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DEFENSE REFORM
House of Representatives,
Committee on National Security,
Washington, DC, Wednesday, February 26, 1997.
The committee met, pursuant to notice, at 9:37 a.m., in room 2118, Rayburn House Office Building, Hon. Floyd D. Spence (chairman of the committee) presiding.
OPENING STATEMENT OF HON. FLOYD D. SPENCE, A REPRESENTATIVE FROM SOUTH CAROLINA, CHAIRMAN, COMMITTEE ON NATIONAL SECURITY
The CHAIRMAN. The committee will please come to order. Good morning.
This morning, the committee takes up the broad subject of defense reform. Reform is often one of those unique Washington exercises that everyone is for until you get to the specifics. There is near universal agreement that the Pentagon remains inefficient in its organization and its operations, yet there is no consensus on how best to attack the problem.
Efforts to reform the Pentagon are not new. Every administration and every Congress since I have been here has talked about or attempted Department of Defense reform. Unfortunately, the track record has been mixed, with only marginal improvements having been achieved.
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Today, the chorus for reform is even louder and more justified than ever before. This time, I believe that the atmosphere has changed and may be more conducive to achieving a more productive consensus.
Today, the Department is operating in the 12th consecutive year of real decline in defense spending. Today, U.S. military forces are 32 percent smaller than 10 years ago, yet they are also busier than at any point during this time. And today, the defense budget faces billions in modernization, readiness, and quality of life shortfalls.
For these reasons, the imperative to reform how DOD does business has never been greater and, in fact, it may be rapidly becoming a matter of survival. We are no longer talking in terms of ''if we balance the Federal budget'' but rather ''when and how.''
In this context, I believe that pressure to cut even below the administration's proposed spending levels will grow in some quarters, which points us increasingly in the same direction, the need for a defense establishment that is more cost efficient and able to maintain necessary combat capability at lower cost.
Therefore, the committee has asked the Department to come forward this morning and provide us with an update on its progress across a range of various reform initiatives, whether mandated by Congress or developed internally. In particular, I have asked our witnesses to focus on three broad areas of defense reform.
First is acquisition policy reform. The past 3 years have been especially productive in this area since two consecutive rounds of sweeping acquisition reform legislation have passed the Congress. With the help of many of my colleagues on both sides of the aisle, Congress was successful in reforming a number of antiquated and restrictive Federal acquisition laws. These changes did not come without considerable resistance from some in Congress, the administration, and elsewhere, but we ultimately prevailed by demonstrating that the effort would result in lower costs of doing business.
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Now, entering the second year of implementation, the responsibility for making sure that the legislation's intent is achieved rests squarely with the executive branch. Whether the administration, the Department of Defense in particular, takes full advantage of the flexibility and increased authorities provided for in this legislation will be the true test of whether it is committed to conducting business more efficiently.
On this point, I must also note the disturbing and sudden departure of a key DOD official who has always been in the forefront of this effort, a departure reportedly resulting from a lack of senior-level support for the aggressive implementation of key acquisition reform provisions.
The second category is infrastructure and support services reform. Using the Department's own definition, the General Accounting Office recently concluded that over 45 percent of all active duty military personnel are assigned to infrastructure functions. The recently released Defense Science Board study states that only 20 percent of active duty military personnel are in combat assignments. While these are admittedly gross measures, they serve to illustrate the growing concern that the Department's overhead is consuming too many people and resources at a time when combat forces are being cut back and stretched thin by higher operational tempos.
Over the years, Congress has mandated numerous studies and pilot programs in an effort to determine the benefits of shifting responsibility for providing certain support services from the public sector to the private. Given the Department's critical national security mission, there will always be important support functions that must remain, in part or in whole, within the public sector. However, that reality should not stand in the way of moving aggressively to achieve greater efficiencies in noncritical support functions, such as printing, payroll, and travel, just to cite a few.
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Finally, an area requiring particular attention is organizational and structural reform of the Department itself. Last year marked the 10-year anniversary of the landmark Goldwater-Nichols legislation. Among other achievements, Goldwater-Nichols brought needed reforms to the way the Department organized itself for combat and managed the command of military forces. However, other than calling for a study, the Congress intentionally deferred action on the issue of how to reform the pinnacle of the defense establishment, the Office of the Secretary of Defense and associated support agencies.
Congress finally began to focus on this issue 2 years ago by proposing a commonsense approach. In exchange for wiping clean from standing law all of the provisions that Congress has enacted over the years related to how OSD must be structured, we asked for a phased reduction in the overall size of OSD and a plan from the Department on how best to streamline and consolidate its functions.
Rather than welcome this hands-off approach, the Department has reacted with hostility and to this day continues to ignore the law. Not only have the mandated reductions not been implemented, the plan requested from the Department for consolidating and streamlining its operation is more than 1 year overdue.
The facts underlying the need for reform have not changed. In the same 10-year period that the active duty military forces have been reduced by 33 percent, the size of the staff and support personnel assigned to the Office of the Secretary of Defense has increased by over 40 percent. This kind of trend is indefensible and undermines the credibility of any effort by the Department to attack the widely recognized imbalance between combat forces and support infrastructure.
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It is my hope that new leadership will serve to overcome the Department's unfortunate reaction to Congress' efforts to bring about even modest progress in this area. While no bureaucracy welcomes external attempts to reform it, the severity of the looming alternatives should serve to unify all of us in this purpose. I am committed to bringing about much-needed reform in these and other areas. In my mind, what remains undecided is whether or not reform is accomplished in a cooperative fashion.
To help us better understand the Department's efforts and start us on ongoing reforms, I am pleased to have with us this morning the Deputy Secretary of Defense, Mr. John White, and the Under Secretary of Defense for Acquisition, Mr. Paul Kaminski.
Welcome back to the committee, gentlemen, and I look forward to your testimony, but before recognizing you, I would like to yield to the committee's ranking Democrat, Mr. Dellums, for any remarks he would like to make. Mr. Dellums.
STATEMENT OF HON. RONALD V. DELLUMS, A REPRESENTATIVE FROM CALIFORNIA, RANKING MEMBER, COMMITTEE ON NATIONAL SECURITY
Mr. DELLUMS. Thank you very much, Mr. Chairman, and members of the committee.
I understand that the purpose for today's hearings is to obtain the status report on the Department's progress in implementing specific legislative direction that addressed structural and process reforms to reduce the Department's cost of doing business. In that regard, I want to join you in welcoming our two distinguished witnesses, the Deputy Secretary for Defense, Dr. John White, and Under Secretary of Defense for Acquisition and Technology, Mr. Paul Kaminski.
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In my mind, Mr. Chairman there are three objectives for this hearing. First, we need to understand the progress that the Department has made in implementing the various initiatives to date.
Second, we need to understand how and when the Department plans to complete the implementation of these initiatives.
And finally and perhaps most importantly, we also need to understand the obstacles and impediments to implementation and how we, the Congress, can indeed help in that regard.
Our witnesses can help us achieve these understandings and I look forward to their testimony, and with that brief opening statement, Mr. Chairman, I would yield back the balance of my time.
The CHAIRMAN. Mr. White, the floor is yours.
STATEMENT OF JOHN WHITE, DEPUTY SECRETARY OF DEFENSE
Dr. WHITE. Thank you, Mr. Chairman and Mr. Dellums. Thank you for the opportunity to be here. This is a welcome opportunity on our part to talk about reform. We think we have a good story to tell, but we also think we have a long way to go and we look for continued support from the Congress and from this committee in particular in that regard.
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From our point of view, we have an obligation to reform and, in fact, given all of the changes that are taking place in the world and in our particular world, we think we also have a major opportunity with respect to how to achieve those reforms.
The world is changing very quickly. With that, our fighting forces have changed and we have to make sure that we are lean and efficient and responsive in terms of the support we give to those fighting forces. There is really only one objective of the Department of Defense from my point of view and that is to support our joint operations wherever they may be the best way we can and do that efficiently, effectively, and as cheaply as possible.
You have been a partner up until now and I am sure you will continue to be. We have also had very strong support from the President and from Vice President Gore, particularly through the NPR program. We have embraced those principles, and as you know, we have been recognized for a number of reforms that we have undertaken over the years.
We have an ambitious task. As part of the Quadrennial Defense Review, a major centerpiece of that is how we are going to reform the Department. With respect to that review, we are asking all of the broad questions. How best can we defend America's interest in the 21st century? What are the threats? What should be the strategy? What kind of Armed Forces should we field? What is the force structure, the infrastructure, the weapons systems, the end strength, and so on?
Underneath that is a clear understanding that we cannot go on the way we are, that, in fact, the way our budget is configured today does not provide us with adequate resources to do the investment that we must do in order to meet the challenges of the next century. Therefore, we have made it an absolute priority to find ways to readjust that budget to assure that we have the appropriate balance going into the future.
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One of the sources for finding savings for adjusting that balance is our operating accounts as they relate to support, to infrastructure, to acquisition, and so on. We think this is an important area in which we can find savings and apply them more directly to combat capability now and in the future. I do not think, unfortunately, that we will be able to find all of the resources there that we will need to come out at the other end of the Quadrennial Defense Review, but we see this as a major effort.
In that regard, it seems to me that there are a whole set of things that we need to do. American industry over the past decade has reorganized, restructured, and adapted revolutionary new business and management practices, and as a result, it has assured that we are at the competitive edge and, in fact, in most major industries, the low-cost producer. I think DOD ought to follow industry in that regard and we ought to make sure that we are embracing the kind of innovation and change that has taken place in the private sector.
So I would suggest three principles for us in terms of going forward on reform. First, adopt the most efficient organizational structures and management practices. Second, adapt best business practices from the private sector. And third, rely on competition in the private sector for goods and services which are not core in terms of our war fighting capabilities.
Let me briefly illustrate what I mean by this in terms of specific initiatives. First, with respect to adopting better organizational and structural reforms, regarding headquarters, it was a recommendation of the Roles and Missions Commission that we, in fact, streamline our headquarters effort. When I became the Deputy Secretary, I established a special advisory group to deal with the recommendations from the CORM.
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As a result of that, we have adopted most of their recommendations, something over 70 percent, including the recommendation to conduct the Quadrennial Defense Review, as well as to integrate and improve the PPBS system and to streamline our military departments. There are a whole array of other management initiatives that we have initiated from the CORM and we have used that as a takeoff point to go forward.
In these studies, we have looked at both OSD and the military departments in terms of ways that we can streamline. I wrote to this committee last year stating our intent to do these studies and that we will share our results with you. Requirement of those studies was subsequently enacted in law and I anticipate that we will be able to provide you with the results of our analysis within the next few weeks. It is the intention of the Secretary and myself to take advantage of these studies to make key organizational and personnel decisions, which we will then report to the Congress in a timely manner, and if we must propose changes in legislation, we will, of course, consult with you and work closely with you to implement these changes.
With respect to base closures, it is one of the most important structural reforms that we have had to undertake. We have completed about 50 percent of the total approved reductions from the four BRAC's. Last year, for the first time, the savings from BRAC exceeded the cost and we will now receive savings on into the out years and those savings will accumulate.
But given the strategic and fiscal realities and given the structure of the Department, I think we have to look again and examine whether or not in the QDR we need to recommend more base closures. We are fully aware that if we were to do so, it would be politically difficult, but as the Secretary has said, everything is on the table and we are going to have to examine base closures once more.
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Let me also discuss field activities. In the process of restructuring, we are examining an array of field activities, some of which you mentioned, Mr. Chairman, financial management system, the civilian personnel system, our travel system, the way we support our commissaries, and the overall supply system.
Let me give you one illustration, operational support aircraft. We have reduced the operational support aircraft in the last 18 months in the Department by some 160 aircraft to save $138 million in 1997, and, of course, more in the out years. In all of these cases, our general watchword is consolidate, computerize, and commercialize, and I think we can do that in a way that will increase effectiveness.
Second, we need to buy smarter. The best illustration is acquisition reform and Dr. Kaminski will discuss it at length. But let me underline the strong commitment on the part of the Department with respect to acquisition reform. It is one of our centerpiece initiatives, one that I am committed to very, very strongly, one that the new Secretary has embraced publicly and strongly, and one which we continue to pursue with all the vigor that we can, and Dr. Kaminski will talk in more detail. Let me just make a couple of comments because it is such an important subject.
We are a long way from finished in terms of our acquisition reform. We have already, we think, been able to save billions of dollars. We think we have shortened the procurement cycle and we have decimated unneeded regulations. We have empowered our managers to do a lot more than they could do before. But we still have a very big challenge, which is the overall culture in which we live which had so many years of doing things the other way. So we need to push this reform right down to the base level and to expand our training capabilities inside the Department to make sure our people have the tools to implement reform.
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Another area of emphasis to us is housing privatization. As you know, we have a critical priority with respect to the quality of life of our forces. This committee has been generous in supporting us in terms of housing reform, and given the magnitude of our problem, we needed those authorities in order to be able to make real progress. We are working hard to implement new housing reform using the authorities from the Congress. We think we can leverage the housing resources about 3-to-1 from what it is we were doing before. We have opened competition to members of the private sector that were traditionally shut out from this market.
