[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
[H.A.S.C. No. 115-104]
HEARING
ON
NATIONAL DEFENSE AUTHORIZATION ACT
FOR FISCAL YEAR 2019
AND
OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS
BEFORE THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
FULL COMMITTEE HEARING
ON
OVERSIGHT AND REFORM OF THE DEPARTMENT OF DEFENSE ``4TH ESTATE''
__________
HEARING HELD
APRIL 18, 2018
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
30-685 WASHINGTON : 2019
--------------------------------------------------------------------------------------
COMMITTEE ON ARMED SERVICES
One Hundred Fifteenth Congress
WILLIAM M. ``MAC'' THORNBERRY, Texas, Chairman
WALTER B. JONES, North Carolina ADAM SMITH, Washington
JOE WILSON, South Carolina ROBERT A. BRADY, Pennsylvania
FRANK A. LoBIONDO, New Jersey SUSAN A. DAVIS, California
ROB BISHOP, Utah JAMES R. LANGEVIN, Rhode Island
MICHAEL R. TURNER, Ohio RICK LARSEN, Washington
MIKE ROGERS, Alabama JIM COOPER, Tennessee
BILL SHUSTER, Pennsylvania MADELEINE Z. BORDALLO, Guam
K. MICHAEL CONAWAY, Texas JOE COURTNEY, Connecticut
DOUG LAMBORN, Colorado NIKI TSONGAS, Massachusetts
ROBERT J. WITTMAN, Virginia JOHN GARAMENDI, California
DUNCAN HUNTER, California JACKIE SPEIER, California
MIKE COFFMAN, Colorado MARC A. VEASEY, Texas
VICKY HARTZLER, Missouri TULSI GABBARD, Hawaii
AUSTIN SCOTT, Georgia BETO O'ROURKE, Texas
MO BROOKS, Alabama DONALD NORCROSS, New Jersey
PAUL COOK, California RUBEN GALLEGO, Arizona
JIM BRIDENSTINE, Oklahoma SETH MOULTON, Massachusetts
BRAD R. WENSTRUP, Ohio COLLEEN HANABUSA, Hawaii
BRADLEY BYRNE, Alabama CAROL SHEA-PORTER, New Hampshire
SAM GRAVES, Missouri JACKY ROSEN, Nevada
ELISE M. STEFANIK, New York A. DONALD McEACHIN, Virginia
MARTHA McSALLY, Arizona SALUD O. CARBAJAL, California
STEPHEN KNIGHT, California ANTHONY G. BROWN, Maryland
STEVE RUSSELL, Oklahoma STEPHANIE N. MURPHY, Florida
SCOTT DesJARLAIS, Tennessee RO KHANNA, California
RALPH LEE ABRAHAM, Louisiana TOM O'HALLERAN, Arizona
TRENT KELLY, Mississippi THOMAS R. SUOZZI, New York
MIKE GALLAGHER, Wisconsin JIMMY PANETTA, California
MATT GAETZ, Florida
DON BACON, Nebraska
JIM BANKS, Indiana
LIZ CHENEY, Wyoming
JODY B. HICE, Georgia
Jen Stewart, Staff Director
Tim Morrison, Counsel
William S. Johnson, Counsel
Justin Lynch, Clerk
C O N T E N T S
----------
Page
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Smith, Hon. Adam, a Representative from Washington, Ranking
Member, Committee on Armed Services............................ 1
Thornberry, Hon. William M. ``Mac,'' a Representative from Texas,
Chairman, Committee on Armed Services.......................... 1
WITNESSES
Dunlap, Preston C., National Security Analysis Mission Area
Executive, Johns Hopkins University Applied Physics Laboratory. 5
Levine, Peter, Senior Research Fellow, Institute for Defense
Analyses....................................................... 2
APPENDIX
Prepared Statements:
Dunlap, Preston C............................................ 53
Levine, Peter................................................ 45
Smith, Hon. Adam............................................. 44
Thornberry, Hon. William M. ``Mac''.......................... 43
Documents Submitted for the Record:
[There were no Documents submitted.]
Witness Responses to Questions Asked During the Hearing:
[There were no Questions submitted during the hearing.]
Questions Submitted by Members Post Hearing:
[There were no Questions submitted post hearing.]
OVERSIGHT AND REFORM OF THE DEPARTMENT OF DEFENSE ``4TH ESTATE''
----------
House of Representatives,
Committee on Armed Services,
Washington, DC, Wednesday, April 18, 2018.
The committee met, pursuant to call, at 10:02 a.m., in room
2118, Rayburn House Office Building, Hon. William M. ``Mac''
Thornberry (chairman of the committee) presiding.
OPENING STATEMENT OF HON. WILLIAM M. ``MAC'' THORNBERRY, A
REPRESENTATIVE FROM TEXAS, CHAIRMAN, COMMITTEE ON ARMED
SERVICES
The Chairman. The committee will come to order.
Over the years, Congress has focused most of our attention
on the military services and on weapons and equipment,
personnel, and policy issues. We have paid relatively little
attention to the rest of DOD [Department of Defense] that makes
up the 4th Estate; in fact, one expert has said the 4th Estate
is untouched by human hands.
Yet, this portion of the Department of Defense spends about
20 percent of the budget, includes about 25 percent of the
civilian workforce, and hires about 600,000 contractors. As we
are working to get more value for the taxpayer dollar, to get
more resources into the hands of the warfighter faster, and to
make the Department more agile and innovative in the face of
the wide array of security challenges before us, we cannot
neglect to examine this large portion of DOD.
Yesterday, I offered a proposal to make reforms to a
portion of the 4th Estate. I look forward to receiving
reactions to that legislative text. But beyond the specific
proposals, I believe it is essential that we work across the
entire Department, leaving no stone unturned, to ensure that
the warfighters have the best that this country can provide,
and that this enormous organization of DOD is ready and able to
defend the Nation.
I yield to the ranking member.
[The prepared statement of Mr. Thornberry can be found in
the Appendix on page 43.]
STATEMENT OF HON. ADAM SMITH, A REPRESENTATIVE FROM WASHINGTON,
RANKING MEMBER, COMMITTEE ON ARMED SERVICES
Mr. Smith. Thank you, Mr. Chairman. And I agree; this is an
important hearing that we are having today on a substantial
portion of the budget that does not get as much attention as it
deserves.
I wouldn't go so far as to say it is untouched by human
hands. I think that there are others that have come before us
that have taken a swing at this, both in the Department and in
Congress, to try to look at the portion of the budget that is
not directly related to the warfighter.
And there is without a doubt, and I don't think anyone
would argue, there is savings that can be found there, and I
think we should look and try and do that. And I think the
chairman's bill that he introduced yesterday or, I guess, the
portion of our markup he introduced yesterday to attempt to do
that is a good starting point.
I would say, however, what these people do is not
irrelevant. There are a number of portions in the so-called 4th
Estate that are essential to assisting the warfighter and
making sure that they are ready for the fight.
So what we have to do in this committee is figure out how
can we find savings without doing damage. And, as I said,
others have come before us and tried to do that. The Pentagon
is a very difficult bureaucracy to get at. I certainly admit
that.
And I will just close by saying, I certainly applaud the
chairman's efforts to take that run. I look forward to working
with him to figure out the best way to do that, to make sure we
cut in a sensible way that saves money, and at the same time,
makes sure that we can continue to provide the services that
our warfighters need so we can fight as efficiently as
possible.
I will stop there because the two gentlemen who are
testifying today know a lot more about this than I do, so it
will be better to hear from them and get to our questions and
answers.
Thank you, Mr. Chairman. I yield back.
[The prepared statement of Mr. Smith can be found in the
Appendix on page 44.]
The Chairman. Thank you. I certainly agree with the
gentleman on all of that, including the fact that our witnesses
have a lot of expertise to bring to the table.
We welcome Mr. Peter Levine, senior research fellow at the
Institute for Defense Analyses, but who has also been Deputy
Chief Management Officer at the Department of Defense. And what
I won't mention is some of his associations across the capital.
We also have Mr. Preston Dunlap, who is the National
Security Analysis Mission Area Executive at Johns Hopkins
Applied Physics Laboratory, but he too has experience in the
Pentagon including serving in CAPE [Cost Assessment and Program
Evaluation] and in other positions.
Thank you both for being here. Without objection, your full
written statements will be made part of the record. And we look
forward to any oral comments you would like to make.
Mr. Levine.
STATEMENT OF PETER LEVINE, SENIOR RESEARCH FELLOW, INSTITUTE
FOR DEFENSE ANALYSES
Mr. Levine. Thank you, Mr. Chairman, Congressman Smith,
members of the committee.
First, it is good to see you all again. I thank you for
inviting me here to address defense management and the DOD's
4th Estate. I think it is a tremendously important issue which
is well worth your attention, and I believe that there are
significant savings that are possible in this area.
When I served as the Department's Deputy Chief Management
Officer I was responsible for a program to carry out about $7
billion worth of savings over the course of the FYDP [Future
Years Defense Program], and most of that we were looking to the
4th Estate to achieve.
I think it is important though not to have unreasonable
expectations as we look at the 4th Estate. As I point out in my
prepared statement, a huge part of the 4th Estate budget goes
to the Defense Intelligence Agencies, the Missile Defense
Agency, and the U.S. Special Operations Command. By some
definitions, the combatant commands are also part of the 4th
Estate, so there is a huge warfighting function that is in the
4th Estate.
Within the balance, we pay for the Defense Health Program
which provides health care to our service members and their
families, as well as the DOD schools and commissaries, which
Members of Congress have generally considered to be off limits
for large cuts.
The 4th Estate also includes DARPA [Defense Advanced
Research Projects Agency], SCO [Strategic Capabilities Office],
and DIUx [Defense Innovation Unit Experimental], all of which
perform cutting-edge research needed to maintain our
technological edge. If all those entities are considered to be
essentially off the table for budget reductions, and I don't
mean to imply that there are no efficiencies possible, but the
large budget reductions, if we are looking at the rest of it,
we have about a quarter of the 4th Estate left to look at. So
you can't achieve 25 percent reduction in the 4th Estate by
looking at only a quarter of the budget.
Unfortunately, the everything else also performs essential
functions. I think these are functions that can be performed
more efficiently and that deserve close attention from the
committee, but they are important functions, nonetheless.
This includes a number of small defense agencies that
perform specialized functions, like DPAA [Defense POW/MIA
Accounting Agency], DSCA [Defense Security Cooperation Agency],
DTRA [Defense Threat Reduction Agency], DTIC [Defense Technical
Information Center], DTSA [Defense Technology Security
Administration], DTRMC [Department of Defense Test Resource
Management Center]. We can go through any of those that you
want, but my point on that would be the overall cost of those
small agencies is relatively small. Their functions have to be
performed somewhere. So there are savings. I believe that the
small agencies can be made more efficient, but you are not
looking for big dollars there.
If you are looking for big dollars, you are probably
looking where others have looked, which is to the big business-
type defense agencies, like DLA [Defense Logistics Agency],
DFAS [Defense Finance and Accounting Services], and DISA
[Defense Information Systems Agency]. That is sort of
everybody's favorite target for budget cuts in the 4th Estate.
Before those agencies were established, the Department ran
parallel activities in each of the services, multiplying the
overhead and the number of people needed to perform the work.
DLA and DFAS, the two agencies that get most of the complaints
because of their size, had almost 100,000 employees between
them when they absorbed functions from the services in the
1990s.
Today they perform the same work better with 34,000
employees. That is about a $6 billion a year annual savings
from the personnel reduction that they were able to accomplish
by bringing in tasks from the services and consolidating them.
I have been following DLA for almost 30 years now, and I
have watched it evolve as a business, reaping savings by
instituting best practices from the private sector like direct
vendor delivery, prime vendor contracts, electronic
contracting, electronic tracking, asset visibility programs,
and business systems that actually work, unlike most of those
in the Department of Defense.
