[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
DEPARTMENT OF DEFENSE FISCAL YEAR 2010 BUDGET
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, MARCH 18, 2009
__________
Serial No. 111-9
__________
Printed for the use of the Committee on the Budget
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COMMITTEE ON THE BUDGET
JOHN M. SPRATT, Jr., South Carolina, Chairman
ALLYSON Y. SCHWARTZ, Pennsylvania PAUL RYAN, Wisconsin,
MARCY KAPTUR, Ohio Ranking Minority Member
XAVIER BECERRA, California JEB HENSARLING, Texas
LLOYD DOGGETT, Texas SCOTT GARRETT, New Jersey
EARL BLUMENAUER, Oregon MARIO DIAZ-BALART, Florida
MARION BERRY, Arkansas MICHAEL K. SIMPSON, Idaho
ALLEN BOYD, Florida PATRICK T. McHENRY, North Carolina
JAMES P. McGOVERN, Massachusetts CONNIE MACK, Florida
NIKI TSONGAS, Massachusetts JOHN CAMPBELL, California
BOB ETHERIDGE, North Carolina JIM JORDAN, Ohio
BETTY McCOLLUM, Minnesota CYNTHIA M. LUMMIS, Wyoming
CHARLIE MELANCON, Louisiana STEVE AUSTRIA, Ohio
JOHN A. YARMUTH, Kentucky ROBERT B. ADERHOLT, Alabama
ROBERT E. ANDREWS, New Jersey DEVIN NUNES, California
ROSA L. DeLAURO, Connecticut, GREGG HARPER, Mississippi
CHET EDWARDS, Texas [Vacant]
ROBERT C. ``BOBBY'' SCOTT, Virginia
JAMES R. LANGEVIN, Rhode Island
RICK LARSEN, Washington
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
GERALD E. CONNOLLY, Virginia
KURT SCHRADER, Oregon
Professional Staff
Thomas S. Kahn, Staff Director and Chief Counsel
Austin Smythe, Minority Staff Director
C O N T E N T S
Page
Hearing held in Washington, DC, March 18, 2009................... 1
Statement of:
Hon. John M. Spratt, Jr., Chairman, House Committee on the
Budget..................................................... 1
Questions submitted for the record....................... 59
Hon. Paul Ryan, ranking minority member, House Committee on
the Budget................................................. 2
Hon. Robert F. Hale, Under Secretary of Defense
(Comptroller), U.S. Department of Defense.................. 4
Prepared statement of.................................... 5
Michael Sullivan, Director, Acquisition and Sourcing
Management, Government Accountability Office............... 35
Prepared statement of.................................... 37
Responses to questions submitted......................... 59
Hon. Gerald E. Connolly, a Representative in Congress from
the State of Virginia, prepared statement of............... 55
Hon. Robert P. Aderholt, a Representative in Congress from
the State of Alabama, questions for the record............. 59
Hon. Lloyd Doggett, a Representative in Congress from the
State of Texas, questions for the record................... 60
DEPARTMENT OF DEFENSE
FISCAL YEAR 2010 BUDGET
----------
WEDNESDAY, MARCH 18, 2009
House of Representatives,
Committee on the Budget,
Washington, DC.
The committee met, pursuant to call, at 10:10 a.m. in room
210, Cannon House Office Building, Hon. John Spratt [chairman
of the committee] presiding.
Present: Representatives Spratt, Schwartz, Kaptur, Doggett,
Blumenauer, Boyd, Tsongas, Etheridge, Yarmuth, DeLauro,
Edwards, Scott, Langevin, Larsen, Bishop, Connolly, Schrader,
Ryan, Hensarling, Diaz-Balart, Jordan, Lummis, Aderholt, and
Harper.
Chairman Spratt. I call the hearing this morning to order
and first apologize to our witnesses for the fact that we are
late, but we just came from a meeting with the Speaker and had
to leave it early. I welcome everybody here today and thank you
for your participation.
The purpose of this hearing is to gain a better
understanding of the Department of Defense budget and to review
the factors that are responsible for cost growth in defense
programs, particularly cost overruns in major weapon systems.
The Obama administration has inherited a defense plan that is
considered by many to be difficult to sustain over time, a
weapons acquisition process that is badly flawed if not broken
altogether.
Over the last 8 years, funding for national defense has
more than doubled, reaching nearly $700 billion for 2008. And
if unchanged, defense plans could cost even more, tens of
billions more per year than the Bush administration has
budgeted in its so-called FYDP, or Future Years Defense Plan,
according to CBO.
Military personnel and O&M costs, which account for about
two-thirds of DOD's budget, have increased steadily at a rate
above inflation. After adjusting for inflation, the cost of an
average military service member is roughly 45 percent more than
the average cost 10 years ago. O&M funding for active duty
service members has steadily increased by 2.5 percentage points
above inflation each year going back to the 1950s. War costs
have increased, not decreased, but increased every year since
2001, peaking at $186 billion in 2008.
Cost growth of major weapon systems has worsened over the
last 8 years. According to the GAO, the cost of major weapon
systems on DOD's books as of 2007 increased nearly $300 billion
above their baseline estimates. After years of large annual
increases in the defense budget and runaway cost growth in
major weapons systems, the President has put forward a more
sustainable budget that tracks with inflation and calls for
sweeping acquisition reform at DOD.
For overseas contingency operations, the budget includes
$130 billion for 2010 and placeholder estimates of $50 billion
per year thereafter throughout a 10-year budget window. This
marks the first time that the budget includes both a full year
estimate for overseas operations for the budget year and
placeholders for future costs. So it provides a more realistic
look at the likely costs and their effect on the budget's
bottom-line over time.
In the midst of these challenging times, it is important to
mention the importance of our strong economy to our national
security. Our economy indeed is the first instrument of
national security. Getting the economy moving forward again and
putting our budget back on a sustainable course is absolutely
vital to ensuring the country's future ability to provide for a
strong national defense.
As we face these challenges, we must now more than ever
gain the best value for every dollar we spend, including
dollars spent at the Department of Defense.
Today we have two panels. On the first panel, the Honorable
Robert Hale, Under Secretary of Defense (Comptroller). On the
second panel, Mr. Michael Sullivan, Director of Acquisition and
Sourcing Management at the Government Accountability Office.
Mr. Sullivan will give us testimony on the work GAO has
performed on a number of areas at the Department of Defense.
Again, I welcome our witnesses. I appreciate your
participation. But before we turn the floor over to you, I
wanted to recognize the ranking member for any statement he
cares to make. Mr. Ryan.
Mr. Ryan. Thank you very much, Chairman Spratt. I would
also like to welcome our witnesses, Mr. Hale and Mr. Sullivan.
Mr. Hale, you have had a long and distinguished career working
with the defense budget both at CBO and as the Comptroller of
the Air Force, and I look forward to your testimony. I have
enjoyed your work over the years.
The Defense Department is our largest discretionary
expenditure, and it has seen robust growth over the last
decade. This growth is understandable, and in my opinion
justified by the fact that we were attacked on September 11th.
If you could bring up Chart 1, please.
But I am concerned that the President's budget uses the
fiscal year 2008 levels, the year of the surge and the most
expensive year of the war, as this chart shows, the red bar
graph, to create the illusion of savings. It does this by
inflating its baseline to assume the surge level of spending
continues every year for the next decade and then claims $1.5
trillion in savings by not funding DOD at surge levels for the
duration of this budget.
The Chairman of the Joint Chiefs, Admiral Mullen, has
clearly stated that he had no plans of spending at surge levels
over the next decade. And, Mr. Hale, as DOD's chief numbers
cruncher, your assumptions on this matter are also of great
interest to this committee.
As the President's budget provides no detail below the
topline, it is difficult to understand its plans for DOD over
the next decade. But the one thing we do know is that the
budget assumes an average annual growth rate of national
defense of 2.4 percent. This compares to an average annual
growth rate of nondefense discretionary spending of 3.3
percent.
Now I can appreciate an attempt at fiscal restraint in the
President's budget, but I find it incredibly troubling that
defense spending is seemingly the only place in which this
effort was made.
Providing for our Nation's defense is the primary
responsibility of the Federal Government, and the President's
budget raises the question of whether defense will be provided
sufficient resources, and that is the debate we are going to
have throughout the year.
That said, I don't mean to imply that there is not a great
deal of work to do to improve efficiency at DOD. To the
contrary, the Defense Department's financial management
systems, while improving, are still nowhere near where they
need to be to assure the American taxpayer that their money is
being well spent. You have an acquisition process that is an
abject failure at procuring weapons systems on time and on
budget.
I will note that I was encouraged that the President's
budget calls for acquisition reform as a priority, but the
devil is in the details, and Congress is also the source of the
problem through its intervention in the DOD procurement process
as well.
The bottom line is that we need to make absolutely certain
that we provide the necessary resources for the defense of our
Nation, in particular for the men and women in uniform in
Afghanistan and in Iraq, who are in harm's way. I look forward
to your testimony, Mr. Hale.
Thank you, Chairman.
Chairman Spratt. Thank you, Mr. Ryan. Before turning to Mr.
Hale, let me acknowledge that the timing of this hearing is
just a bit unusual because we don't anticipate getting the
detailed budget from the Department until April. Right now we
have only an outline that gives us some topline numbers and
some broad policy objectives. And for that reason we understand
that you may be limited in the level of detail you can provide
us at this point in time. We do hope that you can help us get a
better understanding and overview of the President's budget at
your level and the challenges that we all face in getting more
bang for the buck out of the defense budget.
Mr. Doggett. Mr. Chairman, on that point, is it correct
that this is not unique to the Obama administration, that every
time there has been a transition from one administration to
another, the outline comes first because they have only been in
office for a few weeks and don't have time to provide a full
budget at the time that a President would usually do?
Mr. Hale. That is correct.
Chairman Spratt. The gentleman is absolutely correct. Mr.
Ryan agrees with me. It takes a certain amount of time to
compile all of this information in a presentable form, and it
takes at least until April if not later to get that done.
Two housekeeping details. First of all, I ask unanimous
consent that all members be allowed to submit an opening
statement for the record at this point. Without objection, so
ordered.
And secondly, to our witnesses, both witnesses, you may
submit and we will copy your statement in its entirety so that
you can summarize it as you see fit.
With that said, Mr. Hale, the floor is yours, we thank you
again for coming, and we look forward to your testimony.
STATEMENT OF THE HON. ROBERT F. HALE, UNDER SECRETARY OF
DEFENSE (COMPTROLLER), U.S. DEPARTMENT OF DEFENSE
Mr. Hale. Well, thank you, Mr. Chairman and members of the
committee. I appreciate the opportunity to be here to talk
about the fiscal year 2010 defense topline request. I have
submitted a statement for the record. I will summarize it for
you.
As announced on February 26th, the President's topline
budget request will include $663.7 billion of discretionary
budget authority for DOD in fiscal year 2010. That includes
$533.7 billion for our base program that funds ongoing defense
programming and $130 billion for what we were terming overseas
contingency operations in Iraq and Afghanistan.
Let me go first to the base budget request. The $533.7
billion topline for the base budget reflects an increase of
more than $20 billion, or about 4 percent, above what the
Congress enacted for fiscal year 2009 and provides us about 2
percent real growth. We are now conducting a budget review to
craft a detailed request that will meet the Department's needs.
We want this budget review to do more than simply accommodate
this new topline.
Secretary Gates views the budget review as an opportunity
first to seek efficiencies in the Department's operations,
including improvements in contracting and acquisition, to
reassess weapons programs, especially those that are
experiencing execution problems, and to continue reshaping the
Department of Defense to focus more on a regular and
unconventional war while maintaining a balance of programs that
offer capabilities in conventional warfare.
Now, some decisions have already been made. The budget will
support increases in the size of the Army and the Marine Corps.
It will provide strong support for service members and their
families, including a 2.9 percent pay raise for military
personnel. It will fund improvements to facilities and for the
base realignment and closure, improve medical care for the
wounded, and it will incorporate some items previously funded
through emergency supplementals such as medical services,
family support initiatives, and end strength increases.
Other decisions, though, will involve tough choices because
even though the budget is growing, funds are migrating from
these supplementals into the base and there are some growth--we
call them fact of life changes that tend to occur, such as
health care that we need to accommodate. Secretary Gates has
said that he intends to wait until this review process is done
before making any of these tough decisions. So as the chairman
indicated, I won't be able to provide the committee with any
details today about those decisions.
Let me turn now to funds for the overseas contingency
operations, OCO, Washington's, I think, newest acronym. That is
funds for wars in Iraq and Afghanistan. DOD's highest priority
is to provide everything our troops in the field need to
succeed, including resources.
As I mentioned, the fiscal year 2010 budget request
includes $130 billion for overseas contingency operations. This
funding will support the drawdown of forces in Iraq and the
buildup of forces in Afghanistan. It reflects the President's
recent announcements in both of those theaters. The number is
consistent with, as I said, policies about the drawdown
announced by the President. And our submission will reflect
some tighter guidelines about what qualifies for funding in
wartime budgets. This request for $130 billion includes all the
monies we expect to require in fiscal year 2010. Our goal is
not to seek additional supplemental funding in fiscal year
2010.
That said, we recognize that things may change. Wartime
operations could change, strategy could change in ways that
would require additional resources. And in that case, we would
submit a supplemental funding request to ensure full support of
our troops.
Also, I would point out that the President said that he
would submit a supplemental budget request of $75.5 billion to
cover remaining war costs for fiscal year 2009. We are working
with OMB to prepare that request as I speak, and I hope it will
be submitted very soon to the Congress. We ask that Congress
act on it before the Memorial Day recess in order to avoid
funding shortages that hamper our operations and adversely
affect our troops.
And lastly, I want to mention DOD received $7.4 billion of
funds in the American Recovery and Reinvestment Act, better
known as the Stimulus Act. These funds will pay for increases
in military construction, facilities sustainment, restoration
and modernization, housing assistance and some other uses. We
are grateful for this funding, and we hope to spend the money
quickly on projects that meet critical DOD needs. At the
direction of the President, we will also seek a very high level
of transparency and accountability for this spending.
Mr. Chairman, that concludes my opening statement. I thank
you again for the opportunity to appear, and I look forward to
working with you and all the members of the committee and
Members of Congress to support our men and women in the
Department of Defense, and I now welcome your questions.
[The prepared statement of Robert F. Hale follows:]
Prepared Statement of Hon. Robert F. Hale, Under Secretary of Defense
(Comptroller), U.S. Department of Defense
Thank you Mr. Chairman. I appreciate the opportunity to represent
the Department of Defense (DoD) this morning regarding the topline of
the President's fiscal year (FY) 2010 budget request.
The Committee's hearing is an important part of the budget process.
It helps to ensure that the process is open and transparent. As
President Obama has said, ``Those of us who manage the public's dollars
will be held accountable to spend wisely, reform bad habits, and do our
best in the light of day.'' Accountability and transparency are
hallmarks of the President's budgetary policy and are especially
important during this period of economic crisis.
president's fy 2010 budget request
As announced on February 26, the President's topline budget request
to Congress will include $663.7 billion for DoD in FY 2010.