Let me give you, again, one illustration. We recently struck a $9.5 million limited partnership project at the Naval Air Station at Corpus Christi to build 404 units of junior enlisted personnel family housing. Under our traditional approach, those 404 units would have only been 100. This is not only an example of buying smarter but also shows how DOD and the Congress can work together.
Let me discuss buying from the private sector. As you know, I am a strong believer in opening DOD noncore support functions to competition from commercial companies. That does not mean that we should outsource everything. This is not a wholesale effort. This is an effort on our part to identify areas where, in fact, there is an opportunity to outsource because they are not core, where the appropriate conditions are met in the marketplace with respect to competition, and where, in fact, we are convinced we can get best value. We think if we do so, we will be able to save substantial amounts of money.
When outsourcing with competition, we stand to accrue a whole set of benefits. We allow ourselves as senior managers to focus on our core tasks. We get better service quality. We get more responsiveness. We get a natural innovation that flows from the marketplace and from the access to new technologies quickly. And, we get lower cost. Our considerable experience with outsourcing in the past demonstrates that we can achieve these benefits if we are smart and careful with the way we are doing it.
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In the Quadrennial Defense Review, we are looking at a whole set of opportunities for outsourcing, including training, base operating support, computer services, and financial services. We will be coming back to you with a series of recommendations consistent with the schedule for that report, which is May 15.
Let me give you another and different kind of example of where this makes sense. I was recently out at the Transportation Command which, as you know, is responsible for the strategic lift, air, sea, and land for our forces. At the Transportation Command, over half our capability is in the private sector. Most of it is only on call for wartime, saving us billions and billions of dollars. In addition, the senior leadership at the command interacts regularly with the private sector and has learned a lot from them in terms of ways to improve their effectiveness. So we have an extensive real partnership going there which is good for combat capability and good for cost savings.
Last year, we had a discussion of competition and outsourcing focused on depot maintenance, a subject which is critically important to us and to this committee. We are today, based on the guidance from the committee, developing guidelines to implement section 2469 of the law so that, in fact, we will follow your guidance with respect to how to deal with depot maintenance.
I would suggest that, from our point of view, with your permission, we would like to come back in the very near future and have a hearing devoted specifically to that issue. It is a complicated issue. It is one in which there have been a lot of changes, in which we are doing modifications to our policy, and we would welcome the opportunity, Mr. Chairman, to come back and deal with you on that in a more extensive forum.
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In conclusion, let me say that we, I think, have made some progress and we are continuing to make progress. We have come a long way. We have a long way to go. We need to incorporate the best modern business and management practices that we can find. We need to have the most efficient, effective, agile support system we can to support our magnificent war fighters.
So it is critical to us that we continue to press on reform in the Department and we continue to welcome the support from this committee and the Congress. Thank you.
[The prepared statement of Dr. White can be found in the appendix on page 46.]
The CHAIRMAN. Mr. Kaminski.
STATEMENT OF PAUL G. KAMINSKI, UNDER SECRETARY OF DEFENSE FOR ACQUISITION AND TECHNOLOGY
Secretary KAMINSKI. Mr. Chairman, if I may, I would like to submit my written statement for the record and provide just a short oral statement with a few view graphs to illustrate our program of acquisition reform.
The CHAIRMAN. Without objection.
Secretary KAMINSKI. Mr. Chairman, members of the committee, and staff, thank you very much for the opportunity to appear before you today to discuss the Department of Defense program and acquisition reform.
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As I look at our defense acquisition system today as it stands, what I find is that the system is not broken. It fields equipment that is second to none in the world today. The American people can take comfort in the fact that our U.S. defense acquisition work force is, I believe, the very finest in the world. But I do believe that the system can and must operate more efficiently than it operates today.
With your help and leadership, we now have two major elements of legislation. I agree with you, Mr. Chairman, this is sweeping legislation to give us a foundation to implement our program of acquisition reform.
Reforming DOD's acquisition system is the principle reason why I personally committed 2 1/2 years ago to serve as the Defense Department's acquisition executive. Lasting acquisition reform requires a commitment to a continuous process of improving a system which took over 50 years to build.
Lasting reform requires cultural change in that system. You cannot direct it from the top simply by signing a policy memo. Real cultural change requires support from the bottom. It requires ownership in the field. It requires a set of incentives and behavior modification.
The Department must continuously evaluate the way it does business in order to ensure that our war fighters have access to leading-edge technology, technology that is militarily effective and technology that is also affordable. Our vision is to be the smartest, most efficient, and most responsive buyer of best-value goods and services to meet our war fighters' needs.
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When I came to my job, I brought with me some experience from a previous career as a military officer in which I had the opportunity to manage two large streamlined special access programs, experience in managing a large space program, and experience as the director of the stealth program. I looked to bring that experiencing in managing these streamlined programs and spread it across the rest of the Department to manage programs in the same way, cutting through the unnecessary bureaucracy and bringing to bear the skills that our people had.
I believe we have now achieved a large measure of success in implementing this program of acquisition reform. The Department has now made a number of critical and historical changes, but they are still being institutionalized throughout this whole system and that requires additional work to propagate it completely to the field. There are still many areas that require further work.
My statement today is a short report card on where we have been in acquisition reform and I would also like to share with you the vision and the strategic plan for where we are yet going. I do not believe that the Department can rest on its laurels and where we have gotten thus far. We are committed to sustaining the momentum built up during the last several years by continuing to institutionalize the reforms that we have already made.
A year ago, we took 1 day to standdown our whole acquisition system, in May 1996, to work this process I described as spreading the cultural message, getting this message to every member of our work force in the field. That was a very successful acquisition reform standdown day. It was so successful that we have announced our plans to do it again on March 19 of this year.
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Mr. Chairman, you may have heard of the Department's studies of the so-called revolution in military affairs, or RMA. The revolution derives not from a single innovation or idea but really from a fundamental change in the way America fights. The revolution is driven by making use of a full range of new technology involving sensors, computers, low observables, precision-guided munitions, and tying it all together with telecommunications.
Today, I would like to describe the vision of a second but related revolution which I call a revolution in military acquisition affairs, or RMAA. We need the second revolution to bring to bear the first revolution that I described.
As I look at supporting our war fighters, I think that procurement reform in itself is only a subset of the overall acquisition reform program that we need in the Department of Defense. We need to ensure that those responsible for overseeing our procurement process do not forget that our main aim in life is to field systems, not to conduct endless reviews or to impede development by imposing unnecessary hurdles. My No. 1 priority is to get systems into the field that will be useful to our combat forces and to do that as quickly and with as low of cost as we possibly can and cycle time is a key measure of that progress.
Mr. Chairman, I would now like to share with you just a few view graphs illustrating where we have been and where we are going. The first chart, please.
[The charts referred to by Secretary Kaminski can be found in the appendix on page 106.]
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We have seven major focus areas in our program of acquisition reform. They start with supporting the war fighter in this RMAA approach that I just outlined; improving our fundamental acquisition business processes; attacking in a systematic way our life-cycle costs, not just the costs of acquiring new equipment but operating it over its lifetime, because we find that 60 to 70 percent of the life-cycle costs of our weapons systems are incurred after they are fielded as we operate and sustain them through our life cycle. All of our systems put great attention on the first piece, on the development and the acquisition. I do not believe we are giving sufficient attention to the after fielding costs, to look to minimize those costs.
We need to incentivize stability in our programs. The GAO has done some reviews there. I agree with their thrust about the need to improve the stability of our programs. We have some key initiatives we are developing here as part of the QDR which I will outline.
We need to proceed with our program of implementing the statutory and regulatory reforms that you gave us the basis to do with the streamlined regulation. We are moving out to do that in about one-quarter of the cycle time that our Department has typically taken to be able to implement the legislation into regulations and into policy.
You gave us the authority to conduct six pilot demonstrations. I do not have the opportunity to describe all six today but I have picked one example to share with you.
And then the last issue is managing our acquisition work force, rightsizing that work force, reducing it to the minimum size that we need to do the job, but also assuring quality of that work force.
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If I might start with my examples, the first program really has to do fundamentally with this RMAA issue, the revolution in military acquisition affairs. It is really a different process for operating. I picked this 1 of three or four examples to illustrate it. It involves a program called Smart Ship being conducted by our Navy. It involves the U.S.S. Yorktown, an Aegis class guided missile cruiser.
What we are doing differently in this program, if you think about it, makes a great deal of sense. We have, in essence, in one room, in one entity, the operator, the crew and captain of this ship. In that same room, our acquisition team, looking to make improvements to that system. Also in that same room, our industry team, those three elements working in partnership.
Our typical cycle time for major improvements in ships of this class has been about 4 1/2 years to upgrade major equipment in the past, doing business the old way. Doing the business this new way, with those three entities together, our cycle time for upgrading equipment is down to 6 months. In three 6-month cycles now, we have fielded on the U.S.S. Yorktown, and it is at sea—she is at sea today testing these systems—47 different prototype systems now have been fielded on the U.S.S. Yorktown in the last 18 months, and these are major prototype systems.
I have illustrated one on this chart. One of these systems is an integrated bridge and voyage management system. The result of this system is the bridge watch that we have had in the past on the Yorktown had been 13 people. We are now operating with a bridge watch of 5 people. This approach across the full suite of ship systems offers us the capability to reduce the crew size by probably more than 20 percent. We are still gathering data from the sea trials of this system.
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This program is really revolutionizing the way we operate, with the war fighter, the acquisition team, and the industry working together, looking to reduce the cycle time so the systems are modern and attacking these life-cycle costs that I described to reduce the ship's crew to the minimum. It is critical that the crew be participating in this process with us so that they can look at the innovations in the improvements and then decide operationally whether they are adequate or not.
We have the same kind of program underway today in the Army with the Force 21 effort that is being conducted at the 4th Infantry Division at Fort Hood, TX. Once again, we have those developing the three T's, tactics, training, and technology together in the same room. In that Force 21 program, we have reduced our cycle time for improving fielded Army command and control equipment to digitize the force, we have reduced that from 2 to 5 years in the past to 2 to 5 months in this program. We have a similar set of activities underway in our Air Force battle labs.
This is a fundamental change in the way we do acquisition, not just procurement but acquisition, from deciding what we buy to how we go about buying it, how we field it, and how we reduce the support costs for that system.
The next chart, please. As we instituted our full program of acquisition reform, all of our initiatives were wonderful for each new program that we started. My problem, after being in my job about 1 year, was a frustration about how do we attack all the contracts already in place, all the things that we have already contracted for. How do we bring acquisition reform to those initiatives?
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After giving this a lot of thought, Secretary Perry and I announced in December 1995 this program called Single Process Initiative. It was designed to be able to take all the process improvements and steps we had made in acquisition reform and apply them to existing contracts.
Let me illustrate this by one example. As we looked at the work being performed across the government by Raytheon, we found that that company was maintaining eight different soldering processes. A soldering process requires a whole set of equipment, it requires training people, it requires documenting that process. We looked further. We found that three of those processes were commercial. Five of those processes had been imposed by the Department of Defense, each by a different set of program managers. It was not clear to me that we needed eight different soldering processes. You can guess who was paying for the five processes that were not commercial processes at the company.
So we looked at a way to see, could we consolidate those processes to the fewest number we needed, and if possible, could we in the Department of Defense accept the commercial processes, or at least for some pieces of our equipment, could we accept the commercial processes?
As we looked at this, we came into a major stumbling block. We could reduce the processes. The problem is, we had to take this one contract at a time because you could not change a process in a production facility and then not change every single contract that depended upon it. So we were stuck for a minute as to how to do this job.
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We developed this single process block changes initiative to get all the stakeholders with all the contracts together in one forum to be able to make all the changes at once. Last year, we did what I describe as the mother of all block changes. At the Raytheon Corp., with one change, we changed 884 contracts at 16 different facilities to move down to the simplest process base that we could move down to. We are now spreading this across the whole industry.
This chart shows the number of initiatives that have been submitted by 142 contractors now over the 14 months that we have started this program. Thus far, we have documented only about $40 million of cost avoidance in this program. I believe that is just the very beginning of what is available here long term.
This is a very positive program because it, first, saves us money; second, I believe by going down to a smaller number of processes that we understand, we will get better products for our forces; and third, it makes our industry more competitive internationally.
The next chart, please. The next issue here is to reengineer our whole buying practices to do what smart commercial buyers do. Let me draw your attention, Mr. Chairman, to the lower right-hand side of this chart to describe what we mean here by this prime vendor contract.
In the old way of doing business, we would have each of our mess halls contract for food. They would buy food for some period of time because of our slow acquisition system, perhaps 6 months at a time, for bulk items. They would store that food in a warehouse, and then daily, our own transportation system would deliver food from that warehouse to our mess hall. That is the old thinking, the old way of doing business.
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We instituted this prime vendor direct program. What it does is establishes a basic ordering agreement with a volume discount for all the food that that mess hall needs. The cook the evening before breakfast calls up and orders breakfast. He can order breakfast based on the number of people expected to show up for breakfast the next morning. The food is fresh, we have eliminated our warehouse, and we have eliminated our base transportation system. So we not only improve the quality of the product, we have reduced the cost for doing that work.
