career field. In the
    engineering realm, the Navy utilizes the Master's degree programs at
    numerous universities across the nation. The Acquisition Demonstration
    Project is helpful in hiring, training, and retention. It also provides
    flexibility to move personnel to support the most critical areas.
    Therefore, to remove the challenge of the current pay systems, the Navy
    supports making the Acquisition Demonstration Project permanent.
        Maintaining the right level of workload for the Navy Laboratory and
    Warfare Centers is also a challenge that the Navy continues to
    carefully manage and is directly tied consistently maintaining the
    workforce with the right skills. The ability to transform military
    requirements into material solutions comes from education and hands-on
    experience. Providing the right job experiences to transform journeymen
    into experts is critical in maintaining a technological edge. The
    future weapon systems are being developed today and the acquisition
    workforce that has hands-on experience and insight will ensure
    competence and integrity of the Defense acquisition system but only if
    the pipeline of experience can be maintained through budget
    uncertainties.
        Lastly, acquiring the current expertise that resides in industry
    has been a challenge and could be addressed with a one year personnel
    exchange agreement pilot program. The exchange would allow the Navy to
    benefit from the knowledge of industry innovation, business
    streamlining and understanding of industry challenges.
        Dr. LaPlante. Within our acquisition workforce framework, we
    consider the examples you listed, program management, contracting and
    engineering, to be broad functional areas that require the development
    of people with specific sets of skills and competencies related to that
    function. The elements of the acquisition process being performed at a
    point in time, based on the phase and needs of the specific program,
    drive requirements for personnel with specific skills and expertise
    within a functional area.
        While program management, contracting and engineering represent the
    largest portions of the workload required to execute Government
    responsibilities for a major weapon system program, we also can't
    neglect the expertise the Program Manager requires from acquisition
    professionals specialized in financial management, information
    technology, production and manufacturing management, quality assurance,
    life cycle logistics/product support management, cost estimating and
    test and evaluation. Each of these functional areas requires its own
    set of skills and competencies which must be developed by appropriate
    education, technical training and years of experience.
        To have the pool of people required to match people to positions
    within our program offices, the Air Force deliberately develops
    military and civilian acquisition professionals according to well
    defined career path models which serve as a guide for professional
    experience opportunities, education, and training. These career models
    provide ample opportunity and experience for acquisition professionals
    at all ranks, and provide a defined path to greater rank and
    responsibility within the acquisition workforce. The development of
    acquisition workforce members is enhanced by the use of Career Field
    Development Teams consisting of senior leaders from within each Career
    Field. Using published career path models as a guide, the Development
    Teams provide tailored developmental guidance to individuals based on
    their past record of training, education and experiences.
        We have used the Defense Acquisition Workforce Development Fund
    (DAWDF) established by Congress (10 USC Sec.  1705) to address
    professional currency needs and gaps in acquisition technical training,
    developing application skill courses at the Air Force Institute of
    Technology that complement and build on the foundational certification
    training provided by Defense Acquisition University. Examples include
    courses in Cost Estimating, Test and Evaluation, Developmental
    Planning, Human Systems Integration, Technical and Manufacturing
    Readiness, as well as project management and business acumen. DAWDF has
    also enabled us to build a robust Tuition Assistance program for
    acquisition professionals, enabling them to further their education in
    acquisition-related fields--a tool for increasing professionalism as
    well as retention.
        I believe there are certain skills we need to emphasize across all
    of the acquisition functional areas to help our people apply their
    acquisition technical training more effectively. These include critical
    thinking, business acumen, and understanding industry perspective. We
    have been using the Defense Acquisition Workforce Development Fund to
    develop and improve training in these areas, and continue to work
    closely with OSD(AT&L) and Defense Acquisition University on courses
    addressing these needs. Our talent management and force development
    programs are designed to ensure personnel exercise what they learn from
    formal training as they progress through varying assignments of
    increasing responsibility over the course of their acquisition careers.
                           approach to cost overruns
        10. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, Department of Defense weapons systems have often
    been plagued by huge cost overruns, schedule slippages, and performance
    shortfalls. In response to problems like this, recent acquisition
    reform efforts have been focused on not moving forward on a program
    until there are realistic cost estimates, mature technology, and stable
    requirements and budgets. Does this approach force more programs to be
    incremental in their acquisition approach? If so, what about cases
    where there is a pressing need for revolutionary innovation? How should
    these efforts be managed and funded?
        Ms. Shyu. Historically, defense acquisition reform efforts have
    focused on adding oversight to ensure that cost overruns or schedule
    delays experienced by programs do not recur in future efforts. However,
    these additional layers of oversight turn into larger bureaucratic
    hurdles that Program Managers must leap, expending resources and adding
    time to successfully achieve milestone decisions. The recent language
    put forth by the HASC and Chairman Thornberry attempts to streamline
    the process by reducing redundant and overly-bureaucratic documentation
    requirements while maintaining a broad focus on risk reduction. These
    provisions incentivize the Department to instead focus efforts on
    reducing technological risk, building realistic cost estimates, and
    stabilizing funding.
        This approach does not force programs to be incremental, but allows
    program managers more flexibility to utilize an incremental approach
    where appropriate. Incremental acquisition can increase competition and
    thereby reduce overall costs for programs. By employing a modular, open
    architecture approach, the Department can take advantage of rapid
    technological development in private industry more quickly, rather than
    waiting for entire systems to be modernized over several years.
        By incentivizing program managers to tailor their acquisition
    approach and focus their efforts on reducing programmatic and technical
    risk, the Department can more quickly leverage technological
    breakthroughs in industry and incorporate these advancements into our
    weapon systems.
        Mr. Stackley. The DON designed its acquisition process, commonly
    referred to as the Navy Gate Review process, to ensure there is no gap
    between the Requirements and Acquisition organizations so that the Navy
    understands the relationship between requirements, technical
    feasibility, and cost. The process requires the Navy/Marine Corps
    operational requirements leadership and acquisition leadership to
    agree, and repeatedly affirm that the agreement throughout the
    development, acquisition, and sustainment of a system. The DON uses
    Gate Reviews to eliminate any misalignment between requirements and
    acquisition early in a program, and to check alignment regularly.
        This process provides governance and oversight, and ensures
    adherence to the DON's basic principles to get the requirements right,
    perform to a stable plan, make every dollar count, rely on an
    experienced acquisition workforce, and foster a healthy industrial
    base. Performing to a stable plan (stable requirements, designs and
    budgets) translates into predictable, reliable performance, unit cost
    reduction, improved material purchasing and workforce planning,
    retention of skilled labor and the ability for industry to invest in
    facility improvements, all resulting in more efficient production and a
    more affordable program. While proceeding with a stable plan is the
    preferred approach for an affordable program, the Gate Review process
    is designed to ensure the warfighter requirements are well understood,
    including technical feasibility with associated levels of technical and
    cost risk where there is a pressing need to proceed in advance of a
    stable design for a capability.
        Separately the Department has access to rapid acquisition
    processes. The DON has assigned a Deputy Assistant Secretary of the
    Navy (Research, Development, Test and Evaluation) to explore methods
    and opportunities to effectively expand upon existing processes and
    improve our responsiveness to urgent needs.
        Dr. LaPlante. Yes. Depending on the urgency of need for specific
    validated weapon system requirements, anticipated technological
    maturity and full funding support, the incremental acquisition approach
    reduces program risk and may be more appropriate. In order to have
    higher confidence in cost and schedule estimates, we need to ensure we
    use mature technology. Sometimes technology is not mature enough to
    deliver all warfighter capability requirements in a single increment.
    Therefore, it makes more sense to breakup programs into increments to
    take advantage of mature technology while maturing technology in
    parallel for incorporation into future increments to meet the full-up
    capability requirements. Using the incremental approach allows us to
    have higher confidence in our cost and schedule estimates because we
    have a better understanding of the technology and technical risks.
        In addition, the 2014 Air Force Strategy highlights the
    foundational principles of Strategic Agility and Adaptability, which
    places emphasis on fielding systems more rapidly and building resilient
    systems that are inherently resistant to predictive failure. Hallmarks
    of agility/adaptability include modular systems, the use of block
    upgrade approaches to system fielding, and the use of open system
    architecture designs. These techniques help to shorten development
    cycle times, allowing for increased performance beyond legacy systems
    with the rapidly fielded ``A-model'' design of the system. Such systems
    are designed for later modular upgrades/enhancements (block upgrades)
    to the initial baseline design. Additionally, reevaluating technology
    that can be infused into systems and address the threats which systems
    are designed to face is prudent throughout the system's lifecycle and
    allows several on-ramps for new technology and off-ramps for obsolete,
    or ineffective, programs.
        That being said, the DOD acquisition system does provide for cases
    where there is a pressing need for revolutionary innovation. The
    revised DODI 5000.02, Operation of the Defense Acquisition System,
    presents several tailored acquisition processes, which allow multiple
    paths for the services to rapidly field capabilities incorporating new
    technologies. These efforts should take advantage of the flexibility
    allowed per DODI 5000.02 to get the capability to the warfighter as
    soon as possible while considering long-range sustainment
    considerations to ensure the system is sustainable in a cost-effective
    manner.
        Finally, under the Joint Urgent Operational Need (JUON) and
    emerging needs processes, there is a formal Warfighter Senior
    Integration Group (SIG) to identify urgent issues and a Secretary of
    Defense Rapid Acquisition Authority (RAA) Determination to rapidly
    field systems.
                 lowest price technically acceptable contracts
        11. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, There has been a recent trend to buy more products
    through Lowest Price Technically Acceptable (LPTA) and reverse auction
    acquisition methods. I have become aware of cases where these methods
    have even been used for the development of personal protective
    equipment where safety and quality are critical and the failure of the
    item could result in combat casualties.
        Our troops who put their lives on the line for our freedom and
    security should not be sent into harm's way with the cheapest
    equipment--they should go with the best equipment. In combat, as well
    as in training, quality personal protective equipment can prevent
    serious injuries and even be the difference between life and death for
    our service members.
        My understanding is that the Army utilized LPTA and Reverse Auction
    procedures to award contracts for the lighter, next generation combat
    helmet. For the past year and a half, the Army has been unable to
    procure these combat helmets because none of the companies that were
    awarded contracts have been able to pass ballistic requirements while
    meeting the pricing that is a direct result of the LPTA bidding
    process. This has resulted in a new-helmet production delay, and
    currently the domestic helmet supply chain is struggling.
        As the Department considers comprehensive defense acquisition
    reform, I continue to be concerned about the use of Lowest Price
    Technically Acceptable (LPTA) contracts for specialized gear.
        In your opinion, when are LPTA and reverse auction methods
    appropriate and when are they not?
        Ms. Shyu. When used in the appropriate circumstances, and combined
    with effective competition and proper contract type, LPTA and reverse
    auction methods can drive down costs without jeopardizing contract
    performance. These approaches are best suited to the procurement of
    commercial and non-complex services and supplies (commodities or
    commodity-like products that have well-defined specifications and
    universally accepted standards).
        The LPTA source selection method is appropriate to apply when there
    are well-defined requirements, the risk of unsuccessful contract
    performance is minimal, where price is a significant factor in the
    source selection, and where there is neither value, need, nor
    willingness to pay for higher performance. When the Warfighter is
    willing to pay more for performance and may benefit from an innovative
    and technologically superior solution to meet mission needs, a tradeoff
    source selection process is more appropriate than LPTA.
        Use of the LPTA source selection method does not relax contract
    quality assurance requirements or quality standards. Offerors are
    required to provide evidence that their products meet the quality
    requirements set by the Government and identified in the solicitation.
    In the case of the Army Combat Helmet (ACH), the Defense Logistics
    Agency (DLA) awarded the initial contract in 2009 using the best-value
    tradeoff source selection process. Following the development of the
    initial ACH, DLA determined the requirements for the follow-on Light
    Weight ACH (LWACH) were well defined to support awarding a follow-on
    LPTA contract. The LWACH Performance Document included specific
    ballistic and non-ballistic requirements and test criteria to determine
    whether vendor's helmets met or exceeded the requirements. The
    technical evaluation portion of the LPTA analysis required submission
    and analysis of the ballistic test reports. To date, there are no new
    procurement actions, planned or in process, for the ACH or LWACH.
        Reverse auctioning is a technique wherein multiple vendors compete
    to obtain business from the Army. The prices offered by the vendors
    will typically decrease as the sellers compete against one another,
    allowing the Army to obtain commercial goods and services at a lower
    price than might otherwise be obtained.
        The Army is pursuing multiple initiatives to ensure contracting
    professionals are trained on the appropriate use of LPTA and reverse
    auctions. The Army Contracting Command (ACC), in conjunction with the
    Office of the Deputy Assistant Secretary of the Army (Procurement),
    will release an LPTA Quick Reference Guide and additional training to
    ensure contracting personnel across the Army enterprise understand how
    to appropriately use LPTA. Both the LPTA Guide and training materials
    are expected to be published in September 2015. Additionally, the ACC
    has established Source Selection Support Centers of Excellence, which
    consist of subject matter experts and practitioners who support the
    source selection process and facilitate development of source selection
    skills across the workforce. Senior acquisition professionals provide
    source selection training to their junior counterparts at these ACC
    centers. Training includes review of appropriate situations for use of
    LPTA, coaching and mentoring, and providing real-time review and
    assistance for planned and ongoing source selections.
        The Army is also proactively working with defense policy officials
    to develop proposed Defense of Department Federal Acquisition
    Regulation Supplement language that will standardize application of
    reverse auction practices across the Department of Defense. Until this
    language is published, the Army continues to engage with contracting
    organizations to advise on the best use of reverse auction practices.
        Mr. Stackley. Reverse auction methods are another tool in our
    acquisition toolbox. The use of Lowest Price Technically Acceptable
    (LPTA) is used in some cases for reverse auction acquisitions. Within
    the Navy, the Reverse Auction Program is led by the Naval Supply
    Command (NAVSUP). Navy utilizes reverse auctions primarily for service
    contracts that fall under the $150,000 simplified acquisition
    threshold. Approximately 80 percent of the awards made under the
    reverse auction program are awarded to small business. It has been our
    experience that using LPTA within the reverse auction program for
    service contracts is a great value to the Government, while encouraging
    and bolstering small business participation.
        Dr. LaPlante. LPTA is the appropriate source selection process to
    apply only when there are well defined requirements, the risk of
    unsuccessful contract performance is minimal, price is a significant
    factor in the source selection, and there is neither value, need , nor
    willingness to pay for higher performance. Well-defined requirements
    equates to technical requirements and ``technical acceptability''
    standards that are clearly understood by both industry and Government,
    are expressed in terms of performance objectives, measures, and
    standards that map to our requirement documents, and lend themselves to
    technical evaluation on an acceptable/ unacceptable basis. LPTA is most
    appropriate when best value is expected to result from the selection of
    the technically acceptable proposal with the lowest evaluated price.
    LPTA has a clear, but limited place in the source selection ``best
    value'' continuum. Used in appropriate circumstances and combined with
    effective competition and proper contract type, LPTA can drive down
    costs and provide the best value solution. No single source selection
    process is right for every acquisition.
        If we have tradable requirements, then we should pursue use of an
    appropriate tradeoff process and LPTA may not be an appropriate
    selection methodology. Whenever the Warfighter is willing to pay more
    for above threshold requirements or performance standards and might
    benefit from an innovative and technologically superior solution to
    meet their mission needs, a tradeoff source selection process between
    cost or price and non-cost factors is optimal. In these situations, the
    Department should share in advance with industry our technical
    requirements and communicate the monetary value of performance above
    the threshold or performance standards for evaluation purposes.
    Industry will understand the value proposition and can clearly propose
    to meet our needs with a cost-effective and innovative solution.
        Use of Reverse Auction is appropriate when the specification can be
    clearly and accurately defined, when there is sufficient capacity in
    the market, and there are many qualified suppliers. Reverse Auction may
    be used for a broad range of requirements for both products and
    services and, used appropriately; Reverse Auction can stimulate
    competition and determine a market price. Successful Reverse Auction
    acquisitions focus on the market that exists rather than the product or
    service. Advance preparation is critical and thorough market research
    is essential to mitigate risks such as a failed market (no bidders),
    technology failure, collusion, and damage to supplier relationships.
    The Air Force must know its business.
        While the Air Force utilizes Reverse Auction on a limited basis for
    commodities that have clear specifications and lowest price is the only
    determining factor for award, the majority of Air Force purchases
    require more complex methods of evaluation.