I recognize that this Committee marks up a figure for the National
Defense budget function (Function 050). However, we in DoD do not have
visibility at this time into the budgets of the Department of Energy or
some of the other agencies that also have funding in the National
Defense function. So I will focus on the DoD budget (also known as
Subfunction 051) during the remainder of my testimony today.
The $663.7 billion in the DoD topline includes $533.7 billion of
discretionary budget authority in the base budget that funds ongoing
Defense programs. It also includes $130 billion for overseas
contingency operations--that is, the wars in Iraq and Afghanistan.
fy 2010 base budget
The $533.7 billion topline for the base budget reflects an increase
of more than $20 billion or about 4 percent over the $513.3 billion
appropriated by Congress for the FY 2009 Defense base budget. The base
budget request represents real growth of approximately 2 percent, which
is below the average real growth of about 4 percent during the 2001-
2009 period.
Secretary Gates has said that he is pleased with this topline
figure, which will enable us to meet our essential defense
requirements.
what the base budget will buy
Armed with this topline figure, we are now engaged in a budget
review to craft a detailed FY 2010 Defense budget that best meets the
Department's needs. We want this budget review to do more than adjust
the FY 2010 Defense program to accommodate the new topline. It also
provides DoD's senior leaders with the opportunity to:
Seek efficiencies within the DoD program;
Reassess all weapons programs, especially those that have
experienced execution problems; and, most importantly,
Continue reshaping the Defense program to focus more on
unconventional warfare, while maintaining a balance of programs that
provide conventional capability.
In a few cases, we have already made decisions about the programs
that will be included within our base budget for FY 2010:
The budget supports increases in the size of the Army and
Marine Corps to meet warfighting requirements while increasing time
spent at home station.
We will use our funding to ensure strong support of our
military people and their families, including improved medical
treatment for wounded Service Members.
Our budget will include a 2.9 percent pay raise for men
and women in uniform.
The budget will provide funds for improvements to
facilities and for the implementation of Base Realignment and Closure
recommendations.
The base budget for FY 2010 will also incorporate some
budgetary items that were previously funded through emergency
supplementals, including certain medical services, family support
initiatives, security assistance to foreign governments, and
enhancements to ISR (Intelligence, Surveillance, and Reconnaissance)
capabilities. Consistent with the President's goal of transparency, we
are striving to ensure that the base budget incorporates all permanent
programs and those that apply to the entire force.
We also recognize the need to improve business practices,
especially those that are related to acquisition. While detailed plans
have not yet been formulated, we must find ways to reduce cost growth,
minimize scheduling delays, and improve performance in our weapons
acquisition process--while still meeting key warfighter needs. In
addition, as the President has said, we need to improve government
contracting. Such initiatives are especially important because of the
economic crisis that the country is facing.
tough choices
Even though there is some real growth in the FY 2010 defense budget
request, we know that we must still make a number of tough choices.
Choices will be necessary because shifts from supplemental to base
funding will consume funding and because the topline must accommodate
some growing programs such as health care.
These difficult decisions have not yet been announced, and so I
cannot comment on their status. Secretary Gates has said that he
intends to wait until the end of our review process before making any
decisions. In his words, ``putting together a budget package this
large, complex and interrelated requires a coherent and holistic
process--a process that would be undermined if decisions about
particular programs are made piecemeal or before the assessment is
complete.''
We expect that the President will send the detailed DoD budget,
along with budgets for the rest of government, to the Congress sometime
in April.
In the interest of long-term budget transparency, the President's
budget not only shows figures for FY 2010 but also includes base budget
estimates for the next decade. Those figures anticipate zero real
growth in the Defense budget. However, we believe that budget decisions
beyond FY 2010 should await completion of the Quadrennial Defense
Review (QDR) that is just getting underway. After the QDR is completed,
it is possible that DoD will propose some adjustments.
fy 2010 costs for overseas contingency operations
DoD's highest priority is to provide troops in the field everything
they need to be successful, including adequate resources.
The FY 2010 budget request includes a request for $130 billion of
funding for overseas contingency operations--that is, funds for the
wars in Afghanistan and Iraq. This funding request will support the
drawdown of forces in Iraq, including costs of getting troops home, and
the buildup of forces in Afghanistan, including costs to operate in
this austere and challenging security environment. The estimate is
consistent with the decisions about troop levels recently announced by
the President including the drawdown of 35,000 to 50,000 troops in Iraq
by August 2010.
This request for war funds includes all the monies we expect to
require in FY 2010. Our goal is not to seek additional supplemental
funding for FY 2010.
However, there may be significant unforeseen developments or
changes in wartime strategy or tactics that cannot be addressed with
existing resources. In that case, we would submit a supplemental
funding request in FY 2010 to ensure full resource support for our
troops.
The use of supplemental funding for Defense operations has grown
over time. The President wants to reverse that trend and move more of
our predictable costs into the base budget, and we are seeking to make
that change in this budget. The transition to narrower and stricter
criteria governing what expenses can be counted as a cost of war is
difficult. We inside the Department are experiencing that difficulty
now as we build these two budget requests using more stringent rules.
As we work toward putting all predictable costs into the base budget,
we will need to work with this Committee and others in the Congress to
enforce these changed rules.
Consistent with the goal of long-term budget transparency, the
President's requested topline projects funding of $50 billion per year
for overseas contingency operations costs beyond FY 2010. These
projections do not represent a policy projection based on an exact
force structure or operating tempo in those two operations. We cannot
predict these key factors with certainty this far in advance. Therefore
the figures are placeholders that may change depending on events.
remaining fy 2009 war costs
In his February 26 budget overview, the President said he would
submit a supplemental budget request of $75.5 billion to cover
remaining war costs for fiscal year 2009.
I want to thank the Congress for providing the much needed ``bridge
funding'' of $66 billion last year. The troops in the field saw
immediate benefit from that funding. The second funding request would
provide the remaining funds necessary in FY 2009 for the wars in Iraq
and Afghanistan and will likewise benefit the troops in the field.
This funding request is also consistent with the decisions recently
announced by the President about the buildup in Afghanistan and the
drawdown in Iraq.
Working with OMB, we are preparing the FY 2009 supplemental and
hope to submit it soon. In order to avoid funding problems and to
maintain continuity of operations for the troops, we hope that Congress
will enact this remaining supplemental prior to the Memorial Day
recess.
american recovery and reinvestment act (arra)
DoD received $7.4 billion of funds in the ARRA, better known as the
Recovery Act. DoD funds include:
$4.2 billion for facilities sustainability, restoration,
and modernization;
$2.2 billion for hospitals, child care centers, and other
military construction needs;\1\
---------------------------------------------------------------------------
\1\ This is largely limited to troop (including wounded warrior
transition) and family housing.
---------------------------------------------------------------------------
$555 million for housing aid to certain DoD employees who
must move;
$300 million for research on energy efficiency
technologies; and
$120 million for the Energy Conservation Investment
Program.\2\
---------------------------------------------------------------------------
\2\ This is provided in the MilCon Defense-Wide account, but is
being treated as a separate program.
---------------------------------------------------------------------------
We are grateful for these funds. We hope to spend the money quickly
on projects that meet critical DoD needs. We also recognize the
President's strong commitment to accountability for these funds. I
pledge to the Committee that we are committed to transparency and
accountability for the stimulus funds provided to the Department.
closing
Again, I want to thank the Committee for the opportunity to testify
about the Department's topline budget. We are satisfied that the FY
2010 funds and other funds provided to the Department will allow us to
meet the essential needs of the troops and their families and to
continue efforts to reshape the force for unconventional war while
maintaining a balance of conventional capability.
We also pledge that the FY 2010 budget will reflect hard choices
that the Department of Defense will make to stay within the President's
topline while maximizing our defense capability. Making such choices is
especially important during this period of economic crisis.
Along with other DoD leaders, I look forward to working with
Members of Congress to explain those hard choices and to gain support
for them.
Mr. Chairman, that concludes my opening statement. I welcome the
Committee's questions.
Chairman Spratt. Thank you very much, Mr. Hale. I
understand that one factor that is driving some cost growth is
the fact that several years ago we decided to increase the
level of ground troops, the end strength of ground troops, both
in the Marine Corps and in the Army, by 92,000, and we had a
time frame estimated for how long it would take to fill that
requirement. It appears now that partially due to the economy
apparently that requirement is going to be filled 2 or 3 years
ahead of what was originally anticipated. How does that affect
your budget?
Mr. Hale. Well, it increases budget needs. On the other
hand, it provides us more capability at a time when we can make
good use of it, and both the Army and Marine Corps are close to
the goals right now. For fiscal year 2009, we will need to work
some reprogramming actions to handle the budgetary needs and we
are working to address them in the fiscal year 2010 request.
So, yes, it will add funding requirements, but it does also add
some capability. As I said, we will make good use of it.
Chairman Spratt. Rule of thumb, what is the anticipated
cost of an additional division?
Mr. Hale. I don't know about a division. Crudely at
$100,000 a troop, plus some O&M costs----
Chairman Spratt. $80,000 per accession?
Mr. Hale. That is probably about right. I was looking at an
average troop, not just an accession. Say around 100,000. And
then there is an O&M, or operation and maintenance, tail that
goes with that. So we are talking a sizeable amount of money,
given that the Army and Marine Corps have gotten there so
quickly.
Chairman Spratt. Could you give us a rough analysis of a
savings of what 92,000 additional ground troops will cost?
Mr. Hale. Could I do that for the record or do you want me
to try the math right now?
Chairman Spratt. I will take it back of the envelope right
now and then you can refine it for the record.
Mr. Hale. John, help me out here. I am adding the zeros.
Maybe around a billion dollars. Is that right? Say again? I got
a wrong zero. That is not a good start. About $10 billion.
Chairman Spratt. About $10 billion for 92,000 troops.
While deficits have increased to record levels, the cost of
the DOD have grown above inflation almost across the board.
Military personnel costs have grown 45 percent above inflation
over the last 10 years; O&M costs have consistently increased
at 2.5 percentage points above inflation. Going way back to the
1950s, apparently this has been a steady trend.
Can you give the committee a summary of the causes of these
cost pressures and why the basics are going up so much, not
just the high power, high performance weapons systems, but the
basic manning and equipping of our Armed Forces?
Mr. Hale. Well, let me take a shot at that. And I will
separate the two accounts because they are quite different. The
military personnel growth, especially in the last 10 years or
so, reflects part of what you just mentioned, a growth in
numbers of personnel, particularly in the Army and the Marine
Corps. We have also added recruiting and retention bonuses to
maintain an all-volunteer force in the midst of fighting 2
wars. And the employment--we base pay raises on the employment
cost index, which often typically exceeds the rate of
inflation.
If we look toward the future in terms of military
personnel, I agree we need to shine a spotlight on what is
going on. The costs are up sharply. We also need to recognize
that we have got to pay these men and women who are serving our
country so well. I don't have an easy set of answers, but I can
tell you I am mindful of the cost growth and concerned about
it.
Maybe I can be a bit more helpful in the operation and
maintenance account. I often call it the ``all other'' account
in the Department of Defense. It is very diverse. It includes
civilian pay. It includes small spare parts. It includes fuel.
It includes headquarters costs, a wide variety of types of
spending. So you won't be surprised to hear me say that there
is not one cause of why O&M has gone up. And you are right,
even adjusted crudely for force structure it has been going up
for the last decade, several decades.
Part of it is aging weapons that push up all of our
maintenance costs and our overall operating costs. We have done
a fair amount of outsourcing in the last 10 years, and some of
the costs of contractor personnel have been more than what we
were paying for federal workers. Health care costs have been an
important cause of growth in O&M. As with every company, I
think, in the United States, the Department of Defense has seen
health care costs rise significantly faster than the rate of
inflation.
As we look toward the future of O&M, I think there are
several initiatives suggested by my words. We need to look at
health care costs. It is a tough one, but hopefully the overall
plans of the administration for health care reform will help
slow the growth in costs and we would benefit from that, and we
may also need to look at other factors like cost sharing among
our retirees and other factors that influence health care cost
growth.
And we also need to look carefully at how many contractors
we are using and whether there are cost effective ways that we
could bring back in house some more contractor personnel.
All of those factors are being considered in the budget
review. No decisions have been made, as I indicated in my
statement, but there are factors we are going to have to look
at in this budget review and in future ones.
Chairman Spratt. Weapons systems have been notorious at the
Department of Defense for attaining cost, schedule and
performance requirements. This administration has indicated
that it is going to make sweeping reform of our procurement
system--our R&D, as well as procurement system.
Could you give us some idea of what the administration has
in mind for procurement reform? I know that you are only recent
on the job and this has only begun to be putting this together.
But in broad outlines, what do you have in mind with respect to
procurement reform?
Mr. Hale. Let me try to answer that. I add here that we
have only been recently on the job. It is not my primary area
of responsibility. But I think if you are going to get at cost
growth in weapons, you need to go back to the early parts of a
weapon's life, because once it gets certainly into production
you have determined most of the costs. And early in that
weapon's life, you need to make those hard cost and performance
tradeoffs. And they are difficult to do because I think we are
looking to ensure against future conflicts and we are often
looking at a weapon system that will be in the inventory for 20
or 30 years. So you are looking over a very long time. But I
think those are key, cost and performance tradeoffs and
schedule, but particularly cost and performance. As we get
further into a weapon's life--and here I would have more
control as the Comptroller, we need to try to achieve stability
in the production rates. Again, hard to do. Budgets change and
force structure changes only slowly. So we historically have
looked to the investment accounts to accommodate budget
changes. But we need to do that in a way that doesn't adversely
affect economic order quantities.
I know that is not a definite answer and the administration
doesn't have a definite plan yet. We are hoping, perhaps even
today, to see the formal nomination of our Under Secretary for
Acquisition, Technology and Logistics, Mr. Carter. Once he is
confirmed, I think that will be one of his high priorities,
working with other senior leaders.
Chairman Spratt. Does PA&E report to you?
Mr. Hale. No.
Chairman Spratt. In the past, was that not the case?
Mr. Hale. It has been that way and it has not. It depends
on when you look. In the 1990s, they did report to the
Comptroller. That was changed in the early part of the previous
administration and now our Director reports to the Secretary,
but we work very closely together. We worked hand in hand
during the ongoing budget review, meet quite regularly. So I
think there is good coordination.
Chairman Spratt. Mr. Hale, thank you very much, good luck
to you and we look forward to working with you. Mr. Ryan.
Mr. Ryan. Thank you, Chairman.
Mr. Hale, let me ask you about your 2009 supplemental
request. Number one, when do you expect to send it to the Hill?
And will it have funds to send an additional 17,000 troops to
Afghanistan? And how much is going to be included for that
purpose, if so?
