[Congressional Record Volume 141, Number 12 (Friday, January 20, 1995)]
[Extensions of Remarks]
[Pages E150-E152]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


        WHY WE NEED THE ``NATIONAL SECURITY REVITALIZATION ACT''

                                 ______


                         HON. ROBERT K. DORNAN

                             of california

                    in the house of representatives

                        Friday, January 20, 1995
  Mr. DORNAN. Mr. Speaker, I strongly recommend to my colleagues and 
all the citizens of our country the following testimony given yesterday 
to the House National Security Committee. Norm Augustine's comments are 
right on target regarding the direction we should be taking with 
defense spending.
Statement by Norman R. Augustine, Chairman and Chief Executive Officer, 
                         Martin Marietta Corp.

       Mr. Chairman and Members of the Committee:
       I am Norman Augustine, chairman and chief executive officer 
     of the Martin Marietta Corporation. I appreciate the 
     opportunity to present views on several critical defense 
     issues related to legislation which this Committee is 
     considering and which will directly impact the nation's 
     ability to achieve both defense and budgetary objectives in 
     the years ahead.
       Today, I represent a consortium of 13 associations whose 
     members comprise a broad cross section of companies and 
     individuals with experience in many different aspects of 
     America's defense needs. THe organizations are the Aerospace 
     Industries Association, the Air Force Association, the 
     American Defense Preparedness Association, the American 
     Electronics Association, the Association of Naval Aviation, 
     the Association of the United States Army, the Association of 
     Old Crows, the Contract Services Association, the Electronic 
     Industries Association, the National Security Industrial 
     Association, the Navy League of the U.S., the Professional 
     Services Council, and the Security Affairs Support 
     Association.
       Needless to say, it is not possible to speak on behalf of 
     so large and diverse a group of organizations on other than 
     rather broad, generic issues. This I will do, but I can also 
     tell you that there is in fact wide agreement among these 
     organizations on the most critical issues relating to the 
     National Security Revitalization Act. With regard to more 
     specific matters, I will share with you views that I must 
     characterize as my own. In this latter
      regard, I speak from the personal perspective of one who has 
     spent a decade in five different assignments in the 
     Pentagon serving under Presidents from both parties, and 
     another 25 years in various defense-oriented companies in 
     the private sector. Over the course of these assignments, 
     I have seen enormous changes in the defense 
     establishment--but nothing like the tectonic shifts we are 
     facing today.
       Having observed from both the private and public 
     perspectives the way America funds, equips and fields its 
     armed forces, I can say with some degree of authority that 
     somehow it works. In the last decade alone, America's defense 
     apparatus helped stimulate the favorable conclusion of the 
     Cold War, helped crush a well-equipped aggressor in the 
     Persian Gulf, and contributed to America's reign today as the 
     world's only ``full-service'' superpower. Indicative of this 
     success, our military hardware is sought by virtually every 
     nation in the world.
       In short, America's defense establishment--its armed forces 
     and the industry that underpins them--has served the people 
     of the United States successfully and with distinction. This 
     establishment is, in my judgment, well led today by both the 
     civilian and military leadership in the Pentagon. 
     Nonetheless, the very fact that we are here points to the 
     fact that there are serious issues facing all of us, and if 
     we fail to address these issues in a timely fashion, we will 
     surely pay a price in terms of opportunities lost in the 
     future. These issues generally focus on the adequacy of 
     resources we devote to our military and to the manner in 
     which we expend these resources.
       Let me observe at the outset that in my opinion--and it is 
     strictly my own opinion--this nation owes nothing to its 
     defense contractors with regard to future business or 
     prosperity. We as a nation can set forth a variety of 
     alternative defense strategies that might require small, 
     medium or large defense industrial bases to underpin them. 
     The choice among these alternatives is a policy decision to 
     be made by government leaders and not by industrial 
     executives, and should be made on the basis of national 
     objectives, the price we are willing to pay in meeting those 
     objectives, and the degree of risk we are willing to accept 
     in so doing.
       But I do believe that once this choice has been made, it 
     behooves our government to make certain that its policies 
     affecting the defense industrial base are consistent with the 
     national security objectives which have been established. To 
     do otherwise is in fact to maximize risk ... and brings us 
     not the best but the worst of all possible worlds. And I 
     further believe that, whatever may be our established set of 
     national security objectives, we should maintain a balance of 
     force structure, readiness and modernization.
