[Senate Hearing 111-1052]
[From the U.S. Government Publishing Office]
S. Hrg. 111-1052
THE COST EFFECTIVENESS OF PROCURING
WEAPON SYSTEMS IN EXCESS OF
REQUIREMENTS: CAN WE AFFORD MORE C-17S?
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HEARING
before the
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
INFORMATION, FEDERAL SERVICES, AND
INTERNATIONAL SECURITY SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
of the
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
JULY 13, 2010
__________
Available via the World Wide Web: http://www.fdsys.gov/
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
58-398 PDF WASHINGTON : 2011
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri JOHN ENSIGN, Nevada
JON TESTER, Montana LINDSEY GRAHAM, South Carolina
ROLAND W. BURRIS, Illinois
EDWARD E. KAUFMAN, Delaware
Michael L. Alexander, Staff Director
Brandon L. Milhorn, Minority Staff Director and Chief Counsel
Trina Driessnack Tyrer, Chief Clerk
Patricia R. Hogan, Publications Clerk and GPO Detailee
------
SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION,
FEDERAL SERVICES, AND INTERNATIONAL SECURITY
THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan JOHN McCAIN, Arizona
DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri JOHN ENSIGN, Nevada
ROLAND W. BURRIS, Illinois
John Kilvington, Staff Director
Bryan Parker, Staff Director and General Counsel to the Minority
Deirdre G. Armstrong, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Carper............................................... 1
Senator McCain............................................... 5
Prepared statements:
Senator Carper............................................... 35
Senator McCain............................................... 44
WITNESSES
Tuesday, July 13, 2010
Hon. Mike McCord, Principal Deputy Under Secretary of Defense
(Comptroller), U.S. Department of Defense and Alan Estevez,
Principal Deputy Assistant Secretary of Defense for Logistics
and Materiel Readiness, Acquisition, Technology, and Logistics,
U.S. Department of Defense..................................... 8
Major General Susan Y. Desjardins, Director, Strategic Plans,
Requirements, and Programs, Headquarters Air Mobility Command,
U.S. Air Force................................................. 9
Jeremiah Gertler, Specialist in Military Aviation, Congressional
Research Service, Library of Congress.......................... 22
William L. Greer, Ph.D., Assistant Director, System Evaluation
Division, Institute for Defense Analyses....................... 24
Alphabetical List of Witnesses
Desjardins, Major General Susan Y.:
Testimony.................................................... 9
Prepared statement........................................... 49
Estevez, Alan:
Testimony.................................................... 8
Joint prepared statement with Mr. McCord..................... 45
Gertler, Jeremiah:
Testimony.................................................... 22
Prepared statement........................................... 53
Greer, William L. Ph.D.:
Testimony.................................................... 24
Prepared statement........................................... 61
McCord, Hon. Mike:
Testimony.................................................... 8
Joint prepared statement with Mr. Estevez.................... 45
APPENDIX
Charts referenced by Senator Carper.............................. 37
Letter from the Secretary of Defense to Senator McCain........... 44
Questions and responses for the Record from:
Mr. McCord................................................... 68
Mr. Estevez.................................................. 76
General Desjardins........................................... 88
THE COST EFFECTIVENESS OF PROCURING WEAPON SYSTEMS IN EXCESS OF
REQUIREMENTS: CAN WE AFFORD MORE C-17S?
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TUESDAY, JULY 13, 2010
U.S. Senate,
Subcommittee on Federal Financial Management,
Government Information, Federal Services,
and International Security,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:31 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Thomas R.
Carper, Chairman of the Subcommittee, presiding.
Present: Senators Carper and McCain.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. The hearing will come to order.
Good afternoon, one and all. We are delighted that you are
here. Thank you for joining us for our first panel and in about
3 or 4 hours from now the second panel. No, it will not be that
long.
Three years ago, this Subcommittee held a hearing on
strategic airlift that analyzed the cost effectiveness of the
C-5 Modernization Program. Two years ago, we investigated the
growing cost overruns of the Department of Defense's major
weapon systems. Last year, Secretary Gates recommended
eliminating a handful of expensive weapon systems in order to
save taxpayer dollars, and Congress largely agreed and cut
nearly every one of them recommended by the Secretary.
Last month, Secretary Gates announced that the Pentagon
will attempt to cut its budget by more than $100 billion over
the next 5 years. This will not be an easy task, but this
Subcommittee will continue to identify ways to help Secretary
Gates and his team to achieve this level of savings. We do so
because we face a troubling budget outlook. As this chart
shows,\1\ our yearly budget deficits are currently a little bit
over $1 trillion, and they are projected to be hundreds of
billions of dollars over the next few years. Even out to 2014,
the deficit, which last year was about $1.4 trillion, will have
been reduced by two-thirds, down to about $462 billion. But
that is still a lot of money.
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\1\ The chart referred to appears in the Appendix on page 37.
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Can we look at the next chart?
We do not just print money. Some people think we just print
money. When we run out of money and we want to spend money in
excess of the monies raised through the Treasury, what we do is
we borrow it. And if you look at some of our biggest creditors,
China, almost $1 trillion; Japan, about three-quarters of a
trillion dollars; United Kingdom, over quarter of a trillion;
and if you add all those countries that export oil to us, close
to a quarter of a trillion dollars as well.\1\ That is where
the money comes from when we spend money that we do not have.
And we have been spending a lot of it.
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\1\ The chart referred to appears in the Appendix on page 38.
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To go back, it is hard to believe, but in the year 2000 and
I think the fiscal year 2001, we actually balanced our Nation's
budget, only 9 years ago. And there was actually--I remember
hearing--I do not know if it was Chairman Alan Greenspan or
someone else from the Federal Reserve, but someone came in and
testified before us in 2001. There was concern that we were
paying down the deficit too quickly and could destabilize the
economy. Hard to believe. That was 9 years ago. And when you
look at all of this chart, it did not turn out that way, did
it?
One of the reasons why we are having this hearing today is
to figure out how we can have a little bit less red there in
that China column and a little less green in that Japan column
and so forth.
But our spending levels are at record highs to try as we
come out of the worst recession since the Great Depression; two
wars, terrible recession, and it has almost been like having
two feet on the accelerator to try to get us moving, get the
economy moving. Now in the months and years to come, it is sort
of like seeing one foot coming off the accelerator and starting
to tap on the brakes. But it is a delicate balance as we figure
out--too much braking could stall the economic recovery; not
enough braking, I think, represents a concern to a lot of us
who have a sense of fiscal responsibility.
If we do not control spending, if we do not do something to
increase revenues, and if we do not begin to close our
deficits, who are we going to pass the legacy onto? It is my
kids, it is your kids, it is our grandchildren, and yours.
This hearing will analyze potentially unnecessary spending
by once again looking at strategic airlift. This hearing will
ask what happens when we buy more weapon systems than the
Pentagon says we need. It is one thing to buy weapon systems
the Pentagon says we need, we really need them; it is another
thing to continue to spend money for weapon systems that the
Secretary of Defense says, ``We do not need that. We have got
enough of that already.''
We had an interesting battle on the Senate floor about a
year ago. Senator McCain, who will be here in a little bit, and
Senator Levin, the leaders of the Armed Services Committee,
basically at the urging of the Administration and also because
they thought it was the right thing, looked at whether or not
we need to continue to buy F-22 fighter aircraft. And some of
the information that was presented to us, as you may recall,
was here is an aircraft that I think, if memory serves me well,
costs about $191 million a copy. I think we had bought about
187, and the proposal was to continue buying them. Cost per
flight hour, about $45,000.
On any given day, roughly 55 out of 100 of the aircraft are
mission-capable. And if you add up all the sorties they have
flown in Iraq, in the Iraq War, and all the sorties they have
flown in Afghanistan, they added up to zero. So did it make
sense for us to continue buying that aircraft? It did not make
sense. Senator McCain did not think it made sense. I certainly
did not. Neither did Senator Levin, neither did the President,
neither did Secretary Gates, and we said, ``That's enough.
That's enough.''
Today's hearing is going to focus a little bit differently.
It is not going to focus on an aircraft that has not been
delivered. To the contrary. The C-17 is a superb aircraft. We
have a whole squadron of them in Dover, Delaware at our Dover
Air Force Base. We bought over 200 of them and about that many
have been deployed. They perform admirably with high mission-
capable rates. And so the question is not: Is the C-17 a dog?
It is not. It is a very good airplane. When do we have enough
of them?
And so we are going to ask our panelists today what happens
if we buy more C-17s, even though recent airlift studies have
stated that our strategic airlift capability exceeds our
demand. I want to set the scene, if I can, for this topic. Our
strategic airlift fleet consists of about 111 C-5s, big
airplanes--we have some of those at Dover as well--and about
223 C-17s. As good as the C-17 has been, though, it cannot do
everything. As good as the C-5 is, it cannot do everything as
well. That is why we have a blend of C-5s and C-17s, and C-130s
as well.
As you know, the C-5 carries more cargo, sometimes almost
twice as much as the C-17. It can fly further without
refueling, almost twice as far as a C-17. It cannot land on
austere runways, but a study of the record shows that in, I
guess, the last decade or so, about 95 percent of flights that
the C-17 landed and delivered goods, provided airlift for, the
C-5 could have done that as well.
But the problem with the C-5 has been reliability. The
mission-capable rate hovers around the mid-60s, for the most
part in recent years as compared to 85 percent for the C-17.
To correct those deficiencies in terms of mission-capable
rate for the C-5, the last Administration, the last President,
the last Secretary of Defense, said to us: Why don't we take
those C-5s, those C-5s that were built in some cases in the
1970s and in some cases in the early 1980s, that have another
30, maybe 40 years of useful life on their fuselage, on their
wings, why don't we do something about the engines? And at
least one of our witnesses here has flown C-5s. We have them at
Dover. I have heard for years how the engines just do not work.
About every thousand hours, they have to change them out. The
new C-5Ms will get about 10,000 hours. They will get about
10,000 hours between engine changes, and about 50 or 60 of the
weapon systems or components, avionics systems, have been
changed out as well. The idea is to get us from about a mid-50
to 60 percent mission-capable rate up to 75 percent or higher,
north of there, and so far the three C-5s that have been
produced, that are being flown literally out of Dover, are
doing that.
I think Harlan Geer, sitting right here over my left
shoulder, was telling me not long ago, that a couple of months
ago, one of those C-5Ms broke 41 records for airlifts in one
flight from Dover to Turkey. That is the kind of thing we want
to hear.
I will never forget talking to one of the aircraft
commanders when they brought--I guess it was the first C-5,
into Dover Air Force Base for its annual inspection, and I
asked the aircraft commander, ``How does this C-5M fly?'' And
he said--I thought I would never hear anybody say this about a
C-5--``It flies like a rocket.'' I said, ``You are kidding.''
He said, ``No. It really does. It flies like a rocket.''
We have had some blips along the way in terms of the work
that is being done in the C-5, but for the most part, we are
encouraged to this point.
I anticipate that the C-17 will continue to play a leading
role in airlift for years to come, and I also expect that fully
modernized C-5s will be a worthy complement to our C-17 fleet.