Over the last 5 years, DLA has executed a cost reduction
program that targeted contracting, personnel, acquisition of
assets, travel, transportation, supplies and equipment, rent
and maintenance. This program was expected to achieve about $5
billion of savings over the FYDP.
As a result of these efforts, I think DLA is one of the
best run businesses in the Department. That doesn't mean that
further savings aren't possible--they are and the committee
should pursue them--I think we just need to understand what has
gone before as we look at those.
DFAS is also a relatively efficient organization and
outperforms what the services did 25 years ago, but I see a
difference here. Both DFAS and the services have evolved
considerably and have new capability since DFAS was formed 25
years ago.
Given the new ERPs [enterprise resource programs] in the
services, and the new capabilities that they have, I think it
is long past time for a complete re-examination of the role
that DFAS and the services play. And there should be
streamlining that's possible. There may be functions that can
be transferred from DFAS to the services, but a real considered
approach to that and figuring out how those functions work is
necessary.
I am less familiar with DISA, but I know that it runs data
centers that are sometimes considered to be underutilized and
overstaffed. It is tough cutting these kinds of things in the
Department without a BRAC [base realignment and closure]
though, so you might--you know, if you are willing to take that
issue on, not a BRAC issue but the issue of data centers and
whether they are efficiently utilized, more power to you.
Finally, I would like to say just a few words about two
agencies, two defense agencies that reported directly to me
when I was in the Department. Everybody in the Pentagon loves
to criticize Washington Headquarters Services [WHS]. It can be
maddeningly unresponsive at times, but it performs essential
functions without which the Pentagon could not operate.
It runs the power plant and utilities, maintains the
building, allocates office space, contracts for food, handles
the budget, runs personnel system, controls ID [identification]
cards and parking permits, among other functions.
It would be nice to think that we could save money by
eliminating WHS, but somebody has to provide these services.
Similarly, with the Defense Human Resources Activity [DHRA],
which reported to me when I was Acting Under Secretary for
Personnel and Readiness, that is a notoriously inefficient
agency.
And there have to be savings that are possible, but
recognize that it performs a bunch of activities that cannot--
that we really cannot avoid and many of which are mandated by
Congress. It runs the Department's education and training
programs and its manpower data systems.
It staffs the JAMRS [Joint Advertising, Market Research and
Studies] program, the Suicide Prevention Office, the SAPRO
[Sexual Assault Prevention and Response] office, and the
Defense Travel System. It is responsible for the accommodation
program for disabled employees, the veterans transition
program, employer support for the Guard and Reserve. The
elimination of DHRA makes no sense unless those programs are
also going to be eliminated.
So, Mr. Chairman, in conclusion, I appreciate the
committee's ambition in looking at this issue. I think it is
tremendously important. I think you can find efficiency. I
think you can find significant savings, and any savings that
you achieve will be a tremendous victory for the Department and
the taxpayers.
I look forward to your questions.
[The prepared statement of Mr. Levine can be found in the
Appendix on page 45.]
The Chairman. Thank you.
Mr. Dunlap.
STATEMENT OF PRESTON C. DUNLAP, NATIONAL SECURITY ANALYSIS
MISSION AREA EXECUTIVE, JOHNS HOPKINS UNIVERSITY APPLIED
PHYSICS LABORATORY
Mr. Dunlap. Chairman Thornberry, Ranking Member Smith,
distinguished members of the committee, it is an honor to
appear before you today to discuss the oversight and reform of
the 4th Estate and defense agencies and field activities in
particular.
It is also excellent to be joined by my colleague, Peter
Levine, here today.
Though, as the chairman said, I currently work at Johns
Hopkins Applied Physics Lab, I am here today in a personal
capacity. In 2013, I led a review on this topic for Secretary
of Defense Chuck Hagel as part of the Strategic Choices and
Management Review when I was the Director of Program Analysis
and Chief of Staff in the Office of Cost Assessment and Program
Evaluation in OSD [Office of the Secretary of Defense].
While I readily admit that my experience is slightly dated,
the principles that were true then and what we found in reviews
past, I think, remain relevant and true today. To that end, I
am going to walk through six false assumptions that plagued our
review and other reviews that we looked at, and I hope that we
might be able to progress here more quickly past them.
And I do thank the chairman for throwing out the first
pitch and getting the ball rolling on this, so thank you.
Assumption number one: Defense agencies and field
activities are homogenous back offices. Each of the current 27
agencies and activities was initially created by statute to
achieve greater effectiveness, spanning multiple military
departments. These missions vary widely, as you know, from
groceries to geospatial analysis, to educating kids, to
engineering, and so on.
Though each organization does indeed have a back office or
overhead, and a few do function as consolidated back offices,
like the Washington Headquarters Services, the majority conduct
a variety of what many consider valuable direct missions to the
Department of Defense.
Assumption number two: The appropriated budget is the total
budget. We are using publicly available data, unclassified
data--so setting aside things like the intelligence agencies--
the agencies get appropriated, as the chairman alluded to,
roughly $65 billion, but some also receive additional funding
via defense working capital funds from other DOD agencies,
military departments, and even individuals that pay them for
services.
Working capital funds allow consumers, in some sense, some
choice as to where to buy their services from as well as
flexibility and agility to respond to pressing needs. That
included, all told, they execute roughly 16 percent of the DOD
budget or over $116 billion, but as I mentioned before, each in
a different way.
And when you think about 25 percent to the right target,
thinking about both the appropriated as well as revenues and
other appropriated budgets that get sent to these agencies for
execution should be considered.
Assumption number three: The agencies can take cuts and
still perform the same level of mission. And I appreciate the
chairman's comments that--and when you look at this you should
think about not only cuts but also dropping missions that might
not be important or relevant in today's time.
In a bureaucracy it is often harder to cut a mission than
it is simply to cut funding, but, of course, they are related.
It is appropriate to take hard looks at doing the same mission
or even more for less, but if savings are an objective then
tough decisions may have to be made about actually doing less
for less.
For example, one that is often cited is DOD's grocery
stores or commissaries or DOD schools, which, of course,
provide a valued service to military families that can be
difficult to find in some areas overseas or remote areas in the
U.S.
That said, roughly 85 percent of commissaries are located
within a 15-minute drive of a grocery store or a big-box store
with full grocery selections. Options to save here or these
type of agencies would include a careful review of the business
case for each particular location, store, school, and so on.
Assumption number four: Peanut butter spread cuts are
helpful. When faced with tough decisions past reviews often
defaulted to a peanut butter spread approach to efficiencies,
such as multiple years of 10 percent cuts in a generic fashion.
A better approach, I think, as the Congress recognizes, is
to focus on what the Nation most needs from these organizations
to emphasize those missions for the warfighter and take
efficiencies in lower priority areas or obsolete missions.
Assumption number five: Reorganization is the answer. Is it
wise for the same person to oversee an intelligence agency, a
grocery store, and the Missile Defense Agency? Well, maybe. So
our study in 2013 examined the implications of consolidating
all those agencies under one leader versus grouping them by
missions, similar to the way they are today. And we found it
helpful to consider both the personal expertise of the leader
as well as dividing the missions across the Department in the
4th Estate.
Assumption number six: It is all about metrics and
reporting. The agencies and activities have been required to
provide a biannual report to Congress and in the past also
produced metrics that were tracked by organizations like CAPE,
my old organization, and at the time the Deputy Chief
Management Officer.
However, ultimately, there is no substitute for strong
leadership. In our experience, the vision and experience of a
leader who understands the mission of the particular defense
agency or field activity they oversee and the need for greater
efficiencies can, together with oversight and action from
Congress, I think, achieve the greatest steps.
So going forward, any reform efforts might consider these
and other lessons learned to give a sense of the magnitude of
the issue, along with the 25 percent sort of target that is on
the table. If all seven agencies--we will say six of those
mentioned are eliminated, that is roughly a 2 percent budget
cut in total. So there is a long way to go between 2 and 25
percent if you set aside DISA and the transfer.
So how do we think about that? There is four categories
that could find further efforts to be able to get from that
level of percentage up to 25 or whatever the right percent is.
First, large agencies that have not recently been reviewed,
like the Defense Logistics Agency or the Defense Information
Systems Agency, which is put on the table already; second,
missions that may be partially accomplished outside the
government like Defense Commissary Agency or Education Activity
on a location basis; third, missions that are split between the
4th Estate and the services still, like intelligence agencies,
satellite development organizations, and these cases, of
course, in coordination with the Director of National
Intelligence; and fourth, those currently decentralized
missions that may require increased leadership focus, given
advances in both threat and technological opportunities like
artificial intelligence and hypersonics, which could either be
accomplished with existing structures like the Missile Defense
Agency and Defense Advanced Research Project Agency or with
their own organizations.
Ultimately, for any reform to be successful it must be true
both, as was said here, to the taxpayer as well as to the
talented men and women in uniform who put themselves in harm's
way each and every day around the globe.
And I thank you for the opportunity to testify before you
today on this important topic, and I look forward to your
questions. Thank you.
[The prepared statement of Mr. Dunlap can be found in the
Appendix on page 53.]
The Chairman. Thank you. Thank you both.
Mr. Levine, you have got a magic wand and you can wave it
and do one or two things when it comes to the 4th Estate
reform. What would you do?
Mr. Levine. The first thing I would do is to take a close
look at the working capital funds. My colleague, Mr. Dunlap,
referred to the fact that a significant amount of the funding
going into the 4th Estate comes from the services through the
working capital funds.
My concern about the working capital funds is they do what
they are supposed to with regard to the buyer. The services
have a pressure to become more efficient because they see the
cost of what they are buying.
But they don't have the desired effect in terms of
efficiency with a seller, because the way the rates are set,
they are set to make sure that the fund breaks even. So no
matter how high your expenses are, you will always know you are
going to recover them.
My belief is we need a mechanism that will give the
customers the services, visibility into essentially how the
defense agencies are spending their money, how DLA, DISA, and
DFAS are spending their money so they can see the overhead and
push back at excess expenses.
I think that kind of mechanism would create sort of a cop
on the beat to look at those expenses on a day-to-day basis,
and nobody has more incentive to save money than the person who
is actually paying the bills. So I think we need to build that
kind of mechanism into the Department.
Second, there are a number of specific areas I would look
at. The first one is healthcare management. I know that the
committee just went through a major exercise of passing
legislation on that. It is very significant legislation. The
Department has a long way to go to execute it.
But I can't help but say the overhead in the healthcare
area is extraordinary when we are maintaining three separate
surgeon generals and the Defense Health Agency. I don't think
that is an area where we are efficient.
And you and the Department are going to have to keep a very
close eye on the implementation of this to make sure that it is
actually implemented in a way that brings down the overhead and
doesn't just add new organizations to an inefficient system.
The third area that I would look at--and there are others
we can talk about. The third area I would look at is finance
and accounting. And I really think it is important to relook
the whole relationship between DFAS and the services. When I
was the DCMO [Deputy Chief Management Officer], some of the
service comptrollers would come to me and say, look, there are
things that DFAS is doing for me that I can now do myself
because I have an ERP, an enterprise resource program.
It has the capability built into it, but I am required to
ship this stuff over to DFAS and have them do it. And the
consequence is then it is in two systems and then I have to
hire--DFAS has to hire more people. They have to go through a
reconciliation process because it is in two systems. If I just
did it myself I could not only do it within the system I
already have but I could do it cheaper without the manpower to
do the reconciliation.
That is a substantial task to do that re-examination. But
as I said in my prepared statement, there has been a lot of
evolution and capability on both the DFAS side and the service
side, and I think that whole relationship of who does what
finance and accounting tasks deserves a comprehensive relook.
The Chairman. Okay. Mr. Dunlap, magic wand, what would you
do?