       Finally, I believe that we should view the capability of 
     the defense industrial base much as we view the need to 
     provide capable armed services. A nation cannot prevail, or 
     at least not prevail without heavy casualties, in modern 
     warfare without a strong defense industrial base. Such an 
     industrial base, as I will discuss further, is not self-
     generating ... it must be consciously nurtured.
       There are two general points I would like to make this 
     morning--the first relating to the private sector 
     participants I represent and how they have
      been responding to the new realities of the post-Cold War 
     defense environment. The second point has to do with the 
     government's reaction to the same circumstances, both in 
     Congress and in the Department of Defense.
       Let me begin by briefly reviewing the events that have 
     brought us to this committee room today. More than five years 
     after the fall of the Berlin Wall, rapid and fundamental 
     changes continue to ricochet throughout the world political 
     order. Ironies abound: Consider, for example, that among the 
     differences today between the United States and many of the 
     former Warsaw Pact states is that the U.S. has a legal 
     Communist party. Or that each of the recent times I have 
     visited Moscow there were longer lines at McDonald's than at 
     Lenin's tomb. Or that in one trip to what was then Leningrad, 
     I met a very distraught politician who was exceptionally 
     curious about the democratic political system. It turned out 
     that he had just run for re-election unopposed--and lost. And 
     a former Soviet state 
     [[Page E151]] archivist recently observed, ``The state 
     property being privatized most rapidly is KGB files--and 
     they're not for sale.''
       The new world order--or disorder--could perhaps be summed 
     up by Saudi Arabian General Khalid bin Sultan bin Abdul-Aziz, 
     who said, ``If the world is going to have one superpower, 
     thank God it is the United States of America.''
       But now that we've reached this almost unimaginably hopeful 
     end of a wrenching period in the history of mankind, another 
     almost equally wrenching question emerges: Where do we go 
     from here?
       Sometimes it seems that the principal effect of the end of 
     the superpower conflict has been to make the world safe for 
     smaller wars--``smaller,'' that is, except for those who 
     happen to fall in their path.
       Less than 10 days ago, the Director of Central Intelligence 
     testified before a Senate hearing that ``[E]thnic, religious, 
     or national conflicts can flare up in more than 30 countries 
     over the next two years.'' Such a plethora of current and 
     potential conflicts poses an excruciating dilemma as we as a 
     nation seek to balance America's aversion to human suffering 
     with the impracticality of becoming ``911-America.''
       Added to this volatile mix are the sobering facts that 
     states that formerly were part of the Soviet Union still have 
     an estimated 26,000 nuclear weapons in their arsenals, that 
     three other nations have publicly confirmed they have 
     ``atomic devices,'' and an estimated nine additional 
     countries either covertly have or are working to develop 
     their own nuclear capabilities. A reminder of the world we 
     are entering was suggested by the Indian Minister of Defense 
     in his comment a few years ago that the real lesson which 
     many may learn from Desert Storm is: ``Never fight the 
     Americans without nuclear weapons.''
       With the end of the Cold War, America embarked on a path 
     that markedly scaled back our defense expenditures and the 
     forces they support, for example, reducing the size of our 
     army to the point where it will soon be the ninth largest in 
     the world. Let me add that this reduction in defense 
     expenditures has made it possible for our nation to reap a 
     long-sought
      peace dividend. One measure of this dividend is that by a 
     conservative calculation more than $400 billion in real 
     purchasing power has already been diverted from defense 
     budgets to other purposes since the fall of the Berlin 
     Wall.
       Disappointment over what some have characterized as the 
     seemingly modest impact of this reduction on the overall 
     federal budget stems from the fact that non-defense 
     government spending is now growing at a rate which far 
     outstrips any plausible reductions in defense spending. The 
     entire defense budget is now only slightly larger than the 
     interest on the national debt or about one-fourth of the cost 
     of health care. America should, of course, spend no more on 
     national security than it needs, but America can afford 
     whatever national security resources it does need. Today, we 
     spend more on legalized gambling than we do on defense, more 
     on beer and pizza than we do on the Army, more on tobacco and 
     soft drinks than we do on the Navy.
       The budgetary reductions that have already taken place have 
     had a substantial impact on the defense industry. The overall 
     Department of Defense budget has been reduced by some 35 
     percent in real terms from its peak in the mid-1980s. But 
     that part of the defense budget that underwrites equipping 
     our military forces and has provided the underpinning of the 
     defense industry--the procurement budget--has been reduced by 
     68 percent, thus far. The research and development budget--
     while experiencing much less of a reduction--has been scaled 
     back well in excess of what had been planned just a few years 
     ago. But a major concern is that the cost of defense 
     infrastructure has not been curtailed accordingly.