I do not know if we have anybody here from Lockheed, but here
is the deal, as I understand it. We expect the C-5Ms to deliver
at least a 75-percent mission-capable rate and the work that
Lockheed is doing in the modernization to come in under budget,
at or under budget. So that is the deal. If Lockheed will
deliver along those lines, I think this is a pretty good deal
for the taxpayers. If they cannot, it is not a good deal for
the taxpayers.
However, while an even more robust fleet of C-5Ms and C-17s
would ensure that we would never have to worry about strategic
airlift, our current budget problems force us to confront some
tough decisions about how many more aircraft we ought to buy,
and this starts by looking at how many more C-17s we can afford
and whether it is cost-effective to keep buying them. The last
time the Air Force requested C-17s was in fiscal year 2007.\1\
That was 4 fiscal years ago. However, since then, the Congress
has purchased, I think, 43 additional unrequested C-17s. Keep
in mind the second chart we had up here, which shows where the
money comes from when we are spending money we do not have. It
comes from China, it comes from Japan, it comes from the United
Kingdom, it comes from all those countries that have the oil
and that have our money.
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\1\ The chart referred to appears in the Appendix on page 39.
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In 2007, the Air Force asked for 12. They got 22. In 2008,
they asked for zero. They got 15. In 2009, they asked for zero.
They got eight. In 2010, they asked for zero. They got 10. And
the question is, they have asked for zero again in 2011, what
are they going to get? And my hope is that the second column
under congressional purchase, instead of having three question
marks, will have a zero. And, again, it is no reflection on the
aircraft. As I said, it is an exceptional aircraft. We have
just got enough of them.
We have another chart.\1\ The chart is entitled ``DOD
Mobility Capabilities and Requirements Study-2016.'' I think
this was done a couple months ago. Some of you are familiar
with it. Every so often we ask the Department of Defense to
look at what our requirements are going to be for airlift, and
they measure this in million ton-miles per day. Worst-case
scenario, which I think includes a couple of wars going on and
a bunch of problems back here at home that we need airlift for.
And in the worst-case scenario, the Department of Defense, 5
months ago, said we needed capability to give us 32.7, almost
33 million ton-miles per day. Our current capability with our
current fleet of C-5s and our current fleet of C-17s is almost
36 million ton-miles per day.
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\1\ The chart referred to appears in the Appendix on page 40.
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Instead of borrowing $800 or $900 billion from the Chinese,
if they were borrowing money from us, if we had such a robust
Treasury, that would be one thing. We do not. And to the extent
that we have about three million ton-miles more per day
capability than we have need going forward. And even worst-case
scenario, does it make sense for us to continue to go further
and further into debt? I do not think it does. Neither does the
Secretary of Defense. Neither does the President. In fact, the
Secretary of Defense has recommended that the President veto
any spending bill that includes funding for more C-17s.
In this hearing, we are going to explore how to manage a
cost-effective strategic airlift fleet, and it is not this
Subcommittee or any Committee trying to dictate to the
Department of Defense what they ought to be doing or what they
actually need for the strategic airlift for our country. They
have told us. This study up here, this most recent one, this
tells us in a worst-case scenario, and it says we have a lot
more capability than we have need. As it turns out, we have a
lot more appetite than we have money to buy things with.
So we are going to look at whether it is cost effective to
increase our fleet by buying more C-17s. Finally, we will try
to determine if there is a business case for increasing airlift
capabilities beyond our airlift demand. I look forward to this
hearing. I look forward to a productive hearing. We are
grateful for everybody who has come over to spend some time
with Senator McCain and myself, and our colleagues, and I again
want to thank Senator McCain for the excellent work that he and
his colleagues did and certainly Carl Levin last year on the F-
22, and for always reminding us that these weapon systems just
do not materialize out of thin air. We have to buy them. We
have to pay for them. And we do not have the money.
What did they use to say about the theory of holes? The
theory of holes when you are in a hole on the budget, on a
deficit, if you are in a hole stop digging. Stop digging. That
is what we want to do. Senator McCain.
OPENING STATEMENT OF SENATOR MCCAIN
Senator McCain. Well, thank you, Mr. Chairman, and I will
make my remarks brief. I want to thank the witnesses and look
forward to hearing from them, and I do not think we should have
this hearing without the backdrop of the Secretary of Defense's
recent announcement that he intends to save $102 billion over
the next 5 years, which means obviously some very tough
decisions are going to have to be made. And, obviously, the
Secretary of Defense and the President have long ago announced
their opposition to further acquisition of the C-17.
Now, whether the Appropriations Committee will--how they
will act remains to be seen, and, Mr. Chairman, I think that is
one reason why it is important that we have this hearing. And I
quote from the authorization bill. The Secretary of Defense
said, ``The administration appreciates that the Committee
supports the President's budget request regarding the C-17
program and that it did not authorize procurement of additional
C-17s.''
According to the OMB's report on terminations, reductions,
and savings for fiscal year 2011, the number of C-17s in
operations and on order together with the C-5 aircraft exceeds
what is necessary to meet the Department of Defense future
airlift needs even under the most stressing scenarios.
According to OMB, the substantial operational costs
associated with buying additional unneeded C-17s would have to
be offset by retiring C-5s early. Those aircraft still have on
an average 30 years of useful service life, and it does not
seem to me that is a reasonable use of taxpayers' money.
Perhaps most persuasively, as Secretary Gates noted in a
letter to me on this program, ``Continuing to purchase C-17s in
numbers beyond what is required simply diverts limited
resources from other pressing needs, including critical
warfighting capabilities.''
Mr. Chairman, I ask that the letter be included in the
record.\1\
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\1\ The letter referenced appears in the Appendix on page 44.
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Senator Carper. Without objection, it will be.
Senator McCain. And Secretary Gates has also made it clear
that he will strongly recommend the President veto any
legislation that sustains the unnecessary continuation of this
program.
In remarks delivered over the past few months, Secretary
Gates noted that it was time to return to the model in which
real choices were made, priorities were set, and limits were
enforced, and he specifically cited the C-17 program as an
example where Congress was failing to make choices when it
comes to defense spending. And he concluded that we all must be
willing to ask and answer questions regarding real-world
requirements in order to have a balanced military portfolio and
a defense budget that is fiscally and politically sustainable
over time.
Let us be clear. The only thing sustaining the C-17 program
in the face of a military requirement that is and will likely
remain satisfied is the predominance of the military-industrial
complex. Such machinations should end. When decisions are made
to start or continue new major weapons programs, the needs of
the warfighter must preside, not the profit-maximizing
tendencies of industry or the strictly parochial interests of
Congress. After billions of dollars wasted over the last few
years, the C-17 presents the clearest case why in this regard
we must do better.
I thank the witnesses, and I thank you, Mr. Chairman, for
holding this hearing.
Senator Carper. Senator McCain, it is great to be sitting
here next to you and have a chance to hear from these witnesses
today. Let me just briefly introduce them, if I may.
Our first witness today is Deputy Under Secretary Mike
McCord from the Department of Defense's Comptroller's office.
Under Secretary McCord serves as one of the Pentagon's chief
budget and finance officers. He joins Under Secretary Robert
Hale in the Comptroller's office in helping Secretary Gates
take a scalpel to the Pentagon's budget and holding the service
branches' feet to the fire when it comes to wasteful spending.
He joined the Department of Defense with 24 years of experience
in dealing with national security issues in the Legislative
Branch, including, I am told, 21 years as a professional staff
member of the Senate Armed Services Committee.
Under Secretary McCord, we thank you for your participation
in the hearing. We hope you will be working closely with us
over the next couple of years to find additional savings in the
defense budget. Just one quick question. Where did you go to
college?
Mr. McCord. Ohio State.
Senator Carper. The Ohio State University in Columbus,
Ohio.
Mr. McCord. Yes, I attended the university in Columbus.
Senator Carper. Good for you. All right. You are an Ohio
State Buckeye. It is great to have you here. Thanks. Thank you
for your service.
Our second witness on the panel is Major General Susan
Desjardins. Is that French, Desjardins?
General Desjardins. Yes.
Senator Carper. What is it, garden, some gardens?
General Desjardins. Gardens.
Senator Carper. General Desjardins is here today to testify
on behalf of the U.S. Air Force's Air Mobility Command, the
major command in charge of managing the Air Force's airlift
fleet. In the Air Mobility Command, General Desjardins serves
as the Director of Strategic Plans, Requirements, and Programs,
and in this position she is responsible for force structures,
planning doctrine, and requirements of the Nation's airlift and
refueling force. She has some 30 years of service in the Air
Force, I think, this year, and over 3,800 flying hours as a
command pilot in a number of different aircraft, including C-
5s, C-17s, and C-135s. Anything else?
General Desjardins. KC-10s, sir.
Senator Carper. KC-10s, all right. General, we are grateful
for your testimony today. We look forward to a productive
discussion on our Nation's strategic airlift fleet.
And our third and final witness is Alan Estevez. Mr.
Estevez is Principal Deputy Assistant Secretary of Defense for
Logistics and Materiel Readiness, representing the Office of
the Under Secretary of Defense for Acquisition, Technology, and
Logistics. Mr. Estevez is one of the top advisers to the
Pentagon leadership on logistics and readiness. He is here
today because one of his office's many duties is to prescribe
policies and procedures for the conduct of strategic mobility,
to manage strategic mobility programs within the Department of
Defense. Prior to assuming his current position, I am told Mr.
Estevez held key positions in the Office of the Secretary of
Defense. Is that true?
Mr. Estevez. That is correct.
Senator Carper. Where he played a critical role in re-
engineering defense transportation processes. Mr. Estevez, we
thank you for being here today. We understand you flew in from
theater last night. Is that true?
Mr. Estevez. That is correct.
Senator Carper. Not the movie theater, but another theater,
and we want to invite you to discuss, if you want to, a little
bit your experiences there, what you saw and heard as it
relates particularly to the hearing today. And I understand
that you and Under Secretary McCord will be delivering joint
testimony today, and Under Secretary McCord will be giving the
oral statement. We are told if we observe you carefully as he
speaks, we will see your lips move. And we want to see how this
works out, and we hope you will just chime in as is
appropriate.
Under Secretary McCord, I will ask you to start off the
testimony that has been prepared for you and Mr. Estevez, and
then we will go right to our general. Thank you.
Mr. McCord, please proceed, and your full statement will be
made part of the record, and I think you are prepared to
summarize.
TESTIMONY OF HON. MIKE MCCORD,\1\ PRINCIPAL DEPUTY UNDER
SECRETARY OF DEFENSE (COMPTROLLER), U.S. DEPARTMENT OF DEFENSE;
AND ALAN ESTEVEZ, PRINCIPAL DEPUTY ASSISTANT SECRETARY OF
DEFENSE FOR LOGISTICS AND MATERIEL READINESS, ACQUISITION,
TECHNOLOGY, AND LOGISTICS, U.S. DEPARTMENT OF DEFENSE
Mr. McCord. Yes, thank you, Chairman Carper, and Senator
McCain. I am Mike McCord, Department of Defense's (DOD) Deputy
Comptroller, and as you said, joining me is Alan Estevez, the
Principal Deputy Assistant Secretary of Logistics and Materiel
Readiness, and Major General Sue Desjardins of the Air Mobility
Command, and we are here to speak about the Department's
decision to end the C-17 program. Thank you for putting the
longer prepared statement on behalf of Alan and myself in the
record.