We have taken this prime vendor process that we started for subsistence items and uniforms and now extended it to other areas, as well. We now buy our pharmaceuticals this way. Our lead time has gone from 27 days to 24 hours. We have reduced the inventory for over 170,000 items. Auto parts, also, we are buying this way now. The lead time has gone from 36 days to 7 days under the new systems. Helicopter parts, the lead time has gone from 270 days to 8 days and the cost savings is 70 percent.
So we are looking to see in how many different areas can we implement this prime vendor direct concept. We cannot do it in all areas. For example, when a carrier comes into port and wants to be replenished, we need to have some means of storing to be able to satisfy those big demands, but we can do it in more areas than we have done it today.
The next chart, please. I talked about the importance of commercial buying practices and reducing life-cycle costs. This, Mr. Chairman, is an example of a very recent award. It was made only about 3 weeks ago. This is an important program done by our Air Force called the Wind Corrected Munitions Dispenser Program. This is a dispenser that is designed to drop munitions from higher altitudes where the winds might disturb the accuracy of the impact points and it is designed to be able to compensate for winds and give us better accuracy.
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This program was designated in 1994 as an Air Force lead program and is a model for putting in place all of our streamlined acquisition approaches. It was based on early insight, operating as a team, rather than late oversight, and the whole program includes only two military standards on the contract. Aside from that, commercial practices are used across the board.
As we planned for this program, our estimated cost for each of these units was $25,000 and we expected to buy 40,000 of these units. When we put in place all of our commercial procurement practices for this program, the winning bid was $8,937 per unit. That is a 64-percent cost savings as a result of the commercial practice, and if I look at the life-cycle cost over 40,000 units, that is a cost avoidance of $850 million for this one program.
This is a very significant effort. It includes a 20-year bumper-to-bumper warranty and all our requirements were exceeded with the commercial approach to the job.
The next chart, please. Mr. Chairman, I was pointing out that all our attention is on new systems, or at least most of our attention. What I have depicted on this chart is our number of tactical aircraft in the inventory versus time. Nineteen hundred ninety-six, today, is illustrated by the bar in the middle. We have 4,200 of these aircraft in the inventory today.
I expect we together will be spending a large amount of time over the next few weeks in our hearings on the lower right corner of this chart, talking about the new systems that we have in development today, the F/A–18 E/F, the F–22, and the joint strike fighter.
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What I draw your attention to, Mr. Chairman, is the light blue above the bar. All of our attention is going to be focused on these new investment programs. It is important to focus attention on those because those will provide large expenditures in the future, but I submit we do not spend enough attention dealing with the operations and support costs of the light blue, those things which are in the inventory today, and one of the things we have looked to do is to put in place more systematic means to attack the support costs of those that are in the inventory today because every dollar we can take out of those support costs, we can put back into our modernization program, which we would like to see the funding increased for.
Let me illustrate for you just one example of the kind of things that are being done here. If I look at the next chart, here, I have picked just one example. This is a navigation system that is in our F–14 A/B today. This particular navigation system uses a mechanical gyroscope for navigation. It has a mean time between failure of 40 hours, so every 40 hours, as we maintain this airplane, we are replacing that mechanical gyroscope.
If we went to the commercial market today, we would find available a global positioning system, a GPS-aided inertial navigation system. That system will cost us some money to buy and install, but when we do that, it has a mean time between failure of 4,500 hours, 100 times better than the system we have in the field today.
So if you look at the curves, doing business the way we are doing it today, we are on the orange curve where we have an annual cost for maintaining the current systems. If we instead replace that system with the GPS-aided system, we have the green curve. We will spend some more money in the near term as we field this equipment in our whole fleet of F–14 A/B, but once the system is fielded, what you see is that flat line, where every year, then, that goes on we will be saving the money between the two curves.
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The problem is that it is very hard for us in the Department to spend $2 today to save $1 for each year 10 or 12 years running.
One of the things we did, Mr. Chairman, was took advantage of a program you provided last year, our Dual-Use Applications Program. That was a program that ended up with an appropriation of $185 million. Eighty-five million dollars of that, we are using for our dual use science and technology program. The new initiative we took this year is to apply $100 million to be able to take commercially developed subsystems and use this money, cost sharing with industry, to modify as necessary and test the commercial subsystems in our military systems, and if they work out, we can simply buy them on a commercial basis off the commercial shelf for this use. So this is taking an initiative to attack the life-cycle cost issue.
The next chart, please. The next issue, Mr. Chairman, we have all talked about here together for a while. It is the issue of program stability. Any company who is developing a new entity, who is making an investment, will plan some amount of reserves for that new investment. We in our Department of Defense have been operating systematically with a negative reserve each year for our investment program. Let me tell you, it is hard to manage a coherent procurement and investment program when you are operating with a negative reserve in that program.
What I mean by the negative reserve is illustrated in this chart. The first line, the black line on this curve, shows the FDP that we projected when we submitted our 1994 budget, and this was the FDP line for procurement. The projection in 1994 showed that when we got to 1998, we were expecting a procurement budget of about $65 billion. Each year as we made our new FDP projection, that number was reduced, so that as we were coming forward this year, the red line, our projection for procurement is about $42.5 billion.
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It has been difficult to plan each year when the future year's estimate has been reduced somewhat, so we are looking as part of the QDR for some fundamental measures to address this problem. This probably really is insidious. Let me illustrate it by the next two charts.
On a typical program, we experience the following kind of cost profile. We start out on the left-hand side in development and our expenditure grows as we begin to test the developed items and then put them into procurement at some numbers. Then the expenditure falls off as we support the system later.
The real occurrence is not the black but the blue. There is always some amount of growth in any program, unexpected things that happen. For a typical program, it is about 4 percent. That is for an ideal program. What really happens is shown on the next chart.
We start out on the black line, but as the result of various instabilities, other bills to be paid, the slip in the projections for procurement, we do not stay on the black line. We move to the red line. We take out the funds indicated in green to deal with contingencies or other issues. Then when we move down the curve, we also do not stay on the black and we do not experience the blue. We stay on the red curve, and what you see in the gray is the price that we pay for instability in the programs.
What we find historically is that every dollar we take out to restructure the program because of financial constraints or surprises, we end up putting $3 back in the program to deal with the instability. We really have to get after that. We do need to provide for some reserves and some contingencies in our program and we are looking at making a specific set of recommendations on those issues, Mr. Chairman, as we complete the QDR.
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Let me skip the next chart, if I may, and go to the second-to-last chart. Mr. Chairman, you also gave us the authority to conduct six pilot programs. Let me share with you just one example. These pilot programs have been very successful. We have used the authority you gave us and it is paving new paths for us.
This is a program called JDAM, the Joint Direct Attack Munition. The idea behind this program is to take advantage of the large number of dumb bombs that we have in our inventory and to add to each of those dumb bombs a smart kit which will turn this unguided bomb into a precision guided bomb with 10-meter or better accuracy. The idea of this kit is to receive the signals from our global positioning satellite constellation so the bomb knows where it is and into the computer in this kit go the coordinates of the target, and then there is a guidance system to make where the bomb is equal to where the target is to guide this with about 10-meter precision.
We knew we were going to buy a large number of these kits. We started off this program in the old way, before we had all the acquisition reform authority. In the old way of doing business, we put out a work statement that had a 137-page specification for the system and we had 87 military specs on the contract. We got the winning bid by doing this work the old way and the average unit cost for a production run of 40,000 units was $42,000 and we were reasonably happy with that. We thought that was a good price under the old way of doing business.
We then designated this as a pilot program, and I am citing this as an example because it is one of the few examples I have where we started the old way and we converted to the new way so I can make a comparison for you. When we did this in the new way of doing business, we wrote a two-page performance spec. We did not tell the contractor how to build it. We told him the performance that we wanted out of the system and we could do that in two pages. We have exactly zero military specs in this contract. We are doing it on a commercial basis.
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This go-around, the winning bid is $14,000 per unit. Once again, we have a commercial warranty on the program. Over the life of this program, we expect a reduction of $2.9 billion for this effort. So the pilot program authority that you gave us, Mr. Chairman, we have been pushing on very hard and you can see that it has paid off.
The last issue that I would like to address is our acquisition work force. Section 906 of the authorization act asked us to make a reduction in fiscal year 1996 of 15,000 people. We have beat that reduction, Mr. Chairman. We have reduced the work force by 23,802 this year. We expect to take it down another 20,000 or so next year.
I have plotted here two curves. The blue curve shows the funding that we have had for investment starting in 1980 and I have plotted the percentage change, going up to its peak in 1985 and down to where we are today in 1997. Plotted in green below that is the size of the acquisition work force, and I plotted this to show you two things, one, absolute number, and two, trends. What you see here is a lag in our system of correlating work force to investments. That is, when our budget grew and peaked in 1985, you can see it took us some time to grow the work force to deal with that budget. We have some delays in our personnel system. And you can also see that we had some delays in reducing that work force.
We today have reduced that work force more than 30 percent from where it was at its peak and we expect to take it down by another 25 percent or so, so that by the time we reach the turn of the century, the work force will be down to just about a half of what it was in 1989. So we believe, Mr. Chairman, we are complying not only with the letter but the spirit of what you have been communicating to us in reducing the size of the work force.
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In summary, Mr. Chairman, the Department has undertaken many initiatives in order to truly implement acquisition reform, to walk the walk in acquisition reform, not to just talk the talk in acquisition reform. We believe that external and internal pressures to be more effective and efficient have led us to improve and streamline our processes to acquire the systems necessary to support our mission.
As we have improved our acquisition processes, I also believe we are changing the environment in which we are operating. Our organizations, as I have shown you, are becoming smaller. We are moving to electronic-based centers, using integrated product teams of multiskilled professionals, focusing on balancing our tactical business concerns, our strategic visions, our war fighters' needs, and the affordability of those systems in the field.
Mr. Chairman, our Department is not finished with acquisition reform. What I am showing you today are very notable examples. These examples have not been propagated fully through our system yet. We still have work ahead of us to institutionalize this whole base.
The groundbreaking statutory changes that you have provided, the changes we have already made in regulations give us the foundation to do this work. What we need to do to achieve the additional cost reductions and efficiencies are to propagate this now through our whole acquisition system. This acquisition reform day that I mentioned, Mr. Chairman, to occur on March 19 of this year, is another one of those key steps of getting our whole work force together, making them aware of what is available to them, and changing this culture, not only from the top down but pulling it from the bottom up to have this process owned in the field so that the process will last far beyond the term of those of us who are serving in public office.
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Thank you, Mr. Chairman.
[The prepared statement of Secretary Kaminski can be found in the appendix on page 57.]
The CHAIRMAN. Thank you, Mr. Kaminski, and thank you, Dr. White.
You have given us, I think, more reasons why we need reform and how we can reform, Dr. Kaminski. You have especially told us a lot of things that you are doing and these are the kinds of things that we had in mind all along that could be saved, in the way of things that could be implemented. A lot of them come from acquisition reform that we have passed in the law the last couple years.
But if I might just for a minute give you an example of what my concerns are, Mr. Secretary, about the record of compliance with the specific congressional direction on these reform matters I referred to in my opening statement. Let me briefly review a few of the things that I am talking about.
Section 901 of Public Law 104–106 requires that the Department provide Congress with a plan to restructure the Office of the Secretary of Defense by March 1, 1996. Almost 1 year later, we are still waiting for this report.
The same section 901 also requires the Department to reduce the number of personnel assigned to OSD by 25 percent over 5 years and by 15 percent by October 1, 1997. To date, we understand that the Department will only reach a 5-percent reduction by the end of this fiscal year.
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Section 906 of Public Law 104–106 required that the Department evaluate, recommend, and report options by March 1, 1996, for streamlining and reducing the defense acquisition infrastructure with an eye toward reducing its size, its vast size and cost that we are talking about, Dr. Kaminski. This report did arrive, but 10 months late and failing to make any recommendations on reducing the acquisition bureaucracy as intended by Congress.
Section 904 of the same Public Law requires that the Department provide the Congress with a report by March 1, 1997, outlining the options for reducing the size and structure of military headquarters staffs. In checking into this the past few weeks, I understand that the Department has not gotten around to assigning responsibility for this report, much less writing it.
This is the kind of cooperation I have been talking about in my opening statement, Mr. Secretary. It makes it exceedingly difficult for Congress to continue to pursue these reform issues with the flexibility that we have been trying to provide you with. As you know, there are a few proposals floating around Congress that would immediately direct you to downsize and eliminate entire organizations and agencies without the flexibility that we have been trying to give you. We purposely deferred action on these kind of things, thinking that it is best to give you the flexibility to do these things on your own.
But in any event, given the track record so far on what we have done, can you kind of explain to me what happened?
Dr. WHITE. Well, yes, Mr. Chairman. As I indicated in my statement, we have been working on all these assignments and I sent you a letter indicating that what we were doing, that we would be late. We have put these efforts into a whole system, which includes the Quadrennial Defense Review, and looking at all of our needs in the Department. It seems to us, if we can do that, we will do a more cost-effective and efficient job of responding to your concerns.
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And as I indicated in my opening statement, with most of these, I think we will be responding to you, while late, and I apologize for that, we will be responding to you in the very near future. So we will be coming up with, based on the reviews that we are doing with respect to OSD, with respect to the service secretariats and other headquarters, we will be coming up with specific recommendations and suggestions for improvement.