       One of the complicating factors in defense budgetary 
     planning is that the time horizons are so distant. It is 
     useful to recall that the systems that performed so well in 
     the Persian Gulf largely represented the technology of the 
     1960s, the development of the 1970s, and the production of 
     the 1980s--all utilized by the people of the 1990s. That is, 
     decisions made in the 1970s to a considerable extent 
     determined the casualties suffered in the Persian Gulf. 
     Similarly, the decisions we make today will to a considerable 
     extent determine the casualties we will suffer in carrying 
     out our national security objectives in the early part of the 
     next century. This is a very great responsibility for each of 
     us.
       That America's defense industrial base is becoming 
     increasingly tenuous is becoming increasingly evident. The 
     major firms making up that industry sell at a 30 percent 
     discount to the S&P 500 index, and the discount was closer to 
     80 percent until a few mergers raised hopes that part of the 
     industry might yet survive and provide viable. The combined 
     market value of the top four aerospace firms is less than 
     that of McDonald's, meaning that Big Macs and Egg McMuffins 
     are judged by the market to have greater immediate reward 
     than stealth aircraft and ``smart'' weapons.
       Current plans call for the defense budget to decline to 
     less than three percent of GDP in 1999, half of what it was 
     in the mid-'80s, and the lowest level since immediately prior 
     to Pearl Harbor. Of course, these reductions
      are not news to the members of this Committee. But there may 
     not be wide understanding of the challenges that rapidly 
     declining U.S. military procurement budgets are posing to 
     the defense industrial base as well as to the military 
     forces themselves.
       In the middle of this century, our armed forces were called 
     upon to perform a clear mission--to fight and win a global 
     war. For most of the latter half of this century, the 
     American public looked to our forces to successfully prepare 
     for war--and by so doing to deter war. Today, and for the 
     foreseeable future, the public is looking to our military to 
     ``wage peace''--that is, to deter small wars as well as big 
     ones--a challenge that is turning out to be daunting. 
     Nonetheless, this is the challenge the American people have 
     given the defense establishment in the last decade of the 
     20th century. And, properly, those entrusted with the 
     management of this establishment are expected to carry out 
     the challenge efficiently and with the minimum required 
     funds.
       This brings me to the very important point which I alluded 
     to earlier: I believe, and the evidence seems to support, 
     that the private sector--the defense industrial base which I 
     represent today--has moved deliberately and decisively to 
     respond to the challenge of ``waging peace.'' Just as 
     America's commercial industry has been undergoing a wrenching 
     realignment and downsizing over the past decade, prompted by 
     the presence of Japan on the world scene, I believe America's 
     defense industry is experiencing a similar process of 
     realignment and downsizing, prompted by the absence of the 
     Soviet Union on the world scene. The defense supplier base 
     has imploded; some numbers suggest a shrinkage from about 
     120,000 firms a decade ago to 30,000 today. Whatever may be 
     the precise numbers, the impact is being felt far beyond the 
     board rooms of America's defense companies. The basic fabric 
     of the defense industrial base is undergoing profound change 
     as corporations restructure, consolidate or altogether depart 
     the industry.
       I have noted on previous occasions that the one-millionth 
     defense industry job was eliminated on about July 4th of last 
     year, including direct employment only. We will lose at least 
     another half million jobs before the bottom is reached. Many 
     of these were well-paying scientific and technical jobs which 
     employed some of the most talented and motivated people in 
     our national work force. The disruption of the lives of these 
     individuals has been deep and wide and unrelenting  * * * but 
     the inescapable fact is that the threat to America has 
     changed and downsizing of the industrial base was mandatory.
       Our industry has been closing plants and selling properties 
     at an unprecedented pace. In the case of the company I serve, 
     we have already shuttered five million square feet of plant 
     space and another wave is yet approaching. But by so doing, 
     we will have saved the taxpayer next $2 billion over the next 
     five years alone.
       The private sector has thus responded to the changing needs 
     of the nation. We have taken the painful actions and made the 
     difficult decisions. And we are not yet finished: More 
     wrenching decisions lie ahead. But I believe we have faced 
     the tough challenge given us by the American people in a 
     disciplined and pro-active way.