Mr. Dunlap. Thank you.
I appreciate the comments of my colleague here. I think
working capital funds are both a bit of a mystery as well as a
gem. Why do I say that? It is hard to track where everything
goes and the pricing, as my colleague pointed out.
A gem because I think the Congress is also interested in
agility and flexibility in the agencies to respond
appropriately, and that is certainly pointed to as a mechanism
to allow that flexibility and some choice where the choice is
available for the different organizations to choose one
organization or another.
So there is both pros and cons to the approach. But it is,
you know, roughly half of the sort of total appropriations that
the defense agencies oversee, so it is appropriate to take a
careful look at that.
I think the biggest thing here would be to splice out those
functions across all the organizations that truly are a more
overhead and back office functions with an assessment that they
be done more efficiently or effectively. I think a careful,
hard look needs to be done.
We did that in our review by bringing in each of the
defense agency and activities heads, so I personally met with
each of them, went through the org [organizational] chart, the
missions, what they were doing, and why they were doing them.
To be able to get at that, it takes something like that
pressurizing leadership in the Department to go have a careful,
intricate look to support that.
On the reform in terms of making them more effective and
capable for the service members, they also provide a variety of
capabilities that I think, you know, the Congress thinks are
important, intelligence information in light of foreign
adversaries' capabilities, missile defense capabilities, and so
we want to make sure that we emphasize those.
And to that end, there remains, as I mentioned in the
opening remarks, elements of those structures that remain both
divested amongst the services and other organizations as well
as in the 4th Estate.
I don't have a position on whether it is better to be in
the 4th Estate or to be divested back to the services, but I
think there are several missions still in defense agencies
where we could look at that as part of this review and where
things could be done better or worse.
To get to that target of 25 percent or whatever the right
amount is, we are going to have to take--the Congress is going
to have to take a careful look at what to cut and what to stop
doing.
So I appreciate the seven agencies mentioned, one of which
is more of a transfer. But as I said, that only gets to about 2
percent of the budget if they were all eliminated, 2 percent of
the 25 percent, I should say.
And so I think the Congress will have to take a careful
look at whether they are open to issues like Mr. Levine
mentioned with what has typically been off the table with
BRACs, or education, or commissaries, because you have to get
agencies that are large to be able to achieve that kind of
savings.
So I just put that out there for consideration. Thank you.
The Chairman. Okay. I have got several things I want to
pursue, but first, I will turn to other members. Ranking
Member.
Mr. Smith. Thank you, Mr. Chairman.
You mentioned the word ``BRAC'' in that last little
sentence there, and it is the first thing I want to ask you
about. Of all the savings, how important would it be to give
the Department of Defense greater flexibility in closing bases
and moving personnel?
Because we all know, I mean, BRAC is the big bite that
people are reluctant to take in terms of actually closing bases
and realigning them. But they are--even within simply moving
equipment around within DOD or if you wanted to close an office
in one place and open it up someplace else, you have always got
this massive fight with, well, us, whatever district it is that
you are closing down.
So there is two questions in there. Number one, are there
things that we could do to make it easier for DOD to shut
things down, to move personnel, to sort of resist the political
pressures that inevitably come from the district in question?
And I am talking about something as simple as if they
wanted to move four C-130s from one base to another. There will
always be a fight, and it will always take longer than it
should. So there is that smaller stuff. And then on the larger
point, how important would be having a BRAC round to getting at
some of the efficiencies that is we are talking about here?
Mr. Levine. Mr. Smith, I am not going to take on the
political question of how you could possibly get a BRAC passed
in the Congress. I----
Mr. Smith. I didn't actually ask you that question. I am
allowing you to live in your perfect nonpolitical world there,
so----
Mr. Levine. I did manage to go through that once, and it
was a remarkable experience.
But in terms of the importance of BRAC, you may remember a
few years ago there was this Defense Business Board study that
said we could save $125 billion in all these different areas.
And about half of the savings were--that they projected, if I
remember right, were in logistics and real property management.
And so when I became Deputy Chief Management Officer, which
was several, you know, a little while after that Defense
Business Board study, I tasked the Defense Business Board, the
Deputy Secretary tasked them, but at my suggestion he tasked
the Defense Business Board to go and look at logistics and real
property management.
Here you said that there is $50 billion of savings here.
Tell us what we would do in order to achieve those savings. The
one overwhelming recommendation the Defense Business Board came
back with was, you need a BRAC.
So I don't know that they thought when they looked
specifically at logistics and real property management that
they believed that there was really $50 billion of savings
there or that they had recommendations. But they said, if you
want significant savings in these areas, what you need to have
is a BRAC. So that is sort of one marker anyway.
Mr. Smith. Okay. Mr. Dunlap, do you have anything to add to
that?
Mr. Dunlap. I can't answer how much of the defense agency
reform, you know, would require BRAC or not BRAC. Just a
general comment is that on average we sort of see a 10-year or
so return on investment there, so there would have to be a
recognition of upfront cost to be able to move out.
There are some examples in the agencies not requiring BRAC
where they are able to achieve efficiencies. I think Defense
Finance and Accounting Services is a good organization to look
to for that where they consolidate a bunch of their offices
across the country.
I don't believe they required any BRAC authority to go do
that, but they were able, on their own volition, to take
efficiencies there.
Mr. Smith. Thanks.
A related question, and just, if you want to comment on it,
you may. You mentioned the commissaries. You mentioned some of
the stuff locally. I mean, frankly, most of this stuff that we
are looking at, when you say, you know, we want to reform it,
BRAC is a very good example of what we run into.
We asked the question, you know, why don't we reform it.
And at the end of the day, it is because of, you know, politics
in a lot of cases. People don't want jobs lost in their
district. They don't want things moved.
So, I mean, if we are going to do this, we are all going to
have to figure out some process for saying we are going to bite
the bullet, allow the DOD to have greater efficiency despite
how it may impact our individual districts. Yes, I understand
the fantasy of that comment, but I think it is important,
because everything we are doing here is going to run into that
brick wall.
Even if we could all agree that there is one particular
agency that, you know, has 5,000 people working at it, it is a
total waste of money, we ought to do it elsewhere, it is going
to be the mother of all fights, because those 5,000 people are
somewhere, and some group of people are going to fight for
them.
But on the commissary issue, and there are a number of
issues like this, that are basically things that the men and
women who serve and their families, it is a convenience. It is
something they like. It is something that they are used to. It
is something that improves the quality of their lives in their
belief system.
Do you really think there are areas within that, like
commissaries and elsewhere, that we could get to? And if so,
how do we get to it in a way that convinces the service members
and their families that this is okay, that we have a better
option that is not going to negatively impact your life while
we save money?
Mr. Levine. You may remember that a few years ago the
Department proposed to eliminate the commissary subsidy and
Congress said no.
Mr. Smith. I do.
Mr. Levine. After that we were able to work out with you
and with your approval and with legislation an alternative
course, which we hope, if it is successfully implemented, will
reduce the subsidy without reducing the benefit to service
members.
So that, to me, is an example of the kind of reform that
you can do being cognizant of the benefits that you are
providing without removing those benefits but still to provide
them more efficiently.
Just to take just a minute on the defense schools, my
recollection is that the defense schools in the United States,
we spend about $300 or $400 million a year, something in that
range is my memory. For that price, we get extraordinarily good
schools.
The DOD schools match up very well against the better
school districts in the country in terms of performance, and
they are doing it with a sensitivity to the needs of service
members and their children, who move frequently.
And so just the fact that they are defense schools means
that they are more understanding of what kids are going through
with their parents' absence and with their parents in combat
situations. They provide a tremendously valuable service.
When we looked at that, the general consensus was, if we
got rid of the defense schools, we were going to have to
provide an almost equivalent subsidy to local school districts
around the country. So the savings would not be $300 or $400
million a year; it would be maybe some fraction of that, maybe
a quarter of that or something.
But for that $100 million, say, a year of savings, you were
going to lose all the special capabilities provided for the
defense school. So it is not just a matter of politics. I mean,
there is a real value to some of these things, and a real value
to the benefits that we provide to our service members and what
they do for us in terms of recruiting, retention, quality of
life for service members.
So it is easy to say, you know, if it weren't for the
politics, we would get rid of it, but you have got to remember
that there is a real value that we are providing as well.
Mr. Smith. Thank you for making that point. That is really
all you need, and that is exactly--what you just said is what I
will say about that. A lot of times the savings looks big
upfront, but then you have got to factor in everything that you
just said. And I can't say it any better, so I won't repeat it.
But I think you are right. The commissary model is the
model that we are going to have to go through, and this is how
can we do it in a way--forgetting the politics for a moment,
like you said--there is a real service that is being provided.
So we are going to have to work very, very closely with the
communities and with the service members to figure out, you
know, how can we balance this out in a way that is going to
make sure that the benefits are the same and the savings
actually is realized.
With that, I yield back. Thanks.
The Chairman. Mr. Wilson.
Mr. Wilson. Thank you, Mr. Chairman.
And thank you, Chairman Mac Thornberry, for addressing this
important matter of the 4th Estate which manages a significant
portion of the defense budget and represents oversight
responsibilities of a large number of civilian and contractor
workforces with roughly an annual budget of $100 billion.
And, Mr. Levine and Mr. Dunlap, thank you both for being
here today.
And even before I begin, Mr. Levine, I appreciate you
commending the DOD schools and the sensitivity to military
families. I feel the same is being done with commissaries with
a sensitivity and support of military families and giving
opportunities for not just having the conveniences of home
worldwide but also providing for military family members,
spouses, to have employment understanding that they could be
rotated out. And so we are really fortunate to have systems in
place that are so positive and meaningful for morale and
welfare.
And for both of you, what is your assessment of the
successes or failures of the past efforts to reform or render
more efficient the 4th Estate of the Department of Defense? And
especially I would like for you to begin with the description
of the 4th Estate for the benefit of observers of this hearing.
Mr. Levine. So the 4th Estate includes the Office of the
Secretary of Defense, the defense agencies and field
activities. Most people would also include the Joint Staff and
the combatant commands. So that is sort of what you are talking
about when you try to get your arms around the 4th Estate.
That oversimplifies it though, because, as Mr. Dunlap and I
have been describing, those defense agencies are incredibly
diverse and perform a wide range of missions. I can't say all
of them are essential to the Department but many of which are
essential to the Department, many of which are directly related
to warfighting.
I think there have been repeated efforts to get at the
management of the 4th Estate. Most every administration takes
that on at some point because most every administration is
under budget pressure. I mean, we have gone through
sequestration. We know what budget pressure is around here, but
it is not new to the Department of Defense.
My view is that each of those reform efforts has made a
contribution. I look at DLA as an example. DLA today is a
completely different entity from what it was when I first
visited DLA in the 1990s, and it was this huge, unruly mass
that was barely managed.
I think that improvements have been made over the years,
but I believe that management reform is a continuous
responsibility. It is something you can never leave, and every
new leadership cadre needs to focus on it because it is not
something that takes care of itself or that you are ever done
with.
Mr. Dunlap. Great description of the 4th Estate. I
completely agree. Just the one large thing that results in one
of the frustrations, which is if you do reduce a mission and
you end up not seeing the efficiencies or the savings, it can
be quite frustrating, both for the Department and Congress.
So, you know, sometimes you can do these and to make a
decision to reduce an agency. And the Department has done this
in the past as well, and it is kind of like squeezing a
balloon. You move it over here; it just reorgs and shows up
somewhere else. So keeping track on when you decide to cut an
organization, reduce or eliminate, making sure that that, in
fact, happens holistically.
And in past efforts it sort of stops there without being
able to track the ultimate completion of those actions and
direction. So it is an effort that isn't an instantaneous
result. It is going to take time and oversight.
Mr. Wilson. And in line with your balloon analogy, how
frequently does the Department assess the roles, functions, and
relative value of the defense agencies and field activities
that comprise such a significant element of the 4th Estate?