The CHAIRMAN. Thank you.
In reference to your statement, too, in your remarks earlier about the depot problem, I do appreciate that and I understand we will have a hearing later on specifically on that, so this morning, we will not get too much involved in that question. We can solve that later on, or at least try to.
Dr. WHITE. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Dellums.
Mr. DELLUMS. Mr. Chairman, I choose to reserve my time.
The CHAIRMAN. Mr. Skelton.
Mr. SKELTON. Mr. Chairman, I have questions. I choose to reserve my time at this moment.
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The CHAIRMAN. Mr. Sisisky.
Mr. SISISKY. Thank you, Mr. Chairman. Thank you, gentlemen, for appearing today.
The Department's March 1996 report entitled ''Improving the Combat Edge Through Outsourcing,'' you know, I have been a little interested in outsourcing and privatization over the last year or so and you cite three conditions. No. 1, private sector firms must be able to perform the activity and meet war fighting mission requirements. No. 2, a competitive commercial market must exist. And No. 3, outsourcing must result in the best value to the Government. Is that still in effect?
Dr. WHITE. Yes, sir.
Mr. SISISKY. Now, would you please explain to me, No. 1, that private sector firms must be able to—the three things that I cited to you? How do you judge, can they meet war fighting requirements?
Dr. WHITE. Normally, what we do in this case is we conduct a review which looks at the internal operation. We go out into the marketplace and we do a study of whether or not there are a set of firms that can perform the function consistent with our needs, whether or not there are, as I say, a number of firms to assure that there is competition, and then do analysis based on our estimate from them of what it would cost for them to perform a function relative to what it costs us internally to perform the function. If all of those criteria are met and if at the end of the day they can persuade us that, in fact, it is cheaper while maintaining at least the same effectiveness, then we consider it a candidate for outsourcing.
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Mr. SISISKY. So you tie that up with No. 2, a competitive commercial market must exist?
Dr. WHITE. Yes, sir.
Mr. SISISKY. You do that?
Dr. WHITE. Yes, sir.
Mr. SISISKY. Let me cite an instance, if I may, that I have been a little involved in, and the Congress, too, by law, as a matter of fact. That has to do with the BRAC report which has to do with the Louisville Ordinance Center. Would you mind telling me who fixes 5-inch guns in this country and where the competitive activity—I mean, who would you bid it to, and where were the numbers that showed you could do it in the private sector cheaper than you could at the public sector?
Dr. WHITE. Well, I——
Mr. SISISKY. There were no numbers. This is according to the GAO now.
Dr. WHITE. Well, I have not looked at that particular issue in over a year, Mr. Sisisky, but my recollection is that there were such numbers, but I would have to respond for the record. I do not have that with me today.
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[The Department of Defense did not cooperate in providing a timely response for the record.]
Mr. SISISKY. Mr. Secretary, the reason I bring it up, it just seems a lot of activities are happening around here. It happened 2 weeks ago, when the decision was made to take 100 public sector employees and move them into the private sector. There was a political reason for it, and I understand that. All I asked was, what is the difference in cost? Nobody knew. They still do not know. I called the GAO—no figures on it. Either we are going to have these three things that exist or we are not going to have them. That is all I ask. The three things do make sense. But let us do it.
You know, one of the problems, and this is not your problem and I want you to understand that, but somewhere along the line, when people say that we have got to run the Department of Defense like a business, we have to realize you cannot run it like a business when political decisions are made. I do not want to get into the depots, but that is the best example that I know on political decisions. I mean, how in the world can you run it as a business?
All I ask for, under the law, A–76 and the other things, you should go through these and you are not doing it. That is what bothers me. You are not doing it and I can prove that you are not and you are violating the law. I have not said you, but somebody in the Department of Defense is violating the law in doing that and it just has to be corrected. This is absolutely wrong.
I have said personally, I understand privatization. There are some things that you can privatize, no problem with that at all. Prove it. That is all I ask. Prove it.
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Our committee on readiness, the travel thing, we approved that. A pilot program, it made sense. If you can save 75 percent, by golly, do it. Just prove it. Do not do it without any numbers, figures, or anything else.
And I will be glad to share with you what I am really talking about after this meeting, the things that are going on in this Department of Defense that are unconscionable. I cannot believe it. I get excited, and I try not to, and I know my colleagues will laugh sometimes, of not being parochial, but I cannot help it because these are life experiences. I learned from the people that are affected, and these are real life experiences that are happening and you are not following through on the very thing, the report that you outlined, and this is wrong. I just think it needs to be corrected.
The CHAIRMAN. Mr. Bateman.
Mr. BATEMAN. Thank you, Mr. Chairman, and welcome, Mr. Secretary and Dr. Kaminski.
Mr. Secretary, you have mentioned that the Department of Defense would not be outsourcing core depot work, if I recall the terminology. I think that cries out to have you respond to how are you defining core work.
Dr. WHITE. Yes, Mr. Bateman. That is something we, as you know, have continuing review and are re-reviewing, and as I requested of the chairman, I would like to come back and do that and do it in great detail, the detail that you require.
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Mr. BATEMAN. OK. Dr. Kaminski, you mentioned the JDAM program and the savings that were anticipated there. Has that system actually been fielded or have units in that system been fielded and are they performing according to the criteria that you laid down in the two pages?
Secretary KAMINSKI. Mr. Bateman, we have tested in excess of 10 units so far of the LRIF quantity and they have performed right as we expected them to perform, perhaps better. It is not yet fielded in numbers.
Mr. BATEMAN. But it is being tested——
Secretary KAMINSKI. It is being tested as we speak.
Mr. BATEMAN [continuing]. And it is passing with flying colors today?
Secretary KAMINSKI. Yes, sir.
Mr. BATEMAN. Let me mention a program that I have had particular interest in and which I have voiced some concern to you about, but I think in the context of acquisition reform and the good things that you are talking about, I am still just absolutely amazed that the procurement decision with reference to the LPD–17, where the award went to the high bidder on criteria that just do not pass the commonsense test and which have the potential of costing us millions and millions of additional dollars.
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I understand and recognize that the award decision is subject to a formal protest with the General Accounting Office and I do not know how much you can comment or what latitude you have, but if any acquisition decision ever cried out for reevaluation and for undoing, it is certainly, I think, that decision. It just has been, I think, one of the most appalling procurement decisions that I have ever been aware of.
Secretary KAMINSKI. Mr. Bateman, I did look at that decision personally. I think, certainly, this will be resolved at protest. It is at GAO. I expect that we will see a ruling on the merits of that protest here within a matter of a couple of weeks.
Mr. BATEMAN. You would do the Department great credit if you would just forestall and obviate the necessity for the protest going forward. Thank you.
The CHAIRMAN. Mr. Ortiz. Ms. Harman.
Ms. HARMAN. Thank you, Mr. Chairman.
I want to commend you for holding this particular hearing so early in the authorization cycle and commend both witnesses for extraordinarily good testimony. In my view, this subject of defense reform is not just critical but it is the centerpiece, I think the centerpiece, of what we could hope to accomplish in this congressional session, because if we fail to do this and fail to pursue all the leads that were discussed today and fail to be bold here, we will never, and I repeat, never, have the option of enhancing our procurement accounts and, I think, really providing for our national security needs for the future.
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So I am extremely enthusiastic about the issues that were laid out, I think very creatively and with great passion by our witnesses and I want to say just for one member that this is where I will focus a lot of my attention over the 2 years and I want to commend you and the staff on a bipartisan basis for paying so much attention to it in the last Congress.
I just have a couple of questions because I thought everything laid out was headed in the right direction, but several things that were laid out, I think, raised questions.
Dr. Kaminski, you talked about something that, I think, bothers all of us, which is life-cycle cost, and I heard you to say that life-cycle cost either is or increases 50 to 60 percent after fielding a system, and for those of us who have tried to get new systems fielded from time to time, they suffocate in these projected life-cycle costs. So one question I have to you is, I know this is an area of reform, but what do you have in mind in the short term to do about life-cycle costs?
Second, you did have a chart up about the dual-use technology reform process which many of us contributed to last year. I know that our statutory language required you to set up a dual-use czar in your office and that person was to help change the culture in the services so that a percentage of the R&D budgets could be devoted to this dual-use acquisition process. I would like to know, where is that and how optimistic are you about the chances that it will succeed?
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And finally, you both mentioned the QDR and the importance of the QDR. I would like to ask both of you whether there is anything more any of us can do to push you to be as bold as possible in making the QDR a document that really finally changes the way the Defense Department does business, reduces the tail so that we can apply savings to the tooth.
Secretary KAMINSKI. Do you want to start on the QDR?
Dr. WHITE. Let me just start, if I may, Ms. Harman, on the QDR. I think you, and anticipate and hope that you will, in fact, be pleased with our response. First of all, the Secretary has emphasized that we are looking at everything and I can assure you, because I spend a lot of time in these meetings, we are. Things that we would never have looked at before, we would have said they are politically too hard, we are not going to talk about it, we have on the table and we are examining.
Second, we are committed to being on time to the Congress with a full report. That report will contain, based on the Secretary's decisions, I am sure, an array of very specific proposals in terms of where we anticipate we ought to create change. Some of those changes will not be popular. They will be difficult. But I think we will display to you the requirement to reallocate resources in order to increase our effectiveness now and particularly in the future.
Third, we have, through the law, a national panel, defense panel, that, in fact, is convening. I am going to meet with them, I think it is today or tomorrow. I have already met with the chairman. And they are, of course, committed under the law, and I know, because I know the individuals involved, they are actively committed to pushing us and questioning us in terms of where we are going.
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And finally, I would respond that the Secretary has directed me to come up with a plan, an interim plan that will assure that we have close consultation with the Congress between now and May 15, so we will be back up talking to you.
Secretary KAMINSKI. Ms. Harman, if I might respond to your question about DUAP and life-cycle costs, if I might put this chart back up, our DUAP program has two pieces. Let me first talk about the dual-use S&T piece. We structured this program not only to the letter but, I think, to the spirit of the discussion and direction we had from Mr. Weldon and yourself as we went through this program last year. What you were really telling us is that you wanted this program institutionalized in our services, and so the way we structured the S&T piece of this this year created incentives to do this.
First of all, we did put a person in charge, as you directed, and that is Lee Buchanan, and we did bring the services into a steering group, which I chair. And the way we set up the $85 million that goes into the dual-use S&T was to take all the lessons learned from the TRP program in the last round but to make two fundamental changes. The first change is that this is implemented by the services, not by OSD. The second change is to create some incentives for the services to institutionalize this.
The way we set this up, the legislation required that this be a matching dollar program, that every dollar of DOD funding be matched by the commercial sector who is participating. I set this up to create 4-to-1 matching for the service. So each service has to come forward with a proposal, and for their $1, if we accept the proposal, they get an additional $1 from OSD from this DUAP account that was authorized and appropriated, and then they get $2 from industry. So by our carrying this program in an OSD line, the services get 4-to-1 leverage for their program.
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We were continuing this program. You will see a request for an additional amount on the same terms in fiscal year 1998. That is the last year, I believe, we will need to be carrying this program in an OSD line. I think the services will see the wisdom of leveraging the commercial technology and have two years of experience to do this work.
I think we are doing what you asked us to do, to find a mechanism to incentivize and institutionalize this in the services.
The second piece of this was probably the more creative piece. It is what I call the put your money where your mouth is piece on attacking life-cycle costs. As you correctly stated, 60 to 70 percent of the life-cycle costs for one of our major weapons systems is incurred after the system is fielded and there are not enough incentives for us in the Department to go after that. So we took the $100 million that was appropriated and looked to leverage that in the same way, where the services, in essence, have the ability now to use these funds to test out a commercial subsystem or component. Maybe it needs to be modified a little bit to be inserted into our military system and to see if it works and they will be cost-sharing that with industry. So this is a pool for industry to be offering their commercial off-the-shelf components to fundamentally attack life-cycle costs.
The CHAIRMAN. Thank you.
Mr. Hansen.
Mr. HANSEN. Thank you, Mr. Chairman. Thank you for recognizing me.
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Let me just say, Secretary White, I am a little concerned about what I see as rather a dangerous trend. It seems like this administration is going to increase spending by 50 percent and do it all by closure and privatization, and that is quite a concern to me as I look at that.
I notice that Mr. Bateman asked the question of what core is, and I know you want to talk about that at another time and I think it should be discussed because core is to the eye of the beholder, as I see it. If last year McClellan had 63-percent core and nothing has changed and now they have zero-percent core, anybody who wants to make a definition can come up with their own definition and change it around and I think that is kind of disturbing.
I honestly think that this administration and the Pentagon is making some dramatic mistakes and one of those is the interpretation of what the BRAC Commission found on privatization of employees. In the last meeting, we had Secretary Cohen here and General Shalikashvili and it seems like all the way back to Dr. Perry, we get the same old stuff. Well, we had the option of closing or privatizing in place.
Well, somebody reads this thing differently than I do. That does not say that in here. It is abundantly clear what it says. It says, the Commission found that the significant excess capacity and infrastructure of the Air Force depot system requires closure of McClellan Air Base. You go over two pages further and it says, if they are going to privatize, they do it at the private place, not privatize in place.