       Drawing upon my service in both the government and in the 
     private sector, I am acutely aware of how much more difficult 
     it is to reduce infrastructure in government. Anyone who has 
     watched the courageous but prolonged deliberations of the 
     Base Closing and Realignment Commission can grasp the 
     difficulties of reducing the physical plant of the Department 
     of Defense. When I worked in the Pentagon I observed the 
     extraordinary difficulty of ``rightsizing'' the public 
     sector, how many impediments were encountered with every 
     proposed job reduction. Companies in the private sector 
     consistently have made such reductions quickly as an 
     understandable necessity of remaining in business. The market 
     forces are working in this regard.
       This, then, leads to the other important point I wanted to 
     make today: namely, that whatever may be the correct size of 
     our military establishment, we are in fact creating a highly 
     unbalanced force by neglecting to maintain that force in a 
     modern condition. The same temptation exists in business 
     where one can for a time neglect to buy new machines for the 
     factories or new equipment for the laboratories or replace 
     obsolescent buildings. But the trap is that sooner or later 
     this practice catches up with itself in an avalanche of 
     future costs which must be met near-simultaneously.
       I mentioned before that the defense procurement budget has 
     been reduced by 68 percent in real purchasing power in less 
     than a decade. This contrasts with an overall defense budget 
     reduction of 35 percent. Infrastructure costs associated with 
     operations and maintenance have only been reduced by about 18 
     percent. The consensus within the industry is that the 
     elements of the defense budget have fallen out of balance.
       If one takes today's asset value of equipment owned by the 
     Department of Defense and divides that number by the annual 
     investment in modernization--namely the procurement budget--
     one derives a number that indicates we are now on a 
     replacement cycle of about 54 years. Stated otherwise, the 
     average item of equipment provided our armed forces has to 
     last 54 years. This is in a world where technology generally 
     has a half-life of anywhere from two to 10 years. I believe 
     that no private company pursuing such a policy would long 
     survive.
       We saw in the Gulf War the consequences of modern military 
     technology--for example, 
     [[Page E152]] precision guided weapons delivered within 
     inches of their targets, stealth, the ability to see at night 
     and to navigate within a few meters even on a desert. The 
     result was that the war was won quickly, decisively and with 
     relatively few American casualties.
       What is so often overlooked is the fact that in today's era 
     of the ``come as you are'' war, where outcomes can be decided 
     in a matter of days or even hours, the only equipment 
     available to our troops will be that which was planned for 
     and acquired during the decades before the actual conflict 
     occurred.
       As I stated at the outset, it is not the role of those of 
     us from the private sector to prescribe the size--that is, 
     force structure--of our armed services. But it is within our 
     competence to suggest that whatever that
      force structure may be, it should be balanced in terms of 
     both readiness and modernization. To the great credit of 
     those bearing the grave responsibility of providing for 
     America's armed forces, the nation has, in this recent 
     downsizing, to a considerable extent avoided the trap of 
     building a so-called ``hollow force'' in terms of its 
     readiness to fight. But what we must also assure ourselves 
     is that we do not gradually build a force engendering a 
     new kind of hollowness, namely the lack of modernization 
     needed to fight effectively.
       Thus, we must be concerned both with readiness and with 
     modernization. Lack of attention to the former produces near-
     term casualties, to the latter produces future casualties
       Given these considerations, what steps are appropriate to 
     assure the adequacy and efficiency of America's defense 
     forces? I would like to offer six suggestions for your 
     consideration.
       First, the defense budget should be stabilized. The recent 
     Administration initiative to add $25 billion over several 
     years to the DoD budget is a constructive step, but does not 
     address the full range of the challenge the nation's defense 
     establishment faces nor does it significantly do so in the 
     near term. It should be noted that the lag time between 
     authorizations and outlays in the procurement budget 
     virtually assures several more years's erosion in the defense 
     industrial base.
       Second, the balance among procurement, R&D and O&M funding 
     must be restored. We must provide greater funding for 
     exploratory development and prototyping--particularly high-
     risk/high-payoff pursuits of the type which helped make 
     American defense technology the best in the world and which 
     is central to our stated defense strategy. And in so doing, 
     we must be prepared to accept the occasional failure that 
     necessarily accompanies any effort to push the edges of the 
     state of the art. We must invest more in procurement so that 
     our forces are well equipped to protect themselves and our 
     national interests. This is important not only for the active 
     forces but also for the Reserve and National Guard since they 
     are shouldering more and more of the burden for achieving 
     national security objectives.