        12. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, please explain how the Department plans on moving
    away from LPTA and towards the use of Best Value contracting
    mechanisms, where such things as quality and past performance are
    considered when awarding a contract.
        Ms. Shyu. When used in the proper circumstances, and combined with
    effective competition and proper contract type, the LPTA source
    selection method can offer a streamlined and simplified source
    selection approach to rapidly procure commercial and non-complex
    services and supplies while saving taxpayer dollars.
        The LPTA source selection method is appropriate to apply when there
    are well-defined requirements, the risk of unsuccessful contract
    performance is minimal, where price is a significant factor in the
    source selection, and where there is neither value, need, nor
    willingness to pay for higher performance. When the Warfighter is
    willing to pay more for performance and may benefit from an innovative
    and technologically superior solution to meet mission needs, a tradeoff
    source selection process is more appropriate than LPTA.
        The Army has undertaken several efforts to address concerns and
    continuously improve our use of the LPTA source selection method.
    First, the Army Contracting Command (ACC), in conjunction with the
    Office of the Deputy Assistant Secretary of the Army (Procurement),
    will release a Quick Reference Guide and additional training to ensure
    contracting personnel across the Army enterprise understand how to
    appropriately use LPTA. Both the LPTA Guide and training materials are
    expected to be published in September 2015. Additionally, the ACC has
    established Source Selection Support Centers of Excellence, which
    consist of subject matter experts and practitioners who support the
    source selection process and facilitate development of source selection
    skills across the workforce. Senior acquisition professionals provide
    source selection training to their junior counterparts at these ACC
    centers. Training includes review of appropriate situations for use of
    LPTA, coaching and mentoring, and providing real-time review and
    assistance for planned and ongoing source selections.
        Mr. Stackley. The Lowest Price Technically Acceptable (LPTA) method
    is one of the tools in the Best Value Continuum, and when used in
    appropriate circumstances, combined with effective competition and
    proper contract type, can provide the best value solution. The first
    prerequisite to use of LPTA is a firm understanding of what constitutes
    ``technically acceptable.'' The DON, in conjunction with Better Buying
    Power initiatives, continues refining the guidance for appropriate use
    of LPTA in the Best Value Continuum.
        Dr. LaPlante. For those acquisitions where the Warfighter is
    willing to pay more for above threshold requirements or performance
    standards and will benefit from an innovative and technologically
    superior solution to meet their mission needs, a Lowest Priced
    Technically Acceptable (LPTA) methodology is not appropriate. LPTA has
    a clear, but limited place in the source selection ``best value''
    continuum for commercial or non-complex services or supplies which are
    clearly and objectively defined. We will continue to scrutinize all
    source selection plans to assure LPTA is used only in the very limited
    circumstances under which it is appropriate.
                                     ______

                    Questions Submitted by Senator Mike Lee
                                  sustainment
        13. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, the majority of a weapons system's cost is often
    not found in the initial development and procurement phases, but in the
    logistics and sustainment of such equipment throughout the duration of
    its service. This is especially important to consider as the rapid
    development of technology outpaces the ability to develop and acquire
    new systems. Can each of you discuss how your respective branches are
    working to incorporate lifecycle concerns into the acquisitions process
    and how you are achieving efficiency and acquiring a better product
    through this coordination?
        Ms. Shyu. The Army recognizes that sustainment represents a
    significant portion of a system's total lifecycle cost. Accordingly,
    the Army has taken steps to ensure that lifecycle factors are
    considered throughout the acquisition process.
        First, the program manager is required to develop and update a
    sustainment strategy in a Life Cycle Sustainment Plan (LCSP) throughout
    the life of the system. The LCSP captures the robust analysis conducted
    to determine the optimum sustainment strategy, and is updated at each
    milestone. The sustainment strategy and LCSP are developed under the
    leadership of the program manager's Product Support Manager (PSM) who
    is an expert in integrating the sustainment strategy with the system
    design to achieve effectiveness and affordability. In addition, PSMs
    conduct analyses of product support alternatives to determine the
    optimal product support approach while considering cost and risk for
    each support alternative. These processes are designed to ensure that
    sustainment planning remains an important consideration throughout the
    program lifecycle.
        Second, the Army conducts robust reviews at program milestones to
    address sustainment concerns on major systems. Examples of these
    reviews include the Integrated Product Support Review, which assesses
    the readiness and acceptability of the sustainment strategy prior to
    Milestone Decision Reviews, the Independent Logistics Assessment, where
    an expert, independent team assesses the thoroughness of the
    sustainment strategy and whether sufficient resources are available to
    execute the strategy, and a Sustainment Review that assesses actual
    execution of the sustainment strategy.
        Third, the Assistant Secretary of the Army for Acquisition,
    Logistics and Technology and the Army Materiel Command Commanding
    General conduct quarterly Joint Acquisition and Sustainment Reviews.
    These meetings facilitate discussion among key leaders from the
    acquisition and sustainment communities and enable the frank and open
    debate of the Army's strategic materiel sustainment issues. Each of
    these efforts ensures that lifecycle sustainment considerations are
    incorporated in program development to achieve better efficiency and
    acquire better products.
        Mr. Stackley. DON's Program Managers address basic principles to
    get the requirement right, perform to a stable plan, and make every
    dollar count at each Gate Review wherever they are in their program's
    life cycle so that sustainment and its associated costs are no longer
    an afterthought. The DON Gate Review process was designed to ensure
    there is no gap between requirements and acquisition organizations, and
    that cost and affordability are managed with the same discipline and
    rigor as traditional performance requirements.
        DON acquisitions emphasize stable designs as well as modularity and
    open architecture to reduce cost, extend service life, and increase
    acquisition agility, including a focus on operating and support (O&S)
    cost early in design. Earlier engagement on O&S and disposal costs
    enables Program Managers to more fully evaluate system affordability
    and possible trade space leading to better understanding of Total Cost
    earlier in the process, which in turn allows better informed decisions.
    The DON's Program Managers are tasked with understanding what drives
    those costs and formulating a `should cost' strategy to meaningfully
    reduce program cost or risk without substantively impacting key
    requirements regardless of what phase the program is in.
        Dr. LaPlante. The Air Force highlights sustainment planning early
    in acquisition planning and during the systems engineering process.
    These sustainment considerations are addressed in the Life Cycle
    Sustainment Plan (LCSP) and reviewed at every milestone review
    throughout a systems' lifecycle. We have identified Product Support
    Managers for every acquisition program that ensures sustainment
    requirements are considered as part of every review and integrated with
    the other functional areas. We are coordinating with other services in
    joint programs to leverage strategic agility within the acquisition
    process to inject new technologies into weapon systems when it makes
    sense and is affordable. The Air Force will achieve further
    efficiencies by implementing OSD AT&L's Better Buying Power (BBP) and
    applying our own Bending the Cost Curve (BTCC) initiative. BTCC begins
    with having an in-depth grasp of how much various design options will
    ultimately cost--not just to build, but to operate--and what potential
    trade space we have. Additionally, our focus on owning the technical
    baseline emphasizes to Program Managers the need to understanding of
    all aspects their systems and processes--beyond schedule and financial
    management and regardless of where program is in its maturity. This
    includes considering key lifecycle attributes such as interface
    definition and data rights early and throughout a programs lifecycle.
    These initiatives are supported by organizational changes that better
    align authorities with the responsibilities of lifecycle management.
    First, Air Force Material Command reorganized into a 5-center construct
    which created a ``lead'' center for each of AFMC's five mission areas
    (life cycle management, sustainment, test and evaluation, research and
    development and nuclear support). That consolidation made us more
    efficient and effective as an acquisition enterprise by aligning all
    program management authority across a system's entire life cycle--
    cradle to grave--to an accountable program manager in the Life Cycle
    Management Center. As a result of the insight now provided, PEOs are
    empowered to drive down sustainment costs during all phases. The second
    major organizational change was to re-align Air Staff product support
    functions under SAF/AQ. This resulted in the establishment of a ``Total
    Life Cycle construct'' presenting opportunities to simplify lines of
    authority and eliminate process redundancies.

        14. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, the concept of ``acquisitions reform'' has been
    around for many decades, however we have witnessed major weapons
    programs taking a longer time to develop with greater cost and risk to
    taxpayer money. The GAO recently reported that lost buying power over
    the past year created $2.2 billion in additional costs to the
    Department and increased deliver capability by over a month. What are
    the primary and most realistic goals that we should be setting with any
    new acquisitions reform, and significantly, how do you find the balance
    between holding contractors accountable for costs and not waste funding
    on unneeded equipment while preserving the vital parts of the defense
    industrial base?
        Ms. Shyu. Our acquisition system must always balance two permanent
    objectives: delivering dominant warfighting capabilities to our
    Soldiers while ensuring the prudent and efficient use of taxpayer
    resources. To achieve these objectives, the Army must prioritize two
    key efforts, which work in tandem to help us deliver successful
    acquisition outcomes while serving as proper stewards of taxpayer
    resources.
        First, we must continue to recruit, develop, and retain an
    experienced, skilled acquisition workforce. The development and
    retention of talent in acquisition disciplines is an essential
    ingredient to accountability and effectiveness in the acquisition
    system. We must remain focused on recruiting, developing, and retaining
    individuals with critical acquisition skill sets in order to provide
    the Army essential capabilities for continued success. To that end, the
    Defense Acquisition Workforce Development Fund (DAWDF) provided under
    Section 852, of title 10, is a critical and necessary enabler to
    maintain a trained and professional workforce. Additionally, we have
    instituted a civilian talent management process benchmarked from
    industry to identify high performing/high potential talent early and
    provide them with varied experiences to develop breadth and depth to
    meet our future leader needs. By developing competent and innovative
    future acquisition leaders, we will build capacity and capability for
    the Army enterprise.
        Second, any efforts to institute reform must also focus on
    simplifying and streamlining rules and processes while retaining
    emphasis on sound program planning and risk mitigation. To this end,
    the Department submitted several proposals last year designed to reduce
    redundant documentation, place greater emphasis on sound acquisition
    planning, and broaden the established practices for risk reduction.
    While our acquisition process employs a wide range of practices and
    reviews to promote accountability by contractors in the performance of
    our programs, their role must be informed by the need for flexibility
    by our program managers to identify and mitigate risks across our
    programs. If enacted, these proposals will balance sufficient oversight
    of contractors and program performance with the program manager's
    ability to tailor strategies to meet the risks and goals of each
    specific program.
        Mr. Stackley. The DON designed its acquisition process, commonly
    referred to as the Navy Gate Review process, to ensure there is no gap
    between the Requirements and Acquisition organizations so that the Navy
    understands the relationship between requirements, technical
    feasibility, and cost. The process requires the Navy/Marine Corps
    operational requirements leadership and acquisition leadership to
    agree, and repeatedly affirm that the agreement throughout the
    development, acquisition, and sustainment of a system. The DON uses
    Gate Reviews to eliminate any misalignment between requirements and
    acquisition early in a program, and to check alignment regularly.
        This process provides governance and oversight, and ensures
    adherence to the DON's basic principles to get the requirements right,
    perform to a stable plan, make every dollar count, rely on an
    experienced acquisition workforce, and foster a healthy industrial
    base. Performing to a stable plan (stable requirements, designs and
    budgets) translates into predictable, reliable performance, unit cost
    reduction, improved material purchasing and workforce planning,
    retention of skilled labor and the ability for industry to invest in
    facility improvements, all resulting in more efficient production and a
    more affordable program.
        Dr. LaPlante. The most important goal with new acquisition reform
    is to ensure we work together to prevent unintended bureaucratic
    consequences of new legislation before we make it into law.
        To help control cost and schedule, the Air Force supports
    increasing use of incentive type contracts, where appropriate. The
    Better Buying Power 3.0 memorandum contains an initiative titled
    ``Employ appropriate contract types, but increase the use of incentive
    type contracts'' acknowledging the use of Cost Plus Incentive Fee
    (CPIF) and Fixed Price Incentive Firm (FPIF) contracts was highly
    correlated with better cost and schedule performance. The Under
    Secretary of Defense (Acquisition, Technology & Logistics) (USD(AT&L))
    encourages the use of ``formulaic incentives'' contracts, where the
    impact of overruns and underruns are shared between the industry and
    Government based on a formula established in the contract that
    explicitly ties the contractor's cost or benefit to performance.
        In addition the Air Force is paying close attention to
    requirements, making sure they remain stable throughout the programs
    development phase. This will help keep contractor and Government costs
    down. Further, the Air Force supports Government and defense industry
    determination of the minimum viable defense industrial base required to
    support national security (sector-based and not company specific).

        15. Senator Ayotte. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, in a January 22 report, the Defense Business Board
    highlighted what they believed to be $125 billion dollars in savings
    that can be achieved over the next five fiscal years through a series
    of business practice recommendations. The biggest potentials for
    savings they identified were through more rigorous negotiations for
    contract goods and the retirement and attrition of civilian and
    contract workers. Have each of you had the opportunity to review this
    report, and what type of positive or negative impacts do you believe
    recommendations such as these could have on the acquisitions process?
        Ms. Shyu. The Defense Business Board's report, titled
    ``Transforming DOD's Core Business Processes for Revolutionary
    Change,'' concludes that approximately $46-89B in savings can be
    achieved through optimization of contract spending. Specifically, the
    report recommends more rigorous vendor negotiations, aggregating spend
    to gain economies of scale, and reducing contract duplication. To this
    end, the Army is pursuing efficiencies and cost savings through many
    initiatives consistent with the report. In 2012, the Army implemented
    the Services Acquisition Implementation Plan to improve services
    acquisition oversight, management, and execution, with the ultimate
    goal of achieving five percent annual savings on service contracts. At
    the conclusion of fiscal year 2014, the Army's commands reported
    approximately $1.6B in savings as a result of implementing the
    optimization plan.
        As the Department continues to assess the findings and
    recommendations in the report, the Army will pursue efficiencies and
    cost savings through these efforts.
        Mr. Stackley. As noted, an experienced acquisition workforce is the
    single-most important fundamental in achieving strong, repeatable
    performance in Defense Acquisition. Our experience has shown us that
    the best acquisition outcomes are produced by the most experienced
    acquisition people, both in technical knowledge and business acumen.
    The focus on potential for savings through retirement and attrition of
    civilian workers with limited backfill raises concerns because it
    includes reductions in procurement and logistics which are key parts of
    the acquisition workforce that DON is working hard to restore. Since
    implementation of WSARA, the DON has modestly restored our acquisition
    workforce to where we believe it needs to be to support our programs
    while we are continuing to train and rebuild our acquisition workforce
    that supports our fielded systems, and supports our installations and
    our Sailors and Marines.
        Dr. LaPlante. Yes, I have read the report and do not see any
    positive outcomes from the recommendations to the acquisition processes
    for the following reasons:

          The report recommends creating Contract Optimization
    teams responsible to analyze and renegotiate the top 20-50 contracts in
    each major category. If the analysis and renegotiation were plausible,
    an endeavor of this magnitude would hurt an already overworked and
    understaffed acquisition community.
          o  The report suggests the team utilize part time expertise of
    Program Managers (PM), Contract Officers (CO), and Functional Sponsors.
    Contracting Officers are the only profession legally able to obligate
    the Government and are supported by PMs and functional sponsors with
    full time obligations.
          o  The report does not specify the members or disciplines of the
    150 full-time equivalents required to serve in a full time capacity
    with the Contract Optimization team. However, the PM's, CO's, or
    functional sponsors are not part of the core team.
          o  The report proposes a rack and stack of top contract
    categories to renegotiate based on size, complexity and contract terms
    without taking into consideration mission-critical requirements. Many
    services coded under the Knowledge Based Services portfolio are direct
    mission support. For example: System Engineering efforts performed by
    Original Equipment Manufacturer (OEM) in support of sustaining and
    flying a much older aircraft fleet than originally envisioned.
          The report identifies a 29 percent reduction in DOD
    workforce by managing retirements/attrition with limited backfills that
    could result in $50+ billion in total savings.
          o  Cuts leveraged through Human Resources (HR) have impacted the
    organization's ability to effectively manage the workforce based on the
    current environment.
          o  As it pertains to the acquisition process, civilian fill-
    actions do not meet current hiring demands. The slow speed of the
    hiring system actually causes us to miss out on many high caliber, high
    capacity candidates and leaves positions vacant for long periods. More
    and better HR capacity is needed at this time, not less.
          o  As we work to stay in line with industry while supporting our
    warfighters, the reductions imposed on the HR system limit the ability
    to bring in ``appropriately skilled'' IT experts to keep DOD current
    with ever changing technology.
                                     ______