So you folks are spending big, big bucks. The GAO came up with their cost comparison that said you are spending $700 million to do something that is a waste of time. Immediately, Basilio and others come back and say, well, that is not our idea. Then, lo and behold, we get a report from the Air Force that agrees with it, that they go on with it. Well, we have that kind of money to burn. I kind of doubt it.
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Now I look at the example everyone throws at us about Newark being such a wonderful place and a just-completed cost comparison study finds that the estimated costs of the contract and alternatives is $27.3 million more than the organic alternative. That is a 78-percent increase.
So when I start hearing all this good stuff about how wonderful it is all going to be, how can we waste $700 million on this privatization in place, how can we waste all this $27 million at Newark? Let us get honest about it. It is a political thing. You guys won. You got the President. He is our man. Why do we not just drop this issue and go on with the important things?
Dr. WHITE. Well, as I mentioned earlier, Mr. Hansen, we will provide you with some more detail in terms of core.
With respect to the BRAC Commission, there was an issue at the time whether or not this was appropriate. I asked the chairman of the BRAC Commission. He sent me a letter that says it was appropriate. I will be happy to submit that letter.
Mr. HANSEN. I have copies of it I will be happy to distribute to you, the copies I got from the chairman of the BRAC Commission and all of the people who sat on that Commission.
Dr. WHITE. I have a letter from the BRAC Commission. That is the best I could do, Mr. Hansen.
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With respect to the GAO report, let me make one very—I do not know about the Newark report. I have not seen it. I take some exception to the other report. But let me make a very important point, if I may. The issue with respect to McClellan as it relates to competition, not privatization in place, competition, we are competing the work public and private. It need not stay there. We do not have—we are not allowed to follow any other rules for these sites than we are any other sites. But we can go through in detail how we are doing it, but, in fact, it is a standard competition under the rules.
Mr. HANSEN. The competition you are referring to, you feel it is a fair competition between the private and the public?
Dr. WHITE. Yes, sir.
Mr. HANSEN. Do you feel the one that says they have to do it in place is a fair one?
Dr. WHITE. I will have to go back and look at the details.
Mr. HANSEN. I wish you would, Mr. Secretary, because I do not see how—that eliminates one of the players, the way I look at it.
Dr. WHITE. But it does not say we have to do it in place. We cannot proscribe that it be done in place.
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Mr. HANSEN. Let me ask you this. Do you folks pay much attention to the Defense Science Board?
Dr. WHITE. I am sorry?
Mr. HANSEN. Is the Defense Science Board an important part of what goes on——
Dr. WHITE. They provide us with some very useful advice.
Mr. HANSEN. Do you realize what they have said, avoid privatization in place as this approach often results in the preservation of surplus capacity. Their entire report that I have in front of me, the task force strongly urges DOD to avoid privatization in place. As a result, privatization in place often results in the artificial preservation of surplus capacity and utilization of resources.
I just stand amazed. Every time I come in here, I hear all this stuff, and yet somebody keeps avoiding what the law says. I am amazed, especially on the BRAC Commission, that anybody can read the BRAC decision put out and privatize McClellan and San Antonio. That just does not say that, and I personally respectfully point out, you are in violation of the law.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you.
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Mr. Ortiz.
Mr. ORTIZ. Thank you, Mr. Chairman.
Mr. Secretary, I have been a supporter of defense acquisition reform in the past and I am anxious to hear how the initiatives instituted by this Congress in the past few years are progressing. As you know, I have supported privatization initiatives where they make sense, such as in the area of housing. One of the Pentagon's first private sector housing projects, as you mentioned, is underway in Corpus Christi.
But I am concerned that we are headed down a road that could endanger the very national security of our country. Adequate housing is important to the quality of life of our troops, but if we do not have it, it will not stop us from going to war. But if you cannot fix a helicopter or a tank or an airplane, you cannot go to war.
Mr. Secretary, I am convinced that if the Pentagon continues down its current path, before long, it will not be able to fix that helicopter, that tank, that airplane because its policies will have destroyed our organic depots, among them which is Corpus Christi, the largest helicopter repair facility in the world.
Just yesterday, before the Readiness Subcommittee hearing, we heard that the Navy has a maintenance backlog of 500 aircraft engines. Those engines are repaired at the Corpus Christi Army Depot. But now, I have information that shows that the Army will end up with zero engines into the Corpus Christi Army Depot during the next 3 years, and that is none of the engines will be coming to Corpus Christi.
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The Army said yesterday that the work is being privatized because the Army does not have the skilled labor to perform the work. But I know for a fact, Mr. Secretary, that the people who are turning wrenches at Corpus Christi Army Depot for the contractors are the same people who were working at Corpus Christi Army Depot as Federal employees a few months ago.
Sure. When you cut down skilled workers at the Army depot and you contract out people, you do not have skilled labor because they are out. It is not that the skilled labor is not there. It is because the Army has let people go at Corpus because it has been forced by the Pentagon, new policies to manage this labor force by end strength rather than by workload, and that, Mr. Secretary, as I believe it, is a violation of Federal law.
The Army's aviation assets that are all core requirements, yet the Pentagon continues to violate Federal statute by sending these major war fighting systems out to the private sector for maintenance. Just this morning, I was late because some of the work, as I understand it, being done at the Corpus Christi Army Depot, the contract work, they do not have anybody testing the equipment once it is repaired, and what is my concern is once the contractors do the work, they put the label that it was repaired at the Corpus Christi Army Depot by the civil service employees and it is not.
If you have a Navy vessel someplace and it stops, that is fine. You can get help. But when the helicopter is not repaired right, it crashes. It kills people, and I am very concerned.
You know, something that concerns me is that there is no way that we can all get past the law. You will find a way to divert the money by going around the program budget, the directive, the PBD–21. And I know that a lot of money, just trying to get around the 60–40, has gone from maintenance to procurement.
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I am very concerned. We want the strongest defense, the best readiness in our country, but if we go the path we are going, Mr. Secretary, we are going to have a lot of problems. This was more in a form of a statement, but maybe you can try to respond to my concerns about the readiness of our country, the readiness of our troops and our equipment.
Dr. WHITE. Well, let me just say, Mr. Ortiz, I share with you your concern. We obviously will not do anything that in any way jeopardizes the safety of our people. I cannot speak to the specifics of what it is you are referring to in Corpus Christi, but I will certainly look into it and satisfy myself that we are, first, following the rules, but most importantly, doing what is safe and appropriate for our troops.
Mr. ORTIZ. Thank you very much. I guess as we progress along, we will be asking some more questions, but thank you, Mr. Secretary.
Dr. WHITE. Yes, sir.
The CHAIRMAN. Thank you, Mr. Ortiz.
Mr. Weldon.
Mr. WELDON. Thank you, Mr. Chairman, and thank you both for coming in.
Dr. Kaminski, I understand you have announced that you will be ending your service sometime in May. I guess you will be back before us again, but it has been certainly a pleasure to work with you. I have the highest respect for you. You have been a very professional leader that I have enjoyed working with and who I, at all possible times, have felt confidence in the process. While I may not always agree with you, I have felt that I have confidence in the way that you approach your position and the ultimate goal of providing better R&D at a more cost-effective rate, and especially your work last year, as you mentioned, in the dual-use program was very responsive to our request in the Congress.
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But I cannot help but sit here and take in the bigger picture of what we are all about here with acquisition reform and acquisition costs. The only thing that has come to my mind is that it seems to me that we are penny wise and dollar foolish, and the reason why I say that is that here we are, talking about savings that I applaud and the kinds of things that you are doing are necessary, I support, and the examples that you have given are fine.
But then, if we look on the other hand at what is happening, as we have seen this administration not fund acquisition programs, I say that we are dollar foolish because if you look at the big-ticket programs coming down the pike, all you have done—and when I say ''you,'' I do not collectively mean the two of you here, although Secretary White is involved in more of these decisions, certainly, than Dr. Kaminski.
You take programs like the Comanche. The Comanche originally was supposed to cost $36 billion. Because of the administration's lack of focus on an aggressive acquisition buy, that cost is now $45 billion. It takes a lot of $7,000 savings on individual items to make up $9 billion.
The V–22, because you are starving the production rate now, the estimated increased cost is $8 billion over the life cycle of that program. It takes a lot of widgets to be bought off of the shelves to pick up $8 billion.
What you are doing is you are transferring all of these costs to some other administration and some other Congress, which is going to be impossible for them to deal with. If you look at the savings to Congress, this committee, in a bipartisan way, this committee were the ones who forced this administration's hands in terms of the LPD–17 and the LHD–7. Those two procurements alone being sped up by the actions of this committee saved us $1.5 billion that this committee took.
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So here, we talk about acquisition reform, and then we look at the growth in personnel of OSD alone—we had some charts up, so I thought I would put a chart up—there is the actual reduction in active force structure since 1985 through 1997. Look at the growth in the increase of staff within OSD. It is amazing. So I support the effort to not just cut the purchasers, as our chairman, Mr. Hunter, has suggested, but also the staff within OSD, but it has to go beyond that, and let me tell you what has got to happen.
For real acquisition reform, you have to bite the bullet, and if you do not bite the bullet, you are shortchanging the future of this country. What do I mean by bite the bullet? I think you had better suggest that we terminate some programs, and I will take your suggestions, but not continue all these programs and have a new attack submarine, another aircraft carrier, more DDG–51's, the Comanche, a V–22, a Joint Strike Fighter program that you cited that both the Congressional Budget Office in a report that I, in fact, requested which I released 2 weeks ago, supported by the General Accounting Office, now says it is impossible for us to meet because in the out years, the cost of tactical aviation is going to go from between $14 and $17 billion a year. We are currently spending $2.8 billion on tactical aviation. Who are we kidding?
You are letting all these programs, the Army Battlefield Management Program of the 21st century, continue to plod along as we starve them so that somebody else has to make the tough decision.
My suggestion to this administration is, bite the bullet. Recommend we terminate some programs or recommend dramatic downsizing in infrastructure in terms of personnel. And if you are not willing to do that, then cut environmental costs. It is $12 billion out of this year's defense budget. Focus on acquisition reform in that area and reduce environmental costs.
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And if you cannot do that, start paying for the deployments and start budgeting for them. I mean, we are spending $3, $4, $5 billion a year in Haiti and Somalia and Bosnia, much of it not being reimbursed by our allied partners. If we are not willing to make those kinds of tough decisions, if we are not willing to step up to the plate, then I think we really are being penny wise and dollar foolish, and the worst part about this is we will struggle through this year and we will get a defense budget that, as the media calls it, treads water, but we are really shortchanging the future of this country because we are not going to be able to afford these programs in the out years.
And if you recommend terminating programs as you have done, I will support you. As the chairman of the R&D, I took the tough position of voting to cancel the B–2 program on 3 consecutive years and I will do it again. But I am not going to go back and say, well, let us build one more because it happens to be an election year. I was the one who supported the base closing process, even though the Philadelphia Navy Yard was No. 1 on the target list to be closed and it was closed and cost 13,000 constituents from my region their jobs.
We have to make those kinds of decisions, and until you are prepared to do that, Mr. White, and until the new Secretary is prepared to do that, the savings you are talking about here is minimal and it is not going to have, in my opinion, any significant impact on the problem that we are going to face over the next 10 years.
Dr. WHITE. If I may just give a general response, Mr. Weldon, as I mentioned earlier in my statement, as we look at the Quadrennial Defense Review and as we look at our modernization and investment program, we think we have to readjust that balance. That will probably mean when we come out of this review trying to spend more money on investment relative to what we are spending today. At the same time, we are looking at all the modernization programs to see whether we ought to cut some.
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As I also indicated earlier, it is our judgment, at least as of today, that while we will need savings to reallocate funds, we will not find enough in outsourcing and other sorts of economies and reforms, as important as they are, to make those adjustments, so we will need your support in terms of making some very tough decisions with respect to stopping programs, changing other parts of our overall program in order to afford our priorities as we see them going forward.
Mr. WELDON. May I make just a quick response to that, Mr. Chairman?
I will support you in the recommendations you make and I will help in that area, but I also want a commitment that you will look closely at finding ways for us to reduce environmental costs, which are now the fastest growing part of the defense budget, at $12 billion a year, and that you will look forward to working with us to help in the burden sharing of these allied deployments around the world which are eating up dollars that should be going for modernization. I will also look forward to working with you not in terms of rhetoric but significant reductions in the staff at the Pentagon, as well as significant reductions in the purchases of our supplies and equipment. Thank you.
The CHAIRMAN. Thank you.
Mr. Snyder.
Mr. SNYDER. Thank you, Mr. Chairman.
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Dr. Kaminski, I want to spend my 3 or 4 minutes here talking about the culture and the cultural change that you discussed. I was trying to come up with a definition of culture and the best I came up with was collective assumptions and values. I assume that within the last 50 years of the cold war, people were not sitting in these agencies saying, let us think of the best way—our value is to spend 5 times what items cost.
So could you describe for me in a little more detail—I would also be interested to know how many employees are going to participate March 19 and what is the agenda going to be? I mean, what are you all going to talk about?