       Third, we must continue the effort to reform the 
     acquisition process. Secretaries Perry and Deutch and the 
     Congress deserve broad acclaim for the first successful 
     initiative in memory to reform the much-maligned defense 
     acquisition process. The Federal Acquistion Streamlining Act 
     of 1994 demonstrates that it is possible to revise the 
     acquisition process which for many years has been needlessly 
     complex, inefficient and resilient to change. We must now 
     turn our attention to assuring that the regulations 
     implementing this new act carry out the legislation's 
     intentions. In so doing, we need to reform the entire 
     acquisition culture, and having done so, we must recognize 
     that the recent legislation is barely a first step toward 
     full procurement reform.
       Fourth, we must eliminate the turbulence in the acquisition 
     process. The principal cause of inefficiency in the 
     acquisition process is not the infamous coffee pot, hammer or 
     even toilet seat; it is the perpetual motion of requirements, 
     people, schedules, and funding. What is needed is
      to make it much more difficult to start new programs, but 
     once started, to grant very few people the authority to 
     change them. In this regard, the time has come to 
     appropriate funds by the project, not by the year. A true 
     biennial budget cycle would be a reasonable first step.
       Fifth, we need to restore fidelity to the defense budget. 
     The American public might be genuinely surprised by the 
     findings of the Congressional Research Service, which noted 
     that the defense budget is being used more and more to 
     underwrite programs--sometimes very worthwhile programs--that 
     have little or nothing to do with national defense. General 
     Dennis Reimer of the U.S. Forces Command recently told a 
     Senate Subcommittee, ``We spend more on environmental 
     programs than we do training the 1st Cavalry Division.''
       Additionally, U.N. operations and other types of 
     peacekeeping and ``nation-building'' costs should be budgeted 
     incrementally as they occur--some perhaps even under the 
     Department of State budget. Contingency military operations 
     should be separately funded under the Department of Defense 
     budget as such activities take place. Further, restoring 
     ``firewalls'' in the DoD budget would allow more disciplined 
     allocation of costs to national defense.
       Sixth, we should reverse the trend of shifting work from 
     the defense industry to government facilities. Any expansion 
     of the government in maintenance and repair operations only 
     intensifies the decline of the defense industrial base. This 
     trend, minor at first, has accelerated in recent years as 
     military installations seek funds to sustain infrastructure. 
     Maintenance and repair operations increasingly are being 
     conducted by the government itself at the expense of the 
     private sector. This trend toward greater government 
     involvement in functions generally allocable to the private 
     sector flies in the face of trends almost everywhere else on 
     earth.
       In summary, Mr. Chairman and members of the Committee, I 
     believe that both the armed forces and the defense industrial 
     base warrant fresh attention by our national leadership. 
     America may be the only surviving ``full-service'' 
     superpower, but the future is still extraordinarily difficult 
     to predict. General Schwarzkopf, toward the end of this 
     autobiography, included the following passage: ``If someone 
     had asked me on the day I graduated from West Point where I 
     would fight for my country during my years of service, I'm 
     not sure what I would have said. But I'm damn sure I would 
     not have said Vietnam, Grenada and Iraq.''
       And that's the problem in trying to forecast the need for 
     national defense and the industrial base that underpins it, a 
     problem which is exacerbated by the 10-to-20-year lead time 
     for most products of the defense industrial base. For in this 
     age of ``come-as-you-are wars,'' the casualties we suffer in 
     combat may depend more on our preparedness prior to the 
     initiation of combat than on anything we do during combat--a 
     point writ bold in contrasting the initial battles in, say, 
     Korea and the Persian Gulf.
       America is blessed with the finest men and women in its 
     Armed Forces of any nation on earth. It has been my privilege 
     to have personally accompanied them--from Berlin to Saigon, 
     from Panama to Panmunjom--from the ocean's depths in 
     submarines to the surface of the sea in attack carriers--from 
     the dusty heat of Abrams tanks on the desert to the cockpits 
     of jet aircraft in the sky. I have seen for myself just how 
     capable these people are--and this is reflected in public 
     opinion polls which show the high level of confidence America 
     today holds in its military.
       Our opportunity as a nation is to build upon this 
     advantage, an to underpin it with a right-sized, high-quality 
     defense industrial base. This will require considerable 
     effort on the part of those of us who bear a fiduciary 
     responsibility for America's military capability; because as 
     marvelous as is the free enterprise system, there are no 
     forces in that system to assure the preservation of an 
     adequate defense industrial capability. This is the 
     underlying dilemma of the defense industry.
       Thank you for your attention. I would welcome the 
     opportunity to answer any questions you might have.
     

                          ____________________