Each of you.
Mr. Levine. I think the Department is always looking for
cuts in 4th Estate and efficiencies in the 4th Estate. I am not
sure that it does a bottoms-up review of is this mission still
needed in the way you are describing as often as it should, and
I think it is something that can always be used.
Mr. Dunlap. I think, you know, legislatively I think 2
years, sort of biannual type of report and assessment is
required. That said, every year for the President's budget and
program and budget review they are part of that process and
evaluation.
In terms of a holistic review, the closest and nearest one
that I am aware of was the 2013 review that Secretary Hagel
oversaw. And I am not sure about years prior.
Mr. Wilson. And really quickly, the GAO, Government
Accountability Office, has assessed many of the cross-
enterprise business operations of DOD, Department of Defense,
as high risk due to waste, fraud, and abuse. Is that what you
believe has occurred? Each of you.
Mr. Levine. The GAO has assessed all of DOD as high risk
due to waste, fraud, and abuse. I am not sure that the defense
agencies are any different from the rest of the Department in
that regard.
Mr. Wilson. And thank you very much. My time is up.
Thank you, Mr. Chairman.
The Chairman. Mrs. Davis.
Mrs. Davis. Thank you. And thank you, Mr. Chairman.
I certainly appreciate your efforts here in attempting to
reform the defense agencies. Tough thing to do, and I think you
all are speaking to that. Of course, we don't have the
advantage of having that draft and neither do you, but I think
trying to look ahead now and see where are those instances in
which you have seen some successes in doing this and those
areas in which you think that perhaps the intent was a good
one, but in the end it wasn't able to achieve the required
results.
So I look forward to getting into this and seeing how we
can do it in the most inclusive way. What have you seen in
terms of models, perhaps that is BRAC in some ways or other
reorganization attempts, that you think we should be looking to
to try and really reflect here in our discussions?
Mr. Levine. BRAC goes to facilities. Facilities aren't the
only things we pay for.
Mrs. Davis. Right.
Mr. Levine. We have a couple of other things that we need
to look at. Basically the other category, you buy things, you
buy--you have facilities, and you have manpower. If you are not
focusing on things--because we are not talking about the
acquisition system. That is a whole different issue.
Mrs. Davis. Yeah. I think----
Mr. Levine. You are really focusing on manpower and how can
you save manpower. That is military, civilian, and contractor.
You have to look at the total force.
Mrs. Davis. Yeah.
Mr. Levine. So there are issues you can look at about the
balance of the total force. Military tends to be much more
expensive because we have to train and retain and so that we
have a lifetime investment in military. If we are using
military for functions that could be performed by civilians or
contractors, that is probably not a good idea. There is
analysis that can go into that.
Mrs. Davis. Mr. Levine, if I may, is there an organization
or really a process that you think has been a good model? And I
am thinking of making sure that people who are on the ground,
who know this stuff and work with it everyday, are included as
well as those who have fresh eyes on the prize, essentially.
Mr. Levine. So a model I would offer you is what we use for
looking at service contracts, which is an important area to
look at. We had throughout the Department something called
Service Requirement Review Boards, SRRBs--they are sometimes
called contractor courts--where the leadership of an agency or
an entity, service, systematically reviews its own service
contracts and requires a bottoms-up justification for what they
are spending on service contracts.
And so the people who were responsible for those contracts
have to come in and present, this is what I am spending and why
I am spending it. That SRRB process started in the services.
When I was DCMO we expanded to the defense agencies to make
sure that they were under that same kind of review. But that
model of the contractor court, the SRRB, is something that can
be applied, I think, to other areas of the Department as well.
Mrs. Davis. Uh-huh. Mr. Dunlap, would you agree with that?
And do you get people that are willing to say, you know,
listen, we don't need this?
Mr. Dunlap. So I think the important thing--and I think you
might be alluding to this--is talking particularly to the
people both that run the organizations and the beneficiaries of
the organizations and outside perspectives as well.
That was extremely valuable in the review that I was
involved in. And I found, depending on the particular leader at
the time, some actually quite open to talking about where they
could see their organization being more efficient and effective
yet were limited, for a variety of reasons that have been
mentioned here, outside and inside the Department.
And so I think that has been excellent. I think there are
good examples, like DARPA, with technologies that are a great
idea of what the defense agencies are about.
Mrs. Davis. If I could stop you because I have so little
time, how do you see doing this within healthcare management? I
mean, I know this is a really difficult one in terms of
hierarchies within the different services. Is that a good
model? Is that something--how would you do it to really get to
where we want to go?
Mr. Levine. I am not always convinced that Congress is the
best mechanism for defense management reform because you need
to have hands on within the Department to get it right and to
do the details. And so I am a skeptic sometimes of defense
management reform.
But the healthcare area is actually one where I would urge
the committee to keep hands on. I think that the Department is
going to be unable to come to grips with this by itself without
direct pressure and direct oversight from Congress. I just
think that the organization is big enough and dysfunctional
enough that it is going to be hard for the Department to
overcome that.
Mrs. Davis. And one other question. Yesterday we had a
hearing really looking at the culture of innovation, and one of
the concerns is all the requirements, processes, and the many
layers of people who really want to express their opinion. So
how do we help and reform the 4th Estate knowing that that is
going to be an issue?
Mr. Dunlap. I will just offer, you know, I used the example
of DARPA, Defense Advanced Research Project Agency, and
organizations like that, that have the flexibility. They exist
in the 4th Estate as the defense agency, and yet, due to
leadership, passion, vision that they have, and risk-taking,
they are able to cut through a lot of that. Strategic
Capabilities Office is another one. So supporting organizations
like that doing the mission that the Nation needs is useful for
the committee.
Mrs. Davis. Thank you.
Thank you, Mr. Chairman.
The Chairman. Mr. Turner.
Mr. Turner. Thank you, Mr. Chairman.
Mr. Levine, I appreciate your description. As you were
giving a list of all the things that we are going to be
executing in the Department of Defense with civilians that are
not what people consider bureaucracy, I basically heard you
describing many of the functions that are at Wright-Patterson
Air Force Base, which is in my district.
And I too believe we need significant overhaul of processes
in the Department of Defense and areas to find savings. I
served as mayor of my community and had to do that in my own
bureaucracy and organization.
But you made a pretty important distinction, which is how
do you preserve--this is just not just a civilian workforce
issue versus a uniform workforce issue. It is a function. How
do you preserve from a legislative perspective what is coming
from Congress in trying to address issues of civilian personnel
and not hurt those functions?
Because we all know what a bureaucrat is, right. A
bureaucrat is not an accountant. It is not an engineer. It is
not a scientist. It is these functions that you have that are
being executed. There is a product. I am not quite certain how
you would carve that out.
Let me give you some examples. Air Force Institute of
Technology is at Wright-Patterson Air Force Base, all the
graduate programs for the Air Force. There are programs that no
other college or university has, many of which are classified
programs.
Air Force Research Labs are based at Wright-Patterson Air
Force Base, scientists, engineers. In addition to being a
civilian workforce that manages materials, sensors, UAVs
[unmanned aerial vehicles], they also oversee the university
research portfolio of the Air Force.
Life Cycle Management Center, which oversees a portion of
depot maintenance and looks to contractor oversight, has to
have engineers, scientists to oversee contractors. And, of
course, the bidding process is they also have the foreign
military sales aspect and have the interface with those--with
our military counterparts.
Human Performance Wing, scientists, engineers, how we marry
our men and women in uniform to technology and also issues of,
you know, physiological episodes that we are having. We send it
to those engineers and scientists.
So how do we take those things--you know, NASIC, National
Air and Space Intelligence Center, 3,000 people, largely
civilians that are specialists in missiles and what our
counterparts are doing, how do we look at trying to streamline
and pare bureaucracy but make certain that we don't impact
those functions that are actually being executed as missions of
Department of Defense, or in this case the Air Force, that are
inherently going to be civilian functions?
Mr. Levine. Thank you for that question.
In response to the last question or one of the last
questions, I was saying that I thought the Department needed to
be hands-on with health care but you can be too hands-on in the
management area. At the end of the day, management is going to
be a leadership task within the Department of Defense. You
can't manage the Department of Defense from here.
So what I think that the committee can do and
constructively is to set goals, make sure those goals are
reasonable, and that enough time is provided to be realistic
that you may implement it. If you have unreasonable savings
expectations, you are going to have irrational action. But if
you have reasonable goals, reasonable timelines that will keep
the pressure on the Department. And you can have the senior
officials at the Department come over, you know, establish
plans, come over and brief you on that.
Mr. Dunlap did that in his time. I did that in my time. I
think you need to keep the pressure on that and keep the
oversight of that. But the management, the hands-on management
at the end of the day needs to be done within the Department,
and there is no substitute for leadership.
What they have got to do is they have got to get into the
nitty-gritty of how processes work, what organizations look
like, and where there are inefficiencies or where there are
unnecessary tasks. And that is just not something that you can
do in legislation. You have to do it really with a hands-on
management style.
Mr. Turner. Thank you. I yield back.
The Chairman. Mr. Langevin.
Mr. Langevin. Thank you, Mr. Chairman.
I want to thank our witnesses for being here today. And let
me start with Mr. Dunlap. In your statement you provide four
categories by which to think about agencies and potential
reforms. So I am particularly interested in the last two
categories, agencies with missions split between the 4th Estate
and the services and those with decentralized missions.
So responsibilities for artificial intelligence [AI] and
hypersonics, I believe, fall into both these categories. Can
you elaborate further on how you would think about reforming
the agencies currently responsible for AI and hypersonics so
that we achieve and sustain world leadership in each of these
areas?
Mr. Dunlap. Thank you for the question.
I think, you know, those are a couple areas, hypersonics,
artificial intelligence, that this Congress recognizes is
important both to today and in the future. The reason why I
mention it is that what can often happen is that each entity is
trying to do the right thing in and of themselves, but, as Mr.
Levine mentioned, leadership focus can be important to drive
innovation and change throughout a large organization like the
Department of Defense.
And so I offer those not as thoughts for increasing
bureaucracy and overhead but instead to maintain both vision,
passion, excitement, and energy, and resources on those
capabilities. And so those can take place both in the 4th
Estate as well as in the services.
I mentioned intelligence agencies, satellite developers,
things that in the past defense agencies were created to be
able to do good things to achieve efficiencies, gain greater
effectiveness by working together. And so I think that is an
important tenet. Whether or not organizational change is a part
of that is a separate question.
Mr. Langevin. Thank you.
So yesterday in this same room we held a hearing on
innovation, and both witnesses detailed how we essentially have
good people working within a tricky system, and that ultimately
we should place more of our focus on outcome rather than
resources--I am sorry, rather than processes.
Do you agree, or do you feel that there are elements within
the defense field activities and combat support agencies that
require existing processes to achieve the desired outcome?
Mr. Levine. My view on defense innovation is that a huge
part of the issue that is too often overlooked is money,
resources. Are we putting our resources in the right places to
promote innovation.
If you want to do what the Department says they want to do
now, which is to try lots of things and be willing to fail, you
don't want to be doing that in your acquisition programs. I
don't think any of us want to see a major acquisition program
where we are investing $50 billion fail. That is not where you
try something and fail. You need to try and fail before you get
there.
The problem that I see in the way our acquisition system
works is that the way you get defense development dollars in
large quantities is you start a program. Until you have a
program, you have nickels and dimes and try this and try that.
But if you want the big money for development, it is going to
be in a program. Well, once you put it in a program you can't
afford to fail.
What we need to do, to figure out a way to do, is to have
big dollars out there, substantial investment that we make that
is separate from weapons programs so that we can be running
prototypes and tests and experiments where we can try lots of
different things and be willing to fail, that is not a part of
programs where we can't afford to fail.