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\1\ The joint prepared statement of Mr. McCord and Mr. Estevez
appears in the Appendix on page 45.
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I want to begin my oral remarks by thanking you on behalf
of all three of us, and the Department, for your support of the
men and women who wear America's uniform. Your concern for
their well-being is greatly appreciated.
DOD depends on two aircraft, the C-17 and the C-5, to
provide the airlift needed to deliver and sustain our combat
power, including most importantly in support of our operations
in Afghanistan. Over the past 5 years, the Department has
conducted three studies concluding that our C-17 and C-5
airlift capability is more than sufficient for our needs today
and in the foreseeable future. Most recently, the study to
which you referred was known as the MCRS-16, the Mobility
Capabilities and Requirements Study, concluded last February.
It looked at requirements through 2016 to ensure that our plans
and investments for mobility capability will support future
operations.
The results of that study indicated that the Department's
plans for strategic mobility capabilities are sufficient to
support our projected requirements. The study concluded that
the number of C-5s and C-17s in the Department's program of
record is sufficient, even in the most demanding environments.
These findings were consistent with all the studies we have
undertaken over the past 5 years, all of which have shown that
the size and mix of our strategic airlift fleet is adequate to
meet requirements and that we have enough C-17s.
Our analyses have also concluded that keeping the C-17 line
open is simply not cost effective. It is not cost effective to
buy more C-17s and then retire more C-5s to meet the
requirements we foresee, and even if our requirements studies
turned out to be wrong and we wanted to buy more later, keeping
the C-17 line open was not judged to be a cost-effective way to
hedge against that risk compared to upgrading the existing C-5
fleet or even restarting the C-17 production line later.
In addition to these studies, the Air Force Fleet Viability
Board concluded in 2004 that the C-5A, which is the oldest
variant, will remain viable until at least 2025. And according
to the Air Force, the C-5 fleet as a whole will remain viable
until 2040. Moreover, ongoing modernization and refurbishment
of that fleet will increase the fleet's reliability, available,
and maintainability.
So as a result of these studies, Secretary Gates concluded
that it is not in the national interest to keep adding C-17s.
Last September, he wrote to Congress that the Department does
not need additional C-17s to meet strategic needs. Accordingly,
our budget request for 2011 includes no funds for additional C-
17 aircraft. The President has directly expressed his support
for the Department's position on this. In comments concerning
the fiscal year 2011 budget request, he said, ``We save money
by eliminating unnecessary defense programs that do nothing to
keep us safe. One example is the $2.5 billion that we are
spending to build C-17 transport aircraft the Pentagon does not
want or need.''
Secretary Gates, as he usually does, made clear where he
stands by stating in his testimony this year that he would
``strongly recommend'' a presidential veto of legislation that
sustains the unnecessary continuation of the C-17.
The reason the Secretary feels strongly about this is
because he believes, as he told the House Armed Services
Committee a year ago, that ``a dollar spent for capabilities in
excess to our real needs is a dollar taken from a capability we
do need.''
Mr. Chairman, this remains our position on the C-17 today,
and I want to thank the Congress for supporting that position
in all the defense bills that have been reported or passed by
the House or Senate this year, and I welcome your questions.
Senator Carper. Mr. Estevez, how did he do?
Mr. Estevez. He did exactly what we expected.
Senator Carper. That is good. All right.
General Desjardins, please proceed. Thank you.
TESTIMONY OF MAJOR GENERAL SUSAN Y. DESJARDINS,\1\ DIRECTOR,
STRATEGIC PLANS, REQUIREMENTS AND PROGRAMS, HEADQUARTERS AIR
MOBILITY COMMAND, U.S. AIR FORCE
General Desjardins. Mr. Chairman, Senator McCain, and
distinguished Subcommittee Members, thank you for the
opportunity to testify about our Nation's strategic airlift
requirements.
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\1\ The prepared statement of General Desjardins appears in the
Appendix on page 49.
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As the Director of Strategic Plans, Requirements, and
Programs for Air Mobility Command, I and my staff translate air
mobility mission requirements of the armed forces and the U.S.
Transportation Command into fielded capabilities. We do this by
long-range planning, requirements assessment, and funding
allocations that support our ability to organize, train, and
equip our mobility forces.
We are faced daily with difficult choices as there are many
more requirements than resources, more combat needs than
dollars or manpower available. The Mobility Capabilities and
Requirements Study-16, or MCRS-16, is an important tool that
assists us in making some tough, near-term choices that chart
AMC's path towards the future. By clearly quantifying valid
operational needs, we can more accurately streamline and shift
our limited resources to meet other pressing mission
requirements. MCRS-16 determined that our program's strategic
airlift fleet of 223 C-17s and 111 C-5s provides excess
capacity that permits the retirement of our oldest, least
reliable aircraft. These C-5 retirements will free up the
manning and dollars needed to assign 16 C-17s to the Air
Reserve component. The retirements will save approximately $325
million over the future years' defense program in depot level
maintenance, flying hours, and modernization costs.
Conversely, if aircraft retirement restrictions direct us
to maintain a fleet in excess of the wartime lift requirements,
then additional manpower, infrastructure, and resources would
be needed to operate a larger fleet.
To ensure the long-term viability of our strategic airlift
fleet, AMC continues to invest in the necessary upgrades of our
C-5 and our C-17. The C-5 provides a combination of outsize
capability, high-capacity, and long-range airlift that is
unequaled by any other airlift platform.
The almost complete C-5 Avionics Modernization Program will
provide continued access to worldwide airspace. The
Reliability, Enhancement, and Re-engining Program (RERP) is a
vital modernization program. The 52 C-5s currently programmed
for the RERP modification will provide more reliable,
efficient, and enhanced strategic airlift at a reduced cost. We
are confident the modernized C-5M, or Super Galaxy, will
achieve our operational and sustainment goals and will meet the
worldwide air traffic performance standards.
The C-17 continues to be the backbone of our Nation's
strategic air mobility fleet. It exceeds expectations every day
under very challenging operational tempo as we support the
drawdown in Iraq, the plus-up in Afghanistan, and all other
ongoing mobility operations worldwide. It adds great breadth
and depth to the mobility playbook because of its mission
versatility, responsiveness, and enhanced capabilities.
The program fleet of C-17s and the modernized C-5 fleet
provide the Nation with sufficient, flexible, and responsive
inter-theater airlift to meet our wartime and peacetime needs.
I am confident that our Nation's strategic airlift fleet will
remain the keystone of the Department of Defense's ability to
rapidly deliver cargo and personnel anywhere in the world.
Air Mobility Command will continue to support our joint and
coalition partners while balancing the requirements to be
responsible stewards of the taxpayers' hard-earned dollars.
We greatly appreciate Congress' support of America's air
mobility fleet. Thank you again for the opportunity to appear
before you today.
Senator Carper. Thank you very much, General.
We will do 7 minutes for our first round, and if we need a
second one, we will use that as well.
General Desjardins, I just want to come back to your
testimony. Thanks very much for your testimony. But I just want
to try to be clear on one point. Is it the policy of the Air
Mobility Command that we do not need any additional C-17s?
General Desjardins. Yes, sir. We do not need any more C-
17s.
Senator Carper. All right. And what does the Air Mobility
Command believe to be the appropriate mix, if you will, of C-
17s and C-5s?
General Desjardins. Sir, the program fleet of 223 C-17s and
111 C-5s currently, according to MCRS, provides, as you
indicated in your chart, 35.9 million ton-miles a day. That is
excess capacity. The 32.7 million ton-miles a day is what the
Mobility Capabilities Study determined was what we needed to
meet the future 2016 challenges that we have ahead.
So with that excess capacity, then we would look to retire
our least capable C-5s, and that is what we had asked for, 22
C-5s; 17 in 2011, and 5 in 2012.
Senator Carper. And by retiring the C-5s, I think you said
we would realize a savings if we retired with 2 years the 22 C-
5As, realize a savings of about $300, $320 million. Is that
right?
General Desjardins. Yes, sir.
Senator Carper. It was not that long ago that I think we
had some folks in to see us, very senior people in airlift, I
think maybe even the Joint Chief at this time from the Air
Force came in and said basically we want to buy another 30 C-
17s, and we are going to pay for it by retiring 30 C-5s. And I
said, I do not think the math works on that. I do not think the
math works on that.
Mr. McCord, Mr. Estevez, would you just comment on the math
of that tradeoff, retiring 30 C-5s and using the monies
therefrom to buy 30 C-17s? Does that work?
Mr. McCord. No, Senator. We agree that would not work, and
just to follow up on the General's point, if we already have
excess capacity, then making tradeoffs between two types of
airplanes when we already have enough of both is not really
going to be a way that is going to be cost effective to have
more of one and less than the other if we still end up with
more than we need.
Senator Carper. A couple of months ago, Secretary Gates
came before our caucus, Democratic caucus at lunch, and our
Republican colleagues have similar caucus meetings every week,
and I am sure they invited folks from time to time to share
their thoughts. One of the questions that I asked Secretary
Gates and I am going to ask you all here today: If we buy
additional C-17s, what does it mean we do without? That was the
question I asked, and let me just ask you all to comment on
that as well. If we buy more C-17s that apparently we do not
need, what does it mean we do without? Please.
Mr. McCord. Senator, I guess at the end of the day you, in
Congress, would decide that because you would cut something
from our budget to pay for them. About $300 million for every
C-17 that is added is the going price. Already we have had $10
billion added over the last 4 or 5 years beyond what we have
asked for, and should Congress add any more, then, again, you
would be making that choice really here of what you would cut
out of our budget to pay for it.
Senator Carper. I will tell you what Secretary Gates said.
He said, ``There are things that we need to better ensure the
safety and the effectiveness of our warfighters, and to the
extent that you take away money for those needs and simply use
it to buy aircraft that we do not need, you put in danger our
warfighters. Rather than making them more effective and safer,
you make them less effective and less safe.''
I thought that was a very compelling argument. I think we
will find out maybe later this year how compelling our
colleagues find that argument to be.
I will ask one more question, and then I will yield to
Senator McCain, but this is another one for Mr. McCord. General
Desjardins has said in her testimony that in order to manage
our excess strategic airlift capability, we will need to retire
older C-5As, and we talked about maybe 22 of them over the next
couple of years. If Congress appropriates funding for more C-
17s this year, then we could have to retire even more C-5As if
that argument is credible. This balancing act could keep on
going and going and going. And if we retire all the C-5As,
maybe we can retire--actually, if you do the numbers, 22 C-5As,
we save what, $320 million? If you retire all the C-5As, that
would enable us to buy maybe three or four new C-17s. I think
that is an intellectually honest argument. But in your eyes,
would that be a cost-effective process? And does a cycle like
this make it more difficult for you and Secretary Gates to
achieve your goal of about $100 billion in budget savings over
the next 5 years.
Mr. McCord. Yes, it would, Senator, because first of all
adding force structure is kind of the ultimate cost driver in
the Department. So many things flow from having extra force
structure: Training, manning, operating, having construction
projects to base those things. And we are under a floor from
the Congress right now, so we cannot have less than X number of
both strategic airlift planes and C-5s specifically. So it is
not clear that we could retire anything even if we wanted to,
so any more planes that are added are basically increasing in
an area where we already have excess, and adding force
structure always adds costs.