Secretary KAMINSKI. With respect to the culture, what has been institutionalized over a number of years is very conservative behavior. There have not been very many rewards in our system for people who have cut corners and taken some risks to deliver something faster or cheaper. But when somebody makes a mistake, when some problem happens, there is a big GAO report, a big focus, and people get penalized in the system.
What that convinces people to do over a period of time is to operate safe. Do not cut any corners. Follow every possible step in the regulations and be safe. We have institutionalized that over a period of time. I think in our regulations, even in some of the law, what we have put in place is a process that is sometimes described as a process that spends billions to avoid wasting millions.
Mr. SNYDER. Is part of it the promotion policy? Have people been promoted by playing it safe as opposed to not playing it so safe?
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Secretary KAMINSKI. That is certainly a factor in terms of being associated with an effective program. I also think the other thing we have done is put layers in the process, various layers of review, independent review of the contractors' work, several layers of review in the service. By the time a program typically got to me, the program manager may have given 40 briefings and each one of those changing the program in some way.
So what we have put in place to start to adjust that culture is to really implement the process of integrated product teams, an integrated team who is working on this from day one. That includes the reviewers at OSD, the program manager, and on some of these efforts, the participating contractors operating as a team.
The benefit that that has had, if I look at the cycle time from my viewpoint down, in 1994 when these 40 briefings had occurred and a decision came to me as the chairman of the Defense Acquisition Board, the board met, we made our decision. It took, on average, 23 days for my predecessor to be able to sign the acquisition decision memorandum. There were those many problems or issues still to be worked through.
Since we have put this integrated process team effort in place, the average time from the Defense Acquisition Board meeting to the signing of the decision memo has now gone to two days.
Mr. SNYDER. And how many employees are going to participate on March 19?
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Secretary KAMINSKI. I would expect, in one way or the other, we will probably have something on the order of 70 to 80 percent participation.
Mr. SNYDER. What does that mean in total numbers?
Secretary KAMINSKI. The total number of people in acquisition are about 300,000. That includes test and evaluation, our science and technology community, our procurement officials.
Mr. SNYDER. I am curious about what the attitude of these folks must be. Are you all entering into it as if this is the next step or is it, we are doing it well, we are still not there, we are not cutting it, you all are still being too safe, too conservative? I mean, what——
Secretary KAMINSKI. Let me share with you what we did on the last stand-down day. On that day, I arranged for three communication paths to occur. One was top-down, from all of our acquisition leadership, describing what had been done in the changes in the law, what had been done in the changes in our regulation in our 5,000 series, and what did we expect in the way of behavior of the work force. So that was a top-down message.
We then created a path for bottoms-up, for the workforce to come back to us in a 90-day period of saying what was not working, what barriers did they still have in implementing what we wanted them to do.
Those were useful, but the most useful of the three paths was a horizontal communication path, a period in which peers were allowed to share with their peers their accomplishments, things that they had done and things that had worked. That ended up being far more important than I had guessed. Many people who are in this business are not in in it for the money. They are in it for rewards and recognition of their peers, and when the peers saw what had been done, I found that even in my own staff, members of my own staff not knowing what corresponding members had done, that horizontal communication path was the biggest element. So I have taken that to heart as we have structured this next session.
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Mr. SNYDER. I will just make one final comment. As a first year, we have a lot of these orientation sessions and one of the speakers we had, whose name I would tell you except I do not remember, made the comment he thought it would be worthwhile to have entire hearings just on the culture in the armed services and so we can start talking about cultural change. I picked up on that.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, sir.
Ms. Fowler.
Ms. FOWLER. Thank you, Mr. Chairman.
I appreciate your being here today. The Secretary and I have already had a discussion earlier this morning on some of these issues, so I will not dwell on my favorite topic that people know here, which is the depots.
I would say that I know the Secretary has stated his willingness to come up and have a more indepth discussion with the committee on that. I would hope that the chairman or either Mr. Bateman, the chairman of the committee, would follow through on that. I know we are going to have a subcommittee hearing on the depots, but I think it would be good for all of us if Secretary White could be a part of that procedure or another hearing because there are a lot of concerns we have that have been expressed today.
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I think I share Mr. Sisisky's points that we all here on this committee pretty much support privatization and outsourcing, but it is when the requirements that were in your report, the report on improving the combat edge through outsourcing, those three requirements, as long as we see they are being met, we do not have a complaint.
We are having a tough time seeing that those three requirements that you set out in your report, that they are being met, and when we have reports coming forward from GAO and when the Air Force Materiel Command itself says that you are losing over $600 million, it is going to cost over $600 million to privatize in place Sacramento and Kelly. I look at your testimony today, when 200,000 out of 300,000 housing units for our young men and women in the service need to be renovated or replaced and I think of how much housing we could provide for our young people with that $600 million that we are throwing away for political reasons.
So, I do think we need to have some indepth look at this and concern over what is core. Mr. Bateman raised that. What we are hearing is that there are redefinitions of core occurring as this workload at Sacramento and Kelly are being competed and that makes a tremendous difference. I mean, if it was core a year ago but it is not core today because now it is going to be competed in a different manner instead of being transferred to public depots, because when I see that there is a chance that workloads like the F–100 and the F–110 engines, which are key to operating our F–14's, F–15's, and F–16's, those might be being done in the private sector and are not considered core, I think we need to really be looking at that. So, I would hope we could have a more indepth discussion on that later.
I would like to ask you, Mr. Secretary, I was recently in the Pacific and I know you are looking at anywhere you can to save money and I commend Mr. Kaminski on some of the efforts you have been making. We need to go further, as I agree with Mr. Weldon.
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I was told that we, last year alone in the Pacific Command, that our forces were involved in 301 exercises and 101 training events with nations in Asia and the Pacific and the level of compensation that we received for this was minimal, that we were underwriting this. We have over 400 exercises occurring in 1 year, and I would suggest that this might be an area that we could look at.
While it is very important that we cultivate our friendships and diplomatic relations in that part of the world, when these are exercises that are not a direct benefit, a direct relation to our military readiness, then I would think these other countries should be helping us underwrite the cost of those or we should even be cancelling quite a few of them. So, I would hope that is one area that you would be looking at for saving some money.
Dr. WHITE. Yes, ma'am; it certainly is. We are looking across the board at operations and exercises in particular, because we do not think in many areas we have established adequate criteria to judge when, in fact, we ought to say ''yes'' and when we ought to say ''no.'' In some areas, I think we are overdoing it.
Ms. FOWLER. Good. I appreciate that because I think we need to look at those and other areas that are places we could be saving money and continue to put it where we need to.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, ma'am.
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Mr. Dellums.
Mr. DELLUMS. Thank you, Mr. Chairman.
If you gentlemen recall, I mentioned that I thought there were three important objectives for this hearing and I would like to reiterate the third. I said, finally and perhaps most importantly, we also need to understand the obstacles and impediments to implementation and how we, the Congress, can help. I would like to go down that road with you a little bit.
First, I am wondering out loud whether or not some of the problems that we here in the Congress articulate are problems to which we contribute. For example, most recently, my distinguished colleague from Pennsylvania had a chart up that pointed out how OSD staff is expanding, and I am wondering whether or not, when Congress mandates streamlining, downsizing at the service level, that at some point above that level you have to consolidate to continue to carry out that function, as to whether or not that also contributes to OSD expansion.
For example, you also have a very large program to which many of my colleagues on this committee are extremely interested in and that is the expansion of the ballistic missile defense program and ballistic missile defense organization. As I read the table of organization in OSD, that is exactly where this program has gone.
So, I am wondering whether or not my colleagues have created a problem and then chosen to bang on the problem, maybe not really fully understanding that in many instances, we have contributed to the problems that they have articulated, and so you get a chart that says OSD is expanding yet the ballistic missile defense organization is totally in OSD. We mandate certain streamlines. They then have to be consolidated somewhere. If you take them out of the services at the active duty level, you consolidate them in OSD. Somebody has to do them. They do not just happen by osmosis. Then you find the chart expanding and then we suddenly say, look, you are expanding. That is No. 1 that I would like you to respond to, and then I want to come up with another example of a concern that I have in this regard.
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Dr. WHITE. Let me ask——
Mr. DELLUMS. Am I going down the wrong road or is this proper?
Dr. WHITE. Let me ask Dr. Kaminski to respond specifically to the BMDO issue. There is an element of that sometimes in terms of the restrictions we have from the Congress and when we come forward with our review, we will highlight where there are restrictions. As I indicated in my opening statement, we will be back to ask you for relief.
But I also want to take the opportunity to underline that this committee has been very supportive of us in terms of our streamlining, in terms of forcing down our numbers, in terms of encouraging us to go through these reviews. So I think there is a lot to be said on the positive side.
Secretary KAMINSKI. I would second what Dr. White said about the value of the assistance that we have gotten from this committee in setting some targets and moving to those targets.
With respect to the OSD and BMDO issue, Mr. Dellums, there has been some factor along the lines you have described. I will tell you that I have tried to mitigate that factor in the following sense. What I am looking for the BMDO to do for us is to serve in an architectural function, to make sure that the various elements of our ballistic missile defense systems are done in coordination and play together and are done under a central architecture and then to allow various service program offices that already exist to execute their skills in a decentralized way executing elements of that program.
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So, for example, if we looked at a program like the PAC 3, that is being executed by an Army acquisition office but BMDO has responsibility to make sure that will plug and play with the rest of the systems and they have responsibility to oversee the funding to be sure that the program is on the appropriate path.
In fact, we have stood up a new office which will add a little bit to the problem in the way you described, to be able to coordinate in a better way than we are doing today air, ballistic missile, and cruise missile defense. The systems that we field, many of the individual systems could have capability against two or all three of those components. I do not want to spend the money to try to set up architectures to do each one alone.
The system that we set up as a Department must play like a symphony here. The various elements must talk to each other. The battle management and CCC systems have very high leverage in doing this, so we will pay a small premium in both the BMDO and we have set up a new organization in the joint staff, so-called JTANDO, to do this job jointly across all the services, so we have one common set of requirements and one architecture that will do all this job and that combination will add a little bit to this base.
Mr. DELLUMS. Well, I thank you gentlemen for your answers. I could have also mentioned that we have mandated streamlining. You have taken the finance out of the services. You have had to move that up, travel up to the services, other things up to the services.
As I understand the answer to my question, you are saying this committee has been significant in mandating certain streamlining efforts that you have agreed to carry out. The extent to which they cause your office to expand, you, Dr. Kaminski, have indicated you try to mitigate that to the maximum extent possible. But I would just like Congress to understand that on the one hand, we somewhat contribute to that problem.
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In that same regard, let me ask this question, and I do not have the answer to it. I know that a number of my colleagues have raised the issue of depot maintenance, even though there is going to be another hearing, that this will be aired out in another venue.
Let me ask this question. Is it mutually exclusive if, on the one hand, Congress mandates a reduction in acquisition-related activity, acquisition-related work force on the one hand—can that requirement on the one hand that Congress mandates then hold harmless any other acquisition-related activity? Do you understand the question?
Secretary KAMINSKI. I think I do.
Mr. WHITE. Go ahead.
Secretary KAMINSKI. Let me respond, Mr. Dellums, to one particular piece of it, to share with you one concern. I think what we have been doing in reducing the size of the acquisition work force has been constructive, as we streamline, as we put in place effective, integrated product teams. We can do more with less.
But one of the issues that does concern me is that we have been downsizing primarily by taking people of retirement age out of our system and we have not been hiring new people. We are not going to end up over a period of time with the right age distribution in our work force.
Mr. DELLUMS. Let me ask you a question more specifically. On the one hand, Congress has mandated what we should do with respect to depot maintenance, on the one hand, and on the other hand, Congress has mandated reduction in acquisition-related activity and acquisition-related work force. Are those two mandates mutually exclusive? Are they in conflict, or can they operate side by side? Am I directing the question more specifically to help you understand what I am trying to say?
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Secretary KAMINSKI. Yes. If we add up the total numbers in the acquisition work force, if we count that component of the work force that is in the depots, that is about 107,000 people today. So if one puts constraints on the total acquisition work force and includes the depots in those constraints, you are really heading for exactly the issue, Mr. Dellums, that you illustrated. That is, if you held a core piece intact and did not allow any downsizing beyond that core and yet kept putting pressure on the overall work force, that would cause an unfair burden to be placed on that piece of the acquisition work force that is outside of the depots.
Mr. DELLUMS. Thank you. I just wanted to raise that issue again under the rubric of sometimes we mandate things that may run counter to each other or create at least the initial impression of conflict and at some point they result in that regard.
My final question is to go back to the general question that I raised, and that is, are there impediments, issues, problems, that you confront in carrying out these reform efforts that Congress now can better assist you in carrying out with greater efficiency and effectiveness?
Dr. WHITE. I think there are, Mr. Dellums, and we anticipate that in the Quadrennial Defense Review, which is now not that far off, we will give you not only a list of specific initiatives that we want to take but a list of impediments, including legal and other impediments and suggestions with respect to how to change those impediments.
Let me also underline in that regard what we want to do, of course, is work with you in terms of finding the best way to do this, so we are going to consult, as I indicated to Ms. Harman earlier, we are going to consult along the way so that we all know where we are and get your guidance in terms of how to present this in the most constructive way so we can all find a solution.
