[Congressional Record Volume 143, Number 106 (Thursday, July 24, 1997)]
[Senate]
[Pages S8107-S8111]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                           EXECUTIVE CALENDAR

  Mr. GREGG. Mr. President, I ask unanimous consent that the Senate 
immediately proceed to executive session to consider the following 
nominations on the Executive Calendar: Nos. 186 through 199; the 
nominations placed on the Secretary's desk in the Air Force, Army, 
Marine Corps, and Navy; and the nomination of John Hamre, to be Deputy 
Secretary of Defense, which was reported from the Armed Services 
Committee today.
  I further ask unanimous consent that the nominations be confirmed, en 
bloc, the motions to reconsider be laid upon the table, and any 
statements related to the nominations appear at this point in the 
Record, and the President be immediately notified of the Senate's 
action, and the Senate then return to legislative session.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The nominations were considered and confired, en bloc, as follows:


                            in the air force

       The following Air Force National Guard of the United States 
     officer for appointment in the Reserve of the Air Force, to 
     the grade indicated, under title 10, United States Code, 
     section 12203:

                        To be brigadier general

     Col. Tommy L. Daniels, 0000

       The following-named officers for appointment in the U.S. 
     Air Force to the grade indicated while assigned to a position 
     of importance and responsibility under title 10, United 
     States Code, section 601:

                        To be lieutenant general

     Maj. Gen. William J. Begert, 0000
     Maj. Gen. Lance W. Lord, 0000


                              in the army

       The following-named officers for appointments in the 
     Regular Army to the grade indicated under title 10, United 
     States Code, section 624:

                        To be brigadier general

     Col. Edwin J. Arnold, Jr., 0000
     Col. John R. Batiste, 0000

[[Page S8108]]

     Col. Buford C. Blount III, 0000
     Col. Steven W. Boutelle, 0000
     Col. John S. Brown, 0000
     Col. Edward T. Buckley, Jr., 0000
     Col. Eddie Cain, 0000
     Col. Kevin T. Campbell, 0000
     Col. Jonathan H. Cofer, 0000
     Col. Bantz J. Craddock, 0000
     Col. Keith W. Dayton, 0000
     Col. Barbara Doornink, 0000
     Col. Paul D. Eaton, 0000
     Col. Jeanette K. Edmunds, 0000
     Col. Karl W. Eikenberry, 0000
     Col. Dean R. Ertwine, 0000
     Col. Steven W. Flohr, 0000
     Col. Nicholas P. Grant, 0000
     Col. Stanley E. Green, 0000
     Col. Craig D. Hackett, 0000
     Col. Franklin L. Hagenbeck, 0000
     Col. Hubert L. Hartsell, 0000
     Col. George A. Higgins, 0000
     Col. James C. Hylton, 0000
     Col. Gene M. LaCoste, 0000
     Col. Michael D. Maples, 0000
     Col. Philip M. Mattox, 0000
     Col. Dee A. McWilliams, 0000
     Col. Thomas F. Metz, 0000
     Col. Daniel G. Mongeon, 0000
     Col. William E. Mortensen, 0000
     Col. Raymond T. Odierno, 0000
     Col. Eric T. Olson, 0000
     Col. James W. Parker, 0000
     Col. Ricardo S. Sanchez, 0000
     Col. John R. Schmader, 0000
     Col. Gary D. Speer, 0000
     Col. Mitchell H. Stevenson, 0000
     Col. Carl A. Strock, 0000
     Col. Charles H. Swannack, Jr., 0000
     Col. Hugh B. Tant III, 0000
     Col. Terry L. Tucker, 0000
     Col. William G. Webster, Jr., 0000
     Col. John R. Wood, 0000

       The following-named officers for appointment as the Judge 
     Advocate General* and the Assistant Judge Advocate General**, 
     U.S. Army and for appointment to the grade indicated under 
     title 10, United States Code, section 3037:

                          To be major general

     Brig. Gen. Walter B. Huffman, 0000*
     Brig. Gen. John D. Altenburg, Jr., 0000**

       The following-named officers for appointments in the U.S. 
     Army to the grade indicated while assigned to a position of 
     importance and responsibility under title 10, United States 
     Code, section 601:

                        To be lieutenant general

     Maj. Gen. Montgomery C. Meigs, 0000
     Lt. Gen. John N. Abrams, 0000
     Maj. Gen. William H. Campbell, 0000
     Maj. Gen. Roger G. Thompson, Jr., 0000
     Maj. Gen. Michael S. Davison, Jr., 0000

                             To be general

     Gen. William W. Crouch, 0000

       The following-named officer for appointment in the Regular 
     Army of the United States to the grade indicated under title 
     10, United States Code, section 624:

                          To be major general

     Brig. Gen. Warren C. Edwards, 0000


                              IN THE NAVY

       The following-named officers for appointment in the Reserve 
     of the Navy to the grade indicated under title 10, United 
     States Code, section 12203:

                           To be rear admiral

     Rear Adm. (lh) Thomas J. Hill, 0000
     Rear Adm. (lh) Douglas L. Johnson, 0000
     Rear Adm. (lh) Jan H. Nyboer, 0000
     Rear Adm. (lh) Paul V. Quinn, 0000

       The following-named officers for appointment in the U.S. 
     Navy to the grade indicated under title 10, United States 
     Code, section 624:

                           To be rear admiral

     Rear Adm. (lh) John A. Gauss, 0000

               Nominations Placed on the Secretary's Desk


      IN THE AIR FORCE, ARMY, FOREIGN SERVICE, MARINE CORPS, NAVY

       Air Force nominations beginning James W. Adams, and ending 
     Michael B. Wood, which nominations were received by the 
     Senate and appeared in the Congressional Record of June 17, 
     1997.
       Air Force nominations beginning James M. Abatti, and ending 
     Scott A. Zuerlein, which nominations were received by the 
     Senate and appeared in the Congressional Record of July 8, 
     1997.
       Army nomination of Juliet T. Tanada, which was received by 
     the Senate and appeared in the Congressional Record of June 
     17, 1997.
       Army nominations beginning Cornelius S. McCarthy, and 
     ending *Todd A. Mercer, which nominations were received by 
     the Senate and appeared in the Congressional Record of June 
     23, 1997.
       Army nominations beginning Terry L. Belvin, and ending 
     James A. Zernicke, which nominations were received by the 
     Senate and appeared in the Congressional Record of June 27, 
     1997.
       Army nominations beginning Daniel J. Adelstein, and ending 
     *Alan S. McCoy, which nominations were received by the Senate 
     and appeared in the Congressional Record of July 8, 1997.
       Army nomination of Maureen K. Leboeuf, which was received 
     by the Senate and appeared in the Congressional Record of 
     July 8, 1997.
       Army nominations beginning James A. Barrineau, Jr., and 
     ending Deborah C. Wheeling, which nominations were received 
     by the Senate and appeared in the Congressional Record of 
     July 8, 1997.
       Foreign Service nomination of Marilyn E. Hulbert, which was 
     received by the Senate and appeared in the Congressional 
     Record of February 13, 1997.
       Foreign Service nominations beginning John R. Swallow, and 
     ending George S. Dragnich, which nominations were received by 
     the Senate and appeared in the Congressional Record of April 
     25, 1997.
       Marine Corps nomination of Thomas W. Spencer, which was 
     received by the Senate and appeared in the Congressional 
     Record of June 23, 1997.
       Marine Corps nomination of Dennis M. Arinello, which was 
     received by the Senate and appeared in the Congressional 
     Record of June 23, 1997.
       Marine Corps nomination of Carlo A. Montemayor, which was 
     received by the Senate and appeared in the Congressional 
     Record of June 23, 1997.
       Marine Corps nominations beginning Demetrice M. Babb, and 
     ending John E. Zeger, Jr., which nominations were received by 
     the Senate and appeared in the Congressional Record of June 
     27, 1997.
       Marine Corps nomination of Anthony J. Zell, which was 
     received by the Senate and appeared in the Congressional 
     Record of July 8, 1997.
       Marine Corps nomination of Mark G. Garcia, which was 
     received by the Senate and appeared in the Congressional 
     Record of July 8, 1997.
       Navy nominations beginning John A. Achenbach, and ending 
     Sreten Zivovic, which nominations were received by the Senate 
     and appeared in the Congressional Record of June 12, 1997.
       Navy nominations beginning Layne M. K. Araki, and ending 
     Charles F. Wrightson, which nominations were received by the 
     Senate and appeared in the Congressional Record of July 8, 
     1997.