Mr. Langevin. Good observation. Thank you.
Mr. Dunlap, do you have anything to add on that point?
Mr. Dunlap. I will just add, I think one of the most
interesting comments that I heard, you know, yesterday was, you
know, that we don't reward people for failing. We shouldn't for
wrongful failing, but when you are failing for taking risks,
failing early and fast to be able to achieve the greatest
effectiveness, we ought to be rewarding those people in the
bureaucracy.
Mr. Langevin. Yeah. I completely agree.
So support agencies to the Department of Defense play
critical roles in addressing the needs of the Pentagon here at
home and around the world. And while I support looking
holistically at our reform efforts in saving money through
efficiencies like headquarters reductions, new technologies,
and business practice efficiencies, I also believe that we must
tread lightly before rapidly cutting these programs.
Where is the sweet spot between preserving these entities
and making tough cuts so that we can maximize efficiencies and
streamline our efforts?
Mr. Dunlap. I am not sure there is a sweet spot that is
known, which is why it should be done carefully, understanding
both the pros and cons and impacts of each choices, which is
why, you know, I would recommend, you know, a conversation with
the Department and the agency heads about what we can--what can
be done, what can't be done, and how to move forward so that
that sort of illuminated through those conversations. And, of
course, you can't ever quantify enough the value of strong
leadership of those organizations, too.
Mr. Langevin. Thank you both.
The Chairman. Dr. Wenstrup.
Dr. Wenstrup. Thank you, Mr. Chairman.
Thank you, gentlemen, for being here.
One quick question: Is the 4th Estate, I assume, it is part
of the DOD audit that is taking place?
Mr. Levine. Yes, sir.
Dr. Wenstrup. Okay. So, Mr. Levine, I want to get into a
process perhaps. You said many times that we can find savings.
You said that, I think, two or three times at least. And I
would certainly agree with you. So what percent of the budget
do you think--do you estimate could be saved?
Mr. Levine. It depends on what you are willing to give up.
I will give you an example since you just mentioned audit. If I
were the master of the universe, I would give up the audit; $5
billion over 5 years, I would say it is not worth it.
Dr. Wenstrup. Well, that may be for the 4th Estate, but I
don't know if that is the same throughout the DOD. This is the
first audit in the history of America of the DOD, so I am
hoping that we see some benefits from that.
Mr. Levine. If we had a chance of being successful, I
suppose I might agree with you. But I would say that we already
know the problems that--the deficiencies we have in our
financial systems. We know what we--we know we have a long
laundry list of things that need to be fixed. And until we fix
them, we are going to continue to fail audits. So to spend $5
billion over 5 years auditing when you already know what the
results can be, to me, is not a useful expenditure of public
funds.
Dr. Wenstrup. Well, I can't say that I know what the
results are going to be, but bravo to you for knowing what the
results will be. But it is hard for us here to really decide
what could be cut without the advice from experts, those that
are in the trenches.
Mr. Levine. I am sorry. I shouldn't have been so flip. I
just put that out as an example of something that people don't
want to cut but there is a lot of money there. And that tends
to be the kind of thing that we see if we really want to save
big money.
We have to make a tough decision, say we are just not going
to do something that we would like to do, but it is too much
money. And so that kind of judgment about what is it we are
willing to give up is something that I think that members of
this committee have to reach for themselves. No expert is going
to tell you what you are willing to give up.
Dr. Wenstrup. Well, so audit aside, let's go back to
process of what we are trying to do today. Mr. Dunlap, you
talked about peanut butter spread type of cuts, you know, just
making it 10 percent or whatever it may be across the board.
But what if agency leaders were tasked with the notion that
if you had to cut 10 percent, what would that look like and
where would it be, what would it be, why would it be, and then
confer with Congress and appropriators, et cetera, on where we
may need to go with that? Would that be an appropriate process
to put into place?
Mr. Dunlap. So the Department, as I understand it and
certainly when I was there, looked at things like that. And I
think it is always good to pressurize the system to come up
with solutions and choices.
You might get a suboptimal solution there in the end
because with that approach you are also looking only within the
individual organizations themselves. And to have a large impact
in terms of savings or efficiencies, I think you want to think
about sort of holistically across the missions.
And you may not want to give a 10 percent cut to agencies
that are, you know, optimal, efficient, and highly effective.
And so I would just suggest some flexibility in that to be able
to pressurize the Department as a whole to find out not only
where they are going to take those efficiencies but perhaps
even an opportunity to apply those resources in a more
effective manner so there is a----
Dr. Wenstrup. Well, but that is my point too, to what you
just said. I am just asking you to say, if you had to, what
would that look like. Then we would decide does it need to be
done or can it be done and still produce the results that we
want to produce. Do you see what I am saying?
So why not have a process where we challenge people to say,
well, if I was forced to do it, this is what I would do? And
then we take a look at it and say, well, is that realistic?
Should it happen? Or maybe somebody comes back and says, I can
cut more than 10 and still function well. But challenge
ourselves to that process so that we begin, because what is the
optimal way then, you know? If either one of you want to
answer.
Mr. Levine. I think you are right that you need to set
objectives, and I think that is where Congress can play a role.
And there is no science that is going to tell you what the
sweet spot is, but you have got to use your best judgment and
decide what it is.
I think that you have to watch out for if you are going to
tell everybody, tell me what you would cut and come back and I
will decide. You get what they used to call gold watching.
Somebody will come back and tell you their most valuable
programs. This is what I have to cut. And obviously you can't
do that so you don't do anything. You need to watch out for
that.
But I think that in terms of setting goals, my personal
view, 25 percent is way more than you are going to get. But you
have got to have some goal or the Department--because the
Department can justify everything it does. There is no activity
that takes place in the Department where somebody can't explain
to you that there is a good reason for it.
So if you want to get cuts, you are going to have to set
some kind of goal that will get you some pressure to identify
what the low-hanging fruit is.
Dr. Wenstrup. Thank you. I yield back.
The Chairman. Ms. Shea-Porter.
Ms. Shea-Porter. Thank you. And thank you both for being
here.
I was a military spouse, and my husband actually grew up in
the military, so I am always very sensitive when I start to
hear the word ``cuts'' or looking at any programs that military
communities benefit from.
And I have to say, Mr. Dunlap, that reading the testimony
when you talked about the big-box stores are a 15-minute drive
away, I started to think about the people that I knew in the
military who didn't have a car, so that 15 minutes might as
well have been an hour because it was not accessible.
So that just brings it right down to the ground level of
what we are talking about when we are looking at these budgets
and how they actually have impact. And so I just wanted to
throw that out there and say that there is a community there
that needs to be heard.
We are sitting here--and I am so grateful for both of you
and what you have done in the way you have outlined this and
the testimony is excellent, but it still has an impact. And
those kinds of stories might not be told if there isn't
somebody sitting here who actually has been in the military or
been in a family that can say, yeah, but we don't have a car.
Or yes, but it may only be a half of 1 percent savings when you
go to a commissary but still that.
And the other thing I wanted to say, and I recognize that
we have responsibilities and fiscal responsibilities here, but
it does seem like it is a small fraction of the overall budget,
and I am looking at the personnel and the impact.
My husband talks often with others about what that was like
to grow up on different military bases. And that is why I
appreciate your comment, Mr. Levine, about the schools, that
they had to move to places they had never been, but they always
had one kid that they had come across somewhere. So for all of
the moves, and back then they were frequent, I think more
frequent moves for many families, there was somebody that they
could identify with.
My mother-in-law taught in the DOD schools and they were
excellent. They were a source of pride. So what I am talking
about here is community, that when we look at the dollars we
also have to talk about what constitutes a community.
We know in our own communities when we choose neighborhoods
to live in, we say, well, you know, where are the stores, where
are the access points for our children, what is their comfort
level in schools, et cetera.
So I would just urge us, as we take out our pens to do
budgets, that we remember, again, that these are people who get
moved frequently, who leave family, who leave their support
systems. And I know you know this, but I want to state it
again.
And that it is so important for them, wherever they land,
that they have a sense that they are in a special community and
that we don't inadvertently chip away from that sense of
belonging to a community and being part of that.
So, Mr. Levine, I want to ask you something about that. You
know, the strength of our militaries obviously are people, and
it is predicated on the recruitment, the retention of the men
and the women. And they need to know that their families are
always in good care and safe.
These spouses and children who form the backbone of every
member's career depend on those services by these 4th Estate
agencies, such as DOD Education Activity and the DeCA [Defense
Commissary Agency]. We know that that is pretty critical to
them.
So are there any analysis of the impact on recruitment and
retention and any impact on family finances and stability as we
are looking at this? I heard you say earlier that we haven't
really had any recent studies on just simply the cost. What
about the cost on these families and our ability to recruit and
retain?
Mr. Levine. There are studies of impact of compensation
changes on recruitment and retention. There are models that
some of the think tanks have, that IDA [Institute for Defense
Analyses] has, that RAND has, that will predict what the impact
on recruitment and retention is of a change in compensation.
Those don't tell you what the impact is on an individual
family from some of these benefits. You know, the one family--
or the family that doesn't have a car and needs to walk to the
commissary and can't shop otherwise. So it doesn't tell you
about personal impacts. It tells you about aggregate impacts.
But we do have studies that tell you that, that provide that
kind of information.
Ms. Shea-Porter. And is it your belief that if we go after
these programs or we in some way find, you know, small
reductions or large reductions, that it will have that impact
on, not just quality of life--obviously, we are talking about
the quality of life--but also on actually retaining.
Mr. Levine. So I believe we need to be very sensitive to
changes that impact the quality of life.
Having said that, I think that there are very few things
that we do in the Department that we can't do better and more
efficiently. So I don't see any reason to put something off the
table just because it deals with quality of life. We can still
be more efficient. We can still do things better.
I mentioned in my opening statement the Defense Human
Resources Activity, which used to report to me as Acting Under
Secretary for Personnel and Readiness, it is a notoriously
inefficient entity. It provides vital services. So you have to
deal with both of those things. You don't want to cut off the
services and programs that it runs, but you want to have it run
better.
I was privileged to be able to name a new Director for
DHRA, who is taking management reforms seriously and I believe
will reorient it and make it run better. That should eventually
result in savings, but it is a hard job, because if you want to
produce savings without eliminating activities, you need to
look into the details of how your organization is set up, how
your processes work.
Those are hands-on management activities that can only be
done by a manager within the Department. You can't do that from
Congress. You can only set the goal.
Ms. Shea-Porter. Right. And I appreciate that.
Mr. Dunlap, would you like to comment on that.
Mr. Dunlap. I would just like to say that I appreciate your
underscoring the truth, I think, in general about these
agencies, which is that it is really hard to get a free lunch.
There is always an impact to get real savings out of any of
these organizations. So thank you.
Ms. Shea-Porter. Okay. Thank you. And, again, I thank you
for the work that you have done because it is critical, and we
understand our debt is pretty out of control and that we need
to do something. I just want to make sure we target, you know,
the right budget and the right places, instead of inadvertent
impacts on military families and communities.
Thank you, again.
The Chairman. Mr. Gallagher.
Mr. Gallagher. Thank you, Mr. Chairman.
Gentlemen, thank you both for being here today. I
appreciate it. And I know you sort of talked about this broadly
in your testimony, but I think it is worth sort of reviewing a
little bit and foot stomping, or at least for me it would be
useful.
Obviously, we have had various efforts in the past at
streamlining the 4th Estate, and you have been involved in a
variety of them. And I just, you know, we have talked about the
``More Disciplined Use of Resources'' review in 2012, the Core
Business Process Review of 2014, the delayering initiative
2015, on and on.
Could you distill for me what you think we have learned
from these collective efforts on how to embark on successful
reform efforts? What was the source of failure? What was the
source of success? If you could just kind of distill it down
into the bottom line for me, that would be very helpful.