                 Questions Submitted by Senator Jeanne Shaheen
                               acquisition reform
        16. Senator Shaheen. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, small businesses drive technological innovation and
    generate new ideas to benefit the defense industry. I am concerned that
    small businesses that develop new technology, or that improve existing
    technology that may reduce costs, often face barriers to entry in the
    defense acquisition system. What kind of reforms are necessary to allow
    small businesses to share their ideas and new technology and how do we
    reduce barriers to new entrants?
        Ms. Shyu. Small businesses foster innovation, but the risk and
    expense of conducting independent research and development can be
    present significant challenges to many small businesses. To assist
    these types of small businesses, the Army employs several efforts
    designed to attract small business innovation. The Small Business
    Technology Transfer (STTR) and Small Business Innovation Research
    (SBIR) programs allow small, technology-focused businesses to provide
    innovative research and development solutions in response to critical
    Army needs. The STTR program requires small businesses to formally
    collaborate with a large research institution, which combines the
    strengths of both entities and allows small businesses to leverage the
    infrastructure and expertise of larger institutions. The SBIR program
    is a highly competitive, awards-based program that encourages domestic
    small businesses to engage in research and development that has the
    potential for commercialization. The program encourages small
    businesses to explore their technological potential and provides the
    incentive to profit from its commercialization. This practice expands
    the Army's ability to leverage technological innovation from non-
    traditional small businesses that face barriers to entry in the defense
    acquisition system.
        As part of Better Buying Power, the Army is working with the Office
    of the Secretary of Defense to make it easier for small businesses to
    work with DOD. While the SBIR program has been successful in helping
    small businesses make progress in early technology development, it has
    only been moderately successful in helping businesses transition from
    development to production. To that end, the Department provides
    outreach to educate small businesses on Federal contracting and
    provides assistance to small businesses and Government personnel to
    facilitate transition of promising technologies.
        Mr. Stackley. The barriers to entering the defense market remain
    high as the overhead cost of entering and operating in a unique, uneven
    and overly bureaucratic market discourages entrants, both large and
    small commercial companies. The DON recommends that that the Congress
    work with USD(AT&L) in the current effort to identify and roll back
    legislation that has produced unnecessary and redundant regulatory and
    reporting burdens on Program Managers.
        The DON, through the Office of Naval Research, has effectively used
    Broad Agency Announcements for research topics to encourage small and
    large companies to share and develop their ideas and new or improved
    technologies. For small businesses, the DON has effectively used the
    Small Business Innovation Research (SBIR) and Small Business Technology
    Transfer (STTR) program to encourage small businesses to share and
    develop their new or improved technologies. To encourage small business
    participation in our programs, the DON has assigned each Deputy Program
    Manager the responsibility to be the small business advocate for all
    things associated with the program.
        Dr. LaPlante. As small businesses develop and improve technology,
    there are innumerable barriers to overcome in entering the defense
    acquisition system. In an effort to continually increase the industrial
    base and support the sustainment of small business, the Air Force has
    identified several barriers whereby change can occur via reform.
    Specific barriers in need of reform include: Transparency &
    Communication, Intellectual Property, Facilities Clearances, Timelines,
    and Market Research
        Transparency & Communication: The lack of transparency and
    communication during the procurement process has the effect of
    isolating offerors and as a result perpetuates an overall sense of
    distrust for Government acquisition. To combat this, the Air Force
    inserts small business professionals into acquisition planning early on
    in the process to not only provide advice but also ensure that the
    small businesses are kept informed of the acquisition progress,
    therefore alleviating distrust. In an effort to increase communication,
    small business professionals consistently encourage businesses to
    respond to pre-solicitation notices. As a result of this communication
    during `open dialogue periods', small business have a voice in how the
    acquisition strategy is shaped and developed prior to issuance of the
    solicitation. Small business professionals also garner trust by
    prioritizing small business participation through early consideration
    of set-aside opportunities and ensuring a level playing field among
    bidders via early release of requirements documents and technical
    libraries. As a result of these efforts, the Air Force has seen an
    increase in small businesses participation via both set-aside and full
    & open competitive awards.
        Intellectual Property: As a result of recurring small business
    industry engagements, the Air Force has obtained feedback from small
    business that protections related to intellectual property, and more
    specifically data rights, are in need of reform. For example, many
    small businesses are concerned with ``protecting'' themselves from the
    risk of unlawful access to or theft of trade secrets after entering
    into contracts with large prime contractors. To mitigate the
    impediments posed by this barrier the Air Force continues to hold Small
    Business Industry Days to educate small business and encourage further
    protection intellectual property rights by: i) tracking and documenting
    development work; ii) disclosing inventions; iii) utilizing
    nondisclosure agreements; iv) protecting proposal information through
    proper marking; and v) marking all deliverable technical data and
    computer software appropriately.
        Facilities Clearances: Facility clearance requirements continue to
    pose a barrier to small business participation in Government
    acquisitions. For example, present security policies mandate that
    businesses have a contract in place to even become eligible for a
    facilities clearance, which oftentimes is a pre-requisite for
    consideration for contract award. Additionally, the large costs
    associated with obtaining secured facilities only compounds existing
    policy challenges. There is a pressing need to facilitate opportunities
    for small businesses to obtain access to classified programs, an area
    where small business technology capabilities are paramount. To date,
    there has been no collectively identified solution to alleviate this
    barrier to entry.
        Timelines: The lengthy timelines associated with Government
    acquisitions present a barrier to small business participation. For
    example, small businesses may not have the necessary resources to
    expend to prepare a proposal for an effort that will likely not be
    awarded within a reasonable timeframe. In response, the Air Force
    Research Laboratory Center for Rapid Innovation is using new pilot
    program authority to establish a Strategic Innovation component of the
    SBIR program to generate innovative, game-changing concepts. This
    includes expanding and encouraging the use of Other Transaction
    Authorities, Cooperative Research and Development Agreements, Open
    Challenges, and Small Business programs.
        Direct to Phase II Pilot: One of the efforts undertaken by the Air
    Force to reduce the burden on small business is a Small Business
    Innovation Research (SBIR) direct to Phase II pilot program. This
    program will provide full and immediate research and development
    support to small businesses with mature technologies and concepts,
    therefore shortening the timeline associated with these complex
    requirements. Not only will reduce the number of associated low dollar,
    short duration Phase I contracts issued, but also it will expedite
    technology transition and achieve a higher return on investment for
    small business.
        SBIR EZ Pilot: Another initiative to reduce the timeline and burden
    associated with joining the SBIR program is the piloting of SBIR EZ.
    SBIR EZ will enhance the current application process through intuition
    based technology, allowing small businesses to quickly submit
    applications, as well as reduce the paperwork associated with the
    current process.
        Overall, there is a need to shorten the timeline associated with
    Government acquisition and create a joint information environment to
    remove barriers to entry and make programs more accessible to small
    business.
        Market Research: As the Air Force continues facilitate and increase
    small business participation, a barrier has been identified in our
    ability to conduct data-driven market research. Data-driven market
    research allows the small business professional to utilize a central
    database to locate and connect with capable small businesses to meet
    warfighter needs. Existing IT tools and systems not only limit this
    ability, but also present significant challenges when attempting to
    acquire strategic and enterprise wide market intelligence. While there
    are pockets of activity throughout the Air Force to improve this
    capability, there is currently no central repository that will
    systematically address enterprise needs and challenges.

        17. Senator Shaheen. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, the Quadrennial Defense Review Independent Panel
    found that ``the fundamental reason for the continued underperformance
    in acquisition activities is fragmentation of authority and
    accountability for performance.'' Can you provide a few specific
    measures that can be taken streamline and tailor the acquisition
    process and give Program Managers more authority and flexibility?
        Ms. Shyu. Acquisition reform has been attempted many times over the
    last several decades. However, while prior efforts recognized that the
    complexity of processes and rules in the defense acquisition system can
    limit flexibility and add time and cost to the process of developing
    and fielding new warfighting capabilities, few focuses on streamlining
    the process. To that end, the Army has actively worked with both OSD
    and Congress to develop several legislative proposals specifically
    designed to streamline the acquisition process, reduce redundant
    documentation, provide flexibility to program managers, and place
    greater emphasis on sound acquisition planning. These changes would
    allow program managers to tailor effective program strategies to meet
    cost, schedule, and performance goals while balancing technical risks.
    If enacted, these proposals inject much-needed agility and flexibility
    into the process while maintaining robust oversight of taxpayer
    dollars.
        Mr. Stackley. Lessons learned from highly successful programs
    highlight that the right balance is attainable by applying the
    fundamental disciplines already known and available to each program
    manager, then exposing the products of that discipline to simplified
    oversight by an appropriate but limited number of highly experienced
    managers, engineers and business executives who serve at the Service
    Secretariat and OSD levels in policy oversight capacities. The DON
    recommends that that the Congress work with USD(AT&L) in the current
    effort to identify and roll back legislation that has produced
    unnecessary and redundant regulatory and reporting burdens on Program
    Managers which have the effect of thwarting the steady application of
    these fundamentals.
        Dr. LaPlante. The Air Force, in conjunction with the Under
    Secretary of Defense (Acquisition, Technology & Logistics) (USD(AT&L)),
    has extensively studied mechanisms to help streamline and tailor the
    acquisition process. Overall, we recommend Congress institute the
    USD(AT&L)-recommended set of legislative proposals for the 2016 NDAA,
    which seek to reduce additional reporting requirements imposed on the
    defense acquisition workforce. Many of those proposals are included in
    the House-passed version of the 2016 NDAA.
        We also recommend allowing USD(AT&L), the Service Acquisition
    Executive (SAE), or the Milestone Decision Authority (MDA) to waive or
    submit statutory tailoring of ACAT programs. MDAs will ensure tailoring
    is consistent with sound business practice and the risks associated
    with the product being acquired. Justification for waivers will be
    documented in Selected Acquisition Reports (SARs) and MAIS Annual
    Reports (MARs) and will be included as an attachment to Acquisition
    Decision Memorandums (ADMs). Termination SAR/MAR will contain Program
    Manager, Program Executive Officer, and MDA assessments of statutory
    items that provided resistance and/or delays in program success.
        USD(AT&L), via DODI 5000.02, already allows MDAs to tailor
    regulatory procedures in the document consistent with sound business
    practice and the risks associated with the product being acquired.
    Further, the Air Force is instituting mandatory maximum review
    timeframes for statutory acquisition procedures and documents.
        USD(AT&L) continues to pursue streamlining documentation
    requirements and staff reviews under Better Buying Power initiatives in
    order to eliminate unproductive processes and bureaucracy.

        18. Senator Shaheen. Secretary Stackley, you stated that Virginia-
    class submarine procurement is an example of acquisition success. Can
    you highlight a few reasons why and outline what authorities or
    resources you need to replicate this acquisition success to other
    procurement programs?
        Mr. Stackley. The U.S. Navy's Virginia-class attack submarine
    program awarded a ten-ship Block IV contract to General Dynamics
    Electric Boat (GDEB) on April 28, 2014. The Block IV contract is a
    $17.6 billion fixed-price incentive fee, multiyear procurement contract
    with economic order quantity that continues the program's two-per-year
    build rate for fiscal years 2014 through 2018.
        The Block IV award is the largest shipbuilding contract in U.S.
    Navy history in terms of total dollar value and builds upon the
    Virginia-class program's successful Navy and industry relationship. The
    Block IV contract continues the Virginia-class teaming arrangement
    between prime contractor GDEB in Groton, Conn., and the major
    subcontractor Huntington Ingalls Industries--Newport News Shipbuilding
    (HII-NNS) in Newport News, Va. Entering into a multiyear procurement
    construction contract saved over $2 billion across Government and
    contractor furnished equipment, effectively getting ten ships for the
    price of nine as opposed to building the same ships under a more
    traditional annual procurement arrangement.
        The Block IV contract is the culmination of 20 months of work
    between the Navy and shipbuilders. The Navy and shipbuilders performed
    an in-depth analysis and thoroughly engaged on all elements of cost to
    produce a contract that is both fair to the Navy and industry. This
    contract lowers the per-ship cost compared to Block III. On average,
    the Block IV per-ship negotiated cost is approximately $100M less in
    constant year dollars than the Block III per-ship negotiated cost.
        Block IV submarines will incorporate modifications that reduce
    acquisition and lifecycle costs. Reducing the ships' total lifecycle
    cost, an initiative called ``3:15,'' aims to decrease the number of
    major shipyard availabilities from four to three, allowing for an
    additional deployment per hull--raising each submarine's capability
    from 14 to 15 full-length deployments. With the decrease in cost and
    the increase in capability, we are essentially getting more for less.
        Competitive edge features were also included in the Block IV
    request for proposal (RFP). It was structured to leverage the best
    potential ten ship scenario pricing by requiring the shipyards to
    propose both a five/five and a six/four delivery yard allocation. The
    contract included a six/four workshare allocation (6 to GDEB and 4 to
    HII-NNS). A ``win-back'' provision was included in the subcontract to
    allow HII-NNS to deliver the 18-2 ship (fifth HII delivered ship) based
    on certain improved performance criteria subject to Navy approval.
        The Virginia-class submarine program has delivered the last seven
    ships on budget and ahead of schedule. The last ship delivered, USS
    North Dakota (SSN 784), included a completely redesigned bow section as
    part of the Design for Affordability efforts. Additionally, USS North
    Dakota delivered with the highest quality of any Virginia-class
    submarine to date.
        Replicating this acquisition success in other programs would
    require congressional authority for use of multiyear procurement
    authority with funding for economic ordering quantity and streamlined
    acquisition approaches where appropriate. While Virginia-class Block
    contracts are sole-source, the shipbuilders are also motivated by
    innovative contracting approaches such as the optimal pricing six/four
    workshare allocation with a win-back provision. In addition, the Block
    IV team conducted robust, in-depth reviews of major second-tier
    vendors, analyzing labor hours, material, rates, and profits. These
    processes can be leveraged by any acquisition program.
                                     ______

                  Questions Submitted by Senator Mazie Hirono
                     overall acquisition reform/improvement
        19. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, Acquisition Reform has been around as long as the
    Government has been procuring items. Congress and the President began
    to use special commissions and panels to improve the process. Between
    the end of the Civil War and the end of WW II, groups chartered
    include: the Dockery Commission, Keep Commission, Shannon Committee and
    Truman Committee. Over the seven decades since the end of WW II, we've
    likely had 20 plus panels, commissions and industry groups who have
    made many recommendations to improve the acquisition management
    process. Yet, we still have programs with significant cost overruns and
    weapons systems with technical deficiencies. Obviously this is not
    something that can be ``fixed'' overnight. We want you to make the best
    use of tax payer dollars to provide the systems that the men and women
    of our armed services need to carry out their responsibilities.
        For each of you as expert practitioners in the field--I'd be
    interested in hearing what would be the number one item on your list to
    improve the acquisition process?
        Ms. Shyu. The number one item on my list is empowering Program
    Managers. Too often, past reforms have required additional oversight by
    stakeholders outside the acquisition chain. This external influence--
    without corresponding responsibility for outcomes--creates additional
    process and bureaucracy. The acquisition process must be reformed to
    empower Program Managers and Milestone Decision Authorities and foster
    mutual accountability by all stakeholders. Stakeholders involved in the
    process must be incentivized to identify problems and share
    accountability for program success. The acquisition process must also
    provide program managers the ability to tailor their acquisition
    approaches to fit program needs. Accordingly, the Department submitted
    several legislative proposals this year designed to reduce redundant
    documentation and allow program managers the flexibility to manage the
    specific risks inherent to their programs. The Army supports these
    proposals and their intended goal to balance effective oversight with a
    streamlined acquisition process.
        Mr. Stackley. An experienced acquisition workforce is the single-
    most important fundamental in achieving strong, repeatable performance
    in Defense Acquisition. Our experience has shown us that the best
    acquisition outcomes are produced by the most experienced acquisition
    people, both in technical knowledge and business acumen. The
    professional Acquisition Workforce, however, operates in a human
    capital system that was not designed with the 21st century professional
    employee in mind and is increasingly difficult to sustain. The Congress
    has recognized the need for a large, robust, highly qualified
    Acquisition Workforce and provided much-needed legislative relief
    through the Defense Acquisition Workforce Development Fund. The DON is
    grateful to the Congress for their continuing support. For the 21st
    century Acquisition Workforce more agility will be needed to hire and
    retain quality acquisition professionals with critical skills needed to
    attain and sustain the best acquisition outcomes.
        Dr. LaPlante. We believe ensuring we initiate programs with sound
    acquisition strategies, fixed, well-defined and affordable
    requirements, modular systems with open architectures, properly
    resourced program baselines, and deliberate measures to mature critical
    technologies to reduce technology and program risks is the number one
    item to reduce cost overruns and weapons systems with technical
    deficiencies in the acquisition process.
                                 rapid fielding
        20. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, I know that PACOM is concerned with the ability of
    the acquisition process to rapidly deliver the systems that they
    urgently need to meet the threats they face in the Pacific. Do you have
    the ability to make our slow moving system respond to urgent
    requirements?
        Ms. Shyu. Army field commanders and combatant commanders can
    identify urgent operational needs that jeopardize mission
    accomplishment through an Operational Need Statement (ONS). This
    provides an opportunity to the field commander, outside of the
    traditional acquisition and requirements process, to identify an urgent
    requirement needed to meet the threats they face. Once a commander
    endorses an ONS request, Army headquarters can quickly validate,
    authorize funding, and procure and field materiel solutions to meet
    these urgent needs. Accordingly, this ONS process allows the Army to
    quickly respond to urgent combatant commander needs outside the
    traditional defense acquisition system.
        Additionally, Combatant Commanders use the Integrated Priority List
    to characterize high priority needs across Service and functional lines
    in order to define shortfalls in the key areas which may severely
    affect the mission. These processes ensure that Combatant Commanders
    have a means to identify and prioritize the fulfillment of materiel
    needs to meet their urgent mission requirements.
        Mr. Stackley. The DON has demonstrated the ability to accelerate
    capability in response to urgent needs. The most significant example
    was the MRAP program. However, more recent examples--the Torpedo
    Defense System installed on USS George H.W. Bush (CVN 77) and the
    Transportable Electronic Warfare Module (TEWM) installed on board
    select ships deploying to the Eastern Mediterranean--are indicative of
    our ability to make the slow moving system respond to urgent
    requirements. Our current efforts are focused on making these examples
    more the norm by way of fundamental changes to the way we manage the
    Naval Research and Development Enterprise.
        Dr. LaPlante. Yes. Over the last 10 years we have demonstrated the
    ability to rapidly field capabilities and we continue to improve our
    processes. The AF identifies Quick Reaction Capability programs during
    the requirements process to respond to approved Urgent Operational
    Needs, Joint Urgent Operational Needs, and Top-Down Direction. The
    revised DODI 5000.02, Operation of the Defense Acquisition System,
    codifies several of acquisition processes and allows multiple paths for
    the services to rapidly field capabilities including one specifically
    addressing Rapid Acquisition. Supporting the Joint Urgent Operational
    Need (JUON) and emerging needs processes, there is a formal Warfighter
    Senior Integration Group (SIG) to identify urgent issues and a
    Secretary of Defense Rapid Acquisition Authority (RAA) Determination to
    rapidly field systems. Overall, the AF has the mechanisms in place to
    respond to approved urgent requirements.