                         DEPARTMENT OF DEFENSE

       John J. Hamre, of South Dakota, to be Deputy Secretary of 
     Defense.


 STATEMENTS ON THE NOMINATION OF JOHN J. HAMRE FOR DEPUTY SECRETARY OF 
                                DEFENSE

  Mr. DASCHLE. Mr. President, it is a distinct pleasure for me to 
convey to the entire Senate what I communicated to the Senate Armed 
Services Committee earlier today--I am an enthusiastic supporter of 
John Hamre for Deputy Secretary of Defense. I am pleased to note that 
the committee reported out his nomination unanimously. Evidently they, 
like many of their colleagues, are already well aware of John's 
exceptional background and skills, and his impressive record. 
Therefore, I will not belabor these points--except to say that I think 
they make John an excellent choice for this critically important post.
  Less known to some of my colleagues perhaps is the fact that John is 
from South Dakota, my home State. In fact, John was born in the tiny 
town of Willow Lake, South Dakota and grew up in Clark, SD. His rise to 
the No. 2 civilian position in the world's number one military force is 
a tribute not only to John and his family, but to the entire state of 
South Dakota and its people.
  Like many of the families in our state, John's family's story reads 
like a Charles Kuralt profile of small-town America. His maternal 
grandfather was a Lutheran preacher who lived to be 100 years old 
(which should eliminate any chance of John having to take an early 
retirement). His paternal grandfather was a farmer and county sheriff. 
One of John's uncles, Julian, was killed in action as an aviator in the 
Pacific during World War II. John's father, Mel, was a banker and his 
mother, Ruth, was a teacher. They have lived in Clark all their adult 
lives. If you happen to visit Clark on a Sunday morning, chances are 
you would hear them performing with their church choir.
  John graduated with a degree in political science from Augustana 
College in Sioux Falls, SD. After that, he did what every political 
scientist does: headed off to Harvard to earn a masters degree in 
Divinity. It was the first time he had ever really been away from South 
Dakota. From Harvard, John went on to earn a masters degree and 
doctorate degree in 1978 from the Johns Hopkins School of Advanced 
International Studies. I would just note parenthetically: If John is 
confirmed, he may be the first Deputy Secretary of Defense who can say 
the Lord's Prayer--in Russian.
  After graduate school, John joined the staff of the Congressional 
Budget Office [CBO]. In 1984, he joined the staff of the Senate Armed 
Services Committee, where he developed a reputation for being able to 
work closely with both sides of the aisle.
  John was appointed Undersecretary of Defense--comptroller by former 
Defense Secretary Les Aspin. In his new position, John will be the 
second highest-ranking civilian in the Pentagon's

[[Page S8109]]