Senator Carper. All right. Thank you.
Does anybody else want to make a comment?
Mr. Estevez. If I could.
Senator Carper. Mr. Estevez.
Mr. Estevez. First, as you noted, I did come in from
theater last night, and I just want to say that I had the
opportunity on the ground for 6 days in Afghanistan to observe
our magnificent strategic----
Senator Carper. What did you see?
Mr. Estevez. We were in Kabul----
Senator Carper. Give us a flavor, if you will.
Mr. Estevez. Sure. We were in Kabul, Bastion where the
Marines are in Helmand Province, Kandahar, and Bagram. We got
to see C-17s delivering force. They were in every one of those
places. Counter-IED enablers such as Aerostats that we were
putting up above outposts so they could see the enemy at a
distance, and MRAP capability, which we were delivering direct
to the warfighter in those locations. Watched the handoff
between the aerial porters and the Army at Bagram to put force
out into the field. Just a magnificent flow going in. A true
testament to our logistics capability in one of the hardest
places in the world to get force into.
Senator Carper. How was the morale? How was the morale that
you witnessed?
Mr. Estevez. I thought the morale was pretty good, and good
assessments, frankly, on the ground. It is a tough fight, but
people think that we can do this.
Senator Carper. Good.
Mr. Estevez. I am very proud to have been out there to
observe our force engaged.
Senator Carper. Good. Glad you were there.
Mr. Estevez. With regard to the mix here, when we were
looking at the C-5 RERP 2 or 3 years ago, it is most cost
effective to maintain the C-5 fleet than it is to replace the
C-5 with a C-17. As you said in your opening statement, and as
Senator McCain alluded to as well, it is important to have that
balanced mix. Aircraft are different things for different
purposes, all related to the strategic mobility. We have a good
mix right now, so replacing C-5s with 15 C-17s is definitely
not the most cost effective way to sustain the airlift system
and the airlift capacity we have. As we noted, we are in an
overcapacity situation, so retiring some because we do not need
it is OK, but buying more so that we retire more is certainly
not the way the Department needs to balancing its business in
this airlift system.
Senator Carper. Thanks. And before I yield to Senator
McCain, let me just--I like to use this example of--I call it
the pens and pencil example, and I have two C-5s here, A's or
B's that need to be modernized. They have one C-17. For the
cost of fully modernizing two C-5As or C-5Bs, we can buy one
new C-17. We were told by the Air Force that the useful life on
these C-5s is maybe another 30, even 40 years. And as good an
airplane as this is, these C-5s, fully modernized, can carry
roughly twice as much and, as we have seen, fly in some cases
like twice as far.
Now, that does not take anything from the C-17, which can
do some things especially with small fields and austere field
that the C-5s can do. That is a pretty compelling argument. You
buy one of these, you get two of these modernized, fly them for
another 30 years or so. They carry roughly twice as much, and
you can fly them twice as far.
That is a pretty compelling argument. I think it is one of
the things that has led Secretary Gates, this Administration,
and the last Administration to recommend to us that we go
forward with the C-5 modernization, holding Lockheed Martin's
feet to the fire to make sure they deliver. But to the extent
that they can, it seems like to me a pretty decent bargain for
taxpayers.
Senator McCain.
Senator McCain. Thank you, Mr. Chairman.
Mr. Estevez, I was also there over the Fourth of July, and
I bring back the same impressions that you do. I also have a
very strong impression that the C-130 is doing an incredible
job since that was our primary means of transportation around
the area. It is not the most pleasant way to ride, but it
certainly does the job, as I am sure you are very aware.
Mr. Estevez. I agree with you on all fronts there, Senator.
[Laughter.]
Senator McCain. I do not know why they place those aluminum
poles always in the center of your back, but someday--there are
some things that I will never understand.
I think we need to put a little more perspective on the
costs here we are talking about. Isn't it true, Mr. McCord, it
has been about $8.25 billion we have spent just on the
additional C-17s that Congress has appropriated? Isn't that
true, roughly?
Mr. McCord. Roughly. I think it might be a little higher,
but roughly correct, yes.
Senator McCain. So let us call it $8 or $9 billion that we
have spent on aircraft that the military says they neither want
nor need. But I am not sure that the average taxpayer
understands the costs involved with training, maintaining the
crews, all of the aspects of these aircraft that add additional
billions of dollars to the cost. Could you elaborate a little
bit on that? And also you, Mr. Estevez, if you want to.
Mr. McCord. Yes, Senator. As I said earlier, every force
structure increase necessarily carries with it cost increase
because you have to man that force structure, train people on
that equipment. You have bases. You might need a new hangar for
a plane. It would sort of depend. If you only added one, that
would be one thing. If you add 43, as it indicates here, then
you are definitely going to need new bases, new equipment, new
tooling at these bases, all these sort of things that add costs
to operate and maintain and train people for that equipment.
Senator McCain. So we are talking about billions more. I do
not know if we have any real estimate of those additional
costs. I would be interested.
Mr. Estevez. Well, I always say that giving us something
that we do not need is a gift that keeps on giving, because we
are going to sustain it if it is in the force structure. So a
C-17 costs around $23,000, a little more than that, per flying
hour that it is used. If we have it, it is going to be used
because it cannot sit there; otherwise, it is going to rot.
That includes some training involving that crew structure. But
that is a gift that keeps on giving, so we have 10 and that is
$23 million per year to sustain that, and over time, a 30-, 40-
year life cycle, we are talking a substantial amount of money.
Senator McCain. And we are not including in that estimate
the costs of, say, additional hangars or additional equipment
and necessary items to keep those aircraft flying. I do not
know if anybody has a handle on it. I have never seen an
estimate of those additional costs. I am sure they are very
hard to get at because at one base they may just be able to use
existing facilities; at others they may have to build
additional ones.
Mr. McCord. That is correct, sir. Our staff this morning
got me a figure of approximately $1 billion a year for the 43
that have been added, for the operating and support costs for
the 43 that have been added, not all of which are in the fleet
yet, but steady State, about a billion a year.
Senator McCain. Mr. Chairman, I would argue that is another
point that we need to make to our colleagues. It is not just a
one-time expenditure of some billions of dollars, but it is
also additional billion dollars at least per year of additional
costs.
But that also, as I understand it, will then require the
retirement of C-5s. Is that an accurate statement?
Mr. Estevez. That would be what we would like to do.
Frankly, we need some legislative relief in order to get down
to the numbers that we want to for----
Senator McCain. And why do you want to do that? Because we
have overcapacity?
Mr. Estevez. Because we have overcapacity, exactly,
Senator.
Senator McCain. And yet the reason why you are saying that
you have to do this because of overcapacity, these are
perfectly--C-5s are perfectly good aircraft that have 10, 15,
20, 25 years additional life on them that they could have. Is
that correct?
Mr. Estevez. That is correct.
Senator McCain. So we are talking about the $8 to $9
billion, a billion dollars a year, and then the costs of
retiring and not keeping perfectly good assets. So the ripple
effect of this action by Congress is rather significant.
Mr. Estevez. Yes, sir.
Senator McCain. General, do you have sufficient--suppose
that we just went ahead and bought these additional C-17s and
even more to come if the appropriators have their way. What
does that do to your requirements?
General Desjardins. Well, Senator, it is as we spoke about.
We are already at excess capacity. We have a shortfall then
someplace else. And so we would have to look at, consider
retiring the excess capacity that we have got in the strategic
airlift fleet.
I think that as retiring--your point earlier about retiring
and how much does that cost, certainly we owe two reports on
strategic airlift requirements, and then C-5 re-engining, we
owe a couple of reports, as well as getting relief from 316
strategic aircraft.
But even storage costs to the tune of--if it was 2000
storage, if you will, where we would have access to spare parts
for the retired C-5s, that costs money, too, about $50,000 per
aircraft. So there are costs associated, but we would look at
it and consider our least capable aircraft in the fleet and
have to stop flying them.
Senator McCain. Well, if we could have from Secretary
McCord and Mr. Estevez, if we could have a possible--just a
paper, a couple of pages, as to not only the costs of each of
the additional C-17s, but the ripple effects of it I think are
rather important in case the Chairman and I have to engage in
debate and discussion on the floor of the Senate. This could
lead to that kind of a situation if the appropriators continue
to add C-17s in the defense appropriations bill.
Again, this is an important hearing because I think we all
know that with the present economic situation in the country,
there is going to be every part of the Federal budget squeezed,
and the defense budget will not be immune from that. The
Secretary of Defense has already announced that he intends to
reduce costs by over $100 billion in the next 5 years, and he
may be required to do much more than that, depending on what
happens in Afghanistan and other parts of the world.
So this is a fight worth having. We have been having it now
for several years, and I think maybe the environment is now at
a point where we will be able to prevail over the
appropriators, and it is very helpful that we have a Secretary
of Defense who is a man of enormous credibility on both sides
of the aisle.
I thank the witnesses. I thank you, Mr. Chairman.
Senator Carper. Thank you, Senator.
I want to come back to--I just want to clarify a point. I
raised this earlier. I just want to come back to it again as a
follow-on to one of the questions that Senator McCain was
asking. If we retire 22 C-5As over the next 2 years, did I
understand that the savings would be about $320 million. Is
that the number that I heard?
General Desjardins. Over the fiscal year DP, that is
correct, Mr. Chairman.
Senator Carper. And that works out to, I think, about $15
million a copy. And in doing that, that may be the right
decision. Far be it from me to prejudge, but if later on the
modernization program for the C-5Bs goes well and we have
retired these C-5As, do we have the ability to go back and say,
no, Lockheed Martin did a great job, they are getting 80-
percent mission-capable rate on those C-5s that they have
modernized, maybe we should do something with those 22 and
bring them out of mothballs. Can we do that sort of thing? Is
that realistic? Or is it too late at that point in time?
General Desjardins. Mr. Chairman, it would depend on the
kind of storage or retirement status we would put them in. But
I would add that the Air Force is very committed to the
modernization programs for C-5, and I did also want to add that
we are using--we have three C-5s that have been re-engined
and----
Senator Carper. I have seen them all.
General Desjardins. Yes, sir, and we are using two of them
right now in the surge, and they are performing very well.
Senator Carper. Good.
General Desjardins. So I just wanted to add that.
Senator Carper. Good. Thank you.
Now, General Desjardins, let me just ask a follow-up
question. The 22 C-5As that are maybe focused on for early
retirement or for retirement, do they have significant service
life left? Or are they on, if you will, their deathbed? What do
you think?
General Desjardins. Mr. Chairman, we have looked at these
22. Not all of them have we identified by specific tail
numbers, but we have looked at the bad performers, if you will.
Do they have service life yet left? Yes, they do. But compared
with the rest of the fleet, these are the least--we would
retire the least capable ones.
Senator Carper. When you were flying C-5s, any idea how
many flight hours you have in C-5s?
General Desjardins. I do not have very many, sir. Just over
100 in the C-5.
Senator Carper. What I have heard over the years is the big
problem with C-5s is the engines, and when you have had a
broken C-5 somewhere around the world, in many cases it was the
engines. And in the modernization, they have traded out the old
engines for, I think, the same GE engines that they use on Air
Force One, as I recall, and we have sort of increased tenfold
the reliability of those engines.