Mr. Hale. I hope it gets to the Hill next week. We are
working closely with the Office of Management and Budget--I
called them this morning and I don't have a firm timetable, but
I certainly hope it does. And as I said in my statement, we
hope that the Congress will be able to enact it by Memorial
Day. The fiscal year 2009 supplemental will include funds to
cover the President's announced changes in both Iraq and
Afghanistan, to include those extra troops.
I can't give you offhand an indication of the dollar figure
associated with the 17,000. If I could provide that for the
record.
Mr. Ryan. Okay. Firewalls, we used to have them; we don't
now. If Congress does not fully fund your fiscal year 2010
request for the war--and I do want to compliment the
administration for putting the funding of the war into the
budget. That is something that we think is good budgeting. And
the baseline is another issue. But that is something that we in
our substitute budgets the last few years did. So we are
pleased to see that. But here is my question. If we are putting
this in the budget and Congress uses that money to fund other
needs, other domestic programs, will you then give us another
supplemental on top of it?
Mr. Hale. Well, Mr. Ryan, first, we are trying to
discipline ourselves and it is hard at times. We hope that
Congress will follow suit and appropriate these funds.
Mr. Ryan. I wanted to----
Mr. Hale. The Secretary has said, I certainly agree, that
our highest priority is to provide our troops in the field
everything they need to succeed, including resources. So if we
need funds that we don't have to support them, yes, we will
come back and ask for those. I hope we don't have to. Our goal
is to avoid that.
Mr. Ryan. That is our concern here on this side of the
aisle, because we do not have firewalls; that if we just pass a
budget resolution that includes theoretically the 2010 war
spending, that money gets plowed into something else, then we
are really not budgeting for the war. You are going to end up
giving us a supplemental. So that is something we are going to
be very mindful of as the year continues.
Last March, your Inspector General reported that Congress
included 2,656 earmarks in the 2007 DOD appropriations act
conference report totaling $12 billion. The Comptroller of the
Air Force stated in response to that report, ``when higher
priority requirements are cut from the President's budget to
source earmarks, the primary goals and missions of the DOD are
not being optimally resourced.'' The results are, in some
cases, a force less capable than the one submitted by the
President. Both parties do this. I am not suggesting that one
party has cornered the market on virtue on this.
But my question is, do you agree with this assessment of
earmarks and how do you think they affect the Department's
ability to perform its primary mission?
Mr. Hale. Well, I am going to copy the words of the
President on this, although you are speaking in connection with
a nondefense omnibus bill that recently passed, that there were
too many earmarks and he wants fewer and is looking toward a
statement of principles on earmarks. By the same token, I am
mindful of the prerogatives of the Congress, constitutional
prerogatives of the Congress, to appropriate money. So I think
I would like to leave it at that in terms of we will certainly
follow the direction of the President with regard to his
statement of principles and we will keep in mind Article I,
Section 8 of the Constitution with regards to the prerogatives
of the Congress.
Mr. Ryan. A fair point. I wish we could get to some kind of
rating system so we could judge these things on their merits
based upon the needs of DOD.
Last question. We have talked about shovel ready projects
pretty much all year long. And the stimulus bill, the whole
notion of that was to shovel ready project spending out the
door. This didn't occur with DOD. Are there shovel ready
projects that the Department has identified that keep
production lines open and preserve domestic jobs in your
estimation? And if so, give us a sense of how much and what
kind.
Mr. Hale. Well, of that $7.4 billion, about $4 billion of
it was for facility sustainment, restoration and modernization,
And there we will come closest to shovel ready projects.
Mr. Ryan. That is brick and mortar on bases?
Mr. Hale. Yes. It is fixing roofs; it is adding air
conditioning systems, buildings and facilities. It still will
take us a few weeks. I mean, I hope we will--we were given 60
days after signing the bill to get the sustainment facilities--
sustainment, restoration and modernization up here. I think we
will beat that. We have identified most of the projects now and
a number of them will get started in the April time frame, May.
Military construction takes longer because we have got to plan
it and we don't want to do it without. After all transparency
and accountability was one of the goals here, too.
Mr. Ryan. What about outside the MILCON purview?
Mr. Hale. Well, there were several categories of spending.
The two biggest ones by far, facilities sustainment restoration
and modernization, and MILCON.
Mr. Ryan. I am not asking what was in the stimulus. I am
saying are there others----
Mr. Hale. Yes, there are. There was some money for housing
assistance, essentially allowing us to pay troops and in some
cases civilians if they lose money because of a move they had
to make. That one we are working on. Regulations. And I can't
give you a firm date. And there was alternative energy.
Mr. Ryan. So there is none outside of the stimulus package
that--is that what you are saying? There are no shovel ready
projects----
Mr. Hale. Well, in our fiscal year 2009 budget, we are
going forward with a variety of projects there. I mean,
certainly some of our investment programs and many of our
sustainment projects are shovel ready. They were planned
before. But they are ongoing now. I mean, we are bending metal
and hiring people as I speak. I don't know if I answered your
question.
Mr. Ryan. Not really. It is okay.
Mr. Hale. Well, I tried.
Mr. Ryan. Yeah, I am not trying to be combative here. I
guess the question is, some of us believe because this is the
primary responsibility of the Federal Government and if we are
going to go down the path of sort of a Keynesian stimulus with
shovel ready projects, are there some opportunities that were
missed such as in the area of procurement, areas that we need
to procure anyway, that we didn't, that we could have? That is
the question.
Mr. Hale. You know, in general, procurement, if it is new,
if it is starting from today or when that bill was signed,
isn't going to be shovel ready. There may be some small ones. I
will go back to my statement. The way we can help quickly--and
I think Congress gave us money to do it and we are trying to do
it--are these facilities, repair and maintenance kinds of
project. Those, I think, are our best shot and we are pushing
as fast as we can, consistent with doing a good job and making
sure that we get benefit for the taxpayer out of these dollars.
Mr. Ryan. All right. Thank you.
Chairman Spratt. Mr. Doggett.
Mr. Doggett. Thank you. And thank you very much for your
testimony. I know you are very new to the Pentagon. And I think
your comment just now, that the Pentagon is trying to
discipline itself under new leadership is a very new approach
at the Pentagon, one that is long overdue.
We have had a shovel ready approach to the Pentagon in the
past from Congress. We shoveled out hundreds of billions of
dollars as quickly as President Bush asked for it time and time
again. When his Office of Management and Budget initially did a
ratings system on fiscal management at Federal agencies, the
Pentagon got an F. It kept getting an F until they stopped
rating it. And I don't think that the taxpayers have been
getting their money's worth.
I am also encouraged that while not brand new to the
Pentagon, Secretary Gates has been telling all who would listen
that American taxpayers cannot continue to pay for an unlimited
Pentagon budget just because Members of Congress are fearful
that they will be attacked as weak on security if they don't
approve every mismanaged dollar that goes there. And I hope
that despite the many political pressures that come from the
Congress and the lobbying teams for every major weapons system
that are usually larger than the number of Members in Congress,
that he and you will stick to that approach of making the tough
decisions and seeing whether some of these Cold War weapon
systems really serve any purpose in assuring our national
security.
And I applaud you in the tough job that you have ahead. But
you will find at least a few allies here in Congress who want
to apply the same fiscal standards to the Pentagon that apply
to the rest of the government and have not applied there in the
past.
I want to ask you about one specific project. And again, I
am not asking you for your policy advice because I have strong
feelings about this, but on the dollars. And that is the
question of missile defense. As it relates to other major
weapons systems, how does the missile defense money compare to
other major weapons systems going forward there?
Mr. Hale. Do you mean looking forward to our future plans
or----
Mr. Doggett. I am not asking you what those future plans
might be. Let us just look at this past year about how does the
missile defense----
Mr. Hale. I think around $9 billion, if my memory serves me
right----
Mr. Doggett. How does it compare with other major----
Mr. Hale. Missile Defense Agency. A substantial amount of
funding. And of course it incorporates a wide variety of
projects, as you are well aware.
Mr. Doggett. It is one of the largest weapon systems
programs there is.
Mr. Hale. I can tell you that it, along with all other
major weapons, but certainly missile defense, is being looked
at carefully with regard to whether we want to make some of
those difficult choices in that area.
Mr. Doggett. And I understand you are not here to say what
the result would be. I will tell you my feeling is that missile
defense has relied much more heavily in the last 8 years on
ideology than on science. And it has, as the General
Accountability Office report of this Monday pointed out in more
diplomatic and delicate terms, often taken the approach of
``build it and it will work''. An unusual approach, but one
that GAO I think documented again, as so many others have this
week, that this is happening. But the amount of fiscal
mismanagement in that program that is documented there is the
type of thing that taxpayers don't get to see. It is not only
money that is poorly spent, but just reading from the report
that came out on Monday and asking you for your reaction, an
indication that the Missile Defense Agency has not yet
established baselines for total cost or unit costs. For the
sixth year, the GAO has not been able to assess Missile Defense
Agency's actual cost against a baseline. But what they were
able to calculate was a 2 to $3 billion cost overrun. And in
one case, the cost increased by approximately five times the
original value. At the same time, they note overall testing
achieved less than was planned. And they criticized the fact of
what I call the ``build it and it will work'' approach.
How do you tackle something that has had so much money
poured on it, so many years of mismanagement, which appears to
be continuing right through this week? I know you will be
assessing whether this is a--or Secretary Gates and others at
the Pentagon--whether there is a wise use of any taxpayer
dollars. But how do you assure, if we are going to pour so much
money into it, that those dollars are being spent more
effectively than they are being spent?
Mr. Hale. That is a good question and a hard one. I think
that the basic notion of instilling discipline in the Pentagon
needs to extend to MDA. We need baselines. That is a standard
way of assessing how well we are doing both in terms of cost
and schedule.
I have looked at the GAO report. I understand we haven't
done as well as we should have there. That is a first step. I
think there also needs to be a review of each of the many
programs that are embedded under that overall rubric of missile
defense, to decide whether--the priority they should have. Let
me put it that way. And there may be--the Secretary has said
that he is going to be willing, if he thinks it is the right
thing to do, to terminate some programs. There is areas,
missile defense and others, where it may be appropriate to
consider just that.
I think that both the process, establishing baselines, and
a careful review is a good first step toward meeting your goal,
and it is ours, to having a more disciplined program.
Mr. Doggett. Thank you.
Chairman Spratt. Mr. Aderholt.
Mr. Aderholt. Thank you, Mr. Chairman. Thank you for being
here today, and I appreciate your testimony before the
committee.
Just to follow up a little bit from my colleague from
Texas--and I think he makes some good points about baseline and
careful consideration of the budget of MDA. Of course the
President's budget did state that the military must vigilantly
anticipate and meet threats from asymmetrical and
nonconventional attacks. And certainly, as you know, the
current MDA Director, General O'Reilly, has followed up on a
lot of the great work that General Obering did by revamping the
testing process to meet these current needs. And certainly
baseline and careful study is needed. But I know we will not
see the final budget number until April 20th. But as you know,
the rumors are out there that the Missile Defense Agency could
be cut by $12 to $10 billion. And looking at the budget outline
from the administration overall, there is not a lot across-the-
board cuts of 15 percent or more like we are seeing here. And,
of course, I think to many Americans, the developments in Iran
and North Korea indicate that there is very much a large
concern and it may not be the time to cut back on missile
defense. We need both protection as a protection that is a
deterrent.
I know the final numbers are not out and you alluded to
this a little bit ago, but just if you could talk a little bit
about if there is any truth to the rumor that those type of
major cuts will be implemented in what the DOD is looking at?
Mr. Hale. Let me repeat Secretary Gates' words, that
anything you read right now about specific cuts is wrong
because he hasn't made the decisions. I think that is honestly
true. He is certainly in the midst of the review, but I don't
believe he has made any final decisions, including those on
missile defense.
And I think the previous question and yours capture the
difficulty in defense. It is an insurance policy. It is
weighing risks against costs. There is no simple formula. But I
can assure you these same sort of arguments, although in a good
deal more detail, are played out as the assessments are made of
all of these programs, including MDA. And when you see the
budget, then we will be able to go through the specifics and
indicate the decisions the Secretary and the President have
made on programs like this. I am sorry I can't be more
helpful--I can be. I am being quite difficult. I can't be more
definite. But as I said earlier, I think if I were to give you
details, I could just go straight on home because I wouldn't be
very welcome back in the Pentagon. And he is anxious, the
Secretary, that it be packaged together, he be able to see it
and announce it as a package when the budget goes forward.
Mr. Aderholt. Thank you, Mr. Chairman. That is all I have.
Chairman Spratt. Mr. Blumenauer.
Mr. Blumenauer. Thank you. Thank you, Mr. Chairman.
Mr. Hale, I don't envy you your job. You are inheriting a
military that is strained. You have a broken acquisition
system. You mentioned a moment ago the problems with
outsourcing. We have a huge number of private contractors,
which actually outnumber our soldiers in Iraq and have, I
think, since the outset. But notwithstanding all of these
moving pieces, we appreciate the direction that is being
undertaken and the candor with which you and the administration
have outlined some of the challenges in trying to have a more
honest budgeting.
I have two specific areas that I would like to explore that
may not be the most important, but I would like for the record
for you to go back and provide for the committee some
information about the cost, the extraordinary cost of
outsourcing, so much of that military tail that you referenced,
that not only is more expensive on a per person basis than our
own soldiers or civilian personnel, but because it hasn't, we
are finding out, been adequately supervised, they didn't have
the oversight built up to be able to administer the contracts,
we find that performance has been shoddy far too often. And if
you could help us detail some of that so we understand the
challenges that are being faced in terms of the extra cost and
the problems associated with it, I would deeply appreciate it.
My two questions refer in part to the hard work that
Chairman Edwards, who has had the MILCON Subcommittee and
working with the quality of life of our troops--one of the
areas that I have been deeply concerned with for years is the
situation with unexploded ordnance, military toxins that are
all across the country, thousands of locations, every State in
the Union. And Congress and I think the Pentagon has not put a
priority on cleaning up after itself. It is not just that it
has resulted in the death of civilians over the years. Toxic
cleanups, even up at American University--I think we are on the
third round of cleanup from the chemical weapons testing and
manufacturing that we had during World War I. For a while they
had to close down the child care center there. But this is
something that goes across the country, and it rears its head
when we are talking about closing out military bases. I think
the people in Sacramento are going to wait until 2077 to clean
up after a base that was closed in the first round of base
closings. I mean, this is outrageous. And it is one of the
reasons why I think you are getting resistance to people who--
because you need a larger training footprint and people are
saying no, you are not a good neighbor, you leave shells out
there that explode when we have got wildfires. We have
subdivisions that won't actually have fire protection because
people won't come because of the danger of unexploded ordnance.
And I will get to a question here in a moment. But I want
to set the stage, because this has serious consequences for
military readiness. And if you would put a priority on
technology that can accelerate the cleanup, not only will it
make money for the Pentagon over the years, because ultimately
you are going to be responsible for cleaning up, but it will
develop technology that will save our troops in the field from
improvised explosive devices, for instance.