        21. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, do you need the Congress to give you more
    flexibility or release from constraints in order to better support
    PACOM and other Combatant Commands?
        Ms. Shyu. Army field commanders and combatant commanders can
    identify urgent operational needs that jeopardize mission
    accomplishment through an Operational Need Statement (ONS). This
    provides an opportunity to the field commander, outside of the
    traditional acquisition and requirements process, to identify an urgent
    requirement needed to meet the threats they face. Once a commander
    endorses an ONS request, Army headquarters can quickly validate,
    authorize funding, and procure and field materiel solutions to meet
    these urgent needs. Accordingly, this ONS process allows the Army to
    quickly respond to urgent combatant commander needs outside the
    traditional defense acquisition system.
        Additionally, Combatant Commanders use the Integrated Priority List
    to characterize high priority needs across Service and functional lines
    in order to define shortfalls in the key areas which may severely
    affect the mission. These processes ensure that Combatant Commanders
    have a means to identify and prioritize the fulfillment of materiel
    needs to meet their urgent mission requirements.
        Mr. Stackley. While additional flexibility in acquisition is always
    welcome, in this particular case, the Navy has demonstrated the ability
    to rapidly field capability to Combatant Commanders in response to the
    well-defined Urgent Operational Needs (UONs) process. Recent examples--
    the Torpedo Defense System installed on USS George H.W. Bush (CVN 77)
    and the Transportable Electronic Warfare Module (TEWM) installed on
    board select ships deploying to the Eastern Mediterranean--are
    indicative of our ability to make the slow moving system respond to
    urgent requirements. Our current efforts are focused on making these
    examples more the norm by way of fundamental changes to the way we
    manage the Naval Research and Development Enterprise.
        Dr. LaPlante. No. The Air Force uses all the rapid acquisition
    authorities provided to us to respond to any Warfighter urgent needs.
    To ensure a flexible acquisition environment, the Air Force has an
    urgent operational needs process to address capability gaps that would
    result in imminent loss of life or result in critical mission failure
    during a current conflict or crisis situation. To address urgent
    capability gaps which require synchronization across multiple Services,
    the Air Force participates in the Joint Urgent Operational Needs
    process and the Warfighter Senior Integration Group.
                           cybersecurity acquisition
        22. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, cybersecurity is a field that appears to be moving
    much faster than the acquisition processes you describe. In my state,
    we have a number of small businesses with good technologies, but I
    wonder if we can move fast enough to take advantage of them. How can we
    do a better job of buying and deploying the best cybersecurity systems
    in a timely manner?
        Ms. Shyu. The Army recognizes that innovation in cyberspace
    capabilities and cybersecurity will be essential in order to defend
    against sophisticated threats in an increasingly complex and contested
    environment. The Army is actively addressing barriers to non-
    traditional innovative companies through the tenets outlined in the
    Defense Secretary's April 2015 Department of Defense (DOD) Cyber
    Strategy: information sharing and interagency coordination, building
    bridges to the private sector, and building partnerships abroad.
        The Army has a number of active defensive and offensive cyberspace
    pilots to broaden information sharing and interagency coordination, to
    include establishing academic and industry consortia. For example, the
    Army hosted a cyberspace industry and innovation day on 28 May to
    outline requirements and capability needs for industry. Such efforts
    support market research needs and drive awards to vendors through
    existing DOD contract mechanisms. Additionally, the Army will host a
    Cyberspace Challenge in August that will use the integrated cyber
    laboratory at Aberdeen Proving Ground to allow vendors to demonstrate
    their innovative technology to potential Government partners.
        Second, the Army is utilizing consortia hosted by industry and
    contracting instruments such as Other Transaction Authorities to
    acquire new capabilities. These instruments support flexible
    contracting arrangements with industry for innovation and service to
    attract innovative firms that do not typically do business with the
    Government. The Army is looking at the potential use of multiple
    existing cyberspace consortium efforts, including both the Army led C5
    consortium at Picatinny Arsenal and the DOD led Cyberspace consortium
    at Defense Technical Information Center.
        Third, the Army is actively working with partner nations to
    leverage their cyberspace capabilities. The Army has already begun
    cyberspace discussions with partners from the Brazilian Army Center for
    Cyber Defense and the Chilean Cyber Army, and is actively looking for
    other cooperation opportunities. The Army is also planning its first
    coalition Network Integration Evaluation at Fort Bliss in fiscal year
    2016 that will include partners from multiple countries and include a
    variety of cyberspace attack and defense scenarios on a fully
    integrated coalition network environment.
        Finally, commercial innovation can also be built directly into Army
    contract structure(s). The strategy--grounded in Better Buying Power
    principles--includes frequent competitions among multiple vendors for
    mature capabilities, driving innovation while maintaining
    interoperability between different vendor systems, allowing the Army to
    incrementally provide capabilities. For example, to set the conditions
    for future upgrades, the Army will enable ``plug-and-play'' insertion
    of new capabilities on existing platforms. This concept encourages
    competition among a wide pool of potential competitors, to include non-
    traditional partners, which lowers the cost of integrated technology
    solutions. To further encourage competition and innovation, the common
    operating environment provides software development kits, which enables
    interested industry partners to contribute new tactical applications to
    a standard baseline. These methods create a competitive environment
    that will allow us to more quickly procure and insert innovative
    technologies.
        Mr. Stackley. The Department of the Navy (DON) routinely engages
    industry, both small and large companies, to evaluate emerging cyber
    technologies to keep apprised of what is available to help ensure the
    integrity and availability of DON systems. These engagements include
    industry days, conferences, office calls and site visits/capability
    demonstrations. The DON designs contracts to take advantage of small
    business offerings. The DON also has an active fellowship program where
    our program managers and engineers spend up to a year working in
    industry, where they are exposed to best commercial business practices,
    including the value of speed as a critical enabler, as well as pressing
    cyber security issues businesses are facing.
        The latest instantiation of our afloat and ashore networks offer us
    better internal configuration control and network management and
    monitoring tools to more rapidly detect and respond to threats. In
    addition, the contract for ashore networks contains a 35 percent small
    business requirement which explicitly allows for small businesses to be
    assessed for a variety of network contributions, including
    cybersecurity.
        The DON has also established an Innovation Cell within the Program
    Executive Office for Enterprise Information Systems to examine
    alternatives to accelerate the integration of commercially available
    technologies and services (e.g. cloud) into the Naval Business IT
    Enterprise. The Innovation Cell is an assessment framework focused on
    enabling rapid acquisition and deployment of emerging capabilities and
    providing technical and business analysis data in a manner that is
    consumable across the Department of Defense. The Innovation Cell seeks
    to accelerate acquisition of new information technologies, including
    those related to cybersecurity. The Innovation Cell works closely with
    program office staffs to identify enterprise challenges, then seeks
    collaborative engagements with Industry to bridge between available
    technologies and refined requirements. The Innovation Cell is creating
    a competitive environment far in advance of any acquisition. In
    addition, the Innovation Cell process enhances the opportunity for
    small business to propose their recommended solution.
        Dr. LaPlante. In order to buy and deploy the best cybersecurity
    systems in a timely manner, the Department of Defense should continue
    to streamline acquisition, empower program managers, leverage
    continuous monitoring, and manage risk for all weapon systems.
        On January 7, 2015, OSD released a revised DODI 5000.02, Operation
    of the Defense Acquisition System, that addresses these efforts. In
    this latest instruction, OSD continued to reinforce the ability for
    program managers to tailor program execution; ``The structure of a DOD
    acquisition program and the procedures used should be tailored as much
    as possible to the characteristics of the product being acquired, and
    to the totality of circumstances associated with the program including
    operational urgency and risk factors.'' It also includes examples and
    models to aid program offices, acquisition decision-makers, and
    operators to generate requirements and structure programs to enable
    efficient execution and higher probabilities of programmatic success.
    Specifically, it includes models that are designed to field systems
    rapidly while still considering all the necessary risks and threats
    against that type of systems, including cybersecurity. Additionally,
    the DOD is developing a new enclosure to the DODI 5000.02 which will
    specifically address cybersecurity while continuing the transition to
    the Risk Management Framework.
        Within the Air Force, Air Force Materiel Command (AFMC) and Air
    Force Space Command (AFSPC) have been working diligently to improve the
    responsiveness of satisfying cyber requirements to counter ever-
    increasing threats in cybersecurity. Currently, improvements are
    focused in three areas: three tier delivery model, streamlining
    acquisition processes, and organization of AFMC resources to improve
    responsiveness of solutions and collaboration with Air Force cyber
    operations. The three tier delivery model provides a framework for the
    acquisition community to determine the right acquisition approach based
    on requirements and time constraints. In this framework, cybersecurity
    requirements are satisfied through real-time operations and innovation
    (less than 180 days), rapid acquisition (less than 18 months), or
    foundational acquisition (greater than 18 months). Additionally, AFMC
    has put in place several processes and tools to streamline cyber
    acquisition, including the adoption of the Cyber Acquisition Process
    Pilot and maximizing the set of technology producers (both large and
    small) through Broad Agency Announcements and Indefinite Delivery
    Indefinite Quantity contracts. Finally, AFMC has reorganized its cyber
    acquisition organizations to align with the cyber operations community.
    Through these three improvement areas, the Air Force acquisition
    community is better positioned to collaborate, understand requirements,
    and develop courses of action to meet cyber requirements in a timely,
    efficient, and effective manner.
        The Air Force will continue to update published guidance and
    promote tailoring of acquisition processes to satisfy cybersecurity
    requirements, which include creating opportunities for small business.
                         processes that don't add value
        23. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, yesterday, the Chairman called a hearing to
    consider the nomination of Peter Levine to be the Chief Management
    Officer at the Pentagon. We discussed the many levels of checks and
    balances and numerous reports that don't seem to add value, but appear
    to add cost and time to our programs. Can you give some examples of
    those kinds of processes that fit the description from your point of
    view?
        Ms. Shyu. Historically, Congress and DOD respond to specific
    program failures by instituting specific processes and documents
    designed to prevent similar issues in future programs. Over time, these
    responses have resulted in a complex, cumbersome, and inflexible
    acquisition process.
        One example is the requirement for a stand-alone manpower estimate
    report (MER). This requirement was designed to ensure that manpower
    costs associated with weapons systems are fully considered at key
    program milestones. However, the statutory requirements duplicates
    separate processes that generate this information for consideration
    elsewhere in the acquisition process. As such, the Department proposed
    the elimination of this redundant requirements that generates
    unnecessary documentation.
        Another example is the milestone certification required by 10 USC
    2366a and 2366b. These statutes require consideration and documentation
    of certain findings at program milestones which duplicate paperwork
    required elsewhere in the acquisition process. For example, 10 USC
    section 2366b requires certification of a valid requirement for weapon
    systems, which is a predicate to the existence of an acquisition
    program.
        Any time spent by program managers on producing and staffing
    unnecessary documents is time that could be spent on effectively
    managing programs.
        Mr. Stackley. The Acquisition System Framework flowchart includes
    documents, steps and processes that involve multiple layers of
    prescriptive processes, authoritative organizations and extensive
    reporting and documentation requirements. The DON recommends that that
    the Congress work with USD(AT&L) in the current effort to identify and
    roll back legislation that has produced unnecessary and redundant
    regulatory and reporting burdens on Program Managers.
        Dr. LaPlante. The Department of Defense (DOD) concurred with the
    recommendations of the GAO Report ``Acquisition Reform: DOD Should
    Streamline Its Decision-making Process for Weapons Systems to Reduced
    Inefficiencies'' to minimize any reviews between the program office and
    the different functional staff offices within each chain of command
    level and establish frequent, regular interaction between the program
    office and milestone decision makers, in lieu of documentation reviews.
        To ensure the Enterprise is not getting in the way of PM
    accountability, we have performed a review of all acquisition documents
    and the organizations outside the acquisition execution chain who
    review them for coordination and approval.
        We are following the accountability and responsibility of the
    Better Buying Power 3.0-specified action to re-validate the need for
    organizations to coordinate or approve the documents. This
    revalidation, which I will personally approve upon completion, can
    potentially streamline the number of individuals and organizations in
    the approval process; thereby, reducing unnecessary schedule delays. In
    addition, we are automating the document review process using the
    Electronic Coordination Tool (ECT), which allows us to control review
    times. We currently use ECT to route a program's acquisition strategy
    for review and will systematically load other acquisition documents
    into ECT.
        We also worked with and support the legislative proposals that OSD
    submitted to Congress for the 2016 NDAA that included several
    recommended changes to program documentation, which reduces redundant
    and unnecessary documentation burdens on Program Managers. It also
    included some recommendations to consolidate related statutory
    requirements to help programs comply with all statutory requirements
    and minimize excess documentation.

        24. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, if we gave more authority to you three to manage
    your programs, would that relieve some of this burden and speed things
    up?
        Ms. Shyu. The Army supports efforts to promote flexibility and
    streamlined oversight of Major Defense Acquisition Programs. To this
    end, the Army worked extensively with Office of the Secretary of
    Defense (OSD) and Congress to develop legislative proposals designed
    specifically to streamline the acquisition process and provide
    increased flexibility to program managers. These proposals inject much-
    needed agility and flexibility into the process while maintaining
    robust oversight of taxpayer dollars.
        OSD performs an annual review of ACAT ID and special interest
    programs and determines if the program can be delegated to the
    Services. Increased authority to manage programs at the Service level
    would provide additional flexibility.
        Mr. Stackley. Lessons learned from highly successful programs
    highlight that the right balance is attainable by applying the
    fundamental disciplines already known and available to each program
    manager, then exposing the products of that discipline to simplified
    oversight by an appropriate but limited number of highly experienced
    managers, engineers and business executives who serve at the Service
    Secretariat and OSD levels in policy oversight capacities. The DON
    recommends that that the Congress work with USD(AT&L) in the current
    effort to identify and roll back legislation that has produced
    unnecessary and redundant regulatory and reporting burdens on Program
    Managers which have the effect of thwarting the steady application of
    these fundamentals.
        Dr. LaPlante. Allowing the Under Secretary of Defense (Acquisition,
    Technology & Logistics) (USD(AT&L)), the Service Acquisition Executives
    (SAEs), or Milestone Decision Authorities (MDAs) to waive or submit
    statutory tailoring of ACAT programs is an example where processes
    could be improved. MDAs will ensure tailoring is consistent with sound
    business practice and the risks associated with the product being
    acquired.
        USD(AT&L), via DODI 5000.02, already allows MDAs to tailor
    regulatory procedures in the document consistent with sound business
    practice and the risks associated with the product being acquired.
                      training, recruitment and retention
        25. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, obviously, your people are the most important part
    of this endeavor. Without a capable and motivated workforce, all the
    changes to rules and regulations will not amount to much. In your view
    are there things that Congress can do to help you recruit and retain
    the best workforce possible?
        Ms. Shyu. The development and retention of talent in acquisition
    disciplines is an essential ingredient to the accountability and
    effectiveness of the acquisition system.
        Congress can help strengthen recruitment and retention of the best
    talent by making the Defense Acquisition Workforce Development Fund
    (DAWDF) and the Expedited Hiring Authority (EHA) permanent. DAWDF is
    currently set to expire in fiscal year 2018 (fiscal year 2018). Since
    the establishment of DAWDF, the Army has hired 2,127 interns and
    journeymen in mission-critical acquisition career fields. With DAWDF,
    the Army is able to invest in the continuing education and
    professionalism of our acquisition workforce. DAWDF has also allowed
    the Army to fund a Student Loan Repayment Program, which acts as a
    retention tool to maintain more than 4,000 Army acquisition
    professionals in mission-critical acquisition career fields, who are
    required to sign a 3-year service agreement. EHA is set to expire in
    fiscal year 2017. As over 50 percent of our Army Acquisition Workforce
    is eligible to retire in 10 years, permanent EHA will assist the Army
    in securing critical acquisition talent and enable proper succession
    planning for the future. Direct Hire Authority specified for mission
    critical acquisition career fields may enable us to reach out to recent
    college graduates and industry for new talent.
        Mr. Stackley. The Navy appreciates the support of Congress for the
    Acquisition Workforce, especially the Defense Acquisition Workforce
    Development Fund for hiring and retention and would like to see that
    support continue permanently.
        The vitality of Acquisition Corps has suffered due to personnel
    actions affecting the federal workforce including mandated reductions,
    furloughs, sequestration, unstable budgets and retirements. To retain
    the best talent we must find ways to minimize the exposure to forces
    that threaten the Acquisition Corps. Other potential initiatives
    include:

          Make permanent Direct Hiring Authority to provide a
    mechanism to hire quickly and better enable the Navy to compete for the
    best talent in the nation.
          Make the Acquisition Demonstration Project permanent to
    eliminate the recent pay plan roller coaster and provide a pay-for-
    contribution plan.
          Provide authority to build partnerships with universities
    for student internships followed by hiring to assist in immersing
    students in the Navy technical fields and accessing state of the art
    technologies which would assist in hiring and retention.
          Establish a special pay category or incentive structure
    for senior Acquisition Corps members (typically PMs/DPMs/BFMs
    responsible for multi-billion dollar programs) to increase the
    competitiveness of the positions and assist in retention.
          Establish a pilot program to experiment with retention to
    help shape and train the Acquisition Corps. Potential pilots could
    include:
          o  Government/Industry one-year personnel exchange agreements
    would allow the Navy to benefit from the knowledge of industry
    innovation, business streamlining and challenges. Conversely industry
    would benefit from understanding the capabilities of the Navy and offer
    potential insights to more effective partnering. These agreements could
    also add insight to workforce development, retention and succession
    planning.
          o  Specialized training in critical skill areas with retention
    incentives.
          o  Educational benefits for the civilian Acquisition Corps
    similar to the Post 9/11 GI Bill.
          o  Student loan forgiveness for Acquisition Corps members.
        o  Special post-PM/DPM positions to mentor and train the next
    generation Acquisition Corps.