General Desjardins. Yes, sir. And as you know, the
enhancement program also includes 70-plus subsystems that were
also not performing where they needed to be. Each added up to
achieving a certain mission-capable rate in addition to the
engines to get us where we need to be at initial operating
capability plus 2 years.
Senator Carper. OK. Thanks.
If I could turn to you, Mr. Estevez, I think part of the
responsibility of the ATL office--and what does ATL stand for?
Mr. Estevez. Acquisition, Technology, and Logistics.
Senator Carper. Yes, it does. The office in DOD is to be
wary of industrial-based concerns as well. We have been told
that we ought to buy more C-17s in order to keep the C-17
production line alive in case our airlift demand drastically
increases, even beyond the most demanding scenario that we
looked at on one of our charts over here in the recent study.
We have talked with aircraft producers in the past. They have
told us that when you shut down a production line, you do it in
a way that is not permanent. Or to put it another way, they
store the production equipment away so that the line could be
re-established in the future. Is that a possibility with the C-
17 line? And if Congress, for example, did not buy any more C-
17s in the fiscal year 2011 year, would the production line be
permanently shut down? And part of this, I know the folks that
make the C-17, as I said earlier, an exceptionally good plane.
It is not just the United States that uses them, wants to use
them in providing airlift. My understanding is other countries
have purchased or are endeavoring to purchase the C-17s. Where
does that fit into all this in terms of production line,
keeping the line going?
Mr. Estevez. There are a couple of facets to your question,
so I will take them----
Senator Carper. Take your pick.
Mr. Estevez. With regard to shutting down a line, what we
would do is we would take the special tooling related to that
line. We would put that in storage should we for some reason
need to restart that capability. So it would be there. There
would be expense related to doing that. That would not be the
best way to go about it. Frankly, there is an industrial base
that we are fortunate to have in this country that can build
wide-bodied cargo aircraft, and we would more likely draw on
that base for our next generation of airlift rather than
restart that line. But it is a possibility to restart that
line.
Let me just address--there is another industrial base that
we need to consider in this process, and that is our carriers,
aircraft liner companies that we use under our Civil Reserve
Air Fleet program to haul cargo for us that provides us
additional capacity in our go-to-war capability, and they are
doing also a magnificent job in sustaining both our forces in
Iraq and Afghanistan today.
Should we have more capacity than we need, at some point we
dry up the dollars that are available to sustain that
industrial base. So, again, it is important to balance the
whole mix of capacity that we have out there, and sustaining
those craft carriers is one of our key capabilities that we
need to retain.
Senator Carper. Good. One of the questions that I wove into
that mix of questions was whether or not there is an appetite
from other countries, including some of our NATO allies, to
acquire C-17s. I think some have, and my understanding is that
others are interested in the aircraft. Can anybody comment on
that?
Mr. Estevez. There are other countries, and I would turn to
the General to fill that out. The British have some. The
Australians have some. It is not a cheap plane, so some of our
allies do not have the resources that we are blessed to have.
Senator Carper. But it turns out we do not. We borrow. If
we do not have the resources, we just go out and borrow the
money to buy them.
Mr. Estevez. So there are some allies that do have that
capability, and there are some that are buying, continuing to
buy from the Boeing line.
Senator Carper. Good. One of the things that the President
has been pushing in recent months is to, I think, double over
the next 5 years our exports from this country, and this could
be one of the very good things that we make well that we might
want to export more of.
I have maybe one last question, and this would be for Mr.
Estevez and for General Desjardins. Three years ago, we faced a
situation where strategic airlift was in short supply, and we
were supposedly leasing, I think, a Russian aircraft--I think
it is called An-124. Were they called Condors? Did they call
them Condors? I think they did--from the Russians in order to
deliver cargo to the battlefield. And I assume that we have
since stopped this practice given the Air Force wants to retire
22 C-5As. Could you all confirm that we have stopped leasing
the Russian aircraft?
Mr. Estevez. We still use the Russian aircraft in
situations, and I am going to turn to the General to fill this
out. But we select the right aircraft for the right mission for
the right time. An-124 can carry eight MRAPs; a C-5 can carry
five MRAPs. An-124, because it is a commercial plane, being
sustained for commercial business, has a reliability that it
lands at Bagram and takes off without repair and, frankly, it
is more cost-effective than flying a C-5 in for that mission.
So when the opportunity arises to use the right aircraft,
then we are able to lease it and re-lease it through a U.S.-
flagged carrier. We use that aircraft. I think it is less than
1 percent of the total craft costs that we have expended.
Senator Carper. All right. General Desjardins.
General Desjardins. Sir, this does not mean that we are not
using the C-5 and the C-17 for these outsize--when we need to
use the C-17 and C-5, depending on what kind of field they need
to go into, potentially a threat environment, then we
definitely want that organic capacity and that capability to be
able to do that. But this is contracted through TRANSCOM. It is
not a lease. It is a contracted service that we do take
advantage of, but in small amounts, less than 1 percent, as Mr.
Estevez indicated.
Senator Carper. Is it 1 percent of missions? Is it 1
percent of cargo delivery?
General Desjardins. Flying hours. Of the flying hours,
total flying hours for the craft.
Senator Carper. All right. Thanks.
All right. I do not always do this, but I want to do this
today. We have had a chance to hear from each of you. You have
had a chance to hear from Senator McCain and myself on these
issues. I just want to give you maybe a minute apiece, if you
would like, just to give us some closing thoughts, giving us
interchange and ideas that have been exchanged. Feel free to
re-emphasize some of the points that you have already made or
to refocus on others.
I think in our business repetition is good. We call it
staying on message. But feel free, if you want to repeat some
of the points you have made or just to re-emphasize, to
underline those, or if you want to maybe make another point in
closing.
Secretary McCord, why don't you go first?
Mr. McCord. Thank you, Senator. I guess the only other
point I would want to make is that while the possibility is
always out there that the requirements will turn out to be
greater than we have said, we have studied this many times now,
and we do not believe that is the case. But even if we were
wrong by a little bit, we already have, as the General has
alluded to, and you have on your chart, a pretty healthy buffer
in the excess capacity we already have today, and that even if
we were wrong, the first place we would go is to what we
already have on board today to deal with any such mis-estimate.
You would have to go all the way past that to even think about
needing to buy more C-17s. But as Mr. Estevez has said,
RERP'ing or modifying the C-5s we have now would still be more
cost effective even if we got to that point of going past all
the excess capacity we already have on board today. So we just
do not see a case for needing any more.
Senator Carper. All right. Thank you, sir. General
Desjardins.
General Desjardins. Sir, I would just say a couple things.
This MCRS-16 study was probably the most extensive study that
has been 2 years in the making----
Senator Carper. Really?
General Desjardins [continuing]. And some very stressing
cases, looking forward to 2016, and so I think that it is
something that has been studied--mobility coverage airlift has
been studied a fair amount, but I would say that this is, like
I said, 2 years in the making, and very relevant to where we
are and came up with a million ton-miles per day that shows
that we do have excess capacity.
I would ask that we--again, we owe the Congress a couple of
reports that we are working to get to you so that we can get
retirement relief of the C-5As so that we can continue to
operate the fleet the way that we need to so that we, again,
are not corporately, the Department, we are shortfelled
somewhere else. So we would like to do that.
We do not need any more C-17s, and the fleet that we have
right now, the programmed fleet, is a strong fleet and it is
right-sized.
Senator Carper. All right. Thanks.
Before I turn to Mr. Estevez, I think a couple of years ago
we actually asked the Air Force when they were talking about
the 30-30 deal, retire 30 C-5As, the dogs, the worst of the C-
5As in order to pay for buying 30 new C-17s, which does not
work, as we talked earlier. Just the math does not work. Maybe
with the savings of retiring 22 or in that case 30, you could
maybe--I do not know--buy five or six, maybe five C-17s. But we
asked the Air Force, I think--Mr. Geer, correct me if I am
wrong. Didn't we ask the Air Force to identify by tail number
the worst-performing C-5As? Did we ever get that list? We never
got answers. We never got any tail numbers from them. You might
just anticipated we would be wanting to see that list.
General Desjardins. Yes, sir.
INFORMATION SUBMITTED FOR THE RECORD BY GENERAL DESJARDINS
The following are the 22 C-5A's at the top of the retirement list.
Please note that tail numbers may change if schedule inspections reveal
costly repair actions:
70000453 70000459
70000457 68000217
70000447 69000017
69000003 70000446
70000466 68000225
69000027 69000001
69000008 68000211
70000464 69000015
70000454 70000465
70000455 69000019
70000462 70000467
Senator Carper. OK. Mr. Estevez, the last word, please.
Mr. Estevez. First I will say that we will have those 22
identified if we get the congressional relief that we are
asking for in order to retire unneeded capacity.
I am going to take you up, Senator, on repeating the
message. We do not need more C-17s. We have studied this
repeatedly. No studies have come back and said we need more
capacity. In fact, we are over capacity to the point that we
had in dialogue with Senator McCain. It is not just the
procurement cost of a new airplane. It is a gift that keeps on
giving. You have to sustain that plane, once you have it, over
time, and that is a cost that also could be doing other things
inside the defense budget that are more important than having
more capacity than we need.
So we appreciate you having this hearing to let us make the
case that we have the airlift capability that we need and to
hear us out in that regard.
Senator Carper. All right. Thanks.
Well, thank you very much for taking the time to appear
before our Subcommittee today. I thank each of you for your
service to our country, and some of the folks on our
Subcommittee will probably have some additional follow-up
questions. How long do we have to submit those, do you know?
Two weeks. Two weeks. And I would just ask, if you get any
additional questions from Senator McCain or myself or our other
colleagues, that you respond to those soon.
Again, thank you. We look forward to working with you, not
just with respect to providing cost-effective airlift but other
ways to save money and to do so in a way that does not
undermine our security of this country and our ability to
defend itself. Thank you so much.
Mr. McCord. Thank you.
General Desjardins. Thank you, sir.
Senator Carper. We would invite our second panel of
witnesses forward, both witnesses. Mr. Gertler, welcome. Mr.
Greer, welcome.
Whenever I meet somebody whose name is Jeremiah, I am
always reminded of a song, and the one you have probably heard
more times than you care to recount.
Mr. Gertler. Sir, sixth and seventh grade were a
particularly unfortunate time.
Senator Carper. I suspect they were. [Laughter.]
Senator Carper. Great song. Having to be Jeremiah, it could
probably have been a little trying at times. I understand you
go by J.J. What is the second J?
Mr. Gertler. Joseph, sir.
Senator Carper. All right. Well, we are honored that you
are with us. We understand you joined us today from the
Congressional Research Service, and I am told by Mr. Geer back
here that you are their top military aviation specialist. That
is quite a billing.
Mr. Gertler. Yes, sir. I would temper that observation by
noting I am the only military aviation specialist of CRS, so I
am also the bottom one.
Senator Carper. All right. Well, I understand you came to
CRS with extensive experience in providing defense analysis to
the Congress in your 10-year career on the Hill, served in
positions on the House Armed Services Committee and the Senate
Armed Services Committee, where you conducted oversight on the
entire defense procurement budget and issues related to missile
defense.
The House Armed Services Committee, when you were working
over there, who chaired?