Now, can you help me understand how we work with you to get
an appropriate priority attached so that we protect our troops,
we develop the technology, we save money, and the military is a
better neighbor with these thousands of locations that pose
risks to the environment and to their neighbors?
Mr. Hale. Well, I admire your passion and I understand your
point. I mean, we have an obligation to clean up things we did
maybe inadvertently, but we did them or DOD did in the past.
There is an environmental restoration budget and I clearly
sense you think it is too low. It competes with all others in
the Department of Defense. But it is, as I recall, substantial.
And I would urge that we work with you to be sure that it meets
as well as we can the needs that you suggest.
Mr. Blumenauer. Well, I invite your review to see if you
think it is substantial. In terms of the amount of money that
has been allocated over the years, the magnitude of the
problem, most of it bubbles up when you have got a problem with
the Massachusetts Military Reservation there in Martha's
Vineyard where you have got a trophy problem that is going to
infect the water supply and then you rush and spend hundreds of
millions of dollars or the third time when there is a problem
at American University that any member of this committee could
ride to in 30 minutes and then we rush tens of millions of
dollars. But having a systematic, sustained effort at cleanup,
I think you will find that it is a pittance compared to the
potential liability and what is happening to long-term costs
that are going up and the benefit of returning this land to
public use in the future. And last but not least, why people
don't want to give you more land to train on because you didn't
clean up after yourself last time, it is posing serious
problems.
I will stop.
Mr. Hale. May I go back--I take your point. May I go back
to the preamble to your question and then we have heard it
several times today. Yes, we need better discipline in the
Department of Defense and we are working to instill that.
However, I do want to say, I think we have got a great group of
people and generally they are well-equipped and they are
working hard, both on the uniform and the civilian side. I have
great respect for them. Some of them are with me here today. So
I don't want to leave any sense that I don't respect what the
Department has done and what its people are doing. Yes, more
discipline, but the troops are doing a great job and the
civilians who are supporting them.
Mr. Blumenauer. And I started by saying Congress hadn't
done its job giving the resources.
Chairman Spratt. Mr. Harper.
Mr. Harper. Thank you, Mr. Chairman. Mr. Hale, thank you. I
have the great privilege--my father was a gunner on a B-17 in
the latter part of World War II and a brother was a B-52 pilot.
A concern I have is we have got a lot of these young pilots
flying planes older than their daddies. And I understand that
we are going to delay the procurement of airborne tankers for
another 5 years perhaps and cancel future bomber programs.
Is that what you are anticipating to happen in this
unwritten budget?
Mr. Hale. Well, as I said before--and I apologize for being
difficult--but anything you read in here is wrong because those
decisions have not been made. Those programs, the tanker and
the bomber, are certainly being looked at. But decisions have
not been made, notwithstanding, as I said, what you may have
read.
Mr. Harper. It is my understanding that the President
indeed said that he had plans to cancel the future bomber
program. Am I incorrect on that?
Mr. Hale. I am not aware of that statement.
Mr. Harper. All right.
Mr. Hale. I am not.
Mr. Harper. Then I hope I am wrong on that.
I know we have had some discussion on missile defense, and
it is my understanding there have been statements by the
administration on looking at those systems and at those
programs.
Do you consider any of the missile defense systems that
have been in place to have been successful and ones that you
say are off the table as far as cuts or scaling back?
Mr. Hale. Well, I don't think anything is off the table,
but they are certainly having some testing success, perhaps not
as much as they would like. These things are hard to develop.
So, absolutely, there have been some successes. But I will
stick with my mantra, that nothing is off the table in this
review in missile defense or other areas, but no final
decisions have been made.
Mr. Harper. Well, we have had some successes obviously with
these systems, and it would seem to me at a time when we are
seeing around the world potential threats from other countries,
some friendly, some not so friendly, that this would be a
system that needs to be not only continued but looking at the
best technology we can to protect not only our allies, but our
own country. And, you know, I know we break that down into
different segments. But is this something that you are saying
nothing is decided at this point?
Mr. Hale. That is correct.
Mr. Harper. No other questions.
Chairman Spratt. Mr. Scott of Virginia.
Mr. Scott. Thank you, Mr. Chairman. Mr. Hale, good morning.
Mr. Hale. Good morning.
Mr. Scott. I have many ship repair yards in my district,
all of whom have suggested to me that the Department of Defense
has already appropriated money for ship repair. But they
haven't awarded the contracts for that work in a timely basis
and in fact have been holding back. We recently passed a
stimulus bill to try to create and save jobs. These jobs are
being lost. People are being laid off because the work hasn't
been assigned. This is work that has to be done.
And so my question is, what does Congress need to do to
make sure that these contracts are awarded as soon as possible?
Mr. Hale. Well, the Navy manages the shipbuilding repair,
as you are well aware, Mr. Scott. I will certainly take it for
the record to check. I think they phase the obligations over
time depending on their requirement and the availability of the
ships. I am not aware of any across-the-board delays in Navy
ship repair work. But I will be glad to respond for the record
and ask and respond for the record.
Mr. Scott. Thank you very much. A relatively few years ago,
we were talking about a 60-ship Navy. Today we are down to 283,
and the rumors are that it is not going to get much better.
What are the plans of this administration in terms of ship
repair and ship construction?
Mr. Hale. Well, again, I can't give you any specifics. I
think we are mindful of the need for a Navy both with some blue
water and littoral capability. And it will be the size of the
Navy and how it is used, a major issue I think in the
Quadrennial Defense Review that is just getting underway now. I
think you will see this administration support a substantial
Navy, but I can't tell you exactly the size.
Mr. Scott. And that will be part--that report will be part
of the quadrennial review?
Mr. Hale. It will be considered as part of the overall
force structure, not just the Navy, but all aspects of the
military is an important part of the so-called QDR. I believe
the report is due to the Congress--I think it is due formally
next January or February. So the review is just getting
underway now.
Mr. Scott. Private contractors have had their ups and downs
over in Iraq. Can you tell me what your views are on the
relative cost, oversight, and effectiveness of doing what are
essentially military functions with private contractors?
Mr. Hale. Well, first, I don't want to damn contractors
with a broad brush. They serve us well and we could not run the
Department of Defense without them, and I think in a number of
cases they provide----
Mr. Scott. When I was in the National Guard a long time
ago, we didn't have that many contractors. But when you talked
about contractors, people were thinking along the lines of
getting troops out of doing KP and that was about it. What is
happening now is these are essential military functions being
performed, and that seems to be quite a different thing,
particularly in terms of oversight, if not cost and
effectiveness.
Mr. Hale. I understand that. And I think you have done a
good job of anticipating my answer, which is there are some
areas where we need to continue to rely on contractors,
especially to perform some administrative kinds of functions,
perhaps are quite cost effective. We also need to look to be
sure they are not doing inherently governmental functions and
that it is cost effective, and I think there are probably some
areas where the answer is we need to move away from contracting
out that and some more in-sourcing.
But once again, the degree of that or even the amount of it
is although it is part of this review--I feel like a stuck
record here--but decisions have not been made. So I am not
going to be in a position to say here is what we are going to
do.
Mr. Scott. Thank you, Mr. Chairman.
Chairman Spratt. Mr. Diaz-Balart.
Mr. Diaz-Balart. Thank you, Mr. Chairman. And thank you for
being here, sir. And I am sure you would agree that you have
inherited, even though maybe partially strained, the strongest
and most effective military force ever that not only does a
fine job in waging war, but also on humanitarian areas, whether
it is domestically like Katrina or internationally, and I am
sure that is something that you are very proud of.
Mr. Hale. I am. I hope I said that clearly, but I would
like to take the chance to repeat it.
Mr. Diaz-Balart. Absolutely. I just want to make sure that
is not misunderstood.
It is obvious that some rogue nations are trying and
continuing to develop better missile technology, whether it is
North Korea, whether it is Iran. I think all of us are
concerned about what seems to be a more aggressive attitude by
Communist China. We saw the recent incident. It is not the
first and it probably will not be the last. And even though
today we heard that historically those that support missile
defense have done it for ideological grounds, I would further
state that probably the opposite may be said, which is even
before it was in its infancy with research there were many that
for ideological grounds said it could never work and it would
never work and that it was impossible, whatever. Obviously that
has been proven to be wrong.
My question is this, though. Obviously you mentioned that
decisions have to be made still and you are reviewing that,
which is the way it has to be done. I am a little concerned,
though, because we all read about the letter that the President
sent to the Russians where there is clear reference to missile
defense, and clearly many interpreted it as a first step of
saying we are willing to negotiate that away if certain things
were done which obviously a lot of us felt was a rather
interesting way to start negotiations, when you tip your hand
at the starting point. But that is not why I bring it up. The
reason I bring it up is that--and obviously by the way, some of
our allies were rather shocked. Some of our strongest allies,
whether it is the Czechs or the Poles, by the reference to the
letter.
My question is this. Where are we in the deployment of that
system with the Czechs and the Poles? Is it in your budget? Is
there more money to deploy it, to further deploy it or are you
looking at phasing that part out?
Mr. Hale. I can tell you that issue is under intense review
and we have a Secretary who is quite knowledgeable about the
systems, but also very knowledgeable about the politics and
history. What I can't tell you is his decisions because I don't
believe he has made them. And again, I feel somewhat apologetic
to keep repeating this statement. But it is true and he has not
made them. And I would not take--I think that is just the case.
They will be made and released in that case along with the rest
of the budget decisions.
Mr. Diaz-Balart. And I for one think that--I understand
your answer. I think it is a legitimate answer. Obviously there
has to be a review process, but you do not disagree with me
that there are rogue nations that are continuing to develop
their missile capabilities, correct?
Mr. Hale. That is the case.
Mr. Diaz-Balart. All right. Thank you very much. I
appreciate your service. Thank you, sir.
Chairman Spratt. Mr. Schrader.
Mr. Schrader. Thank you, Mr. Chairman. While I understand
you are not able to be very specific for obvious reasons, but I
would assume that with less than a month to go with the budget
and the specifics to be coming out, that we would have some
methodologies in place already by which you are evaluating
various programs that have been discussed here.
With regard to private contracting for various systems,
whether they be missile defense or weapons procurement, what
are the criteria that are being considered by the Secretary and
yourself by which you judge some of the effectiveness and
should we get involved in these particular systems? And in
particular I would like you to comment on--especially with
regard to private contracting, whether or not we could just put
the onus of additional cost overruns on the private company
themselves to foot that tab. Of course we would have to exert
some discipline with our own military establishment and
Congress in terms of add-ons to make that real.
Mr. Hale. Well, to your last question, firm fixed price
contracts at least tend to do that. And as the President has
said, we want to move more in the direction of that kind of
contracting. It does put the onus on the private contractor.
And you put it well. We have to then discipline ourselves and
they will probably insist that we discipline ourselves not to
do add-ons or there will be additions required to the contract.
So I think you will see us move more towards fixed price
away from cost-plus kinds of contracting.
I think your earlier question regarded criteria for, say,
the in-sourcing/outsourcing kinds of decisions. Did I
understand it correctly.
Mr. Schrader. Yes.
Mr. Hale. I mean, first off I think the first criterion has
to be the inherently governmental one. It is not always black
and white. Sometimes it is clear. Sometimes there are gray
areas, but it is one that we need to look at. If it is an
inherently governmental function, then the law requires that we
do it with Federal employees. If it is not, then I think it is
a cost and performance issue.
In some cases, contractors will be more expensive. I think
particularly if you are more or less saying I am going to
replace 10 civil servants with 10 contractors doing similar
things, they will tend to be more expensive. In other cases, a
contractor will have often more flexibility than the government
can have to move quickly to perhaps harness labor saving
technology. And if they are doing a function for us, they may
be able to do it for less cost. But the criteria, first
inherently governmental and then a cost and performance
assessment. And it has to be done at a fairly detailed level.
We will consider some options, some policy, I guess, about the
direction of change with regard to in-sourcing/outsourcing. The
details are going to have to be done contract by contract,
function by function.
Mr. Schrader. Thank you. And I hope you make that clear as
you bring differences forward.
The last question is regarding our involvement in
Afghanistan. I have some concerns about what our strategy is or
is not there. There has never been a nation yet that has ever
been able to win a land war in that particular country. The
Russians, albeit not as great as our military obviously, tried
most recently and failed. So is the administration considering
a different approach to warfare given the 21st century where we
are more doing a war on terror rather than fighting World War
II type of conflicts, and being more surgical in our deployment
of our great men and women that defend this country and defend
us against terrorism around the world? Is there a new strategy
here, a new thought process about how to train our troops and
use them more effectively.
Mr. Hale. I think I am probably not the best person to
answer that question. In general, I think the answer is yes.
The Pentagon is always engaged in, certainly in Afghanistan,
thinking how we best counter, and they are well aware of the
history and, as you suggest, the daunting challenge that we
face. I am not going to be the right guy to tell you whether
there is a new strategy in Afghanistan. I guess I would invite,
you can either try that one for the record, or even better,
perhaps, if you are interested, get you together with some of
our policy folks.
Mr. Schrader. Thank you.
Thank you, Mr. Chairman.
Chairman Spratt. Thank you, Mr. Schrader.
Mr. Larsen is not here.
Ms. Tsongas.
Mr. Etheridge.
Mr. Edwards of Texas.
Mr. Edwards. Thank you, Mr. Chairman.
Secretary Hale, thank you for your present service to our
troops and their families and for your distinguished past
service as well. It is great to have you here today. I would
like to address briefly the issue of earmarks which came up.
For the record, as a Democrat, I am proud that after 12
years of a Republican majority in the U.S. House, when
Democrats took control of the House 2 years ago, we, one,
dropped the total number of earmarks dramatically; two,
provided more transparency for those earmarks so the public and
press can be involved in the necessary oversight to be sure we
weed out the earmarks that don't belong in a new bill.
But when it comes to the Department of Defense, I would
like to make the observation that a lot of members of the press
and the public assume all DOD earmarks coming from Congress are
somehow frivolous and unneeded. Let me say that the Predator,
the very effective Unmanned Aerial Vehicle that is saving lives
and helping our troops in Iraq and Afghanistan and carry out
their mission today as we speak from the comfort and safety of
this room, was a congressional earmark.
Let me say that the MRAPs program, that has saved a
dramatic number of lives by deflecting the power of IEDs in
Iraq and Afghanistan, was either a congressional earmark or a
program that was strongly pushed by Congress at a time it was
really getting nowhere.
Let me say, as chairman of the Military Construction
Committee, the modernization of our DOD hospital system was
shamefully ignored for many, many years through Democratic and
Republican administrations. That new modernization program is
now moving forward because of congressional earmarks.
Some have even made fun of our subcommittee's earmarks for
daycare centers for the Department of Defense. Let me say for
the record, it is no laughing matter to troops from Fort Hood
near my district in Texas who are on their third or fourth tour
of duty in Iraq and have small children back home and a spouse
working. It is no laughing matter to have quality affordable
safe daycare centers so they can focus on their mission in Iraq
and Afghanistan and then come home safely.