        Dr. LaPlante. I believe we have the flexibilities and resources in
    place to recruit and retain the talent we need. We are especially
    appreciative of the acquisition-specific authorities provided by the
    Defense Acquisition Workforce Development Fund (DAWDF) and Expedited
    Hiring Authority (EHA), as well as the Acquisition Personnel
    Demonstration Project (``Acq Demo''). Legislation in work which would
    make DAWDF and EHA permanent will lend stability and increase
    confidence in our organizations for using these authorities.
        In the current austere budget environment, DAWDF has become even
    more important to our efforts to maintain and improve a highly capable
    acquisition workforce. We have become much more reliant on DAWDF for
    training, as well as to increase our ability to find and recruit
    outstanding talent. We have also used DAWDF to offer retention
    incentives for personnel in high-demand career fields such as
    contracting and engineering. Continued support for DAWDF is critical.
        The highly-talented candidates we seek in the job market have a
    choice of where they choose to work. If we are to attract and motivate
    the ``best of the best'' to the challenging work we offer, I believe it
    is incumbent upon all of us in Government to help ``sell'' the career
    opportunities, pride and personal satisfaction available through
    Government service.
                          ndaa 2015 study requirement
        26. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, the fiscal year 2015 National Defense Authorization
    Act included a requirement (on p. 745) that the Secretary of Defense
    submit a report to the congressional defense committees, no later than
    180 days after the enactment of this Act, regarding how the DOD is
    considering the operational impact of energy logistics through energy
    supportability analysis. Lifecycle energy costs are an important
    consideration for acquisition reform. Can you provide a status update
    on how this study is progressing?
        Ms. Shyu. Pending a review of the final report that is currently in
    staffing with the Office of the Secretary of Defense, we will
    incorporate appropriate changes into our acquisition and logistics
    policies as part of our continuing effort to reform acquisition within
    the Army. As an interim step, we adjusted our product support policy in
    October of 2014 to consider design for energy efficiency. The new
    policy calls for materiel developers to conduct product support
    analysis to assess opportunities that improve energy efficiency where
    feasible and assess operational effects throughout the products
    lifecycle.
        Mr. Stackley. The study was submitted to the congressional defense
    committees on August 6, 2015, by the Undersecretary of Defense.
        Dr. LaPlante. The Office of the Secretary of Defense has drafted
    the subject report and is circulating it for comment.
                               service contracts
        27. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, the Department has said that it is 30 percent
    compliant with the fiscal year 2008 requirement to develop an inventory
    of service contracts and integrate those results into the budget
    process. Please explain how the Department arrived at this
    determination.
        Ms. Shyu. The 30 percent compliance represents the percentage of
    services contracts contained within the Enterprise-wide Contractor
    Reporting Manpower Application (ECRMA) for fiscal year 2014 across the
    Department of Defense. The Army uses the CRMA as its primary vehicle to
    compile and review its annual inventory of services contracts contained
    within the CRMA and continues to work with the Office of the Under
    Secretary of Defense (Personnel and Readiness) to integrate the results
    of this inventory into the budget process.
        Mr. Stackley. The Department of the Navy (DON) understands the 30
    percent to be a fiscal year 2014 target that will increase to 90
    percent in the next few years. The target is related to increasing the
    percentage of services contracts that contain the Enterprise-wide
    Contractor Manpower Reporting Application (eCMRA) reporting
    requirement. The DON is including this requirement in all new service
    contracts.
        The DON is compliant with the statutory requirements to develop an
    inventory of contracted services (ICS) and has submitted the inventory
    each of the past five years. The contractor's reporting in eCMRA is
    improving the accuracy and fidelity of data captured in the ICS.
        Dr. LaPlante. We will defer to USD(P&R) to answer this question as
    they provided this overall assessment, but our understanding is that
    this 30 percent factor is the percentage of DOD contracts that have
    incorporated the reporting requirement for contractors to provide their
    man-hours and labor dollars into the Contractor Manpower Reporting
    Application (CMRA) as of our fiscal year 2013 Inventory of Contracted
    Services (ICS). In November 2012, the AF directed incorporation of
    provisions within all of our contracts for the use of the Army designed
    CMRA. Currently, we are nearly complete in the contract modifications,
    but are still working with our contractors on the reporting processes.

        28. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, Mr. Levine testified that the Army has a system in
    place to determine the number of contractor employees while the other
    military departments rely on a conversion factor. It is my
    understanding the Department in 2012 mandated the use of the Army
    system for all DOD Components and in fact resourced that capability.
    Can you please clarify--are other Components in fact using system(s)
    similar to the Army's?
        Ms. Shyu. The Department of the Army utilizes the Contractor
    Manpower Reporting Application (CMRA) to collect information on
    services contracts and comply with the annual contractor inventory
    requirement. Furthermore, the Army is leveraging the Panel for
    Documenting Contractors (PDC), a module within the CMRA, to enable
    commands to better project their contract services requirements. The
    Army will pilot a process in fiscal years 2018-2023 that will leverage
    the data collected by the PDC module in order to better plan and
    program for these contracts.
        Mr. Stackley. The Department of the Navy (DON) is using a system
    modeled after and very similar to the Army's. It is an early Army
    version with tailoring for DON organizational structure, business
    processes, and nomenclature.
        The DON is capturing contractor direct labor hours for an
    increasing number of service contracts each year.
        Dr. LaPlante. Public Law 112-10, the DOD and Full-Year Continuing
    Appropriations Act 2011, Section 8108 (System to Document Contractor
    FTEs)--required the Air Force and Navy to leverage the Army's
    Contractor Manpower Reporting Application (CMRA), modified as
    appropriate for Service specific requirements, for documenting the
    number of contractor FTEs (or its equivalent) pursuant to USC Title 10
    Section 2330a(c) and meeting the requirements of USC Title 10, Section
    2330a(e) and USC Title 10, Section 235.
        The Air Force's CMRA system was operational on 1 Oct 12 and was
    used to inform both the fiscal year 2013 and fiscal year 2014 Inventory
    of Contracted Services. The primary difference in our system versus the
    Army's system is the maturity of the data and the enabling processes
    and procedures. The Army's reporting system is more robust since they
    have been using it for years. The Air Force, DOD Fourth Estate, and
    Navy applications have been able to incorporate many of the Army's
    lessons learned, but are still not 100 percent fully implemented
    primarily due to contractor reporting ``ramp-up''.

        29. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, what are the specific challenges of creating a
    common reporting application?
        Ms. Shyu. While Congress continues to urge the DOD to implement a
    common reporting application to support its annual inventory of
    services contracts, multiple challenges hinder these efforts. First,
    the Department lacks sufficient dedicated resources to successfully
    manage a common reporting application. To remedy this, representatives
    from the Army and other military departments are currently working with
    the Acting Assistant Secretary of Defense (Readiness and Force
    Management) to redefine and re-scope the missions, functions,
    organizational placement and composition of the Total Force Management
    Support Office (TFMSO). Second, the Department lacks a methodology to
    consistently identify Closely Associated with Inherently Governmental
    (CAIG) functions. Some of the inventory review processes may not be
    sufficient to accurately identify CAIG functions. Consistent
    methodologies must be established across the Department of Defense as
    an initial step in developing and applying a common reporting
    application.
        In order to combat the challenges related to implementing a common
    reporting system, the Army is working to designate a senior official
    responsible for managing the Contractor Manpower Reporting Application
    (CMRA). This designee will work with the Air Force, Navy and other DOD
    components to establish a defined path forward and ensure to the Army
    supports the implementation of a common reporting system.
        Mr. Stackley. For a single application, the challenges would
    include standardizing business rules and processes across the
    Department, instituting data standardization, transforming and
    migrating existing data structures, and the related training
    implications.
        Dr. LaPlante. As stated in question 28, we are all using primarily
    the same reporting application, CMRA, albeit slightly different
    operating versions. One specific challenge area, which is continuing to
    be discussed within DOD, is how do we best use this information to
    ensure that it is integrated into the acquisition, requirements
    determination, programming, and budget business processes internal to
    the Military Departments and DOD.

        30. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, what is the Department's current timeline for full
    implementation, including developing rules and standardized business
    processes, to bring all components onto the system and to rely on the
    data for budget analysis?
        Ms. Shyu. In October 2013, the Department of Defense (DOD) fielded
    a system based on the Army's Contractor Manpower Reporting Application
    (CMRA) system, to support the remaining Defense components, to include
    the Air Force and Navy. Each of the four CMRA systems is independent,
    maintaining its own interface, but all are accessible through a common
    webpage. In March 2015, the Office of the Under Secretary of Defense,
    Personnel and Readiness (OUSD P&R) established a working group with
    members from across the DOD to continue maturing the CMRA systems and
    to develop one, common application. As the Army's CMRA system is
    significantly more mature than the other systems, and contains
    capabilities for projecting contracted services for purposes of
    integration into the programming, planning, and budgeting activities,
    the working group will use it as a basis to develop the DOD-wide common
    application. The timeline for full implementation, and subsequent
    development of standardized rules and business processes, are currently
    in the initial stages of development.
        Mr. Stackley. Office of the Under Secretary of Defense for
    Personnel and Readiness is leading an effort to migrate the Department
    to the Defense Manpower Data Center by the end of 2015 to establish a
    ``common environment'' for hosting and maintenance and support of the
    applications. Once transition occurs, the Department plans to develop
    the rules and business processes to bring about a ``common solution''
    across all elements of the Department.
        Dr. LaPlante. Office of the Under Secretary of Defense, Personnel &
    Readiness OSD(P&R) is leading a working group where the AF is
    participating. The timeline for full implementation and the rules and
    standardized business process have not been finalized.
                         total force management office
        31. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, has the Total Force Management Support Office been
    stood up?
        Ms. Shyu. No. Representatives from the Office of the Assistant
    Secretary of the Army (Manpower and Reserve Affairs) and other Military
    Departments are working with the Acting Assistant Secretary of Defense,
    Readiness and Force Management to redefine and re-scope the missions,
    functions, organizational placement, and composition of the Total Force
    Management Support Office.
        Mr. Stackley. A working group has been established by the Office of
    the Under Secretary of Defense for Personnel and Readiness and the
    Department of the Navy is an active participant. The working group is
    developing the necessary work functions and associated skill sets for
    the Total Force Management Support Office.
        Dr. LaPlante. We expect that the Total Force Management Support
    Office will be stood up by September 2015.

        32. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, if so, how many fulltime employees does it have?
        Ms. Shyu. The Office of the Under Secretary of Defense, Personnel
    and Readiness, is reviewing the resource requirements for the Total
    Force Management Support Office. While currently planned to be staffed
    with six full-time employees, this number could change.
        Mr. Stackley. The number of fulltime employees for the Total Force
    Management Support Office (TFMSO) has not yet been defined by Office of
    the Under Secretary of Defense for Personnel and Readiness. A working
    group has been established to support the stand-up of the TFMSO by
    developing the necessary work functions and associated skillsets
    required; the number of fulltime employees desired will be based on the
    work functions and the skillset requirements determined by the working
    group. The DON is an active participant on that working group.
        Dr. LaPlante. The working group, established to support the stand-
    up of the Total Force Management Support Office, is developing the
    necessary work functions and associated skillsets required; the number
    of full-time employees desired will be based on the work functions and
    the skillset requirements determined.

        33. Senator Hirono. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, to whom will the leader of this office report?
        Ms. Shyu. The Office of the Under Secretary of Defense, Personnel
    and Readiness, is reviewing the resourcing requirements and
    organizational structure of the Total Force Management Support Office.
        Mr. Stackley. The current deliberations of the working group are
    recommending that the Total Force Management Support Office (TFMSO)
    Lead receive policy oversight and guidance, as well as operational and
    technical direction, from the Office of Total Force Planning &
    Requirement within the Office of the Under Secretary of Defense for
    Personnel and Readiness (OUSD (P&R)). The TFMSO itself is expected to
    be an element of the Defense Human Resources Activity, a field activity
    of the OUSD (P&R). The working group continues to define mission,
    tasks, functions, and associated skillsets. The command and control
    structure of the TFMSO is currently being developed.
        Dr. LaPlante. At present time, it is anticipated that the Total
    Force Management Support Office (TFMSO) will report to the Assistant
    Secretary of Defense for Manpower and Reserve Affairs (under the
    auspices of the Under Secretary of Defense for Personnel and Readiness)
    for policy direction. The Director, Defense Human Resources Activity
    will provide administrative support (also under the auspices of the
    Under Secretary of Defense for Personnel and Readiness).
                                     ______

                 Questions Submitted by Senator Martin Heinrich
                               acquisition reform
        34. Senator Heinrich. Secretary Shyu, one of the issues that is
    hampering acquisition programs is ``requirements creep'', that is: we
    keep changing what we want our systems to do, even while we are
    building them. For example, we may add new features to a combat
    vehicle, which adds to complexity and cost. How do we try to control
    this kind of change in requirements and the negative effects it has on
    acquisition programs?
        Ms. Shyu. The Army conducts Configuration Steering Boards (CSB) for
    all required Major Defense Acquisition Programs/Major Automated
    Information System programs and encourages them for all other
    acquisition programs. CSBs bring
    together members of the acquisition, requirements, and resourcing
    communities to review system requirements and technical configuration
    changes to help achieve program objectives in terms of cost, schedule,
    and performance. Additionally, many programs use a pre-planned
    Knowledge Point (KP) process to manage requirements through expanded
    collaboration between our program managers and combat developers. This
    review process identifies and addresses key trade-offs that affect
    affordability and performance. Moreover, this process allows senior
    leaders to align requirements and resources early in the program's
    development, maximizing our
    investments by achieving the best capability at an affordable cost
    through cost-informed trades and capability prioritization. This
    process was used successfully in the Armored Multi-Purpose Vehicle and
    Joint Light Tactical Vehicle, resulting in executable and affordable
    programs.

        35. Senator Heinrich. Secretary Shyu, in your testimony you state
    that DOD's ``requirements generation process often develops in
    isolation, based on operational desires removed from engineering and
    resource constraints. The results are requirements based on ideal
    aspirations versus ``good enough'' operational utility.'' How do you
    specifically propose we address the requirements process so that we can
    stop making ``the perfect'' the enemy of ``the good enough''?
        Ms. Shyu. Requirements must be informed by technical feasibility,
    from the initial concept phase through development. To meet a series of
    requirements, a program manager must balance product performance
    against competing priorities, such as cost, delivery schedule, size,
    weight, power consumption, reliability and risks. Informed trades among
    the competing priorities are essential to achieving operational
    capability.
        To ensure requirements are achievable, the Army must fully
    understand the limits of the trade-space, which is informed by
    technical designs, intended product operation, and the availability of
    critical enabling technologies. Our industry partners must be involved
    in providing this trade-space early on in the acquisition process since
    they design and manufacture the products. To this end, there are
    several initiatives that aim to improve the Army's understanding of
    requirements and the trade space throughout product development.
        First, during concept and development, prototyping for critical
    enabling technologies reduces technical risk and informs technical
    design analyses. Involving industry early in the design process,
    through prototyping and feedback on draft requirements, will enable
    detailed technical feedback for informed trade analyses.
        Additionally, the Army conducts Configuration Steering Boards (CSB)
    for Major Defense Acquisition Programs/Major Automated Information
    System programs and encourages them for all other acquisition programs.
    CSBs bring together members of the acquisition, requirements, and
    resourcing communities to review system requirements and technical
    configuration changes to help achieve program performance objectives
    while ensuring the systems remain affordable. Additionally, many
    programs use a pre-planned Knowledge Point process to manage
    requirements through expanded collaboration between our program
    managers and combat developers. This review process identifies and
    addresses key trade-offs that affect affordability and performance.
    Moreover, this process allows senior leaders to align requirements and
    resources early in the program's development, maximizing our
    investments by achieving the best capability at an affordable cost
    through cost-informed trades and capability prioritization.
        From a broader perspective, we aim to increase a program manager's
    ability to understand and mitigate technical risks through annual
    program assessment reviews. These annual program assessments require
    the program manager to analyze the technical aspects of the program,
    including requirements feasibility, and emphasize ongoing risk
    mitigation strategies with the acquisition chain of command.

        36. Senator Heinrich. Dr. LaPlante, if we don't understand what we
    are buying, it is hard to pin down an appropriate cost and schedule for
    the development and delivery of a system. What role do the world class
    technical staff at Air Force Research Labs, the other DOD labs, and DOE
    National Labs play in helping DOD be a ``smart buyer'' of complex
    technical systems?
        Dr. LaPlante. The Air Force Research Laboratory (AFRL) employs
    subject matter experts who support the acquisition community through a
    technical advisory role during the entire acquisition life cycle,
    development, procurement, and sustainment. AFRL's technical expertise
    is used now and will continue to be leaned upon to assist in Technology
    Readiness Assessments, ensuring technical program risks are understood.
    Furthermore, our initiatives to reinvigorate development planning and
    experimentation will strengthen the Air Force's technical knowledge of
    future capability options. AFRL will play a big role in maturing
    technologies and helping others to gain this knowledge and
    understanding of technical options. The development planning and
    experimentation process is expected to design agility into our
    capability development by interconnecting relationships between AFRL,
    operators, acquisition, and requirements communities early-on in the
    acquisition cycle. This integration across Air Force organizations will
    inform strategic funding choices that will result in low risk
    acquisition programs to deliver warfighting capabilities on time and
    within budget.