chain of command. The Deputy Secretary of Defense is one of the most 
critical national security positions in the U.S. Government. He or she 
is given full power and authority to act for the secretary of Defense 
in the secretary's absence.
  As a indication of the trust and confidence Secretary Cohen has in 
John's talents, he recently asked John to head up the Defense 
Management Reform Task Force--perhaps the most critical study the 
Pentagon will undertake in the next decade or so. If our available 
defense resources are to match our proclaimed defense policies for the 
21st century, it is crucial that the Pentagon adopt more efficient 
business methods. The task force John will head is charged with the 
responsibility of overhauling the Defense Department's accounting 
methods and streamlining its business practices. Such reforms are long 
overdue and much needed if we are to get a dollar of defense for each 
dollar we provide the Pentagon. On behalf of the Congress, I wish John 
well in this endeavor and will be closely following his progress.
  Anyone who has spent any time with John Hamre knows his passion for 
defense policy. From his days at CBO in the late 1970's to his present 
position at the Department of Defense, he has demonstrated time and 
again his mastery of defense policy issues. Throughout his career, Dr. 
Hamre has consistently demonstrated an even-handedness and objectivity. 
That has allowed him, in turn, to establish and maintain good relations 
with members of the Congress. The regard in which he is held by both 
parties will enable him to serve the President well. Even more 
importantly, it will enable him to serve his country well.
  In conclusion, it is an honor and a privilege to commend a true South 
Dakotan, a man who has dedicated his life to integrity, love of his 
country and outstanding achievement, and who will serve his country 
well as Deputy Secretary of Defense.
  Mr. GRASSLEY. Mr. President, I come to the floor today to announce my 
support for Mr. John J. Hamre's nomination to be the next Deputy 
Secretary of Defense.
  Mr. President, my support in favor of the Hamre nomination may come 
as a surprise to some of my colleagues.
  A yes vote on the Hamre nomination may appear to be totally 
inconsistent with all that I have said here on the floor about the 
nominee.
  I have made a series of critical speeches about Mr. Hamre since 
January.
  I have criticized Mr. Hamre for failing to control the money and make 
sure it is spent according to law.
  I have attempted to hold him accountable.
  In my book, accountability in government should be a top priority.
  My criticism of Mr. Hamre boils down to one main problem area.
  As Chief Financial Officer at the Department of Defense [DOD], Mr. 
Hamre pursued a policy on progress payments that the Inspector General 
[IG] had declared illegal.
  The General Accounting Office [GAO] has just completed another review 
of the Department's progress payment policy.
  As of July 21, 1997, the GAO report indicates that the policy 
declared illegal by the IG remains in operation.
  It remains in operation today--at this very moment.
  Mr. President, I am happy to report that Mr. Hamre has promised to 
change the policy.
  He has made a commitment to bring the Department's progress payment 
policy into compliance with the law.
  This happened at an important meeting on Tuesday evening, July 22d.
  The meeting took place in the office of Senator Strom Thurmond, 
chairman of the Armed Services Committee.
  This meeting was attended by Senators Thurmond, Levin, Warner, and 
the Senator from Iowa.
  The nominee, Mr. Hamre, was also present.
  Mr. President, I don't quite know how this meeting came about, but I 
suspect that my good friend from Virginia, Senator Warner, was the 
motivating force behind it.
  I would like to extend a special word of thanks to my friend from 
Virginia for helping me out.
  He helped me find a reasonable solution to a very difficult dilemma.
  The Senator from Virginia was instrumental in resolving the dispute.
  At this important meeting, Mr. Hamre made a commitment to bring the 
department's progress payment policy into compliance with the law.
  To do that, the IG says DOD has taken two distinct steps.
  Step One: The Director of Defense Procurement, Ms. Eleanor Spector, 
is issuing a new contract regulation--known as a DFAR.
  The DFAR will authorize contracting officers--or ACO's--to require 
that each contract contains specific funding instructions.
  These would be fund citations.
  Step Two: The Comptroller, Mr. Hamre, has ordered the Defense Finance 
and Accounting Service or DFAS to shut down the current operation.
  DFAS must issue payment instructions that match up with the DFAR.
  This would allow DFAS to match the money with the work performed--as 
required by law.
  This would allow the disbursing officers to post payments to the 
correct accounts.
  Since DOD makes about $20 billion a year in progress payments, this 
should help to clean up the books.
  It should cut down on overpayments and erroneous payments.
  It should cut down on costly reconciliation work done by the big 
accounting firms like Coopers & Lybrand.
  The new policy should save money.
  But the fix won't happen overnight.
  It will take time to phase down the old system and get the new policy 
up and running.
  The IG is planning on a kick off date of October 1, 1997.
  At the meeting, Senator Levin raised questions about the cost of the 
new policy.
  Mr. Hamre responded by saying that he would have to add 50 people to 
the DFAS work force.
  The extra people would be needed to manually process the payments 
under the new policy.
  The software necessary to support automated computer processing will 
not be available until the year 2000 or beyond, according to Mr. Hamre.
  Now, Mr. President, that sounds like more Pentagon nonsense to me.
  Businesses, like NationsBank, routinely conduct 15.5 million 
comparable matching operations in a single day--using computers.
  The software is here--now!
  This is off-the-shelf stuff--not leading edge technology.
  DFAS needs to get on the stick.
  Senator Levin also insisted that the new policy should apply just to 
new contracts--and not be retroactive.
  That makes sense to me.
  Senator Levin raised one other very valid concern.
  He said: ``Maybe we need to change the law? Maybe the law governing 
these payments doesn't make sense?''
  These are valid questions. They need to be explored.
  But I would like to offer a word of caution on this point.
  If Congress should decide to change the law--as Mr. Hamre proposed 
late last year, Congress must then change the way the money is 
appropriated.
  We must never allow DOD to merge the appropriations at the contract 
level, while Congress continues to appropriate and segregate money in 
special accounts.
  That would subvert the whole appropriations process.
  If DOD were authorized to merge the money at the contract level, then 
Congress would have to consolidate accounts upstream in appropriations.
  We might, for example, create an acquisition account by merging R&D 
and procurement money in one big account.
  Quite frankly, Mr. President, I don't think that idea would be a very 
popular around here.
  Segregating the money in the R&D and procurement accounts gives 
Congress some broad and general control over how the money is used--as 
intended by the Constitution.
  Mr. President, I left the meeting in Sentor Thurmond's office 
believing that something important had been accomplished.
  First, Mr. Hamre made a commitment to bring the Department's policy 
into compliance with the law.
  Second, it was agreed that the IG would send a letter to the 
committee.
  This letter would serve two purposes.
  The IG would certify that the Department had taken the two steps 
necessary to bring the policy into compliance with the law.