What I would like to ask you, Mr. Hale, based on your past
experience on Defense budget issues, is it a fact that OMB
doesn't always approve the level of funding requests, whether
it is coming from the Air Force, the Army, the Navy, the
Marines or from the Department of Defense in general.
Mr. Hale. There is a negotiation, Mr. Edwards, as you know,
with OMB and the President. I mean, they are representing the
President as to the right level. I think the Department's voice
is heard strongly in that debate, but that is my impression----
Mr. Edwards. I understand.
Mr. Hale. By and large, the Department, if it can make a
reasonable case that the needs are based on national security,
will get the funding, but yes, there is a debate.
Mr. Edwards. The answer is, yes, there is a debate. What
that means in lay terms, and I respect the carefulness of your
answer, what that means in lay terms is, sometimes your
military base commander, sometimes your Secretary of the Army,
your Chief of Staff of the Army, Chief of Naval Operations,
asks for a priority program, and some bureaucrat at OMB says
no. That bureaucrat might be knowledgeable; that person might
not have ever served our Nation in the military.
So many congressional earmarks, Mr. Chairman, coming from
Congress are actually Defense requests made from our commanders
in theater or our base commanders whose requests were turned
down by OMB, sometimes for good reasons, sometimes for bad
reasons. So I just want to set the record straight when
reporters write that because it was a congressional earmark,
this was a project or program the Department of Defense didn't
ask for; it is simply not a correct observation to make.
Let me ask you, finally, with a little less than a minute
that we have, since I do oversee Military Construction, we have
seen inflation costs go up dramatically during the BRAC process
over the last few years. It was not the fault of the Bush
administration or the Pentagon, but it certainly has impacted
our construction costs. Are we starting to see those costs come
down?
Mr. Hale. We certainly hope so. We are planning on
significantly lower levels of inflation. I think, with the
economy in the situation it is in, that is a reasonable
projection. Those two are based on indices that OMB puts
together, but I think are consistent with what we are seeing.
It is at least a slowdown, a significant slowdown in the rate
of growth.
Mr. Edwards. And I will conclude, Mr. Chairman, by saying
that, given that slowdown in construction and in some parts of
the country, reductions in the natural cost of construction,
this might be a good time to make the investments in
modernizing our DOD hospital system, improving our barracks,
and other construction needs that could create jobs for
Americans, but most importantly take care of our troops and our
families.
Thank you, Mr. Secretary, for your service.
Chairman Spratt. Mrs. Lummis.
Mrs. Lummis. Thank you very much Mr. Chairman.
Mr. Under Secretary, thank you for being here. Could you
tell me, are there any planned reductions in our nuclear
arsenal that are going to be reflected in the President's
budget when we receive more detail? We see all these news
reports. I am curious about your response.
Mr. Hale. Well, I am afraid it is going to be the same
response that I have given before, which is, any detailed
decisions haven't been made and won't be announced until we
actually send the budget probably in late April. Again, I
apologize for not being able to be more helpful, but it is the
nature of the time.
Mrs. Lummis. Thanks.
I would like to say, of course, with the emergence of the
nuclear wild cards like Iran and North Korea, I hope any
modifications to our nuclear force structure will go through a
thorough assessment by your Department and others. How will
that process occur?
Mr. Hale. Well, I can answer that in general terms. The
services all have, and I was head of it or deeply involved in
it for a number of years in the Air Force, an extensive review
process that starts with their commands, and both analytic work
and military judgment is applied. That funnels up through major
commands and eventually the Pentagon, at each point being
assessed both based upon the analytic results and also based on
the judgments of commanders.
So, at the Pentagon, at the level I am at, we are down to
usually a fairly small set of large issues that have been
fairly well vetted. And the pros and cons are well known. That
doesn't mean the decisions are easy, because usually, at that
point, there is a fair amount of, it is the risk-cost tradeoff;
it is always hard in Defense. So it is kind of an academic
answer, but it is the way it works. A series of both analytic
and judgmental decisions are made at various levels.
Mrs. Lummis. Well, Mr. Chairman, a number of us are
concerned about the nuclear potential of Iran, and its low-
grade capabilities seem to be there now. And the concern about
a low-grade nuclear weapon being deployed into the atmosphere
that could interfere with the transmission of electricity and
disrupting to the point of bringing nations to their knees, we
believe, is a real threat.
And so I want to stress the importance, I believe, in the
Iran and North Korean issues, and I appreciate your indulgence
of that comment.
Now I would like to switch over to let you know that my
home Air Force base, FE Warren Air Force Base in Cheyenne,
Wyoming, is almost self-sustainable with the wind energy
development. And the wind turbines there at FE Warren are
providing the lion's share of the power there now. And with the
addition of some additional turbines, it will be a base that
becomes energy efficient. Of course, there are redundant
sources, and so when the wind is not blowing in Cheyenne, which
I can assure you happens occasionally, the base load will be
there to serve the base. But we are proud of FE Warren's
efforts in becoming energy sustainable and doing it in a
renewable fashion. Do you know how many other shovel-ready type
projects of that kind are out there?
Mr. Hale. I don't have a number. I can tell you that there
are, on the current response that I think will be up here in a
few days for the stimulus bill, there are hundreds of projects
that we think, at least dozens of projects, that we can
probably get on contract within a month or two. So if that is
the definition of shovel ready, I think that we will be able to
succeed with the number of--and again, these are the Facilities
Sustainment, Restoration, and Modernization kinds of projects
where we can move quickly.
Mrs. Lummis. And Mr. Chairman, I would like to also
acknowledge and applaud military efforts to work with clean
coal technologies. It is important to stretch our coal
resources so they don't become a stranded asset. And the
efforts that the military has made towards clean coal
technologies are appreciated, are important and I hope will be
part of the budget we see.
Mr. Chairman, thank you kindly. Under Secretary, thank you
kindly for being here.
I yield back the remainder of my time.
Chairman Spratt. Mr. Etheridge.
Mr. Etheridge. Thank you, Mr. Chairman.
Under Secretary Hale, thank you, and thank you for being
with us today. I, like some of my colleagues who have already
spoken, I want to return to one of them, have some concerns
about the readiness of our Army as well as our other services.
I have the privilege of, in my district, having Fort Bragg
and Polk Air Force Base. And as you well know, all those
threats that we talk about to America and Americans really
don't come from Iran and Iraq or Afghanistan, I should say,
from Iraq and Afghanistan. Because our military men have been
stretched pretty thin. And I see that every time I talk with
people from Fort Bragg, because we talk of the long engagements
and the multiple deployments that we have had and others are
headed back either to Iraq or Afghanistan. And our military
families have really shouldered that burden for generations but
in the last several years in a disproportionate way.
And so I know that the 2010 budget details are not
available at this time. So I respect that. But I guess my
question to you is, if you have a ballpark on how much of the
funding would be devoted to, number one, rebuilding here at
home, because we do have to do some backfilling on a lot of
equipment? And how much will be devoted to supporting our
military families, their health care, including mental health
and counseling? That is really an issue that I have a great
deal of concern about, and I think others do. And as my
colleague, Chet Edwards, raised a while ago on the support for
children with the issues of families because it goes beyond
child care.
A lot of these bases are in communities where, depending on
deployment and the level numbers, you have substantial need for
education. And a lot of these counties and local units have
really been stressed with the buildup or movement of folks. And
they really provide the backbone, our families do, of our men
and women in uniform, when they are away on missions.
And finally, if not, if you don't have the details today
and you can't share them, I would really appreciate you at the
appropriate time providing it to me and to the committee in
writing. I think this is a core piece of the issues. I know you
haven't been in the military, I understand that, probably more
so today than ever with an all-military service, that for our
warriors to be totally committed to the job at hand, they need
to feel good about what is happening at home, and I would be
interested in your comments on that.
Mr. Hale. Well, I certainly agree with you. I mean we
depend on our troops obviously to defend us and our families to
support those troops. And I think you will see in this budget
extensive efforts to aid families with child care centers,
family support initiatives, wounded warrior transition
complexes, to help our troops who have been wounded in these
wars, come back, and reassimilate into society.
I don't have a firm number for you, as you can imagine. I
will be glad to try to provide it if the record is open long
enough after the budget has been submitted. But I think, I know
I can speak for the Secretary of Defense. This is a very high
priority with him; it is a high priority with the
administration.
Mr. Etheridge. And one final point in the time left along
that line. As we do that in your report when we get it, I would
be very interested in the impact at certainly a number of these
bases where tremendous pressure is being put on the local
communities to provide the educational opportunities for these
young men and women who are children of our men and women
deployed or are here at home, the effort we are making on that.
Because I think in the future, that is an area where we are
going to have to pay a lot of attention to. We haven't done as
much as we should have in the past.
Mr. Hale. I take your point.
Mr. Etheridge. Thank you, Mr. Chairman. I yield back.
Chairman Spratt. Thank you, Mr. Etheridge.
Ms. Schwartz.
Ms. Schwartz. Thank you, Mr. Chairman.
And thank you, Secretary Hale.
A couple of questions. I don't think this has been
addressed yet, although there has been reference to it. I want
to ask about health care. And obviously, the Department of
Defense provides a lot of health care for our military, both
active and of course for our veterans. As I understand it,
there is an effort, and if not a requirement for DOD and the VA
to implement electronic medical records.
Now, we actually have done that, we have put in the
recovery act a substantial sum of money, $19 billion spent over
the next 2 years, under Medicare, to implement health IT. The
VA has been a leader in this, electronic medical records. They
have done an extraordinary job, as I understand it. And I
visited a facility in my district, the Horsham Clinic, that
does a great job, and of course, we have the VA Hospital in
Philadelphia.
But the fact that, if you are in the active military, their
records can't talk to the veterans. And as more and more of our
young men and women come back from Iraq and Afghanistan serving
overseas in whatever capacity and move from active service to
the VA, linking those two systems can ease some of the issues
for any of our military and help provide better services. That
is what we would like to see happen, ease the burden for them.
I know the military is notorious at paper work, and the idea
that this going to be electronic is potentially very, very
helpful.
But it also could save real dollars. We expect it to happen
under Medicare. And the CBO, which doesn't like to score
savings, as they say has scored $10 billion in Medicare for
this investment.
So two questions. I understand that this joint, this
interoperability between the active military and veterans is
supposed to be operational by September 30, 2009. It is not far
off. What I have understood, there is an article, a GAO report
in January of this year that said that there is now
compatibility for pharmacy and drug allergy data for 21,000
shared patients. I assume that is a pretty small group of
people we are talking about, so we have a long way to go. Could
you speak to whether you are going to be able to meet that
expectation of completing this work? And secondly, whether you
have actually also looked at what kind of savings we might see
as we proceed, and of course, DOD's medical spending has
continued to grow quite a bit, and if we could actually see
some savings in efficiencies and lack of duplication would be
great as well, of course easing the burden of the men and women
who have served our country so well. So if you could speak to
both those issues, and I may have another question if we have
time.
Mr. Hale. I know these issues are active, and there's
active consideration. I don't have the details. I think it is
quite reasonable to assume there will be some savings and, more
importantly, improvements in care. Let me just ask if we have
any details. I am afraid we don't. I am going to have to answer
that one for the record. I apologize not having it, but I don't
want to give you information that isn't right.
Ms. Schwartz. Well, thank you. I wasn't sure you would have
it readily available. But I would ask you could seek the
answers and give us some update on where you stand on that and
how we might proceed because we are--anyway, more information
for the record would be very, very helpful.
Mr. Hale. I will add, there is a lot of, and at very senior
levels, including Mr. Shinseki and the Secretary of Defense at
Veterans Affairs, a lot of high level dialogue with the Veteran
Affairs, much more frankly than I noticed 10 years ago when I
was in the Department. So I think we are moving toward better
cooperation, and I will try to get you the specifics.
Ms. Schwartz. That would be great. And again, the VA has
done a remarkable job on this and is a model for the private
sector as well.
The other question I wanted to ask was about TRICARE fees.
As I understand it, they are not explicitly in the budget
document that we are looking at. But there have been rumors
that there might be an increase, as proposed in the past, or
enrollees having--military retirees having to pay some fee. We
have typically been opposed to those, and I wonder if you could
give us some anticipation whether we are going to see any kind
of recommendation for a fee increase under TRICARE.
Mr. Hale. Well, I can't give you anything specific. I can
tell you that is one of the many issues under active
consideration. It was called Sustain the Benefits. You are
probably aware of it. And the administration, I think the last
2 years, has submitted it--there is a cost-sharing now, as I am
sure you know--recommending an increase to essentially to bring
you back to some levels that were there when TRICARE was
established. We are actively looking at that now, as to what,
if any, portion we will submit.
Ms. Schwartz. There may be a little pushback on that, what
I might suggest to you.
Mr. Hale. I fully understand. We are well aware of the
concerns here. I mean, it is part of a broader issue that we
need to look at as ways to hold down growth in health care
costs. But I think we need to look at more than just fees for
retirees. We need to look at other aspects as well.
Ms. Schwartz. Thank you.
And on a very different subject, and I don't intend to do
this, but this is a very local issue at the Willow Grove Navy
Base that has been BRACed. There is an issue about the 111th
Fighter Wing and keeping some airplanes, the A-10s. And so I
sent a letter to your boss, and I would ask if you could see
whether Secretary Gates would respond to me. It would be very
helpful in getting an answer. It was a little bit of
uncertainty, mixed messages in the BRAC documents, and we would
like to protect those planes, and we would just ask for an
answer. You might see him before I do, so that would be
helpful. Thank you very much.
Chairman Spratt. Ms. DeLauro.
Ms. DeLauro. Thank you very much, Mr. Chairman.
Mr. Under Secretary, these are probably two parochial
interests, but they have, I think, national security
ramifications to both of them. The first is about the F-22,
which in my view is critical to the security of the Nation and
our ability to respond to all kinds of air combat capabilities.
I was in Aviano not too long ago, and the airmen there talked
about their interest in the F-22. So I am not speaking about
myself, but what they view as in their best interest in terms
of carrying out their mission, and that if you close production
on this, it will be difficult to ramp up.
I am going to try to get to the questions here quickly
because I also want to ask a question about Marine One. If we
deal with the cutting the production of the F-22, we will in
fact lead to more job losses. That is critical. We have got--
and I am just going to use my State of Connecticut. We could
lose between 2,000 and 3,000 jobs if we cut production there.
And to date, we funded 184 F-22s. It is below the minimum level
of 381 the Air Force maintains is needed. So my questions with
regard to this, will the complete fiscal year 2010 budget
include a final decision on whether we are going to purchase
more, perhaps continue the production of 20 aircraft a year
until the Quadrennial Defense Review is completed? Will the
supplemental request in 2009 include the four additional F-22
purchases as has been reported? And more generally, are the
economic benefits of increasing Defense spending and dealing
with the economy and jobs part of the debate in the discussion
with regard to this project?