        37. Senator Heinrich. Dr. LaPlante, what can be done to strengthen
    that role?
        Dr. LaPlante. The Air Force must continue to focus on recruiting
    and retaining a highly talented science, technology, engineering and
    mathematics (STEM) and STEM-literate workforce in order to maintain the
    strong relationship the Air Force Research Laboratory has with the
    greater Air Force Acquisition community. To promote these efforts the
    Secretary and Chief of the Staff of the Air Force published the Air
    Force Engineering Enterprise Strategic Plan and the Air Force STEM
    Workforce Strategy, Bright Horizons 2.0. Both documents provide
    framework and strategic goals to guide STEM workforce planning, improve
    the technical workforce and address competency gaps across the Air
    Force enterprise. Recruiting and retaining a highly qualified STEM and
    STEM literate workforce will ensure the Air Force Acquisition community
    has access to top-notch technical guidance to make ``smart''
    procurement decisions.
                                    testing
        38. Senator Heinrich. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, what role do test ranges and testing play in
    ensuring that the products we are trying to build and deploy will
    actually work as planned?
        Ms. Shyu. Test Ranges, test activities, and associated evaluations
    are integral parts of developing and producing equipment, as they
    provide the environments, measurement capabilities, skilled people and
    methods required to collect and evaluate data to verify and validate
    product designs. Developmental testing and evaluation supports
    verification and focuses on collecting and evaluating product
    specification data in order to answer the question ``Did we meet the
    necessary specifications to achieve desired operational outcomes?''
    Operational testing and evaluation supports validation and focuses on
    collecting and evaluating system performance data when the system is
    used by Soldiers under realistic usage conditions in order to answer
    the question ``Will the product meet the desired operational intent
    when fielded?'' Both functions continue to perform an important role in
    the development of warfighting capabilities.
        Mr. Stackley. The results of testing activity conducted in support
    of Navy and Marine Corps defense acquisition systems is used to
    evaluate the capabilities and manage the risks in developing,
    producing, operating and sustaining systems and capabilities that are
    fielded to sailors and marines. Test and Evaluation (T&E) provides
    knowledge to the acquisition community for use in assessing performance
    to the system requirements, evaluating critical operational issues,
    improving the system performance where needed and providing the user
    community with information for optimizing system use in operations.
        Test ranges are critical to the T&E process and provide the
    infrastructure, capability, manpower and knowledge to conduct testing
    in a timely, thorough, and cost efficient manner. The Navy's test
    ranges and facilities, and other elements of the Major Range and Test
    Facility Base assets that we use, serve at the forefront of innovation
    in test capability, instrumentation and enhanced test practices.
    Through these efforts the Navy is able to continually improve the
    quality and capabilities of testing being performed on our acquisition
    programs.
        T&E expertise and test ranges are available to acquisition programs
    at the beginning of the system life cycle to provide learning about the
    strengths and weaknesses of the system under development and throughout
    its lifecycle to facilitate upgrades and enhancements. This allows for
    appropriate and timely corrective actions that can be developed prior
    to fielding of the system.
        Dr. LaPlante. Fundamentally, the purpose of Test & Evaluation (T&E)
    in a defense acquisition program is to help reduce or manage risks in
    defining, developing, acquiring, fielding, using and supporting a
    system.
        T&E is generally divided in two categories. Developmental T&E
    (DT&E), also known as Development Test (DT), verifies a system meets
    detailed technical requirements or specifications (the system is built
    right). Operational T&E (OT&E), also known as Operational Test (OT),
    validates a system meets warfighter requirements in an operational
    environment (the right system is built to complete the mission).
        Quality DT and OT require robust T&E infrastructure, from
    laboratories and simulation facilities to open-air ranges with a wide
    range of threat simulators, stimulators, and emitters. This
    infrastructure enables technologically superior, reliable,
    maintainable, sustainable, and safe weapons systems that ultimately
    ensure warfighter combat readiness. Key components of the AF's T&E
    infrastructure are described below:

          Ranges such as the R-2508 Complex at Edwards AFB, the
    Nevada Test and Training Range (NTTR) and the Eglin Range at Eglin AFB
    provide a flexible, realistic and multidimensional DT and OT battle-
    space to conduct aircraft and aircraft systems evaluations, electronic
    combat testing, munitions testing, electronic countermeasure
    evaluations, small and large footprint weapons testing and sensor
    (Intelligence, Surveillance and Reconnaissance (ISR)) testing.
          The Space and Missile Systems Center is responsible for
    on-orbit check-out, testing, sustainment and maintenance of military
    satellite constellations and other DOD space systems. DT is
    predominately accomplished through Government-led, contractor-run
    ground-based simulations and launch, and early-orbit functional
    checkouts. The Air Force Operational Test and Evaluation Center
    (AFOTEC) completes OT by performing on-orbit operationally based end-
    to-end testing and capability verification. Both components are
    essential to delivering resilient and affordable space capabilities and
    providing mission support to the warfighter (precision navigation,
    secured communications, reliable intelligence, surveillance and
    reconnaissance (ISR)).
          The primary Air Force (AF) cyber test ranges are the
    Capabilities Integration Environment (CIE), the Air and Space
    Operations Center (AOC) Test Lab, the Datalink Test Facility (DTF) and
    the Command, Control Communications, Computers, Intelligence,
    Surveillance and Reconnaissance (C4ISR) Enterprise Integration Facility
    (CEIF). Cyber testing ensures weapon systems can execute the intended
    mission even when faced with cyber threats such as cyber attacks (e.g.,
    denial-of-service operations) and cyber espionage (e.g., network
    intrusions to access sensitive information).

        39. Senator Heinrich. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, what can we do to improve the quality of testing
    and strengthen the organizations that perform that testing?
        Ms. Shyu. We can improve the quality of testing and strengthen the
    organizations that perform it by pursuing test efficiencies and
    adopting best practices.
        The Army must continuously pursue efficiencies in the test process.
    First, instead of sequential testing, we can buy sufficient test
    articles to maximize simultaneous testing. Second, to make test data
    sharing easier and quicker, we can create certified developmental test
    standards applicable to both Government and contractor testing
    practices. Additionally, we can develop a database of qualified parts,
    components, and pre-certified sources the multiple programs can
    leverage to reduce cost and avoid retesting.
        There are several best practices that can be adopted to improve the
    quality of our testing processes and outcomes. By investing early in
    appropriate models and simulations that can be accredited for use, we
    can supplement, inform, and improve physical testing. Another
    improvement is to obtain limited use rights for vendor Computer Aided
    Design/Computer Aided Manufacturing designs and materiel
    specifications. This allows us to rapidly trace faults to root causes.
    Third, Soldier feedback remains one of the most important outcomes of
    test efforts. Multiple early opportunities with users offer better
    feedback than a single defining event and allow the Army to incorporate
    this critical feedback earlier. Fourth, rapid equipping and prototyping
    experiences in theater provide valuable technical insight. The Army can
    leverage this information to adjust testing or challenge existing
    programs. Finally, the Army must base system requirements documents on
    desired operational outcomes, not system attributes.
        Mr. Stackley. I believe the quality of our testing and expertise of
    our Test and Evaluation (T&E) workforce in our organizations is high,
    and we have highly educated and motivated individuals devoted to these
    efforts. However, let me also say, we continually strive for
    improvement to address the latest test capability needs and
    requirements for new systems under development, and to stay abreast of
    the latest threat systems that we must counter on the battlefield. In
    support of acquisition programs, one of the Navy's top priorities is to
    integrate testing earlier in the process. Within the Department of
    Defense (DOD), this early start is known as ``Shift Left'' with the
    focus on enabling acquisition programs to incorporate T&E expertise at
    the beginning of the system life-cycle to clearly define test
    requirements and provide early learning and identification of technical
    deficiencies as part of the developmental process. This ensures that
    appropriate and timely corrective actions can be developed and
    completed prior to operational testing by our independent Navy and
    Marine Corps Operational Test Agencies.
        With respect to the quality of testing and strengthening the
    organizations that perform that testing, since 2009 we have completed
    annual self-assessment reviews and reports to evaluate and confirm the
    adequacy of our Navy and Marine Corps T&E workforce, facilities,
    process and practices. We have received OSD concurrence on that
    assessment in their annual DOD Developmental T&E Reports to Congress.
    Our Naval Systems Commands (SYSCOM), Program Executive Offices and
    Naval Warfare and System Centers utilize a Competency Aligned
    Organization and Integrated Product Team business model to support T&E
    activities. SYSCOM Commanders structure and staff their organization to
    meet workload demands, and provide required T&E technical expertise.
        In the Department of the Navy, our focus on quality testing
    provides a venue to systematically assess and demonstrate system
    performance at each phase of development from design through
    sustainment. Through testing, acquisition programs gain a better
    understanding of any technical challenges early on to ensure the system
    can perform as intended in an operational environment in a systems-of-
    systems content. In doing so, T&E provides an essential service in
    advancing the overall safety and combat effectiveness of our
    warfighters and the systems delivered to them.
        Dr. LaPlante. To improve test quality, the AF is identifying near
    to mid-term investments to restore and improve World War II-era test
    infrastructure and create modern capabilities to meet future test
    requirements. Specific focus areas include:

        1.  Test Range Improvement and Modernization: The AF is pursuing
    improvements to 1960s era range instrumentation. These improvements
    will provide needed instrumentation agility, standardized dynamic data
    access, and seamless data transport. In addition, they will enable
    ``system of systems'' testing through the fusion of range display
    systems.
        2.  Electronic Warfare (EW) Test Capability Modernization: Planned
    upgrades will resolve existing shortfalls and will enable the testing
    of legacy and new EW threat waveforms in realistic densities and
    fidelities to address expected threats in anti-access/area denial (A2/
    AD) integrated air defense system (IADS) environments. Ultimately,
    these upgrades will support the requirements and complex missions of
    5th and 6th generation systems.
        3.  Ground Test Capabilities and Facilities: Wind tunnel and engine
    test facility updates will benefit future AF test programs such as the
    Long Range Strike Bomber, KC-46 and Hypersonic-Boost-Glide Vehicle.
        4.  Cyber Test Infrastructure Improvement and Modernization: The AF
    is pursuing new capabilities to address expanding cyber offensive/
    defensive and weapons systems testing in response to defined threats.
    Specifically, the AF is seeking to develop a Cyber Defense DT&E
    environment and the methodologies, techniques, tools and metrics to
    determine and evaluate mission effectiveness and success for cyber
    protection, detection, reaction and restoration.

        In addition to infrastructure improvements, the AF is pursuing
    efforts to strengthen test organizations through best practice and
    workforce management initiatives. Two such initiatives are:

        1.  Adjust Acquisition Program Emphasis on the Concept of
    Operations/Intended Use: This emphasis would improve acquisition
    programs' OT results. OT is the capstone assessment of the system's
    ability to perform the mission. Per OSD Acquisition policy, CONOPS/OMS/
    MPs are required prior to Milestone `A' and its OT implications are to
    be identified in the Milestone `A' Test and Evaluation Master Plan
    (TEMP), i.e., early in the acquisition process. (DODI 5000.02)
        2.  Professional Test and Evaluation Workforce Management: The Air
    Force is pursuing a formal Management Function that will provide day to
    day management responsibility over the T&E functional community. This
    Functional Manager will maintain an institutional focus with regard to
    workforce development, and will be responsible for ensuring the test
    specialty is equipped, developed, and sustained to provide AF T&E
    capabilities.
                                     ______

                   Questions Submitted by Senator Joe Manchin
                          technology domain awareness
        40. Senator Manchin. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, how important is it for DOD and your Service to
    have better global insight into research and development, both private
    and public? What benefits could increased technology domain awareness
    have for the Department and your Service?
        Ms. Shyu. The technology playing field is changing, and important
    breakthroughs in many fields are now often driven by commercial needs
    and international development. Therefore, it is critical that we both
    understand the global research and development environment and leverage
    these breakthroughs where possible. By better understanding where both
    our potential enemies and our allies are focusing their research
    efforts, we are able to more accurately forecast future threats, as
    well as leverage areas where our allies may be more advanced than we
    are currently.
        The Army conducts a comprehensive annual review of 15 to 20 leading
    open source forecasts on emerging Science and Technology (S&T) trends.
    We compile the top trends and publish them in an unclassified report.
    This analysis then informs the development of future Army concepts.
    Additionally, the Army uses crowd-sourcing techniques to engage
    nontraditional partners in order to generate innovative ideas and novel
    capabilities that the Army could employ in the future (2035-2040).
    Subject matter experts analyze these ideas to determine which are
    feasible, what research needs to be done, and when the technology or
    capability may be ready. This information is then used to better inform
    wargaming scenarios and enable future warfighting concepts.
        Additionally, the Department of Defense is sponsoring a Technology
    Domain Awareness (TDA) initiative, which aims to integrate commercial
    research and development with defense capabilities and expand awareness
    and application of commercial investments. This effort connects defense
    acquisition with innovative providers to enable better, faster, and
    cheaper capability development. The Army is working with DOD to learn
    more about TDA's utility, understand how to potentially integrate
    existing Army technology search tools within TDA, and will explore the
    potential of a TDA pilot program within the Army.
        Mr. Stackley. The Office of Naval Research (ONR) has offices in
    London, Prague, Singapore, Tokyo, Sao Paolo, and Santiago--and closely
    coordinates activities with the other services and Assistant Secretary
    of Defense (Research and Engineering). The mission of these ONR Global
    offices is to catalyze the Department of Navy (DON) science and
    technology (S&T) connectivity to the international research community
    and the Naval Research Enterprise. This technology domain awareness
    benefits DON and DOD by leveraging international S&T investment,
    building partnerships, and preventing technological surprise on the
    battlefield by tracking technology advances and applications,
    particularly in emerging fields such as quantum computing and synthetic
    biology. We search for emerging research and technologies to help
    address current Naval needs, as well as requirements for future
    capabilities.
        As stated in the DOD International Engagement Strategy (2014), the
    mission of international engagement is to ``leverage global R&D
    investment to ensure superior and affordable development in areas
    critical to defense.'' Our International Science Program gives
    scientists from academia, Government and industry opportunities to
    engage leading international scientists and innovators. Our staff, in
    partnership with scientists throughout the Naval Research Enterprise,
    develops key collaborations with international counterparts, and
    identifies the organizations and individuals conducting novel research
    that will significantly advance the Naval S&T Strategy.
        ONR Global establishes contacts with international S&T leaders,
    giving us new perspectives and helping identify trends and forecast
    threats. ONR Global S&T engagement enables us to foster international
    partnerships through mutually beneficial technology advancement. We
    collaborate with the world's scientists and engineers in partnerships
    to benefit the U.S. and our allies and to support security cooperation
    objectives through science diplomacy.
        Dr. LaPlante. With offices in London (UK), Tokyo (Japan), Santiago
    (Chile), and Arlington, Virginia, Air Force International Project
    Officers provide access to world-class researchers and facilities by
    providing grants, supporting conferences, and facilitating scientist
    and engineer exchanges. Technical experts within the Air Force are
    expected to be globally knowledgeable within their domains, and serve
    important roles representing Air Force interests within bi-lateral and
    multi-lateral fora where critical technical information is developed
    and exchanged. Through these relationships, opportunities are
    identified to leverage investments, advance capabilities, produce
    standards for interoperability, and avoid technological surprise.
    Activities include collaborative research, facility sharing, personnel
    exchanges, and information exchanges. The Air Force and DOD must
    continuously monitor, leverage, and increase insight into global
    research and development. The DOD no longer has sole access to nor the
    ability to control the development of cutting edge technology. Public
    and private global research and development is driving revolutionary
    innovation in many emerging areas at a breathtaking pace and is
    accessible to everyone, presenting asymmetric technology trends to the
    DOD. Increasing global technology domain awareness provides an
    effective understanding of the technical landscape as it relates to
    defense needs and better informs where and when to invest Air Force and
    DOD research and development.