[[Page S8110]]

  And the IG would agree to provide Congress with periodic follow-up 
reports to ensure that the new policy is, in fact, executed.
  Mr. President, I have the IG's letter here in my hand.
  It provides the assurances I sought.
  With those assurances in hand, I can support the Hamre nomination 
with a clear conscience.
  I ask unanimous consent that my letter requesting certification by 
the IG and the IG's response be printed in the Record.
                                                Inspector General,


                                        Department of Defense,

                                     Arlington, VA, July 23, 1997.
     Hon. Strom Thurmond,
     Chairman, Committee on Armed Services,
     U.S. Senate, Washington, DC.
       Dear Mr. Chairman: This is in response to your request for 
     my views as to whether the Department of Defense has made a 
     good faith effort to address previous audit findings on 
     progress payments to contractors and whether the Department 
     has established a reasonable schedule to implement the 
     changes needed to bring progress payment practices into 
     compliance with fiscal law.
       On June 30, 1997, the Director, Defense Procurement, issued 
     the requisite contracting guidance in draft form for comment. 
     While we cannot prejudge or speculate as to the outcome of 
     the comment period, I can tell you that at this time this 
     office concurs with the draft guidance as written. The 
     guidance should be issued in final form by October 1, 1997.
       The first elements of the necessary guidance for paying 
     offices, two Under Secretary of Defense (Comptroller) 
     memoranda, were signed out today. Given current statutory 
     requirements, we believe that the procedures and timelines 
     outlined in those memoranda are appropriate at this time and 
     demonstrate positive movement toward fixing this longstanding 
     problem. Between now and the planned October 1, 1997, 
     implementation date for the new progress payment distribution 
     policy, we will work with the Comptroller and the Defense 
     Finance and Accounting Service to ensure that sound desk 
     procedures are developed for the paying offices.
       This office is already auditing various aspects of DoD 
     vendor payment operations and will ensure that coverage of 
     the implementation of the new progress payment procedures 
     receives high priority. We will provide periodic status 
     reports to the Department and the Congress starting in 
     January 1998.
       Thank you for seeking our views on this important issue. If 
     we can be of further assistance in this matter, please 
     contact me or Mr. Robert J. Lieberman, Assistant Inspector 
     General for Auditing, at (703) 604-8900.
           Sincerely,
                                                     Eleanor Hill,
     Inspector General.
                                  ____



                                                  U.S. Senate,

                                    Washington, DC, July 21, 1997.
     Hon. John W. Warner,
     U.S. Senate,
     Washington, DC
       Dear John: I am writing to clarify my position on the 
     nomination of Mr. John J. Hamre to be Deputy Secretary of 
     Defense.
       My opposition to Mr. Hamre's nomination boils down to one 
     main problem area. As Chief Financial Officer at the 
     Department of Defense, Mr. Hamre aggressively pursued a 
     policy on progress payments that the Inspector General (IG) 
     declared illegal. The General Accounting Office has just 
     completed a review of the department's progress payment 
     policy. This report clearly indicates that the policy 
     declared illegal by the Inspector General remains in 
     operation today--at this very moment.
       John, that's the bad news. There is some good news, 
     however.
       I can see a solution looming up on the horizon.
       The IG is telling me that Mr. Hamre is moving to bring the 
     policy into compliance with the law. The IG says that the 
     department must issue: 1) new contract (DFAR) regulations; 
     and 2) The Defense Finance and Accounting Service must issue 
     new payment instructions to match the DFAR regulations. The 
     IG says the new policy directives are in the process of being 
     issued. The new policy must then be put into practice.
       John, I will not oppose the Hamre nomination if two 
     conditions are met: 1) The IG certifies in writing that the 
     department has taken the two steps necessary to bring the 
     policy into compliance with the law; and 2) The IG provides 
     Congress with periodic reports to ensure that the new policy 
     is, in fact, being executed.
       Your assistance in this matter is appreciated.
           Sincerely,
                                              Charles E. Grassley,
     U.S. Senator
                                  ____