And then I am going to get to my Marine One questions.
Mr. Hale. Okay. I will try to be quick.
On fiscal year 2010, you will see a recommendation to
either buy or not buy F-22s. I guess that is a tautology. But
we are actively reviewing that program. The Secretary of
Defense wrote a letter, I believe in December, about the
supplemental indicating four F-22s would be there. We have not
completed an OMB assessment and released it, but I think that
should give you some guidance.
Ms. DeLauro. We believe the four will be there, but we are
not sure about the 20.
Mr. Hale. I am not in a position to formally confirm the
fiscal year 2009 supplemental either. It is not here, although
I hope it will be next week. But I would direct you to the
letter as some indication of thinking and try to be at least
helpful.
In terms of jobs, I think we are all mindful that anything
we do in Defense up or down affects jobs. And in this kind of
an economic climate, there is great concern. But that said, our
job in the Department of Defense is to recommend what the
country needs or what we think the country needs for national
defense. And that is the basis on which we try to make these
decisions, not jobs per se.
Ms. DeLauro. I understand that is why.
Mr. Hale. I don't want to be unsympathetic.
Ms. DeLauro. I understand. I anticipated the answer which
is why I began my comments with talking about the airmen in
Aviano. And when they talked about down range, and maybe it was
something that, you know, I learned down range was Iraq and
Afghanistan and what they do. And that is the issue here, is
about national security and Defense and their well being in a
weapon.
Let me move to the Marine One helicopter. I am not going to
regale you with all the past on that, of which a number of us
have spoken up clearly then and now where we believed that,
since Lockheed-Martin does not build helicopters from the
ground up, that this consortium of AgustaWestland and
Finmeccanica would produce delays, cost overruns and in fact
put us behind the time in which we needed to do this.
Now I understand Lockheed-Martin is suggesting that it
complete increment one. Quite frankly, it was increment two
that we were looking forward to in terms of the new technology,
the new security efforts as well. Increment one is way over
budget and delayed. It has breached Nunn-McCurdy; 50 percent
over estimate.
Lockheed now is essentially saying they cannot do the job,
which is no surprise, as I said. What can we expect from the
Defense Department for this program in its Nunn-McCurdy report
for the fiscal year 2010 budget? And assuming there is still a
requirement for production of increment two helicopters, will
your Department look at alternatives, as is suggested by Nunn-
McCurdy, and rebid the contract?
Mr. Hale. Well, I think you can expect a decision or a
recommendation on that for sure. I mean, the President has
commented on this helicopter. It is a, we are well aware, a
program that is having execution programs, and we are committed
to reviewing all weapons, but particularly that are having
them. I am just not in a position to tell you what the
recommendation will be at the moment, but I can tell you that
that one is a program that is under review.
Ms. DeLauro. I will make one final comment, and beg the
indulgence of the Chair, is that in fact Sikorsky, again
parochial, when Stratford, Connecticut, built this helicopter
since the 1950s, whenever there were changes required, they
built it on budget on time. There was no need to shift this
contract when it was, and we now would have the product, and it
would have come in on budget and on time. That is a national
security issue. That is an issue of security of the President
of the United States, with the requirements I don't make. I am
not in the business. You all are with what you need for the
security of the President of the United States. And in fact, we
wouldn't have off-shored jobs, and we would not have off-shored
the technology, which truly is one of the big issues with
regard to the Marine One helicopter.
Thank you, Mr. Chairman.
Chairman Spratt. Thank you Ms. DeLauro. Mr. Boyd.
Mr. Boyd. Thank you, Mr. Chairman.
Mr. Under Secretary, welcome. You have quite an impressive
resume. And thank you for your service to this country, both in
uniform and out.
Mr. Hale. Thank you.
Mr. Boyd. Mr. Secretary, I think everybody in this room
knows that there are some, and even GAO has written there are
some very glaring and pervasive weaknesses in the DOD financial
management systems, even to the point that it creates a very
high-risk situation for waste, fraud, mismanagement, and
general waste of the taxpayers' dollars. And those problems are
inside the Pentagon financial systems itself. My question is
sort of a 20,000-foot question. Do you consider the DOD's books
auditable today?
Mr. Hale. No. That is the easiest question I have ever had
to answer. No, they are not. We have had a disclaimer of
opinion for years, and it will continue.
Mr. Boyd. Can you briefly talk to us then, what we might do
to help you?
Mr. Hale. First of all, let me say a little more about that
other than what I said is true; they are not auditable. First
off, I think you need to understand DOD systems were designed
to keep track of the money that Congress appropriated and how
we spent it. They do that and they do that well. We can tell
you whether we have spent the money in accordance with the
guidance that you gave us. They are not designed to meet audit
standards, which require that you have a transaction be able to
trace back to an original transaction, for example, and there
are some more detailed requirements about when moneys are
expensed that auditors require.
Our systems weren't designed to do that. They don't do it,
and for that and other reasons, evaluation for example, we
can't value our weapon systems based on historical costs
because we just don't have those kinds of records. We are
looking at both improving our financial information and
becoming more audit ready. And progress has been made in the 8
years or so since I have been in the Pentagon, some substantial
progress. For example, the Army Corps of Engineers was able to
obtain a cleaner unqualified audit opinion on its last
statement. I think we are getting close with certain aspects of
the Marine Corps to have auditable statements. But I am also
mindful we have put off some of the hardest challenges to the
end, especially for the large military services evaluation of
equipment, for example.
And what I am doing right now is looking at priorities,
realizing there is only so much time and money that we are
going to be able to devote to this as to how we should proceed.
I don't have a plan, but I hope I will within a few months.
In terms of what Congress can do, I think their oversight
role here is appropriate. I may not enjoy it, but it is
appropriate that you continue to ask us questions about what
our plan is and how we will get there. And I think Congress has
done a good job at that.
Mr. Boyd. In light of the new administration, new
leadership team and in light of the fact that I think everybody
here knows that what you have just said leads to the fact that
you can tell what you have spent the money on, but what
happened beyond that, in many cases, we do not have a good way
of tracking the use of the taxpayers' money, that leads to a
lot of--I mean, certainly what you have just described is not
acceptable to this current administration, is that a fair
statement?
Mr. Hale. It is fair. The law requires auditable financial
statements, and we are moving toward them. And as I say, we
have made, the Department has made some progress over the last
10 years or so. It is a challenge, and it is how much resources
you want to spend on it.
Again, I will repeat, we can keep track. You appropriate
money. We can tell you whether we have spent that money for
what you have told us in terms of the appropriations. What we
can't do is go back to transaction-based requirements, every
voucher, et cetera, that auditors require in order to give you
a clean financial opinion. We can't value our equipment in ways
that the auditors would require. But I think some fundamental
things the financial system does reasonably well, fundamental
things that should be of concern to this Congress in terms of
your statutory responsibilities, but we need to do better, and
we will continue.
And I am looking at priorities. Again, there is only so
much time and money I am going to be able to devote to this, or
the Department should, because we need to not take away from
our war fighting commitments. And we need a set of priorities,
in my view, that go after, first, the most important management
information in terms of achieving auditability.
Mr. Boyd. Thank you, Mr. Chairman. I know my time is out.
This is a subject which is near and dear to the hearts of many
of us who feel like that for us to ever be accountable for the
dollars that we collect, taken voluntarily from our citizens,
and we have a responsibility to make sure they are spent well.
I hope that, as time goes on, we will spend, as a Budget
Committee, we can spend some more time on this kind of issue.
Chairman Spratt. Thank you, Mr. Boyd.
Mr. Yarmuth.
Mr. Yarmuth. Thank you, Mr. Chairman.
We have votes, so I am not going to ask too many questions.
I just have one point to make, and I would just like to, I
guess, reinforce the comments made by Congresswoman Schwartz
regarding increased fees for TRICARE. That is something that is
out there. That is something that many of my constituents have
already made comments to me on. I know that I am no different
than any other Member in that regard. So I would express my
deep concern that that is something that would not be looked
upon favorably by my constituents, and I doubt if the Congress
would as well. But I thank you for your testimony, and I yield
back Mr. Chairman.
Chairman Spratt. That concludes your questioning, Mr.
Yarmuth?
Mr. Yarmuth. Yes.
Chairman Spratt. Mr. Langevin, I believe.
Mr. Langevin. Thank you, Mr. Chairman.
Secretary Hale, thank you for your testimony here today. I
have a couple of questions. I will only ask one, though, in the
interest of time. Perhaps we can get another member in.
As a member of the House Armed Services Committee and a
former member of the Homeland Security Committee, I have been
long concerned about the tendency of agencies with national and
homeland security responsibilities to focus exclusively on
strengthening their own programs and initiatives while losing
some of the larger strategic goals to which their programs are
contributing. Therefore, I propose creating what is called a
Quadrennial National Security Review, QNSR, similar to DOD's
quadrennial national security review, though at an interagency
level.
In your opinion, how do you think an effort like that would
help us better coordinate our assets of national power, and
what, if anything, legislative recommendations would you make
to help increase such a strategic cooperation between the
Department of State and Defense?
Mr. Hale. Well, I would like to think more about the answer
to that rather than answer it off the cuff. It is an important
question. I can tell you that there is interagency involvement
in a quadrennial defense review, the one that the Department
does. It does focus on the Department's resources, but I think,
increasingly, we are aware, the Secretary of Defense has said,
it is very important that we make use of the full range of
resources, State and Homeland Security, in terms of maintaining
our overall national security. So I would like to think about
and inquire of others rather than give you an off-the-cuff
answer to a Quadrennial National Security Review, so I will
take that one for the record. But I would assure you, I think
there is increasing cooperation going on among the Departments,
something I noticed as having increased over the last 10 years
since I have been in the Department.
Mr. Langevin. But it needs to be vitally important as we go
forward, particularly in the global war on terrorism. This is
not a war that we are going to win just by military might
alone----
Mr. Hale. I think we would agree with you, the Secretary
would agree with you.
Mr. Langevin. The hearts and minds and getting at those
people that may be on the fence as opposed to seeing it go in
the direction of al Qaeda, that we move them more in the line
of more of a civilized society. Anyway, I will stop there, and
perhaps one of the other members might want to ask a question.
I have some other questions for the record which I will submit.
Chairman Spratt. Okay. Without objection.
Ms. Kaptur.
Ms. Kaptur. Thank you, Mr. Chairman.
And welcome, Secretary Hale. I am sorry, I was at a hearing
of the Army in my other committee so I couldn't be here
earlier. My question relates to contracting out. And it is my
understanding that, currently in theater, take Iraq, that there
are actually more contracted personnel than regular force
personnel; is that correct?
Mr. Hale. I think that may be.
Can you help me out here? Do we have numbers, John?
We don't have specific numbers, but I think your facts are
basically right.
Ms. Kaptur. I am very interested in the impact of that
enormous amount of contracting out, which is at historic
proportion in its relationship to the budget. For example, the
other day, in a hearing on the Marine Corps, one of the issues
that came up was the availability of mechanics and trained
mechanics to handle armored Humvees in theater. A lot of the
vehicles were being brought back to base to be repaired by
contracted personnel. I am very interested if your Department
has a summary, an understandable summary, that they could
provide to us on the nature of contracting out overall within
the Department, and then its budgetary impact. Because this is
not cheap, whether we are talking security personnel, whether
we are talking service personnel. And one of my greatest
interests is in sourcing those services back into the
Department. And I am wondering, can you help us in that regard?
Then we can make good budget decisions when we see how much a
contracted worker is costing us versus a regular force
individual.
Mr. Hale. I will do my best to provide some additional
details for the record. But let me say, to really get down to
the cost-benefit analysis, you have got to go well below the
level of the aggregate number of people or jobs we are
contracting. You actually have to get to the function. There
are functions where contractors can be more efficient. They
have often more flexibility than we do in the civil service.
They may be able to import technology in ways that we can't
readily do in the civil service of the government. So I think
there are cases where they will be more cost-effective.
If it is simply doing a particular job, a one-for-one
transformation of a contractor or a Federal civil servant, the
contractor, they are probably more expensive because of the
overhead associated. So I will do my best to give you an
overview. And this issue is under active discussion in the
Department of Defense, and you may see some proposals in our
next budget. But we are going to actually have to get well down
below that aggregate level to answer the cost-effective
questions or cost-effectiveness questions that you are asking.
Ms. Kaptur. Well, at least you are talking about aggregate
level, because we haven't even had any good presentations on
the overall impact of contracting out, the increase of it over
the last decade or so, and how atypical that has been of our
history as a country. When I was actually being flown into Iraq
by a regular force guard, actually, who had been deployed, we
were talking about some of the contractors that they were
flying over. And the morale among our troops, knowing how much
those folks were making versus what our folks in regular force
were making, it has consequences inside. And I, obviously, am a
very strong supporter of regular force. And I want to take a
look in some understandable way, if it can be made
understandable, of the impact of this exponential growth in
contracting on so many levels.
Frankly, one base we were at, there were so many
contractors, they were falling over themselves. And there
became a real question of who was in charge. And what shocked
me was that some of the logistics on the ground were being
handled by contractors. I have to tell you, that was not a
comfortable moment for me as a citizen of our country. So they
are not just doing incidental activities; they were embedded
right into the war-making function. So I am very interested to
see how the Department perceives that architecture of
contracting and now sort of an overlay in all of the
Departments, and particularly Army and support functions. Has
there ever been a report commissioned that really looked at
this?
Mr. Hale. I am not aware of an overview report. I can tell
you that there is active consideration now.
Does anybody know of an overview report?
I am not aware of any. But the issue is being looked at. I
think your words and words from others have gotten through to
the Department and to the Secretary. As I say, an active review
of this issue is under way.
Ms. Kaptur. Thank you.
And finally, Mr. Chairman, let me ask, Blackwater's
contract with the State Department was terminated, but they
changed their name to I think Xe or some name like that. Are
they under contract to the Department of Defense in any way now
as renamed?
Mr. Hale. I do not know. That is something I will also have
to check for the record.
Ms. Kaptur. All right. Thank you very much.
Chairman Spratt. Thank you very much, Mr. Hale, for your
excellent answers and responses. In the list of things that you
answer for the record, it would be useful if we could have also
your sort of back-of-the-envelope analysis of what it costs to
move one brigade combat team from the theater to the stateside
post.
Mr. Hale. I am not going to be able to give you a good
number there, Mr. Chairman, just because it varies so widely.
Is it heavy? Is it light? Where is it located? But we can
certainly lay out the factors that will drive it. We cost this
out on a detailed basis when we know a particular unit, but we
can certainly lay out the factors for you that influence it.
Chairman Spratt. Mr. Sullivan, we shall return.
I beg your forbearance. We have two votes, but we will be
right back as soon as these are over.
[Recess.]
Chairman Spratt. We will now proceed with our hearing with
the second panel.