Mr. Gertler. Actually, three chairmen during my tenure,
sir: Floyd Spence, Bob Stump, and Duncan Hunter.
Senator Carper. All right. And on the Senate Armed Services
Committee?
Mr. Gertler. I was not on the committee staff. I was on the
staff of a member of the committee handling committee issues
for Senator Charles Robb from Virginia.
Senator Carper. OK. And in addition to your time on the
Hill, I am told, Mr. Gertler, that you have also served as
analyst at the Department of Defense during part of the Clinton
Administration and as a senior fellow at the Center for
Strategic and International Studies. We thank you for your
testimony today and look forward to hearing from you as we
delve into this issue.
Mr. Gertler. It is an honor to be here.
Senator Carper. Our second and final witness is Dr. William
Greer from the Institute for Defense Analyses. The Institute
for Defense Analyses is a federally funded research center that
conducts research and analysis on issues of national security
for policymakers. Dr. Greer is the Assistant Director of the
System Evaluation Division at the Institute for Defense
Analyses. Dr. Greer's service at the Institute of Defense
Analyses has included conducting studies on air mobility and a
range of other aviation issues. Dr. Greer was a task leader of
the congressionally mandated study on the Size and Mix of
Airlift Force, which was published in February 2009.
Dr. Greer, I understand that your testimony will focus
today on the conclusions you came to in the course of that
study. We are eager to discuss whether these conclusions can be
applied to our current airlift discussions. We thank you for
your testimony. I think it is going to be quite insightful and
I think useful as we move forward on these issues and these
deliberations. Thank you.
Your entire testimony will be made part of the record. I
would ask each of you to use maybe roughly 5 minutes. If you go
a little bit beyond that, that is all right. If you go 25
minutes, that is not all right. I will have to rein you in
before we get that far along. But, again, thank you both.
Please proceed.
TESTIMONY OF JEREMIAH GERTLER,\1\ SPECIALIST IN MILITARY
AVIATION, CONGRESSIONAL RESEARCH SERVICE, LIBRARY OF CONGRESS
Mr. Gertler. Thank you, Chairman Carper, and thank you for
inviting me to testify and participate in this hearing on
behalf of the Congressional Research Service (CRS).
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\1\ The prepared statement of Mr. Gertler appears in the Appendix
on page 53.
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Senator Carper. Do you two know each other?
Mr. Gertler. For about an hour now, sir, yes.
Senator Carper. All right. Fair enough. Please proceed.
Mr. Gertler. As this is my first testimony since joining
the Congressional Research Service, I wish to acknowledge for
the record the significant contributions made to CRS' work and
to that of the entire Congress by my predecessor, the late
Christopher Bolkcom. As a former staffer and client of CRS, I
well know and share the regard in which his counsel was held by
Members of the Congress, and I hope only that my work will do
credit to his memory.
That work today concerns strategic airlift. I will not
repeat the many facets of the current request or current
situation regarding C-17s and C-5s that have already been gone
over by the previous witnesses.
Senator Carper. Let me just interrupt for a moment. As I
said earlier to the first panel, sometimes repetition is
helpful. Sometimes it is not. So do not be reluctant to
emphasize or re-emphasize----
Mr. Gertler. Well, I was being mindful of your 25-minute
dictum, sir.
Senator Carper. Fair enough.
Mr. Gertler. In that case, as you know, the 2011 budget
submission does not include any further procurement of the C-17
transport and proposes to retire 17 C-5As.
In previous years, Congress has added C-17s beyond the
number requested. So far this year, both authorizing committees
and the full House have acted on the bill. None has added any
new C-17s. None has added any additional C-5 modernizations.
As Members of the Subcommittee know, Mr. Chairman, Congress
traditionally adds programs to defense budgets for quite a
number of reasons. Each of these is discussed more fully in my
written testimony, but, briefly, they include such factors as
policy differences with the Executive Branch, as seen in the
case of the alternate engine for the F-35 Joint Strike Fighter
and the V-22 Osprey and in the Congress' annual solicitation of
the services' unfunded request lists.
Another factor is to maintain options for future policy
changes, as in the sustainment of the B-1 bomber prior to the
1980 Presidential election, which allowed the voters to choose
between the two candidates' competing visions for that program.
Constituent benefit. As members' statements and press
releases make clear, economic and employment benefits for a
particular geographical area underlie a number of congressional
procurement decisions.
To maintain a viable industrial base: Separate from the
constituent interest aspect of keeping production facilities
open, maintaining national capabilities to design, develop, and
manufacture certain defense items has been seen as a goal
worthy of national investment. Indeed, this interest is not
unique to Congress. The Department of Defense itself has on
occasion requested systems, absent formal requirement or in
excess of them, in order to preserve industrial capabilities.
To reduce risk. Now, ``risk'' is one of the less
consistently defined terms used in defense discussions, but it
usually attempts to measure the probability that a particular
military goal will not be met by a certain schedule. If a
particular force posture is deemed high risk, Congress has
added assets in order to bring that risk down.
And to hedge against changes in requirements from current
projections. One common observation regarding the post-Cold War
world is that uncertainty is the norm in defense planning.
Budget requests are based on estimates of future challenges
and threats, projections of U.S. national interests, and the
likely capability requirements extending from them. But even
highly educated projections have at times not foreseen
substantial challenges. Other times, Congress may have
differences over the assumptions or analytical process of an
important study. Adding unrequested systems can be seen as
giving commanders flexibility in case future events differ from
DOD's projections.
That brings us to today's hearing. DOD's most recent study
of airlift demand, the Mobility Capabilities and Requirements
Study-2016, is classified. But its unclassified executive
summary stated, ``With few exceptions, MCRS found the
Department's planned mobility capabilities sufficient to
support the most demanding projected requirements.'' It went on
to say that the capacity of the Department's strategic airlift
fleet exceeds the peak demand in each of the three MCRS cases
that they studied.
Critics, some of whom are advocates of further C-17
production or additional C-5 modernizations, can have
legitimate questions about that conclusion. It is a challenge,
Mr. Chairman, to address the contents of a classified study in
an open session, but I have included in my written testimony
some questions that readers of MCRS-16 can ask to gain insight
into the relevance of the study's data and the validity of its
conclusions.
Finally, as to cost effectiveness, it can be a very tricky
metric. Costs from mature systems are comparatively easy to
determine, but the effectiveness side of the equation is more
difficult to quantify because, as I have noted, the purposes
for which DOD requests certain systems and Congress' goals in
approving and/or expanding on those requests may not be the
same. And, of course, another effect of spending on unrequested
items is to divert money from known needs.
Instead of chasing any one element of this farther, I will
stop here, Mr. Chairman, so that we may focus on the points of
most interest to the Subcommittee.
Thank you for the opportunity to appear before you today on
behalf of the Congressional Research Service.
Senator Carper. Mr. Gertler, thank you so much. Dr. Greer,
please proceed.
TESTIMONY OF WILLIAM L. GREER, PH.D.,\1\ ASSISTANT DIRECTOR,
SYSTEM EVALUATION DIVISION, INSTITUTE FOR DEFENSE ANALYSES
Mr. Greer. Thank you very much, Mr. Chairman. I am pleased
to be here to talk about a recent study we have done also. Our
study is not the MCRS study but one done a year before that, as
you mentioned, and it is called the Size and Mix of the Airlift
Force.
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\1\ The prepared statement of Mr. Greer appears in the Appendix on
page 61.
---------------------------------------------------------------------------
The Department of Defense selected us to do a study, which
was actually requested by the National Defense Authorization
Act in 2008. And so I am going to confine my testimony today,
not to all the parts of the study we were asked to do, but I
will confine it to the C-5/C-17 part of it, which is what is
relevant here.
I will also ask that the lengthier version of my oral
remarks be entered into the testimony.
Senator Carper. Without objection, your entire testimony,
including those remarks, will be included.
Mr. Greer. Now, the National Defense Authorization Act had
a wide range of operational scenarios they asked us to look at:
Peacetime operations, humanitarian aid, disaster relief,
homeland security, irregular warfare, all the way up to major
combat operations, so the whole gamut.
Within these, the study considered numerous alternatives
that included upgrading existing C-5s and procuring additional
C-17s. So we looked at a large number of alternatives, all of
which had different mixes of these aircraft.
We also examined fleets that were both larger and smaller
than planned for acquisition. We looked at operational
effectiveness and life-cycle costs. So unlike the MCRS, ours
was a cost-effectiveness study. So I will summarize the
approach we took, the alternatives we looked at, and the main
findings.
The program of record when we did our study 2 years ago was
the base case that we used, and then we did excursions from
that. For strategic airlift, the program of record actually
only had 205 C-17s at that time, not 223. So that is what we
used as our base case. It did have 111 C-5s for a total of 316
aircraft. The C-5s can be further divided into 59 C-5As and 52
C-5Ms. So that is the program of record.
Senator Carper. When you say C-5Ms, do you mean C-5Bs or--
--
Mr. Greer. Well, I mean B's and C's that have been upgraded
to the C-5M through the RERP process. One name for it is either
C-5 RERP or C-5M.
Senator Carper. Thank you.
Mr. Greer. So the RERP modification, by the way, just so
you know, involves not just new engines and pylons but a number
of other auxiliary power units----
Senator Carper. What are some of the most important ones?
Mr. Greer. Well, the most important one would be the
engines, no question about that.
Senator Carper. But beyond the engines?
Mr. Greer. I have listed the auxiliary power units, and I
do not remember the other multiple--I can provide that later.
Senator Carper. OK. Thanks very much, if you could.
Mr. Greer. I just do not remember off the top of my head.
Senator Carper. Just for the record. Thank you.
Mr. Greer. The most important one is the engines, though.
So I will just remind us again that we looked at 205 C-17s
rather than 223. So the requirements--we had sort of two
questions to answer here. What were the requirements? And did
this program of record meet the requirements? And how did the
alternatives match up in cost-effectiveness?
The requirements we used were different from the MCRS. The
MCRS had not been done, so we did not have the same major
combat operations details that they had. So instead we used the
only other existing Department of Defense requirements, which
was the MCS, the Mobility Capabilities Study from 2005, for the
major operations.
For the non-major operations, we were able to take
advantage of the latest--the SSSP or the Steady State Security
Posture scenarios, which were the same as used in MCRS. So our
requirements were a mixture of the non-combat ones from MCRS
plus the major combat operations from the MCS.
When we take those scenarios, we looked at how the program
of record matched itself against delivery, and we found that
the program of record meets the acceptable risk for delivery in
those scenarios, in all those scenarios combined. So the
alternatives we looked at, just to mention them briefly, were
not just the base case, which had 316 aircraft, but it looked
at smaller and larger excursions that held the C-5 RERP fleet
constant at 52 C-5Ms, while adding C-17s and/or reducing C-5As.
We also looked at excursions in which all of the C-5s were
RERP's to C-5Ms, all 111 of them, and then other ones in which
we actually did not RERP all the C-5Bs that are currently
planned, so something less than 52 would be RERP's and then
either adding or subtracting other aircraft.
What we found, obviously, is that larger fleets do better
than smaller ones. They cost more so there is a tradeoff in
cost and effectiveness, but I will remind you that the program
of record met the requirements that were postulated.