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Mr. DELLUMS. Thank you very much.
Thank you for your generosity, Mr. Chairman.
The CHAIRMAN. Thank you, Mr. Dellums.
Mr. Bartlett.
Mr. BARTLETT. Thank you very much.
Some years ago, Dr. Parkinson noted that as the British Navy shrunk in size, the British Admiralty became relatively larger. Apparently, history is repeating itself. Here is a chart of data from the General Accounting Office and it shows the DOD acquisition work force and the procurement spending. If we look at years 1985 and 1994 and look at the numbers over on the right-hand side and do some simple division, you find out that in 1985, it took about 4 1/2 people to purchase $1 million worth of material or services. In 1994, it takes nearly 10 people. We have about twice as many people in 1994 to procure $1 million worth of acquisition for the Air Force and about 4 1/2 people in 1985.
My question is, Is this, as Dr. Parkinson noted, an inherent frailty of bureaucracies or is there something we can do to keep this from happening? This is particularly a problem in this downsizing as we have less and less dollars for the military, relatively more and more of it is going to administration and less and less of it is available for procurement. Can we do something to change this or is this something just inherent in bureaucracies that we have to live with?
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Secretary KAMINSKI. Mr. Bartlett, I do not believe this is inherent in bureaucracies and that we should live with it.
Mr. BARTLETT. It has been true for a long time, apparently.
Secretary KAMINSKI. Let me first, though, make what I think needs to be two corrections to the figures. The acquisition work force is not only doing procurement. They are also doing all the research and development. The procurement has gone down in this period of time by two-thirds. We are spending today about one-third what we were spending at the peak in 1985 and that reflects a very sharp downturn of your red curve.
What your chart does not show is the RDT&E spending, which is down some but it is not down by two-thirds. It is down by about 15 percent, I think, in real terms. So we have to add the RDT&E base to that procurement spending. If you would allow me, Mr. Bartlett, the chart that I finished with showed both of those together.
My spending line, funding line on that curve, the blue line, includes both RDT&E and procurement dollars and what you can see has happened here is that when the procurement funding went up by 90 percent over where it was in 1980, the work force did not go up by 90 percent. The work force went up by, what, 18 percent or so. And when the procurement budget has come down, the investment budget has come down, the work force has not quite come down in proportion. You see a time lag of about 3 years.
Now, what I find in looking at this, and I wish, Mr. Bartlett, I had brought the chart—I did not and I will supply it for the record—I also plotted on this same scale the number of contract actions over $25,000 that had been taken and what you will find is not a very high degree of correlation between the amount being spent and the number of contract actions. That has stayed—there is a little rise and a little drop but it is a small percentage.
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So the phenomenon that I find here is that if you are developing and procuring a major weapons system, actually, the number of people required to deal with that program does not vary linearally with whether you are buying 100 airplanes or buying 50 airplanes. It requires nearly the same amount of people to do that job. It is probably more related to the number of development programs that you have.
So the downsizing that we have been making in the work force really in my mind is not so much a function of what are we spending for procurement. It is actually more related to being more efficient, more streamlined in the process.
Mr. BARTLETT. Grossly, what are the dollars spent in procurement and RDT&E?
Secretary KAMINSKI. The dollars spent in procurement in this year's budget are about $43 billion and our RDT&E budget this year is about $35 billion, plus or minus a little bit.
Mr. BARTLETT. We need to ask GAO, then, to give us numbers that reflect both of these things is what you are saying.
Secretary KAMINSKI. Yes, sir.
Mr. BARTLETT. It is still going to show a discrepancy between the drop in procurement and the decrease in personnel.
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Secretary KAMINSKI. Yes, but I would point out, the other thing you have to do, Mr. Bartlett, to be fair about this, is adjust the baseline, because you can see, if you wanted to make the worst possible case, you would pick the peak funding year, 1985, and start to plot at that point and show that the work force has not come down in proportion to where it was in 1985, but I could also do the opposite and pick 1976—well, in this case, I picked 1980 and what you can see is the work force, neither did it go up——
Mr. BARTLETT. But your chart starts at a different year.
Secretary KAMINSKI. Yes.
Mr. BARTLETT. Yours starts in 1980 and theirs starts in 1985.
Secretary KAMINSKI. You can make your case a little better or less depending upon which year you pick as a base year.
Mr. BARTLETT. But we were doing procurement OK, presumably, in 1985, is the point they were making. If we were doing procurement OK then, we were using 4 1/2 people per $1 million. Now, we are using nearly 10 people per $1 million.
Secretary KAMINSKI. Yes. The point I would make overall, though, is if you are buying twice as many missiles per month, you do not need twice as many people to supervise that contract.
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Mr. BARTLETT. Thank you very much.
The CHAIRMAN. Mr. Pickett.
Mr. PICKETT. Thank you, Mr. Chairman.
Dr. Kaminski, one of the things that is coming more into play in increasing efficiencies in the military is the use of communications and telecomputing and telecommunications. I would like to know generally what is being done in this area, and in particular, in areas like the one that I represent in the Hampton Roads area, where there is a cluster of military installations that have a need for improved computer communications, for example, at Fort Eustis, Langley Air Force Base, Norfolk Naval Base, Little Creek Amphibious Base, and so on.
There are a number of advantages that could be realized if these could all be linked together in a high-speed computer transmission facility. I guess they call these local area networks. I am not an expert in this area.
Secretary KAMINSKI. Or wide area networks.
Mr. PICKETT. I just wonder if you could comment on that, what you are doing to make these things happen.
Secretary KAMINSKI. Yes, Mr. Pickett. This is a field in which the commercial sector is leading the charge. This is not an area in which the Defense Department's research and development is developing the fundamental new capabilities. The commercial sector here is leading.
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If I could, Mr. Pickett, I would like to share with you two examples. What we have been trying to institutionalize in the Department is, where it makes sense, to buy the commercial capability to lease it, even if it makes sense to do that, but to improve our cycle times so that we can field the latest advancement.
The first example I would share with you, before our forces deployed to Bosnia, our IFOR forces, Secretary Perry asked a Defense Science Board task force to look at how well we would be supporting our forces with intelligence. The Defense Science Board task force came back with a good news-bad news story. The good news was that our major command centers would be very well supported. The bad news was that our forces in the field were depending upon 9-dot, 6-kilobyte-per-second modems. You can go to your corner store and buy a 28 kilobyte-per-second modem.
So we looked at an initiative to solve that problem. We implemented this in 6 1/2 months at a cost of $80 million. We did this on the basis of one of our advance concept technology demonstrations that had paved the way for the concept and what we did, Mr. Pickett, was lease one transponder on a commercial Orion direct broadcast satellite. This one transponder provided a 30-megabyte-per-second link to the ground, a 3,000-fold improvement over the 9-dot, 6-kilobyte per second modems that our forces had.
To receive this data stream, all we needed was a 20-inch dish like your direct broadcast satellite receiver at home and a set of decryption software. We put in place a 4-megabyte-per-second local area network along the lines you described which gave us connection back to the CONUS so that our field commanders could order over that network just the way you do with a hand-held infrared remote control on your TV set. They could order up the programming on that video link, so they could get weather information, intelligence, and get that delivered directly to the field.
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That was done, as I said, in about 6 1/2 months' time. Had we been doing this our old way of doing business, we would still have been arguing about the requirement in 6 1/2 months. This would have been about 12 years to have fielded, and all we had to do here was lease a commercial capability and add some encryption technology to it.
Mr. PICKETT. Would you look into possibly linking these facilities in the Hampton Roads area together?
Secretary KAMINSKI. Yes, sir; I will.
Mr. PICKETT. I would appreciate that.
Dr. White, you mentioned the issue of possible base closures. I would urge the Department, before you move ahead with any further looking at base closures, to give the base commanders adequate resources to carry out the demolition projects that they want to carry out on their bases. I believe that there is a huge amount of erroneous information being fed back into the system because anything that happens to be standing on a base when they make their reports about how many square feet of building space they have, they are required to include that in their report.
In a lot of cases, the base commanders know that they should be demolishing these buildings but they do not have the funds to do it. In a lot of cases, the payback is one year, and I would urge you to try to institute a program, like if it is a payback of three years, to fund it all as rapidly as you possibly can because this is a huge return and it also would eliminate inaccuracies in the reporting that the bases make in showing what their capabilities are.
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Dr. WHITE. That is a very good point, Mr. Pickett. I reviewed the other day the issues in this very area and we talked at length about the opportunities for demolition and that is on our program list to further investigate.
Mr. PICKETT. Thank you very much.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you.
Mr. Chambliss.
Mr. CHAMBLISS. Thank you, Mr. Chairman, and gentlemen, it is always a pleasure to have you all with us.
Dr. Kaminski, I want to go back to Mr. Dellums' question regarding the discrepancy between downsizing of personnel within the depot and outside the depot. This last chart that was up here clearly shows why there can be and should be a discrepancy between downsizing and depot and nondepot, because what we saw up there was that in 1985, you had a smaller number of people buying a larger number of goods than really what you have today. So you can have a smaller number of individuals buying the nuts and bolts but you cannot have a smaller number of individuals turning the wrench in the depots to do the work, so it is very clear.
Second, there is an indication that the depots may not be taking their fair share. Well, by golly, we are willing in the Air Force to take our fair share. If you all would just do what BRAC said to do and close Kelly and McClellan, then there will be a downsizing within the Air Force depots. I just wanted to make those points to you.
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I know, Dr. White, that you have said that depot maintenance is a subject for more discussion on another day and I certainly look forward to that day, but I have listened here today with great interest to your comments with regard to saving the Pentagon more money throughout outsourcing. I have listened most closely to your assertions as they relate to depot maintenance aspects of the DOD budget.
Now, I want to work with you and with every other member of this body and with every other individual in DOD to advance reforms that will, in fact, save taxpayer money. That is why the chairman has devoted valuable hearing time to this topic over and over again.
Dr. White, I simply refuse to sit here in this committee room and allow you to spread the idea that there is, in fact, savings to be had in the area of widespread privatization in the area of military depots. No member has spent more time than I have in poring over the information that has come from DOD and the individual services to support your claims, and yet I have found in every case your claims are overblown and downright misleading.
What troubles me the most is that you and others in the administration have refused to acknowledge even the numbers generated within your own organization that show privatization of depot functions is costing more money.
Now, I am going to go out here and anticipate your answer, and it is one that I have heard now for over 2 years, and that is with respect to the numbers set forth in the GAO report where it says that the taxpayers are going to save $468 million a year if we close Kelly and McClellan. The standard answer I have heard is that the GAO report is wrong, period. That is it.
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Well, you know, I am not one of those who believes necessarily every single thing is true that comes out of GAO. I think we need to respect that. But when you look also at the Air Force's own numbers which say that not only is it going to save $468 million a year but in actuality it is going to save $700 million a year, or $689 million, that we just cannot afford to pour that kind of money down a rat hole.
We in the Air Force simply do not have that kind of money, and I know you understand that. So when we have the GAO report saying it is going to save $468 million and we have the Air Force saying that it is going to save $700 million, then, by golly, it is simply time that somebody started paying attention to that.
We are preparing to spend the next month in this committee listening to service members stand tall and with a stiff upper lip try to convince us that your budget is adequate, but I am here to tell you that it is not and your plan to privatize work that from a cost and policy standpoint is better left in the hands of the Pentagon is a waste of this committee's time.
Mr. Chairman, our time would be much better spent on real savings initiatives and figuring a way out of this fiscal mess that this administration has created with its entirely inadequate budget request.
I looked at your written statement here, Dr. White, in which you say that the largest piece of our infrastructure reform is base closings, and I agree with you 100 percent. We have got the numbers that substantiate the fact that Kelly and McClellan must be closed. What my question to you is, When do you intend to comply with the law and do exactly what the BRAC Commission told you to do and close Kelly and McClellan and transfer the work at those two bases to the three remaining Air Force depots at Tinker, at Hill, and at Robbins?
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Dr. WHITE. Mr. Chambliss, I guess you and I disagree as to what the BRAC Commission told us to do. I spent a lot of time at that time on that issue. I spent a lot of time with the chairman of the BRAC Commission. I spent a lot of time up here explaining what our policy was. We are in the process of conducting competition with respect to those workloads and those competitions include public depots.
Mr. CHAMBLISS. But Dr. White, you still have not answered the question. The law said and the BRAC Commission clearly said, you have got to close those bases and transfer that work. Now, are you telling this committee today that you are disregarding the GAO report, disregarding the Air Force numbers, that you are not willing to go along with the savings of somewhere between $468 million a year and $689 million a year?
Dr. WHITE. What I am saying, Mr. Chambliss, is that we are conducting a competition for that work. That work does not stay in those depots. And at some later time in the near future, I am happy to come up and go through all these issues with the numbers and so on and so forth with you and see where we have agreement, and if we have disagreement, how we work it out.
Mr. CHAMBLISS. We sure look forward to that day, Dr. White. We have been waiting on it for 2 years now, so we will look forward to that. Thank you.
The CHAIRMAN. Thank you, Mr. Chambliss.