        41. Senator Manchin. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, what is your Service doing to achieve greater
    insights into intellectual property being developed and advances being
    made by public and private sector research and development? How can
    this effort best be structured to maximize the value, especially
    through development of opportunities to leverage these advances, for
    the whole Department?
        Ms. Shyu. The technology playing field is changing, and important
    breakthroughs in many fields are now often driven by commercial needs
    and international development. Therefore, it is critical that we both
    understand the global research and development environment and leverage
    these breakthroughs where possible. By better understanding where both
    our potential enemies and our allies are focusing their research
    efforts, we are able to more accurately forecast future threats, as
    well as leverage areas where our allies may be more advanced than we
    are currently.
        The Army conducts a comprehensive annual review of 15 to 20 leading
    open source forecasts on emerging Science and Technology (S&T) trends.
    We compile the top trends and publish them in an unclassified report.
    This analysis then informs the development of future Army concepts.
    Additionally, the Army uses crowd-sourcing techniques to engage
    nontraditional partners in order to generate innovative ideas and novel
    capabilities that the Army could employ in the future (2035-2040).
    Subject matter experts analyze these ideas to determine which are
    feasible, what research needs to be done, and when the technology or
    capability may be ready. This information is then used to better inform
    wargaming scenarios and enable future warfighting concepts.
        The Army leverages the independent research and development pursued
    by industry and academia through multiple forums. One example is the
    Army Research Laboratory's (ARL) Open Campus Initiative. This effort
    enhances innovation by connecting Army researchers with the substantial
    intellectual resources of the global scientific research community,
    including academia, industry and small business. Since its inception,
    the Open Campus has initiated 84 Cooperative Research and Development
    Agreements with small businesses, industry and academia, with another
    70 in the works. More than 500 researchers have leveraged the
    laboratory to conduct side-by-side research in critical Army Science
    and Technology portfolios.
        Mr. Stackley. U.S Naval forces require a broad spectrum of core
    capabilities to assure access to the global maritime domain.
    Consequently, the Naval Science and Technology (S&T) strategy invests
    in a balanced and broad portfolio of promising scientific research and
    innovative technology in the United States and around the world.
        The Office of Naval Research Global (ONR Global) establishes
    contacts with international S&T leaders, giving us new perspectives and
    helping identify trends and forecast threats. This technology awareness
    prevents technological surprise on the battlefield by tracking
    technology advances and applications, particularly in emerging fields
    such as quantum computing and synthetic biology. ONR Global S&T
    engagement enables us to foster international partnerships through
    mutually beneficial technology advancement.
        Achieving this mission requires working with the best and the
    brightest people from partner organizations both at home and abroad.
    Fostering the intellectual capital necessary for America's Defense is
    fundamental to our national security.
        The Naval S&T strategy ensures the technical superiority of the
    Navy and Marine Corps and avoids technology surprise.
        Dr. LaPlante. The DOD Technology Domain Awareness initiative is
    focused on developing the networks, knowledge, and business processes
    to connect our needs to industry's technology development and potential
    solutions. DOD stakeholders will have improved insight into thousands
    of commercial businesses, start-ups, venture capitalists, universities,
    and defense contractors. Additionally, the Air Force and DOD have
    initiated a continuing series of joint technical interchange meetings
    with industry, organized by 17 DOD Science and Technology (S&T)
    Communities of Interests (CoIs). Through a continuous virtual exchange
    of data and in-person reviews, the S&T CoIs provide industry with
    detailed information about future program plans and requirements, while
    gaining enhanced understanding and visibility into relevant industry
    research and development efforts. Through this increased transparency
    and awareness, our goal is to better focus and align industry's
    investment and solutions toward Air Force needs and problems.
                          current acquisition concerns
        42. Senator Manchin. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, what current program in your portfolio are you most
    concerned about? What are the challenges about it that have you
    concerned and how do you plan on mitigating those issues?
        Ms. Shyu. I remain most concerned not about one particular program,
    but about the ongoing budgetary instability that affects every one of
    the Army's modernization programs. Stable resources are a primary
    factor in program success, and the continual budget cuts and lack of
    long-term fiscal stability represent a significant threat to our
    modernization efforts. Since manpower costs cannot be reduced quickly
    or significantly, the Research, Development, and Acquisition accounts
    take the brunt of budget cuts. These long-term funding uncertainties
    significantly hamper the Army's capacity to plan and execute programs
    for the development of new Soldier capabilities.
        Mr. Stackley. While not a specific program, there are challenges in
    defining requirements and pricing contracts for fielded systems that
    are no longer managed by the PEO/PM structure. While we've modestly
    restored our acquisition workforce to where we believe it needs to be
    to support our programs, we are focusing additional effort and making
    progress to train and rebuild the acquisition workforce responsible for
    these other acquisition and procurement areas. Today the budget
    environment threatens to dismantle the progress made in restoring the
    acquisition workforce.
        Dr. LaPlante. The program I am most concerned about is the Next
    Generation Operational Control System (OCX), which is the ground
    control system within the Global Positioning System (GPS) Enterprise.
        The contractor's approach of concurrent systems engineering for the
    OCX program, as well as cyber-security requirements that proved more
    challenging than anticipated, drove both cost and schedule breaches on
    the program. In December 2013, the GPS Program Director ordered a pause
    to further design work until corrective actions were implemented by the
    contractor. I reviewed these corrective actions along with USD(AT&L) at
    a Deep Dive in February 2015 and they appear to be moving the program
    in the right direction.
        We have put the following additional controls in place on OCX:
    First, USD(AT&L) established five key milestones with cost/schedule
    tripwires that require Department review if the program breaches.
    Second, SECAF requested an Acquisition Incident Review on 29 Apr 15,
    chartered by the PEO for Space, to identify root causes of program
    issues and make recommendations to the acquisition community. Finally,
    the GPS Program Director commissioned a long-term study to determine if
    there are viable alternatives in the event that one or more tripwires
    are triggered and the Department makes the decision that the current
    OCX contract approach is no longer viable. As a result of these
    oversight controls, OCX continues to be under rigorous review by the
    Air Force and Department.

        43. Senator Manchin. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, what broader lessons for the future can we learn
    from these challenges?
        Ms. Shyu. Acquisition reform is a goal sought over the last several
    decades. The recent steps taken by both the House and Senate, as well
    as the Department's acquisition reform legislative proposals, reflect a
    shared commitment to streamline the acquisition process. However, the
    acquisition process works in tandem with budgeting and requirements
    processes. The complex integration of these processes, combined with
    the multitude of stakeholders who can influence or stall program
    decisions, is a significant impediment to successful programs. True
    acquisition reform must fundamentally take a holistic look at the
    integration and mechanics of these processes and significantly reduce
    the stakeholders impacting program decisions. Without streamlining the
    decision process and willingness to accept manageable risk, we cannot
    significantly reform the defense acquisition system.
        Mr. Stackley. Defense acquisition is a large enterprise of complex,
    interdependent systems-of-systems, engineering disciplines, procurement
    rules, budget rules, organizations and processes. Oversight and
    governance of the enterprise is necessary and is expected, but it is
    crucial to strike the right balance in order to achieve affordable
    outcomes. Experience has shown that an experienced Acquisition
    Workforce is the single-most important fundamental in achieving strong,
    repeatable performance in Defense acquisition, and requires highly-
    educated and highly-skilled professionals. Lessons learned from highly
    successful programs highlight that the right balance is attainable by
    applying the fundamental disciplines already known and available to
    each Program Manager, then exposing the products of that discipline to
    simplified oversight by an appropriate but limited number of highly
    experienced managers, engineers, and business executives serving at the
    Service Secretariat and OSD levels. The current oversight and
    governance requirements, however, have added multiple layers of
    prescriptive processes, authoritative organizations and extensive
    reporting and documentation requirements that run counter to the
    objectives of efficiency, productivity, and performance. The DON
    recommends that the Congress work with USD(AT&L) in the current effort
    to roll back legislation that has produced unnecessary and redundant,
    regulatory and reporting burdens.
        Dr. LaPlante. Command and control systems are inherently complex.
    As we learn more about the challenges and complexity that cyber
    security brings to complex systems, it is important we develop these
    using a very robust systems engineering approach. Agile software
    development has proven to be an effective approach for the iterative
    development of very large software systems. We found on the Next
    Generation Operational Control System (OCX) for Global Positioning
    System satellites that the added complexity from new cyber security
    requirements may have been more than could be absorbed into an agile
    development, resulting in substantial rework. So we returned to a more
    structured systems engineering approach that appears to be bearing
    fruit. As we move into the future and incorporate similar cyber
    security requirements into other command and control systems, we will
    relook at how best to balance the efficiencies of agile software
    development with the structure of a traditional systems engineering
    approach.
                                     ______

                    Questions Submitted by Senator Tim Kaine
       best practices success of weapons systems acquisition reform act
                                    (wsara)
        44. Senator Kaine. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, since the implementation of the WSARA and the
    Better Buying Power initiatives, GAO indicates that acquisition program
    costs have come more under control. What are some of the specific steps
    that have led to these successes?
        Ms. Shyu. Sequestration has significantly reduced investment in
    Army acquisition programs. As a result, the Army has started fewer new
    programs and faces an all-time low in modernization investment. The
    Army recognizes that given this reduced investment, it is more
    important than ever to ensure that programs are affordable to maximize
    the return on the limited investment available. Accordingly, the Army
    has implemented several process controls designed to promote
    affordability.
        First, the Army requires Program Managers (PMs) to consistently
    look for ways to reduce program costs throughout the acquisition life-
    cycle. Accordingly, all PMs establish ``Should-Cost'' targets for
    programs to set cost goals below budgets. Second, the Army requires PMs
    to establish an affordability assessment and competitive strategy at
    each milestone decision. Setting and enforcing affordability caps for
    major programs helps screen requirements to ensure that programs remain
    viable and within budget. While managing programs to affordability
    constraints is mandatory for major ACAT I programs, the Army is
    expanding this policy to include all programs. These efforts promote
    improved management of the leading causes of cost growth in programs.
        Additionally, the Army conducts Configuration Steering Boards (CSB)
    for Major Defense Acquisition Programs/Major Automated Information
    System programs and encourages them for all other acquisition programs.
    CSBs bring together members of the acquisition, requirements, and
    resourcing communities to review system requirements and technical
    configuration changes to help achieve program performance objectives
    while ensuring the systems remain affordable. Additionally, many
    programs use a pre-planned Knowledge Point (KP) process to manage
    requirements through expanded collaboration between our program
    managers and combat developers. This review process identifies and
    addresses key trade-offs that affect affordability and performance.
    Moreover, this process allows senior leaders to align requirements and
    resources early in the program's development, maximizing our
    investments by achieving the best capability at an affordable cost
    through cost-informed trades and capability prioritization.
        Mr. Stackley. The DON designed its acquisition process, commonly
    referred to as the Navy Gate Review process, to ensure there is no gap
    between the Requirements and Acquisition organizations so that the Navy
    understands the relationship between requirements, technical
    feasibility, and cost. The process requires the Navy/Marine Corps
    operational requirements leadership and acquisition leadership to
    agree, and repeatedly affirm that the agreement throughout the
    development, acquisition, and sustainment of a system. The DON uses
    Gate Reviews to eliminate any misalignment between requirements and
    acquisition early in a program, and to check alignment regularly.
        Each `gate' is co-chaired by the Service Chief or senior military
    requirements officer and the Service Acquisition Executive (SAE). In
    all there are six gates, with the first three chaired by the Service
    Chief (co-chaired by the SAE) and ensure warfighter requirements are
    well understood and can be translated into technical requirements that
    the acquisition community can affordably achieve in the commercial or
    defense marketplace. The last three gates are chaired by the SAE (co-
    chaired by the senior military requirements officer) and ensure the
    technical specification, statement of work, and Request for Proposal
    have accurately translated the warfighter's requirements into an
    acquisition approach that is executable, affordable, and agreeable
    across acquisition and requirements leadership.
        This process provides governance and oversight, and ensures
    adherence to the DON's basic principles to get the requirements right,
    perform to a stable plan, make every dollar count, rely on an
    experienced acquisition workforce, and foster a healthy industrial
    base.
        Dr. LaPlante. The Air Force remains committed to keeping the costs
    of weapons program development under control. One of the steps we've
    taken that have led to our successes is encouraging programs to make
    what are often difficult trades in cost and capability. Essentially, we
    are working to figure out where can a program reduce or eliminate a
    requirement to save cost without impacting the warfighter's capability.
    These trades are never easy, but they force us as a team to determine
    where we are willing to decrease some functionality to save costs and
    still provide the warfighter the capability they need. In programs
    where we have done these trades so far, we've been successful in
    enabling the Air Force to be strategically agile and deliver
    capabilities on time.
        The Air Force also remains committed to Should Cost, which was
    first introduced in Better Buying Power (BBP) 1.0. Should Cost is a
    management tool designed to proactively target cost reduction and drive
    productivity improvements into programs. I am pleased to announce that
    the Air Force's fiscal year 2014 Realized Savings were $2.8 billion.
    While that is a tremendous start, I continue to challenge all PEOs and
    PMs to seek out additional Should Cost opportunities, reaping as much
    as possible from our current portfolio.

        45. Senator Kaine. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, I am told there are proposed changes to processes
    created by WSARA, which GAO says have helped improve acquisition
    outcomes, for example by putting more discipline into checking how
    ready technologies are and by mandating strict oversight reviews of
    programs before they fall behind schedule. Do you have concerns about
    these proposed changes?
        Ms. Shyu. Section 203 of the Weapon System Acquisition Reform Act
    of 2009 currently requires the Department to utilize competitive
    prototyping prior to Milestone B approval of the development phase in
    an acquisition program. In practice, many acquisition programs seek to
    upgrade existing systems to meet additional requirements and do not
    employ as many novel, untested technologies. Therefore, full
    prototyping of a system may not be cost-effective in these programs.
    Moreover, the current statute does not address other measures designed
    to address technological maturity and attendant risks in acquisition
    programs, to include modeling and simulation, systems engineering, use
    of multiple designs approaches, and subsystem prototyping, e.g.,
    prototyping of components.
        The Department has proposed modification of this requirement to
    provide greater flexibility in the Army's ability to tailor risk
    mitigation approaches to fit the product being acquired. The language
    moves from a single prescriptive requirement to assess competitive
    prototyping to a set of guidelines that addresses a broader set of
    approaches to programmatic and technical risk reduction. In addition,
    the elimination of a complex waiver process will further streamline the
    documentation requirements imposed on Program Managers. I have no
    concerns about these proposed changes, as they will strengthen and
    broaden the mechanisms in place to ensure that program risks are
    readily identified and effectively managed.
        Mr. Stackley. The DON's acquisition process, commonly referred to
    as the Navy Gate Review process involves discipline in assessing
    technology readiness levels and associated risks, and adherence to the
    basic principles of getting the requirements right and performing to a
    stable plan. The Gate Review process has resulted in the requirements
    and acquisition community being aligned around the table and at each
    step of the program, starting with the definition of the requirement
    translated into technical requirements that the acquisition community
    can affordably achieve in the commercial or defense marketplace, right
    down to the contract award and execution of the contract. When there is
    no separation between requirements and acquisition throughout the
    process, the DON is able to keep control over the requirements as well
    as the cost and schedule to meet those requirements.
        Dr. LaPlante. The Air Force concurs with the GAO that WSARA
    provided additional discipline in the early stages of the acquisition
    lifecycle to help set up programs for success. We believe the current
    assessment of technology readiness and program oversight is
    appropriate.
          working with high tech startups and technological innovators
        46. Senator Kaine. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, this week, Secretary Carter was in Silicon Valley
    engaging some of our high tech companies. It appears the Government no
    longer seems to attract the fastest moving, most innovative companies.
    What has been your experience in trying to work with some of the best
    high tech commercial companies?
        Ms. Shyu. The Army recognizes the importance of leveraging high-
    tech commercial innovation. However, some of these companies have
    difficulty working within the Government's acquisition process due to
    barriers in three primary areas--the complexity of the regulations,
    compliance with audit oversight, and data rights. First, contracting
    with the Federal Government is a highly regulated process. The rules
    and regulations governing defense acquisition frequently change and
    evolve. Both the complexity of the regulations and the cost to keep up
    with the changes can make it difficult for some companies to enter the
    Government contracting arena. Second, the numerous audit and oversight
    bodies with jurisdiction to oversee Defense contracts may dissuade some
    companies from competing. There is a financial and administrative
    burden associated with compliance that may outweigh the benefit for
    some companies. Finally, Federal contracts generally--and Defense
    contracts particularly--give the Government broad rights with regard to
    the two types of intellectual property that are most likely to be of
    concern to small and midsize businesses: (1) patent rights, and (2)
    rights in technical data. Smaller businesses can experience particular
    difficulties in protecting their rights because of their size and the
    comparatively limited resources available to them.
        IT capability is critical to connecting our global Army, yet
    commercial innovation often outpaces our traditional acquisition
    processes. As part of the Department's Better Buying Power initiative,
    the Army is working to address the challenges associated with access to
    commercial innovation and IT acquisition. The Army is currently
    participating in Department-wide efforts to identify barriers to the
    adoption and use of commercial technology for military systems. This
    study will facilitate recommendations to improve the incorporation of
    commercial off the shelf technology from nontraditional information
    technology contractors. A related area of focus is designed to improve
    the process for technology insertion into our current weapon systems.
    This allows the Army to more quickly leverage commercial innovation as
    opposed to waiting until the overall system is modernized. Moreover,
    the Army is also investing in modular open systems architecture. Open
    architecture standards and modularity opens the market to more
    companies with cutting edge capabilities that may not traditionally
    compete for development of a full system.
        Mr. Stackley. The DON, through the Office of Naval Research, has
    effectively used Broad Agency Announcements for research topics to
    encourage small and large companies to share and develop their ideas
    and new or improved technologies. For small businesses, the DON has
    effectively used the Small Business Innovation Research (SBIR) and
    Small Business Technology Transfer (STTR) program to encourage small
    business innovators to share and develop their new or improved
    technologies. To encourage small business participation in our
    programs, the DON has assigned each Deputy Program Manager the
    responsibility to be the small business advocate for all things
    associated with the program.
        Dr. LaPlante. The Air Force and DOD must continuously strive to
    increase access to and collaboration with nontraditional suppliers.
    Expanding and encouraging the use of Other Transaction Authorities,
    Cooperative Research and Development Agreements, Open Challenges, and
    Small Business programs are flexible and potentially faster processes
    to tap the innovative talent of nontraditional vendors. The Air Force
    is always on the lookout to find the leading edge technologies often
    found in nontraditional vendors. We recently partnered with
    nontraditional defense companies, Applied Minds and Stottler Henke
    Associates, to develop innovative space operations solutions, building
    an immersive visualization environment tool and using artificial
    intelligence to aid satellite communications. It's true, our capability
    development paradigm is inadequate. To the extent that our current
    policies and regulations can be modified to change the paradigm from
    large, complex programs rife with crippling interdependencies to
    programs with simple, severable components, open architectures, and
    more distributed participation, we will enact those changes.