We addressed two other issues--several other issues, one of
which was starting and stopping the C-17 line, which was one of
the major questions asked of us. Our assessment of the C-17
line shut down and restart is that continued production, even
at very low rates of, let us say, five aircraft a year is
expensive relative to the restart costs. So we think that the
scenarios in our study do not call for any larger numbers, but
if there were a requirement that emerged some time in the
future, our feeling from our calculations is that restarting
would be better than paying the cost as a hedge for continuing
production, because the likelihood of that future requirement
we think is fairly low.
The requirements that we used from the MCS study seemed to
be very similar to that from the MCRS study after 5 years. So
we do not see a reason for extrapolating to higher
requirements.
We also looked at lifetimes, and we found the C-5s and C-
17s all have lifetimes beyond the year 2040.
So, Mr. Chairman and other Members of the Committee, I will
conclude there with my prepared remarks and be glad to discuss
any of the other findings. Thank you.
Senator Carper. Good. Thanks so much for those comments.
I would like to start off my first question just by asking
you to look back just a little bit to earlier in the afternoon
when we had three other people sitting at this witness table,
and they gave us their testimony and responded to our
questions. I just want to take a minute or two, each of you,
and just reflect on what you heard that maybe you agreed with,
anything that you did not agree with, or maybe just some
thoughts that sort of grow out of what you heard them say.
Please. Dr. Greer, do you want to go first, please?
Mr. Greer. I would be glad to. I did take a couple of
notes.
Senator Carper. I thought you might.
Mr. Greer. Some of the comments, the questions had to do
with cost, and since the MCRS study really did not deal with
cost, that was not in that study, but there were opinions
expressed anyway. We looked fairly extensively at the cost of
everything, and one interesting observation was the tradeoff of
one for one if you buy a C-17 and get rid of a C-5A, what is
involved there. And vaguely it was said this would not be a
good idea.
Actually in our study we show that quite explicitly. There
is about a factor of 2 in the difference between the money you
pay to buy a C-17 and operate it for 25 years and the cost to
operate a C-5A for the same period. It turns out to be around
$400 to $600 million, depending on whether it is reserve or
active. So that is about $400 to $600 million to buy--$250
million of which is to buy it, the rest of it is to operate it,
as Senator McCain was commenting about. And if you then compare
that with getting rid of a C-5A, how much do you save? Over
that same period of time, you save about $250 million. So there
is a factor of 2 difference. You pay more to buy a C-17 than
you save in getting rid of a C-5. You would save--you would
have to get rid of two C-5s to pay for the one C-17 that you
bought. You would lose an airplane, one total airplane.
Let me just let you make some comments, and if you do not
mind, I will look at my notes and see if there are any others I
want to comment on.
Senator Carper. OK. Thanks.
Mr. Gertler. Senator, I think the most striking piece of
testimony that I heard this morning had to do with the tail
costs, the idea that, yes, you buy the aircraft and that is one
price, but it is so rare that we look at the costs to operate
and support that over its lifetime.
Now, frankly, that goes both ways. If one is resuscitating
a C-5, particularly one that has been retired and is going back
through a modernization program, that, too, will have an
operational tail cost, although the C-5Ms should have a lower
operating cost than the current C-5A, B, C fleet, in large part
due to the improved engines that get much better fuel
efficiency. But consideration of a life-cycle cost rather than
the year-by-year acquisition cost, which is what Congress seems
so often to focus on, may lead to a different conclusion than
if one just looks at the annual outlay.
Senator Carper. Thank you. Thank you for those
observations.
Mr. Gertler, I believe in your testimony you said to us
that Congress sometimes adds on unrequested items to defense
bills because they differ with the policy and not necessarily
because of parochial concerns. You gave us a very good example
in the F-35 alternate engine program. I know some members
without parochial interests in the F-35 alternate engine
believe that the competition of the alternate engine will drive
down costs and produce a better quality engine. When it comes
to adding more C-17s, are there any policy disagreements akin
to the one that you cited with the F-35 alternative engine? And
do any of these policy arguments have any merit in your
opinion?
Mr. Gertler. There are several policy arguments. I think
the two main ones that come to mind as being on point with
regard to the C-17 decision are the industrial base discussion,
which we have had at some length. There has currently been or
rather recently been a very public debate on this subject.
Secretary Gates, in testimony a few weeks ago, stated that he
believed that the commercial wide-body airline or aircraft
industrial base would be sufficient to pick up the slack if we
needed to go back and do another tranche of military cargo
aircraft. And some members publicly took him to task for that
statement and differed with him on that.
Senator Carper. Say that again? What did the Secretary
testify to? Just say that again.
Mr. Gertler. That military--and I am paraphrasing here.
That military cargo aircraft are just wide-bodied cargo
aircraft, and we already know how to make civilian wide-bodied
cargo aircraft, so the military--there may not be a military
uniqueness to the C-17 production line or technology base. And,
again, that is something over which people can reasonably
differ, and have.
But I think the other significant one has to do with
hedging, the notion of do we have margin if our projections
about the future are wrong. In terms of the million ton-miles
per day figures we saw, the Department currently has an excess
of about 10 percent. Now, when an insurance salesman comes to
your home and says, ``I would like to sell you some insurance;
something bad might happen to you,'' you make a decision about
what it is worth to you to have that eventuality covered.
We have right now 10 percent worth of insurance already
built into the program. Some members may believe that we need
to have a greater insurance, that we need to have more excess
in case our projections about future demand for airlift prove
to be wrong.
Senator Carper. Thanks.
Dr. Greer, if I could, a question for you. In your
testimony, you discuss, among other things, the cost of
restarting the C-17 production line if it were to be shut down
in the next year or two. I believe that if Congress decided not
to buy additional C-17s in fiscal year 2011, as I said earlier,
foreign sales would prevent line closure, at least for the next
couple of years. Could you further discuss the cost of
restarting a terminated C-17 production line? Did your
calculations include the possibility that foreign sales could
at least keep part of the C-17 production line open for the
next several years?
Mr. Greer. I would be glad to answer. First of all----
Senator Carper. One more time. There you go.
Mr. Greer. Yes, sorry. Thank you very much. We did not take
into account foreign sales. We were simply looking at U.S.
acquisition, and it really would not change anything in our
analyses other than the start date at which the line would shut
down.
We looked at this from a point of view of an investment,
very much like an insurance policy that was referred to before,
is that if we have several hedging options against a future
which might change dramatically from that which we have today.
One would be to go ahead and build 15 a year. Another one would
be to build five a year, keeping the line operating at a sort
of sustainment level. And then a third one would be keeping a
warm line active, which I think Mr. Estevez referred to as just
keeping the tooling at very minimal cost, but not building
anything. And then shutting it down. Those were the four
different things we looked at.
It would take about a billion dollars, we think, to restart
the entire facility from cutting it down, razing it to the
ground, and building a new facility. This was a rough guess.
There are numbers twice that much, actually from the Boeing
company that it might be as much as twice that, but $1 or $2
billion seems to be the range that the Air Force and
contractors believe is right. And this seems to be in accord
with, comparison with other large facilities that have been
proposed to be built to build large-bodied aircraft.
The hedging calculation then is to say how likely is it
that you would expect to see a large requirement increase, and
we do not see that very likely from any of the patterns we have
seen in past studies.
Another angle we took on that was to say how many years
would it be before--let us say we went 10 years and then
discovered, my gosh, we really need to build--we have suddenly
emerging very high requirements. We need more C-17s. We
probably would build a different airplane at that time, but let
us say we would still build C-17s. Would it have been smarter
to have maintained the C-17 line or to have stopped it, 10
years from now restarting it? In that particular case, it
actually would have been better to have stopped and restarted.
You do not get--in the sense that you would have saved money
overall because of the discounting value of dollars in the
future spent versus dollars spent tomorrow. And the one
advantage in continuing the production is that you would get
the aircraft faster. You have already been building them, so
there they are. But you have had to maintain them during a
period of time when you did not need them, and then there is
still time to build--and whether you would build a C-17 10
years from now is still arguable. Probably new technology would
come in, and a new airplane would be chosen.
Senator Carper. Thanks. Let me just follow up on that. Do
you recall--actually, either of you can respond to this one, if
you will, but do you all recall--and you may have said this but
I missed it, but has there been an aircraft production line
that has been successfully restarted in recent memory upon
having been shut down?
Mr. Gertler. Actually two come to mind.
Mr. Greer. OK. I only know one, so you----
Mr. Gertler. OK. That again is referencing, as I mentioned
in my testimony, the B-1, which the Carter Administration
canceled in 1997, I believe, production of that stopped. And it
was restarted several years later under the succeeding
Administration.
That was a fairly unusual case because in that case the
contractor, Rockwell International, put an enormous amount of
their own money, something in the vicinity of a quarter billion
dollars, to keep the facility there, to store the tooling and
to keep most of the workers employed so that they would be
available. They were essentially betting on the outcome of the
presidential election and that the subsequent Administration
would restart the B-1.
But it should be noted, even with a large investment and
their maintenance of large amounts of raw materials as well to
start the B-1, it still took 3 years from when they got the go-
ahead until the next plane came off the production line. So
they were shut down for a long period, but the restart still
took a good while.
That differs in a very significant way, I think, from the
C-17 case, and it is this: At that time there was a thriving
aerospace industry in Southern California. People who stopped
working because a program went away at one plant went across
the street to the plant that had just won a contract. And so
there were a lot of workers to draw from when you restarted,
when you got your contract.
That is not the case now. The C-17 line is the last
airframe production line in California. And so there is a big
question as to whether if you close the plant the workers would
disperse to other industries and not be available when you
decided to restart.
The other one that comes to mind--and I knew fewer details
about this--is the C-5. The C-5A was built from 1969 to 1973.
Congress decided to start the C-5B, and that ran from 1985 to
1989. There was a 12-year break in production of C-5s. But,
frankly, I do not know much of the detail of how Lockheed
facilitized to restart that production.
Mr. Greer. I do not know much more about that. We actually
talked to Lockheed about the C-5's stop and restart, trying to
get data for analyzing the case for the C-17, trying to find
analogs. I know that they did stop and put their tools aside,
kept them in mothballs, so to speak, so that they could use
them again 12 years later. Most of the records from that period
of time seem to have gone away, so it is hard to reconstruct
the actual cost, which was our issue. So I cannot comment any
more than that because there is no more information than that.
Mr. Gertler. It should be said, I believe, though, that
that was at Marietta, Georgia, which was a plant that was doing
other production of other aircraft during that period. It was
not dedicated to a single aircraft in the way that the C-17
facility----
Senator Carper. What else were they building? C-130s?
Mr. Gertler. C-130s were made there. They were doing
fighter work at the time?
Mr. Greer. They were doing fighter work. Which one would
that have been? I do not know for sure. I do not remember.
Mr. Gertler. Not coming off the top.
Mr. Greer. But you are right that there were----
Mr. Gertler. And one other factor with regard to the C-17
facility. It is an enormous amount of property in Southern
California. It is immensely valuable land, which is to say----
Senator Carper. Roughly how many acres? Any idea?
Mr. Gertler. I do not know. It is next to an airport, and I
do not know how much of the entire airport facility Boeing
actually owns.
Senator Carper. Which airport?
Mr. Gertler. It is part of the Long Beach airport.
Senator Carper. OK.