We have Michael Sullivan. Mr. Sullivan is director of
acquisition and sourcing management, a group which has
responsibility for examining the effectiveness of DOD's
acquisition and procurement practices and in meeting its
mission, performance objectives and requirements.
Most recently Mr. Sullivan has directed the Government
Accountability Office in assessing major weapons system
programs and providing Congress with visibility over
acquisition costs and the causes of unwarranted cost growth.
This team also provides Congress with early warning on
technical and management challenges facing these investments.
Mr. Sullivan has been with the GAO for 23 years.
He received his bachelors degree in political science from
Indiana University and a masters degree in public
administration from the School of Public Affairs at Indiana
University.
Mr. Sullivan, thank you for appearing here today. We look
forward to your testimony. We will file your testimony in its
entirety as part of the record, so you may summarize it as you
see fit.
The floor is yours, sir.
STATEMENT OF MICHAEL SULLIVAN, DIRECTOR, ACQUISITION AND
SOURCING MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Sullivan. Thank you, Mr. Chairman.
I am pleased to be here today to discuss the Department of
Defense's Fiscal Year 2010 budget and its major acquisition
programs.
Over the next 5 years, the Department plans to spend more
than $357 billion specifically on its major weapons system
programs. While the details of the President's budget have not
been released as of yet, its emphasis on reforming DOD weapon
system acquisitions is notable, as it may bring new momentum
from the administration and key congressional committees such
as yours to address this issue.
Today I want to focus on our efforts to achieve the
efficiencies through our high-risk series and other products,
the systemic problems that have contributed to poor cost and
schedule outcomes on weapon system acquisitions and further
steps that might be needed to improve performance. In January
2009, we released our high-risk update for the 111th Congress.
Of the 30 high-risk areas we identified, the Department bears
sole responsibility for 8, including weapon system acquisition,
and shares responsibility for 7 others.
During fiscal year 2001 through 2007, we issued 637 reports
to the Department of Defense that included a total of 2,726
recommendations. In responding to those recommendations, as of
October 2008, about 62 percent had been implemented; 28 percent
remained open; and the Department was still working on closing
those and about 10 percent were closed, but for one reason or
another, they were not implemented for a variety of reasons. We
recorded over $89 billion in financial benefits associated with
those recommendations at the Department. A significant amount
of this benefit was due to our recommendations related to
improving the Department's major acquisition programs and its
acquisition process. For example, in Fiscal Year 2007, 74 of
our 313 recommendations were related to improving those
programs, and we reported $2.6 billion in financial benefits as
a result of the actions taken by the Department to close them.
In 2008, we reported about $5.7 billion in benefits. We
have been reporting for years on poor cost and schedule
outcomes on the Department's major weapon system acquisitions,
and most recently, in March of 2008, we reported that there
were 95 major weapon system acquisition programs in the
Department's current portfolio, and they had grown in cost by a
total of $295 billion and, on average, were delivered about 21
months late.
We believe there are problems at both the strategic and
program level that cause these outcomes. At the strategic
level, the Department's three systemic processes for building
its investment strategy are fragmented and broken. The
requirements-setting process is stovepiped. It takes too long
to approve needs. It does not consider resources, and it
approves nearly every proposal for a capability that it
reviews. The funding process accepts and funds programs with
unrealistic cost estimates and does not fully fund their
development costs. These two processes, which are very
important to the acquisition process, are poorly integrated,
and this poor communication leads to unhealthy competition
where too many programs are chasing too few dollars.
Finally, at the program level, the acquisition process
initiates programs with unreliable cost estimates and without
knowledge from proper systems engineering analysis to
understand each weapons system program's requirements and the
resources that will be needed to achieve them. With the Federal
budget under increasing strain from the economic crisis now
facing the Nation, the time for change is now.
In testimony last month, the Secretary of Defense
identified many of these systemic problems associated with
acquisitions, recognized that the acquisition process was a
chief institutional challenge at the Department and indicated
that efforts are underway to address it.
The Congress is also proposing legislation that focuses on
improving the acquisition environment. It targets key problem
areas, provides much needed oversight and provides increased
authority and independence to critical functions, such as cost
estimating and development testing, that has been lacking in
recent years. Its provision for requiring a full inventory of
the Department systems engineering capabilities as an excellent
beginning to rebuilding that sorely needed capability in the
acquisition workforce. It also sends a strong signal to the
Department to prioritize its needs better and to make sure it
has requisite knowledge about costs and other resources about
each program before it begins the program.
It is important to state that there is a need for changes
to the overall acquisition culture and the incentives it
provides as well. These changes should be begin with resisting
the urge to achieve the revolutionary but unachievable
capability in one step, allowing technologies to mature in the
tech base before bringing them on to product development
programs, ensuring that urgent requirements are well-defined
and doable and instituting shorter, more predictable
development cycles. These changes will not be easy to make.
Tough decisions will be needed about the Department's overall
portfolio of weapons programs and about specific weapons
systems, and stakeholders, from the military services to
industry to the Congress, will have to play a constructive role
in this process.
Mr. Chairman, this concludes my prepared statement. I will
be happy to answer my questions.
[The prepared statement of Michael Sullivan follows:]
Chairman Spratt. Mr. Sullivan, just to clarify for the
record, do you have authority to undertake--the concurrent
resolution of the budget for fiscal year 2009 asks or requires
GAO to report to the appropriate congressional committee by the
end of that Congress regarding DOD's progress in implementing
your recommendations over a 7-year period of time. Over a 7-
year period of time, what authority did you rely upon to
require DOD to give you access to their financial records and
other data so that you could make these examinations?
Mr. Sullivan. In terms of the recommendations that we made?
Chairman Spratt. So that you could undertake the
examination that supported the recommendations you made?
Mr. Sullivan. The law for one thing. There was
legislation----
Chairman Spratt. The general authority of the Government
Accountability Office?
Mr. Sullivan. Yes.
Chairman Spratt. You have the authority to initiate an
examination and audit or some sort of oversight?
Mr. Sullivan. Yes, we do. You know, it stems from a
congressional mandate or from requests from committees such as
yours.
Chairman Spratt. But what I am building at, is there any
deficiency in your authority that needs to be bolstered or
filled out more completely so that you would have the authority
to do this on a continual basis?
Mr. Sullivan. Not to my knowledge, sir. I think we are okay
there.
Chairman Spratt. Good. Would it help you if we renewed
Section 402 in this year's concurrent resolution? I ask you to
give--you have given us a 6-year report. I ask you to maintain
the same level of effort to do it on a fiscal-year-by-fiscal-
year basis.
Mr. Sullivan. From here on out you mean?
Chairman Spratt. Yes, sir. Is that a problem or is that
useful?
Mr. Sullivan. I think that we responded to the mandate
here. It takes resources for us to do that. If it is useful to
the Congress, of course. It is something that we would do. If
you mandated it, we would take care of it.
Chairman Spratt. You just gave a pretty astounding number,
$89 billion in savings?
Mr. Sullivan. Yes, sir. Well, I guess, to get into that a
little bit more, we have--the authorities that we are given
right now from the law and from the authorities that you
mandate to us as you write laws or as you request work, we
gather the information that we are able to claim these
accomplishments from in that way. We do a lot of budget
analysis. We are in communication with the cognizant committees
on a regular basis. We have access to the things we need to
look at in terms of the budget. So our budget analysis, the
recommendations we make in our reports, you know, when we do a
drill-down of a weapons system, for example, like the Joint
Strike Fighter or the C-17 or whatever, and we say--we see an
area where we might gain efficiency by taking money--you know,
just a quick example would be, if we know there is some testing
that is supposed to take place in fiscal year 2010, but the
program is behind, and the money that they were appropriated to
do that testing is not going to be used; we have the ability to
report that to Congress, and Congress can claim that money as
an efficiency. So I think we do that pretty well now, and we
are able to document our accomplishments the way we did in this
report that we gave to you.
Chairman Spratt. All of the testimony today and
particularly the questions from members indicated a widespread
belief that the procurement system is badly flawed, if not
broken, at the Pentagon, and the Department of Defense. First
of all, if you make that overall assessment, how would you
describe the system overall?
Mr. Sullivan. First, I would describe the system for
developing and procuring most things that the Pentagon
procures, in particular major weapons systems, as three major
processes. And it is requirements; it is the comptroller's
shop; and it is the acquisition process itself.
And I would say that there are a lot of problems at a
strategic level getting those three processes to talk to each
other properly and to prioritize properly, and there are
problems once you get down to the acquisition process in
building a proper business case for each weapons system and
then seeing it through. There are problems with accountability.
There are problems with a lack of knowledge to make good cost
estimates. And there are a lot of problems with setting
requirements properly.
Chairman Spratt. Let us start with requirements. You noted
that in your testimony, but in particular, I think GAO had made
some significant contributions to a study that Senator Levin
had done that led to a piece of legislation that is being filed
indicating that, amongst other things, we had far too few
systems engineers.
Mr. Sullivan. Yes, sir.
Chairman Spratt. The sort of engineers who could assess a
particular proposal and decide where the pressure points and
likely vulnerabilities were and things that could be foregone
in order to achieve significant savings at a minor penalty for
performance. Could you describe in your view, from your
experience, the deficiency of especially types like system
engineers in the procurement workforce?
Mr. Sullivan. In the acquisition workforce right now, I
don't have the exact numbers right now, Mr. Chairman, but it is
certainly something we are working on all the time. And I can
get that for the record if it is available.
But we know for a fact that, in the past several years,
acquisition dollars have doubled and the acquisition workforce
has remained constant. So, number one, the acquisition
workforce at large, not just systems engineering, but program
management, contract management, all of those functions is
probably way down from where it was 10 years ago.
Chairman Spratt. Quantitatively?
Mr. Sullivan. Quantitatively, by numbers, yes. I mean, we
have been growing--the dollars have been growing that we
purchase things with. The workforce has actually been
declining. A lot of that was discussed in the last panel. There
are a lot of contractors that are doing a lot of that work now,
and we rely heavily on them. Systems engineering, in
particular, is down, and as I said, I can get probably more
specific numbers for you. But it is down significantly I can
tell you right now.
Chairman Spratt. What about management reporting systems,
have you made a particular study of them, the selected
acquisition report for example?
Mr. Sullivan. We have not--actually, the last time we
probably looked at the selected acquisition reports as a
management reporting system is probably 5 or 6 years ago, and
we found them to be lacking in some specifics, but probably
more importantly, there were two things that came out of the
study. One is that they are not timely, that the Department
should do something to make that information available much
sooner than they do. It should come out with the budget is, I
think, the suggestion we made.
And the other thing at the time, and I am going back
probably to 2004 here; the other thing that we focused on was
the rebaselining of weapons systems programs. At that time, the
selected acquisition reports were not putting down a permanent
baseline for a weapons system program and having that in every
one of the reports. It was in the first report, but on an
annual basis, you could lose the baseline, the cost and
schedule baseline, of an acquisition program because the
reports would slip as programs.
Chairman Spratt. We tried to stop that in the Armed
Services Committee because I offered one of the amendments for
that purpose. What is your judgment as to the reliability of
the baseline today? Do we still have a problem with a rubber
baseline?
Mr. Sullivan. I think it is a lot better today. I would say
that it is probably acceptable today. The report we made back
then, we recommended that they put a permanent baseline in and
have that in each report. I believe the committee supported it.
Chairman Spratt. When do you think that baseline should be
determined? At what stage in the acquisition process?
Mr. Sullivan. We believe it should be determined at
Milestone B, which is the initiation of a weapons system
acquisition. That is when the big dollars get turned on.
Chairman Spratt. Engineering development or beyond that?
Mr. Sullivan. It would be, Milestone B is the beginning of
system development and demonstration. So it would be when the
design effort begins; product development is what we call it,
engineering and manufacturing development.
Chairman Spratt. Would you give us your recommendations
based on years of experience, particularly the close-up
experience you have had, as to what should be done with respect
to personnel, with respect to a process to really make our
acquisition system far more efficient and effective?
Mr. Sullivan. Would you like it right now and then get
something for the record?
Chairman Spratt. Just for the record and off the top of
your head.
Mr. Sullivan. Okay. Well, off the top of my--we will get
something for the record, but we do need a lot more people, and
we need more knowledge in the process, basically. They begin
programs when they don't know what they are building,
basically.
Chairman Spratt. How does DOD go about soliciting these
people, encouraging them to work on program management, work on
source selection, work on engineering development, things of
this nature? It has always seemed to me that DOD had something
to sell to energetic young engineers and MBA types and that
kind and wasn't really marketing the opportunities they had to
offer young college graduates and, for that matter, older more
experienced engineers.
Mr. Sullivan. I think that is an excellent point. And a lot
of that is probably at the service level as well. They probably
would want to look at the program management tracks and the
acquisition communities of the services. But I think they could
do a lot better job of that. Of course, more money always
helps, and government jobs are probably not as attractive as
private sector. However, in times like today, you would think
that they would be a lot more attractive.
They do have a lot of programs that drive towards
acquisition excellence through recruiting. They have taken note
of that. They know that their workforce is down, so they have
got some programs in place. I believe the legislation that the
Senate Armed Services Committee put forward and that I think
that you are probably a part of has some sections in it that
will----
Chairman Spratt. A lot of effort went into the background
of that.
Thank you very much for your testimony.
And we have members here who would like to ask you
questions.
We will begin with Mr. Doggett of Texas.
Mr. Doggett. Mr. Chairman, I believe Mr. Connolly has the--
I yield to him.
Chairman Spratt. I beg your pardon, Mr. Connolly.
Thank you.
Mr. Connolly. Thank you, Mr. Chairman.
I have a markup right now of another committee, so I
appreciate the accommodation. And I would ask unanimous consent
to enter my opening statement into the record.
Chairman Spratt. Without objection.
[The statement of Mr. Connolly follows:]
Prepared Statement of Hon. Gerald E. Connolly, a Representative in
Congress From the State of Virginia
Mr. Chairman, I would like to thank you for holding this hearing
today with respect to the defense component of the Fiscal Year 2010
budget. I have always been a staunch advocate for a strong national
defense. As the former Chairman of the National Capital Region's
Emergency Preparedness Council, I know the risks this country faces and
the benefits of a proper defensive capability. Our men and women in
uniform represent the best that America has to offer and are the
premier military force in the world.
I would like to commend the President for his Fiscal Year 2010
defense spending proposal. The budget presents an honest look at the
true costs of defense and overseas operations spending. As the base
request for defense funding has gradually risen over the past five
years, it is important to ensure that the funds are spent in support of
our troops and in an efficient manner to preserve our national
security.
I look forward to the Quadrennial Defense Review and its
comprehensive look at the entirety of our defense requirements. In its
overview, I hope that the Review, while ensuring that we provide our
military with the proper resources and support, also recognizes that
there is never a military-only solution to every potential conflict.
There are circumstances when military action becomes unavoidable and
justified; however, it would be unwise for us to ignore the roll of
diplomacy in the necessity for defense operational spending.