                                                      U.S. Senate,


                                  Committee on Armed Services,

                                    Washington, DC, July 24, 1997.
     Senator Charles E. Grassley,
     U.S. Senate,
     Washington, DC
       Dear Chuck: Enclosed is a copy of a letter from the 
     Department of Defense Inspector General received today by the 
     Committee on Armed Services. The letter addresses the 
     concerns that you expressed in the meeting in my office on 
     July 22.
       With kindest regards and best wishes,
           Sincerely,
                                                   Strom Thurmond,
                                                         Chairman.

  Mr. GRASSLEY. Mr. President, I only hope Mr. Hamre understands my 
position on this issue.
  From day one, I have merely tried to hold him accountable for the 
improper progress payment policy.
  I do my best to watchdog the Pentagon.
  And when the IG tells me something is wrong, then I'm going to speak 
out. I'm going to dig and bore in--until things are right.
  That's what I did in this case.
  I believe that together we have crafted a constructive solution to 
this problem.
  I thank the committee for its leadership and for helping me resolve 
this issue.
  Mr. LEVIN. Mr. President, I strongly support the nomination of Dr. 
John Hamre to be Deputy Secretary of Defense. The position of the 
Deputy Secretary of Defense is one of the most important members of the 
Secretary of Defense's team. The Deputy serves as the Secretary's alter 
ego; he traditionally exercises primary responsibility for the internal 
management of the Department of Defense; and he acts for the Secretary 
when the Secretary is absent.
  Those are all very important responsibilities. The decisions that 
Secretary Cohen and his deputy make will have a major impact on the 
security of our Nation, on the protection of our national interests, 
and on the well-being of the men and women of our Armed Forces. I have 
complete confidence in John Hamre's ability to perform these important 
responsibilities.
  John is, of course, very well known to many Members of the Senate 
from the 8 years he spent on the staff of the Senate Armed Services 
Committee. Since leaving the committee staff in 1993, John has moved on 
to serve as the Comptroller and Chief Financial Officer of the 
Department of Defense.
  In this capacity, John has devoted a tremendous amount of time and 
energy to bringing about meaningful and much-needed reform in financial 
management within DOD. John would be the first to acknowledge that the 
job is far from finished, but the progress under his leadership has 
been substantial in my view. For example:
  DOD is in the process of consolidating its accounting offices, moving 
from 333 offices to only 21 in less than 5 years. DOD had closed 230 
accounting offices through fiscal year 1996 and is scheduled to close 
an additional 103 in fiscal year 1997 and fiscal year 1998.
  As a result, DOD has been able to reduce employment at the Defense 
Finance and Accounting Service [DFAS] from more than 31,000 in fiscal 
year 1993 to 24,000 today. DFAS operating costs have dropped 25 percent 
in 4 years, from $1.6 billion in fiscal year 1993 to $1.2 billion in 
fiscal year 1997, in constant fiscal year 1993 dollars.
  DOD has consolidated its civilian pay systems from 25 systems in 
fiscal year 1991 to 2 systems today and hopes to be down to a single 
system next year. The system that DOD has designated to take over all 
civilian pay accounts has gone from handling 15 percent of DOD accounts 
in fiscal year 1992 to a projected 73 percent in fiscal year 1996 and 
83 percent in fiscal year 1997.
  DOD has consolidated its military pay systems from 24 systems in 
fiscal year 1991 to 4 systems today and hopes to be down to 2 systems 
next year, with only the Marine Corps maintaining a separate system. 
The system that DOD has designated to take over all military pay 
accounts has gone from handling 15 percent of DOD accounts, other than 
Marine Corps accounts, in fiscal year 1991 to a projected 65 percent in 
fiscal year 1996 and 90 percent in fiscal year 1997.
  DOD contract overpayments have dropped from $592 million in fiscal 
year 1993 to $184 million in fiscal year 1996.
  The two most significant categories of problem disbursements--
unmatched disbursements and negative unliquidated obligations [NULO]--
have dropped from $34.3 billion in June 1993 to $7.9 billion in January 
1997. Unmatched disbursements are cases in which a payment has been 
made, but cannot be matched to its obligation authority; NULO's are 
cases in which too much money is disbursed, for example, contractor 
overpayments, or the wrong obligation has been charged.