Mr. Gertler. But presumably, if the production line were
shut down for a significant period of time, Boeing would want
to operate on good business principles and monetize their
asset.
Senator Carper. OK. Thank you.
This might be my next to the last question for either of
you, but, Dr. Greer, your written testimony indicates that
there might be future ways to increase airlift outside of C-5s
and C-17s. I think you discussed an interesting possibility of
employing refueling tankers that are not being utilized to
conduct airlift missions. To your knowledge, has the Department
of Defense and the Air Force ever put this suggestion into
practice?
Mr. Greer. Well, yes, sir. The tankers carry cargo all the
time. The KC-10 self-deploys, carrying its own internal cargo
that it needs wherever it goes. I am told from the Air Force
that aircraft, KC-10s or C-135s, returning to the United States
refueling, let us say, in Germany, if there is cargo at the
base that needs to come back, rather than calling in an
airlifter, they simply put it on the tanker. The tanker then
brings it back.
The tanker has a fixed space for cargo, so the fact that it
is carrying fuel does not displace the cargo. The cargo and the
fuel go into totally different areas of the airplane. It does
add weight, so you get more fuel burned, of course, if you are
carrying cargo. So this is done frequently.
What I do not know would be done--this is a fair question
to ask--is that in our analysis we assumed that the tankers
that went to the theater, while waiting for tanking missions as
we built up forces in theater, could they be used during their
spare time, so to speak, carrying cargo around in the theater?
They are not leaving the theater. They are still operating
there. They are on call to come back and be a tanker when
needed, but they can operate during this open time as
airlifters. I do not know if we have experience with that sort
of thing happening. But there is no question that tankers can
carry cargo, they do carry cargo, and this kind of utility
certainly is possible. It may be just a policy change, that is
all.
Senator Carper. OK. The next question I want to ask is one
that neither of you may be prepared to respond to. I am going
to ask you, if you cannot respond to it today, if you could for
the record. We talked about the potential for foreign sales,
additional foreign sales of the C-17, and my question either
for here or for the record is: Could you recommend some things
that our government, Executive and Legislative Branches working
together, might do to incentivize and encourage those foreign
sales so that the line may be extended beyond the next year or
two? That would be a question. If you all want to respond to
that now, or a bit later, I would ask that you do that. What
would be your preference?
Mr. Greer. Later for me.
Mr. Gertler. Certainly to find someone who would know an
answer to the question would be my preference.
With regard to foreign sales, though, the C-17 is currently
operated by the United Kingdom, Australia, Canada, Qatar, and
NATO is buying a small pool to share among NATO nations.
Senator Carper. When you say small pool, what? Three or
four?
Mr. Gertler. I believe it is three aircraft to be a NATO-
wide capability. They have an order from the United Kingdom for
one additional aircraft. They have orders from the United Arab
Emirates for six. And they have an agreement for another 10 for
India, but as of last month, that contract had not been signed.
I do not know whether it has actually been signed yet. So far
that is what they have got in train for the production line.
Senator Carper. Good. Well, with an Administration, a
President--as I said earlier, the President has been quite
vocal about doubling our exports over the next 5 years, and
this might be one for the Administration to focus a bit on.
Did either of you want to add anything in response to my
question?
Mr. Greer. No. I have nothing to add to that.
Mr. Gertler. No, sir.
Senator Carper. What I would like to do as we come to the
end here is just say, any closing thoughts? Do you want to take
a minute or two to add any closing thoughts before I give a
wrap-up statement and we call it a day?
Mr. Greer. OK. Shall I start?
Senator Carper. Please.
Mr. Greer. OK. I had just one thought that I would like to
add to the comments so far. As you know, from the time we did
our study until the time MCRS did its study, there was about a
10-percent rise in capability. In our study, we see one could
also extract at least another 10 percent, if not 20 percent,
higher capability without buying a single additional airlifter.
And this would be partially through using tankers--that was
part of it--partially through having CRAF, aircraft, the Civil
Reserve Airlift Fleet, carry heavier cargo than they
traditionally carry. They carry bulk now. If they can carry
small larger vehicles called ``oversized'' by the military,
that would help a lot. We found that was actually the single
biggest help. And C-5s carrying a larger load temporarily
during wartime, which they are permitted to do, and also
relying more on allies who have airlifters to assist would also
greatly benefit this.
Now all of these can be counted on, you understand, but if
we can extract even some of those, you are going to increase
the capability even more before we have to buy a single
additional airplane of any kind.
Senator Carper. Good. That is an interesting thought. Thank
you. Mr. Gertler.
Mr. Gertler. Sir, one other factor with regard to
maintaining the production line has not really been gone into
today. Over the last few years, there have been a number of
looks, both by the Department and by private industry, at a
civil variant of the C-17. There is some interest from the
package delivery industry, from the freight haulers, in that.
There are also some obstacles, technical ones and having to do
with export-controlled items. It may also not wind up being an
economical proposition, but I believe that if you are looking
for a way to extend that production line, the possibility of
commercial sales, which are then aircraft that could be in the
Civil Reserve Fleet and available to the Department as that
insurance policy, should we need more than we think, is one way
to address both issues.
Senator Carper. All right. Well, good. Thank you so much
for all the thought that you have put into your work that
enabled you to come here to testify before us today and to
respond to our questions.
I have a closing statement for the record that I want to
enter into the record.\1\
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\1\ The prepared statement of Senator Carper appears in the
Appendix on page 35.
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I would like to add to that the following: I said early on,
a decade ago--it is hard to believe a decade ago we had
balanced budgets in this country. We had two of them in a row,
I think, the first since 1968. And there were concerns about
our paying down the debt, the Nation's debt too quickly, that
it would somehow destabilize our economy. And it did not work
out quite that way, as we know, and we found between 2001 and
2008 we basically ran up as much new debt in our country as we
did in the first 210 years of our Nation's history. And last
year the deficit was even greater, and we are looking toward--
if we do not do something, we will end up doubling our Nation's
debt again over the coming decade. That is not sustainable.
What do we do about it? One of the things that the
Administration, the President has called for, and what I would
describe as a multi-pronged attack on the deficit: One, a
freeze on overall non-security discretionary spending; second,
convene a Deficit Reduction Commission, with a lot of good
people, Democrats and Republicans, some very bright people on
that Commission whose job is to come back to all of us later
this year, all of us in the Congress, and say these are some
things we think we might want to consider with respect to
entitlement programs, Medicare, Medicaid, Social Security, and
some of the other entitlement programs, too, to be able to save
some money, and to look at revenues--we have a lot of--we call
them the Bush tax cuts which expire, I think, later this year.
The question is what do we do about those? So everything would
be on the table, the entitlements and the expiring tax cuts.
The third thing that the Administration has started
focusing on--and this Subcommittee has certainly focused on it
for several years, both when Senator Coburn was our Chairman
and the last several years that I have been privileged to Chair
this Subcommittee. But one of the things we tried to focus on
is some people call it waste, fraud, and abuse. It is more than
just that. It is just inefficient spending, in fact, an
inefficient spending of taxpayers' dollars, and in some cases
not taxpayers' dollars but monies that we borrow from all over
the world.
Among the things that we have begun to focus on are
something called improper payments. As it turns out, we spent
last year, Federal agencies--this is not including the
Department of Defense or all of Homeland Security, but improper
payments in the Federal Government, about almost $100 billion
in 1 year, a lot of the overpayments. We are focused on trying
to recover monies that have been overpaid, misappropriated, and
going out and recovering those monies. I think we recovered in
Medicare just in the last maybe 2 years, and just part of the
Medicare program, Parts A and B, not C and D, but we have
recovered about $600 million by just going after--we call it
post-audit recovery for inappropriate spending. So the idea is
not just to stop making improper payments but to go back, and
after we have overpaid the monies, go out and recover it. And
we provide to the--it is contractors, private contractors, who
do the recovery. They get to keep maybe 10 cents on the dollar.
That is their incentive for doing the work. We are going to
extend that to not just Medicare Part A but Medicare Part A,
Part B, Part C, and D, and also to work the same approach with
respect to Medicaid, and now to extend that to--with the House
voting, I think tomorrow, to pass our improper payments
legislation which some of us have worked on for a long time,
with the Administration and with the past Administration, we
can increase our ability to go there and recover money and
bring it back to the Treasury, bring it back to the Medicare
trust fund.
The major weapon systems, cost overruns a big factor here.
If my memory serves me correctly, in 2001 the Department of
Defense, as I said, major weapon system cost overrun in 2001
was about $45 billion. That is a lot of money. I think in 2008
it was $295 billion, which is a whole lot more money. And so
part of that is F-22 and part of it is, frankly, weapon systems
that we may not need any more of, and that could go to really
good systems, like the C-17s.
One of the ideas that is being discussed is whether or not
to give this President enhanced rescission powers. Some
describe it as almost statutory line-item veto powers, not to
give them forever but maybe a 4-year test drive, see if it
works, see if it is actually helpful, see if the President
abuses that power and unbalances this balance between the
Executive Branch and Legislative Branch.
We have got a bunch of IT projects that actually deliver
better service for less money to the people of this country.
Unfortunately, we have a bunch of IT projects that do not, and
they are way over budget, they are not meeting their advertised
benefits for us.
And another area that we have explored in the Subcommittee
is the tax gap. The last time we heard, the IRS was saying, I
think 2 years ago, that they felt the tax gap was about $300
billion in any given year. That is monies that are owed to the
Treasury that are not being collected, a fair amount of which
they actually know who owes the money. And if we can only
collect a third of that, that is $100 billion. That is a lot of
money.
And so if you add all that stuff together--the 3-year
freeze on non-security discretionary spending, the Deficit
Reduction Commission that we have got up and running to look at
entitlement programs and the revenue side, consider improper
payments, including the ability to go out and recover money
that has been misappropriated or misspent, major weapon
systems, enhancing the President's rescission power, try it out
for maybe 4 years, and these failed IT projects that the
Administration is focusing on, and the tax gap, just collecting
more of the money that is owed. And one other that has always
intrigued me is surplus properties. The Federal Government owns
huge amounts of property, not just land, not just defense
installations but all kinds of property that we do not use
anymore, that are empty, we have to pay utilities, provide
security, do some maintenance to maintain them. It does not
make a whole lot of sense. And the idea that we can maybe
encourage agencies to sell that stuff and reduce our costs,
those are just some of the things that we are trying to do.
When you put it all together, it is actually a pretty good
program. Does that mean we are going to wipe out all that red
ink that we are looking at down the line? No. But we would sure
have a lot less than we would otherwise, and we need to do
that. So your testimony is helpful in that effort, and we are
grateful to you and to our first panel of witnesses for it.
Again, over the next couple of weeks, you might hear some
questions from our colleagues, who either were here or not
here, and to the extent you can respond to those questions and
take a look at the one question I asked about when you are
promoting foreign sales, particularly our friends from CRS, if
you could help us with that, we would be most grateful.
I have asked our Republican colleagues here over my right
shoulder if they have any questions and they wanted to use me
as their mouthpiece to ask any other questions. I could not get
them to do it. But they said they thought Senator McCain did a
pretty good job, and I think he did as well.
We look forward to having an ongoing dialogue with you, and
thank you again for joining us today. With that, this hearing
is adjourned. Thanks.
[Whereupon, at 4:21 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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