Mr. Levine. I will give you one thought, which is, in my
view, in management reform, you get what you pay for, not only
in terms of dollars but in terms of time.
Top management has to be willing to devote a lot of time
and stick with an issue in order to make it work.
Mr. Dunlap, when he did the SCMR [Strategic Choices and
Management Review], he had to spend, I am, sure vast amounts of
time. When I was DCMO and I had my savings initiative, the
delayering initiative that you mentioned, among others, that
was something that was a solid commitment of a big chunk of my
time every day over the course of a year.
Mr. Gallagher. Sure.
Mr. Levine. And it had to continue after I left. I hope it
continued after I left, but you can't take your hands off the
wheel and expect it to happen. And you can't expect savings to
magically appear. Frankly, you don't expect much savings in the
first year.
Mr. Dunlap mentioned with BRAC that there is the 10-year
payback period. With most management types of savings, you are
investing upfront. And maybe it is just the time and effort of
management that you are investing upfront, but you have to
invest upfront in order to get payback in the long run.
Mr. Gallagher. Sure.
Mr. Dunlap. If I could just augment that. I appreciate
that. Three things: Number one, strong leadership, which my
colleague just mentioned, vital through the duration. Second,
watch the balloon. I talked about squeezing in one area----
Mr. Gallagher. Sure.
Mr. Dunlap [continuing]. And it moving to another. And,
third, and perhaps the most difficult for both Congress and the
Department, which is the tough decisions to cut or reduce or
completely eliminate missions. And that often is the difference
between sort of marginal savings and significant savings but,
of course, more difficult choice.
Mr. Gallagher. And I commend your testimony for drawing out
sort of how difficult it is to cut mission relative to cost but
how the two are related.
Another thing that seems to come up is a lot of these
reform efforts are baked into the FYDP, so we expect savings
redistributed out to support other priorities in the out-years.
So can you just kind of, again to foot stomp this, how has DOD
planning been impacted by these kind of phantom savings that
are projected in future years but sometimes do not appear?
Mr. Levine. If you put a wedge in the DOD budget of savings
that are anticipated and then they don't appear, what happens
is you have to cut something else. And what you usually cut
something else ends up being operations and maintenance. And
operations and maintenance can impact every phase of your
activity and your ability to perform the mission. So, if you
put in savings and they are not achieved, at the end of the
day, you are going to impact mission.
Mr. Dunlap. I will just add that it is tough for any
company to run if you don't have realistic projections of what
you are going to do and what you are not going to do. So you
want to be realistic in your planning and budgeting.
Mr. Gallagher. And then, if we just kind of look at, even
if you adjust for inflation I believe, and you compare what we
are spending today versus the 1980s, we were spending less
during the Reagan building in the 1980s and getting more in
terms of quantity.
Now, you could say that, just as my iPhone cost more than
whatever people were using back in 1980s, I don't know, I was
like 5 years old, you are paying more for a more sophisticated
piece of equipment, but I do think what we are talking about
today is the way in which other priorities have crowded out a
lot of the things that we want to spend money on, which is to
buy lethality and sort of support the direct mission of the
Department of Defense.
Among those many things, it seems health care, just like it
is affecting the rest of society and crowding out other
priorities, is affecting DOD. As you look at the many problems
we face, does health care stand out among the rest of them as
an area where cost continues to outpace inflation and it is
crowding out other priorities?
Mr. Levine. Health care is a big block, which makes it
attractive to look at when you are looking at trying to be more
efficient. To me, the place you will look for a lot of savings
is not big blocks but little chunks.
An example I would give you is something the Department is
undertaking right now, which is just to look at all the
training programs, mandatory training that they require the
troops to put through. Just an extraordinary expenditure of
time, which is not going to military training but is going to
awareness training of this, readiness, you know, prep training
for that. Sort of every program that everybody has ever thought
of, it is great to think that you are going to train people,
but when you have 15 different requirements and you have to go
through this training and that training and the other training,
you are distracting from the mission. So that is one example.
Another example I would give you is when I was the DCMO, I
looked at the hiring process for the Office of the Secretary of
Defense. Everybody knew it was dysfunctional, but they just
lived with it because it was what the hiring process was.
One of the things I discovered was it was, one of the
reasons it was dysfunctional was because, at some point, the
personnel authority had been removed from the individual
offices, centralized, which is great, except then what the
individual offices did, each of the Under Secretaries then put
their own personnel people in because they didn't trust the
central function.
And what happened was they spent all their time negotiating
with each other. So it would take months and months and months
just to get a position description because the guy who was
working for the Under Secretary for X would put together a
position description, and then he would have to negotiate with
the personnel people over in WHS [Washington Headquarters
Services] about whether he was allowed to say that. And they'd
go back and forth and back and forth over a period of months
before they'd even get a simple position description written.
So you have to think about consequences of your actions.
Sometimes you centralize; sometimes maybe centralizing isn't
such a great idea. And you have to get into the nitty-gritty of
processes like that. And I had an approach that I was taking to
untie that knot, but you can't do that without analyzing the
actual process and digging in.
You don't expect great savings, but if you never look at
processes like that, then everybody does what they did with the
hiring system, ``Well, it is just something I have to look at,
something I have to live with.'' If nobody looks at it and
nobody takes it on, that will stay that way forever.
Mr. Gallagher. Thank you.
Mr. Dunlap. I will just offer to you the Defense Health
Agency, somewhere around $34 billion, it is 25 percent or so of
the 4th Estate defense agency cost. You know, the Congress has
done a lot to work on that and reform that, you know, in recent
years as well.
I agree with your assessment that personnel costs have
increased dramatically recently, and that could be, you know,
that could be good if we have good people. That may make sense.
But health care is certainly one of those areas that has
increased at a rapid rate.
Mr. Gallagher. Thank you both.
The Chairman. Mr. Veasey.
Mr. Veasey. Thank you, Mr. Chairman.
I want to ask both of you about your assessment on the role
of civilians and military personnel and contractors in
performing the work of the 4th Estate. And do you think that we
have the right proportion of each of them to do the work of
defense agencies and field agencies?
Mr. Levine. Military, civilian, and contractors are all
vital parts of the DOD workforce.
We rely on all of them, and we need all of them. They
perform different functions, and we don't always have it right.
There are some functions that we put military people in which
could really be performed by civilians and contractors and
would be much less expensive.
There are also functions that we have contractors
performing where we really need to have organic capability and
we cannot and should not be relying on contractors. And you
need to have that ability in-house.
Your civilian workforce tends to be your institutional
knowledge, and if you divest too much of your civilian
workforce and lose that institutional knowledge, you may lose
the ability to do the job.
So it is not that any one of those parts, components of the
workforce is more important than the other. They all have their
roles, and we need to keep a balance. And, no, I can't tell you
that we have it right. I think that that is an area which is
ripe for re-examination, not only now but at all times. We need
to constantly be on top of that to try to make sure we are
perfecting that balance.
Mr. Veasey. I wanted to specifically ask you about what you
think the appropriate relationship of the newly created Chief
Management Officer to the defense agencies and field activities
should be, especially as it relates to the Department's cross-
enterprise business functions, like civilian resource
management, or service contracting?
Mr. Levine. I believe that the CMO, the Chief Management
Officer, can play an important role in providing common
services and ensuring that common services are provided in an
efficient manner.
I am much less convinced that the CMO should be in the
direct management chain for the defense agencies, for a couple
of reasons. One is, that, to me, one of the big advantages I
had when I was DCMO, the predecessor to the position, over
other senior officials in the Department, was that my day job
was less burdensome. The routine tasks of the office didn't
fill up my inbox. So I had time and ability to get into a
management improvement program, to take on the issue of hiring
in the Pentagon, to take on a $7 billion savings program,
because my inbox wasn't always full.
Most senior officials in the Department, the inbox is so
pressing that they have maybe 5 percent of their time is
discretionary that they can spend on their own initiatives.
My concern with the CMO being in direct line of authority
over defense agencies is that that could overwhelm the office,
that it could overwhelm the individual, and then, all of a
sudden, that time that the CMO has to develop management
initiatives that cut across the Department, you no longer have
that time and ability.
The second concern I have is that I am not sure that the
CMO right now has the institutional capability, that that
office has the institutional capability to do that. There about
100 people in the CMO office and most of them have relatively
routine jobs. They are not the people you would want to have if
you were managing all the defense agencies.
So, if you are going to give the CMO that task, the first
thing the CMO is going to want to do is to build up new
capabilities. Essentially, you will be building a new office
and a new bureaucracy. I am just not sure that that is the
direction that you want the CMO to go. I won't tell you it is
the wrong thing to do. There are other factors that weigh in
the other direction, but those are my concerns with putting the
CMO in the direct line of authority.
Mr. Veasey. Thank you very much. That is very good to know.
Thank you, Mr. Chairman. I yield back my time.
The Chairman. Mr. Jones.
Mr. Jones. Mr. Chairman, thank you very much. And thank
you, gentlemen, for your research, your hard work, and being
here today to give us, hopefully, some ideas to make DOD more
efficient.
You know, recently in Stars and Stripes, there was an
article written that DOD could not locate 95,000 vehicles in
Afghanistan. That equaled out to about $3.1 billion lost.
Okay. One other story, and then I have a question. Years
ago, John Sopko testified in front of the Senate that DOD spent
$6 million to buy nine goats. Well, it is almost the end of it.
Nobody ever picks up to say: Well, how are we going to recover
the money? How are we going to recover the vehicles? It just is
endless.
My question to you, because you are an expert in the areas
that you are talking about today, why do we in Congress keep
increasing the budget? I am all for the warfighter. He or she
deserves whatever we can give them. But the system itself
continues to spend and spend in a way that there is no
accountability.
What would be wrong with putting the responsibility in the
Office of the Secretary of Defense--it wouldn't happen
overnight, but in a period of time--and saying to the Secretary
of Defense: You have the responsibility for accountability. If
you cannot account for 95,000 vehicles in Afghanistan, then we
are going to take $3.1 billion out of your budget.
How does Congress--and I have heard some your comments, I
was late getting here, sorry, but some of your comments--how do
we put the responsibility? It can't be on Congress, because we
will always continue to fund the military because of the
families and the warfighting. That, I understand. I am in favor
of that. But somewhere along the way, somebody has got to be
accountable.
And I don't think it is going to be Congress, to be honest
with you. I think we have done a great job under Democrat
leadership and Republican leadership of trying. But until you
put one Department or one person overseeing the problem, and
that person knows if we can't account for moneys that we have
lost, then we are going to lose money from Congress the next
year.
How can we, as the American people, not Congress, how can
we get a control of the waste, fraud, and abuse if sombody is
not held responsible?
Mr. Levine. Congressman, I suppose that, in a way, we are
all responsible. Before I went to the Department of Defense, I
spent better than a quarter century working for Senator Levin
and helping write legislation and addressing defense
management, so I suppose that makes me responsible and
accountable.
I don't know, I don't know how you do it, other than to say
that the idea that you do it by cutting the defense budget, to
me, doesn't work. If you are unhappy with performance, you have
got to go after that performance, but to say you are going to
take away $3 billion, well, that is going to come right out of
the mission and undermine the mission.
So I don't know what the right answer is, but I am pretty
sure that is not it.
Mr. Dunlap. I will just offer, and I think you alluded to
some of this, which is a theme that we had been talking about,
which is strong, you know, leadership, both at the top and
throughout and accountability.
So I certainly underscore the need to have people that
oversee this in a way that care about the mission, care about
accountability and waste and abuse and fraud and so on, and
that action should be taken. I can't speak to the specific
examples that you are referring to, but in general and in
principle, I think the Department of Defense certainly wants to
be accountable and not have those types of activities happen. I
can't point to a specific reform the defense agencies that
would affect that, but appreciate that we certainly don't want
those kinds of things to happen.