[[Page S8111]]

  The third category of problem disbursements--in-transit 
disbursements--has increased recently, but is still down substantially 
over the long run, from $16.8 billion in June 1993 to $11.1 billion in 
January 1997. In-transit disbursements are cases in which a payment has 
been made, but the obligation has not yet been matched to its 
obligation authority, and more than 180 days have passed.
  Over the last several months, a number of statements have been made 
about Dr. Hamre's handling of progress payments under complex contracts 
using money from more than one appropriation. While there is no 
evidence that the existing progress payment system has ever resulted in 
a violation of the Antideficiency Act, Dr. Hamre has acknowledged that 
this system is incapable of meeting all applicable requirements, and he 
has been working hard to address the problem.
  On Wednesday afternoon, I received a letter from Eleanor Hill--the 
inspector general of the Department of Defense--who first identified 
the progress payment issue. In response to a joint request from the 
chairman of the Armed Services Committee and myself, Ms. Hill reviewed 
the steps taken by Dr. Hamre to address the progress payment issue. Her 
letter concludes:

       Given current statutory requirements, we believe that the 
     procedures and timelines outlined in those memoranda are 
     appropriate at this time and demonstrate positive movement 
     toward fixing this longstanding problem.

  I am pleased that Dr. Hamre has taken the actions necessary to 
address the progress payment issue in compliance with existing 
requirements. But we also need to make sure that these changes are in 
the best interest of the taxpayers and the Department of Defense. I 
have asked Dr. Hamre to review the issue and let the Armed Services 
Committee know if any legislative changes may be needed in this regard.
  Mr. President, I think President Clinton and Secretary Cohen have 
made an excellent choice with this nomination. I strongly support John 
Hamre's nomination to be Deputy Secretary of Defense, Mr. Chairman, and 
I look forward to working closely with him and Secretary Cohen in the 
future.
  Mr. President, I ask unanimous consent that Ms. Hill's letter be 
printed in the Record.
       There being no objection, the letter was ordered to be 
     printed in the Record, as follows:

                                                Inspector General,


                                        Department of Defense,

                                     Arlington, VA, July 23, 1997.
     Hon. Carl Levin,
     Committee on Armed Services,
     U.S. Senate,
     Washington, DC.
       Dear Senator Levin: This is in response to your request for 
     my views as to whether the Department of Defense has made a 
     good faith effort to address previous audit findings on 
     progress payments to contractors and whether the Department 
     has established a reasonable schedule to implement the 
     changes needed to bring progress payment practices into 
     compliance with fiscal law.
       On June 30, 1997, the Director, Defense Procurement, issued 
     the requisite contracting guidance in draft form for comment. 
     While we cannot prejudge or speculate as to the outcome of 
     the comment period, I can tell you that at this time this 
     office concurs with the draft guidance as written. The 
     guidance should be issued in final form by October 1, 1997.
       The first elements of the necessary guidance for paying 
     offices, two Under Secretary of Defense (Comptroller) 
     memoranda, were signed out today. Given current statutory 
     requirements, we believe that the procedures and timelines 
     outlined in those memoranda are appropriate at this time and 
     demonstrate positive movement toward fixing this longstanding 
     problem. Between now and the planned October 1, 1997, 
     implementation date for the new progress payment distribution 
     policy, we will work with the Comptroller and the Defense 
     Finance and Accounting Service to ensure that sound desk 
     procedures are developed for the paying offices.
       This office is already auditing various aspects of DoD 
     vendor payment operations and will ensure that coverage of 
     the implementation of the new progress payment procedures 
     receives high priority. We will provide periodic status 
     reports to the Department and the Congress starting in 
     January 1998.
       Thank you for seeking our views on this important issue. If 
     we can be of further assistance in this matter, please 
     contact me or Mr. Robert J. Kieberman, Assistant Inspector 
     General for Auditing, at (703) 604-8900.
           Sincerely,
                                                     Eleanor Hill,
     Inspector General.

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