Defense Secretary Robert Gates said in July, ``We cannot kill or
capture our way to victory * * * It has become clear that America's
civilian institutions of diplomacy and development have been
chronically undermanned and underfunded for far too long.'' Secretary
Gates understands the value of diplomacy as a defensive tool.
Therefore, I believe it is important that as a component of our
national defense strategy, we support and protect President Obama's
request of a $4.5 billion increase in next year's international affairs
budget. The international affairs budget, which funds two of the three
pillars of our national security strategy, development and diplomacy,
represents only 1.4% of the FY 2010 Budget, and represents an extremely
cost effective compliment to the third pillar of defense.
In closing, I would like to bring up an issue that has an impact on
the ability of our military personnel to properly function and
accomplish their duties--that of the Base Realignment and Closure
process. As a former local government official, I know the benefits and
burdens that BRAC can impose on localities losing and gaining military
personnel and facilities. I hope that the Administration and this
Congress continue to look at the impacts of the most recent BRAC
decisions and pledges the proper support to the affected localities.
I look forward to Undersecretary Hale and Mr. Sullivan's testimony
today.
Mr. Connolly. Thank you, Mr. Chairman.
If I could, Mr. Sullivan, just hone in on acquisition for a
minute. One of my observations, having been sort of on the
other side of the desk, if you will, in the contracting world,
is that the Federal Government as such and the Department of
Defense perhaps in particular are not very well organized for
large complex acquisitions. You can have multiple project
managers during the course of the contract, the procurement
contract, acquisition contract. Many of them don't have the
requisite technical skills or technological know-how to always
be able to fully manage or grasp or even write up the scope of
the acquisition to be made. Combined with shortages in
acquisition personnel to begin with and the extended burdens,
the Federal Government is just not very well equipped to manage
complex acquisition.
And then you ask yourself, what could go wrong with that?
And of course, we know. We have documented in the GAO report 72
programs assessed, not one of them had proceeded to the system
development meeting or the best practices standards. Weapons
systems increasingly have cost overruns. The requirements
process does not even take cost into account, which is amazing
and would come, I am sure, as news to most citizens who pay the
bills. What is your observation about whether the whole
acquisition process is maybe broken and needs to be addressed?
Mr. Sullivan. I think excellent points, and we have been
talking about that for quite some time. In fact, I believe that
the Department is actually beginning to listen to some of that.
There has been some initiatives recently that respond to that.
But if I could take them kind of one by one. The first one
is the workforce issue, program managers, for example, in the
Department of Defense. If we are talking about major weapons
systems, those acquisition programs can take as long as 15
years just in development before they get into procurement. And
in that period of time, you might have as many as six to eight
program managers. They tend to spend about--we did a study on
that not too long ago I believe--maybe 18 months is the average
that the program managers are there. We believe that is a very
good indicator that you are going to have trouble on a program.
When you have that many managers, there is no continuity, and
it is very difficult to manage something that way.
Mr. Connolly. If I could interrupt just one second. Again,
my experience on the other side of the table on this issue,
each one of them has his or her own special needs that further
refine the project at hand often, so that by the end of the
project, if you have had multiple program managers, the scope
of the project may actually look differently than the beginning
of the process.
Mr. Sullivan. The scope of the project probably will look
differently, and that is not just because of the program
manager; that is a lot of the other pressures, the users,
industry itself.
There are a lot of requirements created by these programs.
That is a second thing that I would say is very undisciplined
and poorly organized that they need to work on. They need to
have shorter programs. They need to have requirements that are
understood. That is where the systems engineering, this
workforce that they need to be able to look at requirements
more and analyze those requirements in a systems engineering
way so they can determine if they have the technologies and the
knowledge and the money and the time to be able to build what
it is that is coming before them as a requirement. And we have
suggested many times that, when you are doing product
development, you should probably limit yourself to no more than
a 5-year effort and do it in an evolutionary way.
We view the F-16 as an example of a program that probably
was done pretty well. They delivered the initial capability
within 5 years, continued to deliver block upgrades to that for
the next 30 years. And that is a pretty good fighter jet and
has been for a long time.
Mr. Connolly. One quick question, could the SAR, the
selected acquisition reports program, be better utilized? It
really hasn't changed much in 40 years.
Mr. Sullivan. Yes. The chairman was alluding to that a
little bit, and as I mentioned there, timeliness could be
improved. I think they have done a lot for getting the
baselines more permanent. But we think that there are other
elements that you could put into a selected acquisition report
that kind of records the knowledge we are talking about, like
technology maturity for instance. They could have an element in
that report that records the technology maturity level at the
time that the SAR begins and track that. You could have an
element to check design maturity, which is another knowledge
point that we talk about.
And they could do a lot more with manufacturing processes.
As a program begins to move towards production, it is
designed--there are indicators of design maturity that could be
in there, and there are indicators of having control over your
critical processes that could be in there as well. That is a
lot of knowledge that would help people getting oversight of
the programs.
Mr. Connolly. Thank you.
Thank you, Mr. Chairman, so much, and I thank my colleague.
Chairman Spratt. Thank you, Mr. Connolly.
Mr. Doggett.
Mr. Doggett. Thank you, Mr. Chairman.
I appreciate your efforts here and in the Armed Services
Committee as well to literally get us more bang for our buck
when it comes to this matter. And certainly, Mr. Sullivan, the
important work that you and your team does has given us, if not
more accountability at the Pentagon, at least kept us aware of
how little accountability we have had over the huge amount of
money. It seems we have shoveled out almost all of the money
requested by the hundreds of billions of dollars to the
Pentagon and a little bit more on top of that without assuring
taxpayer protection.
I agree fully with one of my Republican colleagues earlier
who said that President Obama has received the strongest
military in the world from President Bush. Unfortunately, I
think it is a much weaker military than he got from President
Clinton, but nevertheless, it is and always should be the
strongest military in the world. The other thing that was
missing from that statement is that President Obama also
received a civilian military bureaucracy at the Pentagon that
has given us more waste than any military in the history of the
world. And I know you have worked to put in place systems to
try to get at that waste because I think that our taxpayers
ought to be getting more money--more benefit from the dollars
being spent there than we have.
I want to direct your attention to the report that I
questioned earlier. Was this new report on missile defense
components that came from GAO this week prepared under your
office?
Mr. Sullivan. Yes, it was. In fact, under our team. I
wasn't the director involved on it, but I worked closely with
those who did.
Mr. Doggett. Are the programs under the missile defense
agencies, are they among the most expensive in the weapons
systems at the Pentagon?
Mr. Sullivan. If you take the programs as a whole, I think
the MDA is in the top three.
Mr. Doggett. And is this experience of having gone there,
from GAO, 6 years in a row and trying to get them to give you
the information you need to evaluate the programs and not get
it even yet, has that been pretty typical of what you found
with the weapons systems there?
Mr. Sullivan. I think it has been a lot more difficult for
the teams that we have had going to MDA to get that kind of
information, specifically because of the way it is structured,
I think.
Mr. Doggett. Again, referring to earlier discussion, I
think there is a feeling here that if Members of Congress or
ideologues outside of Congress say this system works enough,
that it will work, but when I look through the details of the
report that your team there produced, I believe that, of the 10
components or 10 elements of the Missile Defense Agency, which
vary significantly, that not a single one of them was on time
and fulfilled. Only one out of nine could be said to fulfill
all of its objectives, is that right?
Mr. Sullivan. I believe that is correct, sir. And I think
one of the reasons for all of that is the way the MDA has been
allowed to operate. And the MDA is really not even an
acquisition program. It doesn't fall under--it has been exempt,
if you will, from the acquisition policies at the Department,
which we call the 5,000 series.
Mr. Doggett. So it has not even had to meet the standards
that applied to other weapons systems?
Mr. Sullivan. That is right.
Mr. Doggett. Well, neither acquisition standards nor good
science seems to apply there. I noticed in reading the report
that, as it relates to the land-based system, the suggestion or
the indication is that they, I think, they did about half the
tests that they said they would do for last year and that you,
your team concluded that they didn't have the information
necessary because of the deficiencies in the sensory data to
tell you whether the system would work or not. Is that about
the bottom line of that?
Mr. Sullivan. That is, you know, as I said, I didn't work
on that. But if our team said it, it is correct.
Mr. Doggett. Do you know if your team explored what the
Congressional Budget Office reported again within the last few
weeks concerning alternatives for missile defense in Europe?
Mr. Sullivan. Pardon me?
Mr. Doggett. The Congressional Budget Office, which also
attempts to get a little accountability, has issued a report
that there is an alternative to placing a permanent U.S. bases
in the Czech Republic and Poland. If there is any protection to
be offered at all from this missile defense system, can be done
using existing U.S. bases; has that been an area of study by
your office?
Mr. Sullivan. That is something I could get for the record
if you want. We could go and ask the team that is doing that
work.
Mr. Doggett. Thank you for the time, Mr. Chairman.
Thank you so much for your service. It sounds like we have
hope now that there will be a little more cooperation at the
Pentagon, and when you are there, and maybe we will have a
happier report this time next year. I certainly hope so, and I
think American taxpayers would hope so.
Chairman Spratt. Thank you.
Let me echo what Mr. Doggett just said. Thank you for your
very excellent testimony and for the fine work that the General
Accounting Office, now the Government Accountability Office,
has done for us. I think there will probably be a counterpart
to Section 402 in this year's budget resolution to ask you to
do this, so we can make it an annual affair. I think that would
be healthy for us to know and not a bad thing for the Pentagon
to have to respond to.
We thank you very much indeed for your efforts and for your
testimony here today. Thank you for your participation.
I ask unanimous consent that any members having statements
they would like to enter for the record or questions they would
like to propose to the witness, you will have 7 days in order
submit those for the record. Thank you very much. The hearing
is adjourned.
[Questions for the record submitted by Mr. Aderholt
follow:]
Questions for the Record Submitted by Mr. Aderholt
1. President Obama has made many comments about the creation of
jobs. It seems to me that a glaring omission in this Administration's
actions thus far is that the defense industry not only protects our
nation, but also supports hundreds of thousands of jobs. Can you
comment on how the forthcoming budget will take that into account, and
how the budget will maintain some continuity in the procurement and
manufacturing process?
2. As you are aware, the President and Congressional leadership do
not want sole source contracts, especially on earmarked projects. As
you know, any company currently can challenge such a contract and apply
to do the work. If the President follows through on the denial of sole
source contracts, is the Pentagon prepared to hire the extra personnel
required to review all the contract applications, in order to ensure
that programs and products are not dramatically delayed?
3. One of the Air Force's key war-fighting needs has been
identified as updating America's fleet of aging refueling tankers. Yet
in the past few weeks we have heard about a delay of up to five years
to begin replacing the fleet. How can such a delay be justified given
the fleet's importance to our nation's security?
4. If the decision were made to invest in dual-use defense research
as an investment in future innovation and as an economic stimulus in
what technologies should we invest to get the biggest benefits for both
national security and for the commercial marketplace?
[Responses to questions for the record from Mr. Sullivan
follow:]
Responses to Questions for the Record From Mr. Sullivan
Chairman Spratt
1. Could you describe in your view, the systems engineering
deficiencies in the acquisition workforce?
The number of military and civilian personnel in DOD's systems
engineering workforce has not kept up with the growth in the number of
major defense acquisition programs. According to DOD's Selected
Acquisition Reports, the number of major defense acquisition programs
grew from 71 to 89 from fiscal year 2001 to fiscal year 2007. We
recently reported that over the same time, the number of systems
engineers in the acquisition workforce declined from 34,899 to 34,710.
It is difficult to assess the extent of DOD's systems engineering
deficiencies because DOD lacks critical departmentwide information in
several areas necessary to assess, manage, and oversee its acquisition
workforce. Specifically, the Office of the Undersecretary of Defense
for Acquisition, Technology and Logistics does not have key pieces of
information regarding its in-house acquisition workforce, such as
complete data on skill sets, which are needed to accurately identify
its workforce gaps. In addition, it lacks information on the use and
skill sets of contractor personnel performing acquisition-related
functions. To address these issues we have recommended that DOD
identify and update on an ongoing basis the number and skill sets of
the total acquisition workforce--including civilian, military, and
contractor personnel--that the department needs to fulfill its mission.
2. Would you give us your recommendations as to what should be done
with respect to process and with respect to personnel to really make
our acquisition system far more efficient and effective?
With respect to process, DOD will need a comprehensive approach
that not only addresses problems in the acquisition process, but the
requirements and funding processes as well. For example, at the
strategic level, DOD's processes for identifying warfighter needs,
allocating resources, and developing and procuring weapon systems--
which together define DOD's overall weapon system investment strategy--
are fragmented and broken. At the program level, the military services
propose and DOD approves programs without adequate knowledge about
requirements and the resources needed to execute the program within
cost, schedule, and performance targets. While DOD has made some
progress in addressing these challenges, DOD must take the following
additional actions to improve its overall acquisition outcomes: (1)
make better decisions about which programs should be pursued or not
pursued given existing and expected funding; (2) develop an analytical
approach to better prioritize capability needs; (3) require new
programs to have manageable development cycles; (4) require programs to
establish knowledge-based cost and schedule estimates; and (5)
requiring contractors to perform detailed systems engineering analysis
before proceeding to system development.
With respect to personnel, DOD must sure it has an acquisition
workforce that is the right size and has the right skills to execute
its major defense acquisition programs. In our March 2009 report on
DOD's acquisition workforce, we recommended that DOD take four actions
to address this issue. First, DOD should collect and track data on
contractor personnel who supplement the acquisition workforce--
including their functions performed, skill sets, and length of
service--and conduct analyses using these data to inform acquisition
workforce decisions regarding the appropriate number and mix of
civilian, military, and contractor personnel the department needs.
Second, DOD should identify and update on an ongoing basis the number
and skill sets of the total acquisition workforce--including civilian,
military, and contractor personnel--that the department needs to
fulfill its mission. DOD should use this information to better inform
its resource allocation decisions. Third, DOD should review and revise
the criteria and guidance for using contractor personnel to clarify
under what circumstances and the extent to which it is appropriate to
use contractor personnel to perform acquisition-related functions.
Fourth, DOD should develop a tracking mechanism to determine whether
the guidance has been appropriately implemented across the department.
The tracking mechanism should collect information on the reasons
contractor personnel are being used, such as whether they were used
because of civilian staffing limits, civilian hiring time frames, a
lack of in-house expertise, budgetary provisions, cost, or other
reasons. DOD concurred with the last three of the recommendations and
noted that implementing the first will require careful consideration
before making it a contract requirement.
Representative Doggett
1. The Congressional Budget Office has issued a report that there
is an alternative to placing permanent U.S. bases in the Czech Republic
in Poland for missile defense. If there is any protection to be offered
at all from the missile defense system, can it be done using existing
U.S. bases? Has this been an area of study for GAO?
We have not evaluated the Congressional Budget Office study on
missile defense alternatives and did not address this issue in our
recent reports.
[Whereupon, at 1:12 p.m., the committee was adjourned.]