Mr. Levine. Having said that I was accountable, I want to
clarify: I never bought any goats.
Mr. Jones. Well, I am going to close in 1 second.
It is almost like you are saying there is nothing we can do
about it. And that is sad for the taxpayers because we are
headed for a financial collapse as a country. Then we won't
have any money to pay the troops. Anyway, thank you.
Mr. Levine. If I could offer a ray of hope there, I think
you can do something and it is what you are doing right now.
You can hold hearings. You can shine spotlight. You can
identify problems. And the primary tool that Congress has to
hold senior DOD officials accountable is to bring them in here
and make them explain what they have done and why. And believe
me: It has an impact on the way senior officials at the
Department manage. They know the power that you have, and they
know, if they screw up, they are going to have to come in here
and report to you on it.
Mr. Jones. Thank you very much.
The Chairman. Mr. Norcross.
Mr. Norcross. Thank you, Chairman, and thank you for having
this hearing. Although it feels like deja vu all over again,
especially to you who spent so much time.
Over the past month, I have spent a considerable amount of
my time going through a couple of programs that we are running.
The Columbia class, and certainly our warfighters in terms of
dealings with ships. And chart after chart is talking about the
workload of the workforce building those ships--there is going
to be a downplay; we are going to have to lay off people and
then rehire them; and how tough it is to keep that quality
workforce--which I have to agree with. But it doesn't seem that
we have that same conversation when we are talking about
eliminating or downsizing parts that affect the quality of life
of our warfighters, whether it is schools, the commissary.
People by their nature are inefficient at times. They get
sick. They are humans. And this seems that those who don't have
the paid lobbyists tend to get hit the worst. What sort of
analysis do you do in terms of the human side, how it affects
our warfighters and their families when they go home? Gee, the
commissary was closed; we have to drive down the street. That
quality of life that affects the decision making whether or not
they want to remain in the Armed Forces.
How do you go through that side of analysis, because you
have extensive analysis when it comes to the efficiency of
building something. How about building the human side of the
quality of life for our warfighters? How do you handle that?
Mr. Levine. Congressman, that is the responsibility at the
OSD level of the Under Secretary of Defense for Personnel and
Readiness, has an entire office that looks at those functions
and tries to protect them.
Within each of the military services, we have an Assistant
Secretary for Manpower and Reserve Affairs who has that
responsibility.
On each of the service staffs, we have a Deputy Chief of
Staff for Personnel, the one who is responsible for that. At
the base level, we have base commanders who are responsible for
that.
We have people throughout the military system who are
responsible for the well-being of people, of the men and women
in uniform.
Mr. Norcross. We fully understand, but how does it come to
you.
Mr. Levine. It is and has been and will be a major priority
for the Department of Defense. I don't think it is a
responsibility the Department takes lightly.
Mr. Norcross. But I don't hear you discussing that today
until--whether it was, Ms. Shea-Porter, that side of the
equation. How do you deal with that? Just, oh, we can save 10
percent; that is a nice goal to go for.
Mr. Levine. I believe that my colleague and I have tried to
emphasize that, as you look at potential cuts, you have to
think about the programs that are going to be cut and you have
to make choices and understand the impacts of your action.
I still believe, even so, that there are things that we can
do more efficiently, that we can run our business more
efficiently, we can run our business more efficiently even in
the personnel area, even when it comes to quality of life.
I am not convinced that the Human Resources management of
the Department is efficiently run. I believe, without having
done a detailed study--but I believe that we have an
extraordinary number of human resource officials in the
Department at every layer of the organization. And there may be
so many of them that that is an overhead factor that could be
looked at.
So I don't want to say, that deals with quality of life,
that is off the table. We need people who care about that. We
need people who work on it. We need to maintain quality of
life. We need to pay attention to that, but it doesn't mean we
can't do it more efficiently.
Mr. Norcross. Nobody has argued with that. So let me ask
you a very direct question.
Do you think that warfighters and their families, say, are
happier in their service to their country than they were 10, 20
years ago? Do you any quality-of-life measurements across the
entire organization?
Mr. Levine. There are quality-of-life surveys that take
place regularly in the Armed Forces. I can't tell you what----
Mr. Norcross. Do you know if they are more satisfied with
what they are doing today than they were 5 years ago?
Mr. Levine. I can't tell you offhand what the trend is over
the recent period. I don't know. But I know that those surveys
are taken and that information is----
Mr. Norcross. You certainly could tell us the
inefficiencies of many of the other programs.
Here is one of the most important--I am not digging just on
you. I am trying to suggest that is as important as sometimes
some of the classes of submarines we buy or ships we buy,
whether or not those people who call the military their home or
their community is just as important.
Mr. Levine. Congressman, I am going to agree with you. It
is not only as important; it is more important. Our most
important asset is our people.
Mr. Norcross. Thank you. Mr. Dunlap, do you have anything
to add?
Mr. Dunlap. I will just underscore Mr. Levine's last point,
which is, I think the Department's people are its most
effective capability, and that should always be held in mind.
It is hard to analyze sort of the hearts and minds and
perspectives of people sort of in a quantitative, analytical
fashion. And so----
Mr. Norcross. And by the way, it is not hard to measure. It
is measured every day. It is called the retail outlets. They
know exactly what people want. And I think we can know that
information also.
I yield back the balance of my time.
The Chairman. Mr. Russell.
Mr. Russell. Thank you, Mr. Chairman. And thank you,
gentlemen, for being here. There is an old adage that says that
which is not inspected is not done.
I would find that to be true. And I think, in many cases,
when we look at the Department of Defense on the personnel
side, you have got people actually that are involved with
units, that are involved with programs, and they generally will
try to clean up their individual agencies, much like you did
when you were working in the five-sided building.
But I have to say that there is a solution here. And when
you look at the Department of Defense: $700 billion annually is
the norm now for its budget; $2.4 trillion in assets; 3 million
Americans both in and out of uniform committed to defending our
Republic, and yet only 1,700 Department of IG [inspector
general] staff oversee all of that.
Well, there is part of your solution: that which is not
inspected is not done. When I was a commander, both on
battlefields or in peacetime, if I didn't go down and inspect
my equipment or do layouts or look at motor pools or have
uniform inspections or do any of those things, I guarantee you
that all of those things, like plates spinning on a pole, they
will wobble and they will break.
And I have to totally agree with my colleagues, Mr.
Norcross and Ms. Shea-Porter. We are not going to see reform in
saving or realize anything close to that by eliminating Mrs.
Russell's ability to go buy a can of beans in the commissary. I
think that is absurd. We have to take care of our people.
But the big ticket things, you know, why wouldn't we
increase and authorize instead of 1,700 Department of IG staff
or Department of Defense, why not make that 3,400. That would
cost a lot less than your audit concerns.
Really? Eliminate the audit? Do you realize that the
Department of Defense is the only agency ever in the United
States Government that has never been audited, held to
absolutely no account? I am a retired warrior. I still got a
little fight left in me. But we need an audit. That which is
not inspected is not done.
Here are a few things: Payment to grantee verification.
Yeah, we grant all kinds of stuff. Department of Defense
improper payments, just last year in 2017 accounted for $1
billion of improper payments. I wouldn't call it low-hanging
fruit because we like to eat fruit, but there is some weeds
that we could pull right there.
Department of Defense improper payments. Procurement
management. Here is from a recent Department IG CIGIE [Council
of the Inspectors General on Integrity and Efficiency] report,
quote: Many DOD programs fall short of costs, schedule, and
performance expectations. As a result the Department of Defense
regularly pays more than anticipated, buys less than expected,
and delivers less capability than its contracts require.
And we have been doing it since we have been wearing
tricorn hats.
So how do we stop it? That which is not inspected is not
done. And so, you know, while I appreciate your comments here,
and I have great admiration for IDA and so many other great
organizations that do so much to promote proper defense of our
Republic, we have to have accountability.
We are not going to realize it off of, you know, Ms. Shea-
Porter's dependents or, you know, Mrs. Russell being able to
buy beans at the commissary. We are not going to do it that
way. We are going to do it by going after these bigger
programs.
And you had made mention, and I agree with your comments,
Mr. Levine, about the big dollars that get sucked into these
programs, and then they are locked in, and it creates enormous
inefficiency. And I would suggest to you that, as a Congress,
we owe ourselves to bolster programs that DIUx, SOFWERX, Skunk
Works, things like that where the innovation comes out where
you have something actually developed, and then it ends up
going from, ``Wow, this works, can we immediately get it
fielded,'' and then we just fund it. Those things work.
Big primes provide big things, and there are lot of
implements for the things that we come to rely on, but they
also buy up innovation and squash it.
And so I would hope, Mr. Chairman, as we look at the
problems in the future on the 4th Estate stuff, we could
bolster those innovative programs to prevent some of that
waste.
We are all frustrated with it. I even found myself
associated with Mr. Jones' comments on Afghanistan today. That
is a rare thing, being an Afghanistan veteran as well. But he
is right. Our overseas contingency dollar programs, three
biggies right now, where is the oversight and accountability?
Mr. Chairman, I don't really have any questions, but I
would suggest that we ought to do everything we can to increase
the Department of IG numbers, even double them, and we will get
to billions right away.
Thank you. I yield back.
The Chairman. Do you all have any comment?
Mr. Levine. Mr. Chairman, I think those were helpful
comments. And, frankly, I agree with the point that, if it is
not inspected, it often doesn't get done.
I think that you saw some examples of that with previous
management reform efforts at times. And one I would point to
is, in the 1990s, we cut back quality inspection on our major
acquisition programs. And what we discovered is, when we cut
back the DOD inspectors, the contractors responded by cutting
back their own inspectors, too. And so we had quality problems.
More recently than that, the reason that the DOD Test
Resource Management Center, the DTRMC, was created because the
Air Force was neglecting its major test facilities. It was
allowing really valuable assets to atrophy. It wasn't putting
money into them. We created an oversight entity.
So it is not just IGs who look at things. Other people have
that responsibility for the inspections and oversight and can
bring attention to these kinds of problems and make sure that
important issues don't get neglected.
The Chairman. Let me just pick up on that for a second.
Because it seems to me one of the ways we got to where we are,
is, okay--and I will just take this example: Air Force is
neglecting its key testings. What do we do? We create another
office that is supposed to oversee them to make sure that they
take care of their test resources rather than hold the Air
Force accountable for doing what they should have done to begin
with.
And isn't it true that, over time, that layer after layer,
and we are as much responsible--``we,'' Congress--is as much
responsible as anybody of reacting to a problem by creating a
new process or a new bureaucracy.
Do you think I am wrong?
Mr. Levine. I think you are right, Mr. Chairman. I would
say that, in the case of the Test Resource Management, that the
number of people who actually review the budget--to me, budget
review is a plus.
The number of people who actually review the DOD budget for
the MRTFB [Major Range and Test Facility Base] is relatively
small. I think that most of the budget of that entity is for
investment in test capabilities--science and technology,
investment in test capabilities, the National Cyber Range
Complex. They maintain important capabilities.
There is a handful of people who review the service
budgets. And, frankly, that is at the core of what OSD's job
is, is to review the service budgets to make sure they are
spending their money wisely.
The Chairman. But there is also a separate DOD entity
responsible for independent testing.
Mr. Levine. There is, but it doesn't have the
responsibility for the test base, for the investment in
facilities, which is what TRMC does.
The Chairman. Okay. Let me, if I can, just go back to the
beginning for just a second.
My sense is, as one looks out, not only at business but at
nonprofit and essentially every sort of organization outside
government, the trend in recent years has been flatter
organizational structure, savings in the back office. The
supporting functions of the key missions have been reduced or
at least squeezed to gain greater efficiency so that more
resources can go to the core mission.
And, yet, the Department of Defense, anyway, has not kept
up, at least to the extent that all the rest of the world has,
in that regard.