        47. Senator Kaine. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, what steps should we take so that we can get more
    of these companies working on our defense acquisition programs?
        Ms. Shyu. The Army recognizes the importance of leveraging high-
    tech commercial innovation. As part of the Department's Better Buying
    Power initiative, the Army is working to address the challenges
    associated with access to commercial innovation. The Army is currently
    participating in Department-wide efforts to identify barriers to the
    adoption and use of commercial technology for military systems. This
    study will facilitate recommendations to improve the incorporation of
    commercial off the shelf technology from nontraditional information
    technology contractors. A related area of focus is designed to improve
    the process for technology insertion into our current weapon systems.
    This allows the Army to more quickly leverage commercial innovation as
    opposed to waiting until the overall system is modernized. Moreover,
    the Army is also investing in modular open systems architecture. Open
    architecture standards and modularity opens the market to more
    companies with cutting edge capabilities that may not traditionally
    compete for development of a full system.
        To increase partnership between the department and technology
    leaders, the Secretary of Defense announced the creation of the
    department's first permanent office in Silicon Valley as well as a plan
    to provide venture capital to tap into developing technology for use
    across the Army and Department of Defense. The Army is looking forward
    to working through these new initiatives to leverage new technologies
    that make us faster and better connected. These steps are the first of
    many to improve our ability to adopt the cutting edge technologies that
    will enable our information dominance into the future.
        Mr. Stackley. The DON, through the Office of Naval Research, has
    effectively used Broad Agency Announcements for research topics to
    encourage small and large companies to share and develop their ideas
    and new or improved technologies. For small businesses, the DON has
    effectively used the Small Business Innovation Research (SBIR) and
    Small Business Technology Transfer (STTR) program to encourage small
    businesses to share and develop their new or improved technologies. To
    encourage small business participation in our programs, the DON has
    assigned each Deputy Program Manager the responsibility to be the small
    business advocate for all things associated with the program.
        To encourage further opportunity and greater participation by high-
    tech startups and technological innovators, the DON recommends that the
    Congress work with USD(AT&L) in the current effort to identify and roll
    back legislation that has produced unnecessary and redundant regulatory
    and reporting burdens on Program Managers. Additionally, a timely,
    predictable defense budget would improve both Government and industry's
    ability to manage outlay risk and invest in R&D, facilities, and
    people.
        Dr. LaPlante. Intellectual property concerns and burdensome
    acquisition processes often make doing business with the Air Force and
    DOD unattractive to nontraditional suppliers. There are policy and
    authority adjustments that can help to reduce and eliminate some of
    these barriers and impediments. For example, the Air Force is
    establishing a Small Business Innovation Research (SBIR) direct to
    Phase II pilot program to provide full and immediate research and
    development support to small businesses with mature technologies and
    concepts. This will reduce the number of associated low dollar, short
    duration Phase I contracts issued, expedite technology transition, and
    achieve a higher return on investment. In addition, the Air Force
    Research Laboratory Center for Rapid Innovation will use this new
    authority to establish a Strategic Innovation component of the SBIR
    program to generate innovative, game-changing concepts. Expanding and
    encouraging the use of Other Transaction Authorities, Cooperative
    Research and Development Agreements, Open Challenges, and Small
    Business programs are flexible and potentially faster processes to tap
    the innovative talent of nontraditional vendors.
                     incentives for government contractors
        48. Senator Kaine. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, one theme that has come out in the current
    discussion of acquisition reform is the need to develop better tools to
    provide incentives to contractors to help improve acquisition outcomes.
    What tools do you have, or wish you had, to incentivize contractors to
    reduce costs and deliver the best technology?
        Ms. Shyu. Since 2010, with the implementation of the initial Better
    Buying Power guidance, the Army has initiated several measures to
    enhance the acquisition process and incentivize contractors to reduce
    costs while continuing to deliver the best technology for the
    Warfighter.
        Selection of Appropriate Contract Type and Incentive Strategies:
    The selection of a contract type that most appropriately balances the
    responsibility assumed by the contractor for the costs of performance
    and provides the contractor with the greatest incentive for achieving
    or exceeding standards or goals is essential for successful acquisition
    outcomes. To that end, in June 2014, the Army provided updated guidance
    regarding the selection and justification of contract type based on the
    principles set forth in Better Buying Power. This memorandum emphasized
    that all procurements are unique in nature, and that contracting
    officers should select the appropriate contract type for the product or
    service being acquired. Furthermore, in line with the Performance of
    the Defense Acquisition System 2014 Annual Report, which emphasized
    that a key element for improving acquisition performance is improving
    how contract incentives are aligned with performance objectives, and
    how effective those incentives are when measured against the
    performance objectives, the Army challenged both program and
    contracting offices to consider, where appropriate, incentive-type
    contracts, including Fixed Price Incentive Firm Target, to encourage
    industry to reduce its costs while providing first-class equipment for
    the Warfighter. The Army continues to work with the Department of
    Defense (DOD) to further refine guidance for the use of incentives,
    while ensuring the acquisition professionals maintain the latitude to
    identify the best contract type for the individual procurement.
        Other Transaction Authorities (OTAs): OTAs are valuable tools
    utilized by the Army to establish contractual relationships with
    technology firms to obtain leading-edge research and development or
    prototype products. By its nature, an OTA allows for more flexibility
    and allows for the establishment of a contractual relationship with
    technology firms that otherwise would be unwilling or unable to comply
    with the Government's procurement regulations. For example,
    intellectual property terms and conditions and cost accounting standard
    clauses are negotiable under an OTA and are not as restrictive as those
    required by the Federal Acquisition Regulation. In recent years, many
    projects have been successfully executed by t he Army with significant
    participation from nontraditional defense firms. The Army is currently
    working with the DOD to explore the possibilities of establishing an
    OTA Community of Practice to promote the increased use of OTAs for
    Prototyping and Research projects.
        Superior Supplier Incentive Program: In fiscal year 2015, the Army
    implemented the Superior Supplier Incentive Program at the direction of
    the Defense Acquisition Executive. The program recognizes the Army's
    high-performing industry partners based on past performance
    evaluations. The 2014 superior supplier list, published in February
    2015, generated extensive discussions with industry about how they can
    continue to improve their performance. Moving forward, the superior
    supplier list will be jointly released with both the Air Force and Navy
    lists on an annual basis.
        Mr. Stackley. Adherence to basic principles--to get the requirement
    right, perform to a stable plan, make every dollar count, rely on an
    experienced acquisition workforce, and foster a healthy and competitive
    industrial base--have proven to be useful tools to incentivize
    contractors. Our most successful programs have stable requirements,
    stable designs, and stable budgets. This stability translates into
    predictable, reliable performance, unit cost reduction, improved
    material purchasing and workforce planning, retention of skilled labor
    and the ability for industry to invest in facility improvements, all
    resulting in more efficient production and a more affordable program.
        Dr. LaPlante. Under Secretary of Defense for Acquisition,
    Technology and Logistics released the implementation directives for the
    third iteration of Better Buying Power initiatives during a Pentagon
    press conference April 9, 2015 that included a stronger emphasis on
    innovation, technical excellence, and the quality of our products. This
    updated policy will continue to prioritize previously established core
    initiatives aligning to those goals, including program affordability,
    ``should cost'' savings opportunities, competition emphasis,
    bureaucratic reduction, improved services acquisition and increased
    professionalism of the workforce.
        Better Buying Power 3.0 Implementation Guidance identifies
    ``Incentivize Productivity in Industry and Government'' as a major
    initiative under this effort, with ``aligning profitability more
    tightly with Department goals'' as sub-element. Under this initiative,
    profit incentive is tied to better performance and lower profit to
    poorer performance. Industrial performance responds to the incentive
    structure that the Department designs into our business arrangements.
    While the Department will continue to refine its guidance on the use of
    incentives in contracting to align profit with performance that ensures
    a defense industry that is competitive and innovative, the following
    are ongoing Air Force efforts to encourage contractors to improve
    acquisition outcomes:

          Manufacturing and Industrial Base Policy (MIBP): The Air
    Force supports the Deputy Assistant Secretary of Defense for MIBP, with
    the Defense Procurement and Acquisition Policy (DPAP) office and the
    Assistant Secretary of Defense for Research and Engineering (ASD(R&E))
    with the development of a handbook of methods and best practices by
    August 2015 that informs DOD managers on how to engage more effectively
    with commercial technology companies using existing authorities. The
    handbook will emphasize Other Transaction Authority (OTA), Cooperative
    Research and Development Agreements (CRADAs), Federal Acquisition
    Regulation (FAR) Part 12, public-private partnership, use of 10 USC
    2373, and applicable FAR clauses to enable DOD to more quickly access
    companies that provide commercial technologies of interest and
    incentivize them to do business with DOD. In addition, the Air Force
    supports MIBP and DPAP in evaluating the potential for legislative or
    policy changes that would provide greater opportunity for access to
    commercial technology and report results by November 2015. This action
    will include an assessment of intellectual property, liability
    implications, and other commercial industry concerns.
        In addition, the Air Force utilizes two tools to incentivize
    superior contract performance in alignment with BBP 3.0 include
    incentive type contracts and the superior supplier incentive program:
        [Questions for the record with answers supplied follow:]

          Incentive Type Contracts: Air Force use of incentive type
    contracts, when appropriate, to facilitate better cost and schedule
    performance. In formulaic incentives contracts, such as those with Cost
    Plus Incentive Fee (CPIF) and Fixed Price Incentive Fee (FPIF) pricing
    arrangements, the impact of overruns and underruns are shared between
    the industry and Government based on a formula (established in the
    contract) that explicitly ties the contractor's cost or benefit to
    performance.
          Superior Supplier Incentive Program (SSIP): SSIP is
    designed to recognize higher-performing industry partners based on past
    performance evaluations, with the intent of incentivizing superior
    performers and creating healthy competition among industry.

        49. Senator Kaine. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, how do we incentivize them to invest their own R&D
    money in defense technologies?
        Ms. Shyu. Under Better Buying Power (BBP) 2.0 and 3.0, the
    Department expanded programs to leverage industry's Independent
    Research and Development (IR&D) to support priorities in defense
    acquisition. To better align industry IR&D with Department of Defense
    (DOD) needs, BBP 3.0 stresses improved communication between DOD and
    industry to restore a higher degree of Government influence and insight
    into these investments. One example of these initiatives is the Defense
    Innovation Marketplace, which is a one-stop shop for information on the
    Army's investment priorities and technology requirements. This website
    allows the Army to publish its investment priorities and provide
    initial direction to industry, which allows industry to better align
    its IR&D projects to the Army's needs. We will continue to work closely
    with industry to seek new avenues to increase the Soldier's
    capabilities and ensure our technological superiority.
        Perhaps most importantly, resource stability is the most essential
    condition for any potential investor. The threat of continued
    sequestration is the largest disincentive to the defense industry.
    Stable and predictable budgets demonstrate the Department's--and the
    country's--commitment to long-term investment and modernization.
        Mr. Stackley. Government Contractors' R&D money, or Independent
    Research and Development (IRAD), is largely spent on defense
    technologies. Better use of IRAD toward future defense needs requires
    continuous communication from the Department of the Navy on technology
    roadmaps and future plans.
        Dr. LaPlante. Two great examples of how the Air Force makes use of
    existing opportunities to incentivize Government contractors to invest
    their own research and development (R&D) money in defense technologies
    are the Defense Exportability Features (DEF) Pilot Program and the
    Other Transaction Authority (OTA). The DEF legislation and Pilot
    Program gives Air Force program offices the authority to spend R&D
    dollars on international requirements while requiring cost-sharing with
    their industry partners to incorporate exportability features into
    system designs. Traditionally the cost-sharing has been split 50/50
    between Government and industry and has resulted in lower per-unit
    costs.
        The Air Force Evolved Expendable Launch Vehicle (EELV) program
    utilizes the OTA to incentivize Government contractor R&D investment.
    OTA is granted from 10 US Code Section 2371 enabling Department of
    Defense programs to enter into agreements with industry to prototype
    projects that are directly relevant to weapons or weapons systems
    proposed to be acquired by the Department of Defense. The EELV program
    is using OTA to develop new rocket propulsion system(s) and increase
    competition for future launch systems. The Air Force is providing R&D
    to develop propulsion and launch system prototypes and industry
    partners will be required to invest at least 1/3 of the total cost of
    this prototyping project.
        role of the office of the secretary of defense vs. the military
                                    services
        50. Senator Kaine. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, I know that each of you and your staff manages some
    of your Services major weapons programs, while others are managed by
    Secretary Kendall and his OSD staff. How should we think about the
    proper role of the OSD versus the Military Services with respect to
    management of acquisition programs?
        Ms. Shyu. OSD oversight provides significant expertise and
    independent evaluation on the Department's major programs. Importantly,
    USD(AT&L) interfaces on behalf of the Army's major programs with OSD
    Cost Analysis and Program Evaluation and the Director, Operational Test
    and Evaluation. This relationship supports our efforts to successfully
    guide critical programs through the test and evaluation process and
    ensures that cost estimates are accurate and realistic at program
    initiation. Additionally, OSD plays an important role in adjudicating
    cross-Service issues on joint programs. This independent and external
    perspective ensures that the Department maximizes its limited resources
    across all three Services.
        Mr. Stackley. The Service Chief sets requirements and allocates the
    necessary resources to meet these requirements. It is the role and
    responsibility of the acquisition system to meet these requirements. As
    such, the DON's experience is that the greater role/involvement by the
    Service Chief in the acquisition process, the greater likelihood of
    successfully meeting the requirements within the resources provided.
    The DON's Gate Review process strives to achieve total alignment
    between requirements, resources, and acquisition by establishing shared
    responsibility for oversight and decision-making via a structured
    milestone process co-chaired by the CNO or CNO representative and the
    Assistant Secretary of the Navy (RD&A).
        Separately, USD (AT&L) and his OSD staff have an oversight role
    that is important for program management and they add value in that
    role. The Military Services are best suited to manage programs and the
    day to day business of the programs under their cognizance while
    allowing OSD insights and abilities to check the program as it
    proceeds.
        Dr. LaPlante. As the Services become more integrated in delivering
    war-winning effects, the impact of an Air Force program's success or
    failure may extend beyond just the Air Force in executing the mission;
    therefore, it makes good sense for programs to fall under the external
    decision authority and oversight of the Defense Acquisition Executive
    (DAE). This ensures that Air Force programs will meet all of the
    Services and/or Departments requirements. Additionally, DAE oversight
    decreases the risk of overly optimistic program planning and provides
    an objective assessment of affordability leading to realistic cost and
    schedule projections.

        51. Senator Kaine. Secretary Shyu, Secretary Stackley, and
    Secretary LaPlante, is there a healthy balance of programs managed at
    the OSD and Service level? What are the benefits and costs of this
    distribution of management?
        Ms. Shyu. OSD oversight provides significant expertise and
    independent evaluation on the Department's major programs. Importantly,
    USD(AT&L) interfaces on behalf of the Army's major programs with OSD
    Cost Analysis and Program Evaluation and the Director, Operational Test
    and Evaluation. This relationship supports our efforts to successfully
    guide critical programs through the test and evaluation process and
    ensures that cost estimates are accurate and realistic at program
    initiation. Additionally, OSD plays an important role in adjudicating
    cross-Service issues on joint programs. This independent and external
    perspective ensures that the Department maximizes its limited resources
    across all three Services.
        Mr. Stackley. The Service Chief sets requirements and allocates the
    necessary resources to meet these requirements. It is the role and
    responsibility of the acquisition system to meet these requirements. As
    such, the DON's experience is that the greater role/involvement by the
    Service Chief in the acquisition process, the greater likelihood of
    successfully meeting the requirements within the resources provided.
    The DON's Gate Review process strives to achieve total alignment
    between requirements, resources, and acquisition by establishing shared
    responsibility for oversight and decision-making via a structured
    milestone process co-chaired by the CNO or CNO representative and the
    Assistant Secretary of the Navy (RD&A).
        Separately, USD(AT&L) and his OSD staff have an oversight role that
    is important for program management and they add value in that role.
    The Military Services are best suited to manage programs and the day to
    day business of the programs under their cognizance while allowing OSD
    insights and abilities to check the program as it proceeds.
        Dr. LaPlante. Yes, I believe there is a healthy balance in the
    distribution of program authority and oversight between the Service and
    OSD level. Specifically, for larger ACAT I/IA acquisition programs, OSD
    oversight provides an objective assessment and integrates requirements
    across the Services. Additionally, our engagement with OSD across the
    full spectrum of our programs improves the Air Force's ability to meet
    affordability requirements, make sound business decisions, and reduce
    risk during program execution.

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