Now, do you all agree or disagree with that premise?
Mr. Levine. I would say that I believe that is a constant
focus of defense management. I believe that was Mr. Dunlap's
focus when he was doing the SCMR. That was my focus when I was
working in DCMO.
Nonetheless, you are absolutely right. More needs to be
done. More always needs to be done on this. I would point to
the Air Force, when the Army was working on its delayering
activity, the report that came back was that there would be
times when the Army's Chief of Staff would issue an order to a
subordinate, and it would have to go down through 13 different
people. And a couple of months later, somebody would do the job
and then would have to report back up to 13 different people.
And by the time you played that game of telephone, the job that
was done was completely different from what the Chief Staff had
asked for.
So, of course, you have to look at that, and you always
have to look at that because it builds up over time, and it
will continue to build up over time. If you don't keep
fighting, you are never going to get there.
Mr. Dunlap. Sir, thank you. I certainly agree with the
trend that I see in industry. And I think that I completely
agree with you in flattening the organization can make it more
effective.
I think there is a natural tension between that, as I tried
to allude to earlier in my opening statement, where there is a
good chunk of those agencies in the 4th Estate that are more
direct mission than they are overhead function.
And so looking at sort of the overall budget of the defense
agencies and activities as a whole and putting a specific
target on that and thinking that that can be achieved purely
through efficiencies and delayering might be optimistic because
I think you really have to cut into mission, which I commend
you for thinking about that, in sort of your opening volley
that you put out this week.
So I would just offer that I completely agree with you, but
I also think to achieve the savings to be able to put towards
the warfighter that you are talking about, you know, cuts in
missions are going to have to be made.
The Chairman. Well, let me just pick up on that for just a
second. Because even--and I will use Defense Health Agency as
an example. Even if you say they are doing their mission, you
know, perfectly, which I take your point that they are not, but
even if you say they are, there are certain supporting
functions within that organization, their business practices,
their real estate management, their logistics, their
contracting, their personnel management, and those things can
be improved across-the-board.
I mean, we tend to think of it as all our charts do like
this, but there are some commonalities here across the 4th
Estate where greater savings and efficiency, as well as
compatibility, could be achieved.
That is my premise. Tell me what you think.
Mr. Levine. I agree with you.
Mr. Dunlap. I agree. We tried to get to that in 2013 as
well to dissect overhead versus mission functions. And any new
reform going forward ought to consider that. So I agree.
The Chairman. And to me--I don't know if it is going to be
25 percent, but that is a lot of where some of this can come
from, is in some of that back office.
Mr. Levine. Mr. Chairman, you have two tasks, though. One
is to separate the overhead from the mission and then to figure
out how much you can cut the mission. And I think that looking
at the defense agencies, it is important to recognize that is
not the overhead. There is a lot of mission in there.
The Chairman. Yeah, no, I understand your point.
Mr. Levine, I want to just ask you once again, because you
talked at the beginning about the Defense Finance and
Accounting Service.
One of my suggestions in my proposal is to look at--I know
them by acronyms, I have got look at exactly, the Defense
Contract Audit Agency [DCAA] and DCMA--whatever that is.
Mr. Levine. DCMA, and Defense Contract Management Agency.
The Chairman. Defense Contract Management Agency, yeah. So
we have three separate entities that are essentially dealing
with finance and accounting, which, as I have tried to drill
down, the difference in responsibilities is not always as clear
as maybe I thought it was.
Can you comment? Because you talked a lot about DFAS, but
talk about DFAS in connection with DCMA and DCAA, and I guess
to some extent the comptroller's office, in how all that
financial management----
Mr. Levine. DFAS works for the comptroller and is
essentially the finance and accounting, the authoritative
finance and accounting entity for the Department of Defense. So
they are the ones who are responsible for DOD's books. They
have to work with others to do that, but they have the
accountability.
DCMA and DCAA deal with acquisition. They don't deal with
finance and accounting, so DCMA is an acquisition support
agency. They support program managers and contracting officers
by doing onsite inspection and onsite management of contracting
facilities.
DCAA is a contract audit agency. That is different from
what DFAS does because what they are doing is auditing
contractors. They are not doing DOD's finances. They are
looking at contractor finances.
So three separate functions. Three separate agencies.
The Chairman. And I guess the essence of my question is you
believe there needs to continue to be three separate agencies
to do each of these discrete--or each of these
responsibilities?
Mr. Levine. I do because I believe they are discrete
responsibilities. This is an area where I think you can achieve
efficiencies within any one of those, but I don't think that
they can appropriately be combined.
My particular concern with combining DCMA and DCAA, for
example, is DCMA is an acquisition support activity. It is part
of the acquisition community, working for them. DCAA is an
auditor. They have to maintain audit independence. If you
combine them, then you lose the audit independence. GAO is
going to say that none of their audits are valid. So you have a
problem.
The Chairman. Yeah. Do you have any opinion on this, Mr.
Dunlap?
Mr. Dunlap. I think we have actually had, at least in my
experience, some successes. So I mentioned DFAS consolidating,
on their own, some headquarters functions, which is good for
efficiency.
DCMA, you know, is often out there with the contractors,
and so they will catch things in support of the contractors
early, you know. DCAA kind of comes in on the back side with
the audit. And they can actually report out, as they did for
me, particular metrics on the cost savings that they have been
able to find.
Now, that is retroactively. You know, you would like to get
ahead of that in the process as well, but, you know, each have
their own function.
The Chairman. Okay. Let me just ask about one other area
right quick, and that is DLA. And, Mr. Levine, you talked about
how you believe that DLA has made great strides in improving
its management and so forth.
I am probably like a number of members, and I remember, I
don't know, 2 or 3 years ago, a number of news articles about
vast warehouses, they didn't know what they had, throwing
things away, and a number of items that at least called into
question their ability to manage their inventory and to get
items where they needed to be on a timely basis.
I mean, I want you to elaborate a little. Do you think they
have overcome those problems? But then, secondly, I am also
looking at commercial companies that I can click on and have
something delivered to my front door that day or the next day.
The just-in-time sort of approach that business is using.
And so I would appreciate from each of you an evaluation of
DLA's ability to meet the military's needs in the context of
the way that business has also moved. Understanding, you know,
DLA will never be exactly like Walmart or some business, you
know. I think we can all agree to that. But have they kept up
at least with those trends?
Mr. Levine. So, when I first looked at DLA in the early
1990s, they were a mess. They didn't know where anything was.
They couldn't track what they had. They lost things. There were
reports that things would fall off of trucks, and the truck
would arrive and they didn't even know something had fallen off
because they had no idea what was coming.
They have made tremendous progress in their own system.
They have asset visibility systems which allow them to know
what they have in much greater detail than ever before, pretty
much comparable to what is available in the private sector.
Not only that, they have come to rely on the private
sector. So, where, in the 1990s, they used to stock things like
medical supplies and hardware, they figured out 15, 20 years
ago, they didn't need to stock those because they could buy
them from the commercial sector. And not only could they buy
them, they could rely on commercial distribution networks so
that they could have hospital, medical supplies, for example,
delivered directly to the hospitals, never touched by anybody
at DLA. So they are dramatically more efficient today.
I won't tell you that that means that they don't have
problems. They still do have problems. The one that always
comes back up is the unneeded inventory that they have on hand,
the excess inventory. What I would say is there is more work
that can be done on that, but that is largely a consequence of
demand signals that they get from the services: I think I am
going to need this, and by the way, these are critical spare
parts, so I have got to have delivery within 30 days when I
need it. And they are a unique build, so, in a 9-month advance
time, you are going to have to have them on hand or airplanes
aren't going to fly.
So you have a lot of stuff that you have to have on hand.
And then, sometimes, the product is discontinued; you don't
need it anymore, and we are stuck with that on hand. But it is
a consequence of a need to be responsive, which DLA has,
because it is servicing military hardware in a way that the
private sector doesn't necessarily have.
It is not just a matter of avoiding the error in terms of
not buying too much; it is at least as important to avoid the
error in terms of not having a critical part on hand when it is
needed.
Mr. Dunlap. DLA is an interesting case, not only because it
is the second largest agency in terms of revenue that it
oversees, but also sort of historically. So it, at least to my
understanding and reading, it had not done well, and then it
sort of turned its game around and started being much more
successful in terms of logistics, delivery. It split off DCMA
actually from DLA in the nineties to focus on logistics,
delivery. It gained sort of more efficient, effective notoriety
in the Department, and then became, perhaps recently, more of a
victim of its own success where it began to be asked to take on
more and more responsibility sort of outside the core logistics
and fuel delivery. It provides nearly 100 percent of the fuel
for the warfighters, for example.
Mr. Levine. And if I could, DLA now provides personnel
support services. It now buys IT [information technology]
systems. It does things for other parts of the Department of
Defense because they have been good at it. And so this is where
they get additional assignments that can become a problem.
Mr. Dunlap. Yeah, so I think sometimes it is hard when you
take your eye off the target and forget what your core mission
is and get diluted. And it, you know, might be time to think
about those additional missions that were added that could
possibly be done elsewhere.
In that sense, I think it might be a victim of its own
success. You know, that said, I think where it can look to
adopt commercial practices or use commercial vendors directly
is an excellent idea, won't always work getting fuel to your
ship in the middle of the ocean, but in other cases, it could
be the right choice.
The Chairman. Well, just two things right quick on that.
Number one, I am hopeful that our e-commerce provision, which
is on the way to being implemented, can assist for basic off-
the-shelf commercial items. And that can include some medical
equipment which can provide that delivery.
Secondly, we are hearing recently about advances in
artificial intelligence that can improve predictive maintenance
so that you don't have, you know, 10 things on the shelf, just
in case. But you have a database of evidence that can give you
very much higher probability of when you are going to need what
to repair.
And my hope is that cannot only make DLA more efficient but
also, as we move towards additive manufacturing, may also play
a role.
Mr. Levine. Mr. Chairman, I think you have correctly
identified the next frontier for DLA. Better algorithms, to
predict use and identifying, you know, the just-in-time
manufacturing with 3D can get you out of having to stock parts
in some cases.
So identifying those kinds of uses of new technology is
probably the direction they need to go. But I still say, for
what they are doing, they are so much more efficient now than
they ever were before, and so much more efficient than a lot of
other parts of the Department of Defense that they really ought
to be given credit for that.
Mrs. Davis. Mr. Chairman, I was just going to say, I think
it has been, you know, you have been excellent in trying to
help us see where some of the pitfalls are in moving forward
and, at the same time, that we need to move forward. And I just
want to thank you for that.
I think we want to move in that way very thoughtfully, not
rhetorically. You know, I think people are always concerned
that you can make cuts that may sound good, but a lot of people
could get hurt along the way. And I think that the discussion
today has been helpful in understanding that there is a lot
more to this. It is not as easy as it looks, and, yet, at the
same time, it is an important thing for us to be doing. So
thank you very much.
The Chairman. I appreciate it. Actually, that is what I was
about to say to wind up. I think it is important to acknowledge
the efforts and the progress that has been made. Both of you-
all have had part of that. And the folks who work at the
Pentagon now are looking to take the next steps.
We, I believe, have a key role in also pushing that along.
But the purpose of all this is not just to make cuts; it is to
have more resources in the hands of the warfighter faster. And
as everybody on both sides of the aisle keeps reminding me, we
don't have unlimited resources around here, and the world is
not getting any safer.
And if we are going to meet our obligations when facing
sophisticated adversaries as well as terrorism as well as the
other threats around the world, we are going to have to make
some of these reforms in order to meet those obligations.
Thank you both for being here.
I would just alert members that, in approximately 15
minutes, we will reconvene upstairs in 2216 for a briefing on
some of the management initiatives underway at the Department.
The hearing now stands adjourned.
[Whereupon, at 11:52 a.m., the committee was adjourned.]
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