Mr. Skelton.
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Mr. SKELTON. Thank you very much.
First, Mr. Kaminski, we compliment you on the work that you have done and I know full well that between now and the time you leave, there is a lot of hard work still left in you, so we look forward to continuing to work with you until that day.
Mr. White, I will send you a request in the form of a letter so I can word it correctly as to possible savings within the defense agencies and the DOD field activities, but let me correctly word it to you.
Also, Mr. White, I would like to give you a caution to be responded for the record because it is slightly outside the scope of this inquiry. It relates to the Commission on Roles and Missions which you chaired which recommended a realignment and a consolidation of certain aspects of the Department of Defense infrastructure, particularly between the offices of the Comptroller and the Under Secretary of Defense for Policy. I would appreciate your telling me what recommendations have been implemented and results thereof, please, sir.
Dr. WHITE. Yes, sir.
Mr. SKELTON. Stick around long enough and someone else is going to ask your question. Mr. Dellums' third question was one of great interest to me, so I will omit reasking it, but let me ask this, if I may, and I am not sure which gentleman wishes to respond.
Noting that there is a 22-percent cut in the acquisition work force that occurred between 1985 and 1994 without a commensurate decline in the civilian payroll costs, why are you confident that a 25-percent reduction in the work force will result in projected cost savings? Could either one of you touch on that, please?
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Secretary KAMINSKI. We are confident there will be some savings, but, Mr. Skelton, not linear with the number of people in the work force. In fact, I was beginning to address this with Mr. Dellums. One of the ways this work force is being taken down is through retirements of people in the work force, and as it is downsizing, we are not hiring new people. Hiring new people at junior grades is what gets you the distribution of both earnings and demographic age distribution in the work force.
That is something we are in the throes of looking at right now, looking at a piece of this in the QDR, as to how to build and sustain this work force over a period of time, because a policy of simply taking out the senior people year after year and not bringing new ones in is not a good policy.
The CHAIRMAN. We have a vote coming up. We might try to get Mr. Thornberry, I think, next, before we break.
Mr. THORNBERRY. Thank you, Mr. Chairman.
Gentlemen, earlier, Ms. Harman exhorted or admonished you all to be bold in the defense review. She did the same thing with Secretary Cohen earlier. To the extent it matters, I want to add my echo to her admonition, because sometimes I have the fear that what may seem like a bold thing within the building of the Pentagon is not so bold when you look in other places. I also have the sneaking suspicion that this is an incredible opportunity, that if we do not take advantage of it, we will regret for a long time to come.
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I saw something in some of the literature yesterday where somebody suggested we ought to do away with the service secretaries, for example. I do not know whether that is a good idea or not but at least it is a bold idea and maybe we ought to look at it. Rather than have them forever just because we have had them forever, we ought to take a look at that order.
I am talking about that degree of boldness, at least organizationally, and also with the acquisition reform, because I agree, if there is anything that we can do to help take the good examples you have shown us and spread them across the Pentagon, then we want to do that. I am afraid these are examples and not the rule, and I am also afraid that 9 times out of 10, when you are doing the Raytheon thing, you are going to get bogged down into 184 different contracts and figure it is not worth the time and effort to negotiate them all and just let it go and we are going to continue wasting the money. So I just want to add my voice to that.
The other thing I want to ask about that has not been asked today is what effect does consolidation of the defense industry have on what we are talking about today? Two years ago, the administration came up and justified in large measure another Seawolf submarine to keep another plant operating so we can have competition in building submarines, that we needed that for the infrastructure and to have this competition for the design of the new attack submarine.
We also see that there are fewer and fewer defense contractors. There is less and less, I guess, competition. How does that affect what our mutual goals are and how do we adjust our planning in light of the fact that there is a lot of consolidation going on?
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Secretary KAMINSKI. Let me, Mr. Thornberry, respond first to the issue of the need to spread the examples that I described through the whole Department. I do not believe that has been done yet. I believe the examples that I showed you are being reasonably well instituted now in our major programs. I think our major program managers have the message, their staffs have the message, they are implementing what I described, and we are starting to see many of those examples.
I do not think we have pushed this down yet through all of our smaller programs and down into base procurement or even into some of our depot functions. That still lies ahead. That is going to take some work to push it through the rest of the system. I think we have enough of an example base and the benefits in walking the walk, though, to make that possible to be done, but it still must be done.
With respect to the issues associated with the industry, thus far, the consolidation of the industry has been clearly to our benefit. We have dramatically reduced the overhead that the industry has been carrying as it has downsized and it has consolidated.
There are probably two areas that deserve some special care as we look at this work. One, we recognized about 6 months ago and we have been giving some attention to this. In fact, I asked for a Defense Science Board task force to be formed to look at this problem 6 months ago and the issue is excessive vertical integration. By vertical integration, I mean a prime contractor building everything that goes into the system that that prime contractor supplies.
The reason I have some concerns about excessive vertical integration is that there are situations where it will be in our interest in the Department to allow the industrial base to go down to one prime contractor. We are practically at that position today with tanks. It just does not make economic sense to keep two people building tanks when we are not building any new tanks, when we are upgrading the tanks we have.
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But in that situation, if I am prepared to rely on one prime contractor, then I am going to want vigorous competition at the supporting tiers, for the electronics that go in a tank or the avionics, et cetera. And to the extent that prime contractors are vertically integrated, it is going to be hard to get that competition at the supporting tiers. So we have been looking at that. We have been looking to put in place an early warning net to see signs of concern there.
Also, I would say with the degree of consolidation that we have had, I have felt that it is time to, in a sense, push back from the table a little bit and look at where we are today and where we have headed and I have asked for that kind of review to be done by my staff.
Where we are today, I think, is a reasonable match with the investment funds we have and our military needs. I do not see anything that has been hurt in our national security needs by the consolidation of the industry, but in some segments, we are now getting thin to where we are getting down to two in some segments, and in a few, there is a threat of one major supplier, where the amount to be bought is sufficient that we can sustain two suppliers. Those are a few of the areas we are looking at more carefully.
Secretary KAMINSKI. Mr. Thornberry, if I may, I agree with all of that. I wanted to make one additional comment.
There is another experiment being run on this issue of downsizing and that is our European friends, and when you look at their performance, I think you will be even more pleased with our performance. They are very slow. They have their governments deeply involved in this. Their costs are not coming down and their competitiveness is not coming down.
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The CHAIRMAN. We have about 3 minutes before we have to go, Mr. Abercrombie, if we can get your questions in.
Mr. ABERCROMBIE. Mr. Chairman, is it your desire to end the hearing?
The CHAIRMAN. If we can get your question in.
Mr. ABERCROMBIE. I realize there are just a couple of minutes. I will just make a couple of comments, then, which you may care to respond to.
Mr. Chairman, several members have indicated that they believe there may be some violations of law or some questions as to whether law is being adequately followed here. I just submit that I think we should not just leave that hanging. I do not believe there is anything being done deliberately but there are some questions raised here as to whether interpretations of what is being required are being carried through and I think we need to follow through on that side of it and I trust that you will.
Second, again quickly, Mr. Sisisky brought up and I believe Mr. Weldon brought up questions, as you have and Mr. Dellums, also, with respect to the 1996 report on improving the combat edge through outsourcing. This relates also to the last question. I have lots of questions about whether or not privatization is all that it might be when you have consolidation or what you call vertical integration.
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That is not so easily worked out and I think we will need more attention to that, Mr. Chairman and Mr. White, and I think that that is something we have to go into, because we do not want to get rid of—just going to shipyards, very quickly. You get rid of public employees and then suddenly you are required to go into the private area or privatize and it does not work, or with aircraft. Outsourcing may simply mean trying to get nonunion employees. That may on the surface be cheaper but it does not give you the kind of quality that you need.
So I just think we need to concentrate on what outsourcing and privatizing means, Mr. Chairman. Thank you.
The CHAIRMAN. Mr. Dellums.
Mr. DELLUMS. Thank you, Mr. Chairman.
I would simply, as we are concluding the hearing, compliment you for setting up these hearings. I think this is an important hearing as we carry out our responsibilities with respect to oversight and I would like to join you in thanking our two distinguished witnesses for their contribution to these proceedings. I look forward to the results of the Quadrennial Review, which I think is an extraordinarily important activity that we will be looking at very closely.
The CHAIRMAN. Thank you, gentlemen. We will let you go early.
Dr. WHITE. Thank you, Mr. Chairman, Mr. Dellums. Thank you.
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The CHAIRMAN. The committee is adjourned.
[Whereupon, at 12:04 p.m., the committee was adjourned.]
A P P E N D I X
February 26, 1997
"The Official Committee record contains additional material here."
CHARTS SUBMITTED FOR THE RECORD
February 26, 1997
"The Official Committee record contains additional material here."
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QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD
February 26, 1997
QUESTIONS SUBMITTED BY MR. SPENCE
OSD Reorganization
Mr. SPENCE. How will DoD implement the 25 percent reduction in OSD staff mandated by Congress? Will certain offices or functions be targeted, or will across the board cuts be made?
Dr. WHITE. Former Deputy Secretary of Defense John Deutch directed, and the Department has been implementing, a 5 percent per annum civilian reduction in the OSD staff and associated activities for the period FY 1996 through FY 2001. However, Secretary Cohen and I believe that a different approach is required. In accordance with Section 901 of the National Defense Authorization Act for FY 1996, we are currently conducting a thorough review of the overall roles, missions, functions, relationships and organizational structure of OSD with a view toward reengineering the organization in a manner that will reduce its size and, at the same time, increase its effectiveness. We intend to make reductions based on the results of this review, rather than using across the board cuts.
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Mr. SPENCE. What options has DoD examined for restructuring and reducing the size of OSD?
Dr. WHITE. We are considering all available options, to include fundamental changes in the roles, missions, functions, relationships and structure of the OSD staff. In general, we are looking to divert the organization away from operational and program management activities and to refocus its efforts more exclusively on corporate level matters, such as policy evaluation and development, long range planning, and providing advice and assistance to the Secretary and Deputy Secretary of Defense. Traditional streamlining measures, however, have not been ruled out. For example, we are also looking for ways to consolidate related functions, reduce overhead, eliminate obsolete or marginal functions, transfer out functions that can be performed at lower organizational echelons, and do away with excessive layering, duplication, overlap, and fragmentation.
Mr. SPENCE. To what extent has DoD's study of OSD identified redundancies between the functions of personnel assigned to the JCS and OSD?
Dr. WHITE. I cannot answer that question at this point, because the study has yet to be completed. I can say, however, that this is an issue we are examining very carefully. We can no longer afford redundancies between OSD and other DoD headquarters organizations, whether with the Joint Staff or the Services.
Mr. SPENCE. The Commission on Roles and Missions recommended realigning or consolidating certain functions currently divided between the Offices of the Comptroller and the Under Secretary of Defense for Policy. In addition, the report recommended portions of the Office of the Under Secretary of Defense for Policy should be organized along mission lines in order to improve DoD's ''responsiveness to new and evolving missions.'' Are these recommendations being pursued?
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Dr. WHITE. These, as well as other recommendations of the CORM, are being carefully considered as part of our ongoing OSD review.
Mr. SPENCE. How are OSD personnel requirements generated?
Dr. WHITE. In general, OSD personnel requirements are derived from the functions and responsibilities of the Secretary of Defense as prescribed in Title 10, U.S.C. Additional requirements are generated based on Administration goals, Secretary of Defense priorities, Congressional mandates, codified legislative requirements, and emerging national security requirements. When new requirements cannot be met within their authorized ceilings, the OSD principal staff officials propose incremental changes to programmed strength. These are reviewed at the staff level and forwarded to the Deputy Secretary of Defense for determination, either during the PPBS process or as an out-of-cycle change. Currently, because of the reductions mandated by the National Defense Authorization Act for FY 1997, OSD principal staff officials have been directed to perform their assigned functions within their authorized ceilings.
Mr. SPENCE. The Commission on Roles and Missions weighed the consolidation of the secretariat and service staffs and ultimately recommended the integration of their functions to reduce friction and cumbersome management processes. Is this being pursued?
Dr. WHITE. Secretary Cohen and I plan to conduct an in-depth review of the secretariats and service staffs, in compliance with Section 904 of the National Defense Authorization Act for FY 1997. However, we are currently concentrating on our study of the OSD staff, which should be completed within the next several weeks. A number of the key issues being addressed in this study (such as the appropriate role of the OSD staff in the DoD management process and in the oversight of Departmental level operating organizations) impact directly on the military service headquarters. Accordingly, we view the review of the secretariats and service staffs as a logical follow-on effort, the thrust of which will be determined by the decisions made regarding the roles, missions, size, and organizational structure of the OSD staff.
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DEFENSE INFRASTRUCTURE REFORM
Mr. SPENCE. The Department's fiscal year 1998–2002 spending plan is, in part, reliant on $5 billion in savings from infrastructure efficiencies. How firm are these savings projections? Is there risk associated with these projections? Does the Department have a contingency plan if these anticipated savings do not materialize?
Dr. WHITE. The savings projections are accurate and represent a good baseline for infrastructure efficiencies. There is, however, some degree of risk associated with achieving the identified savings, primarily dependent on the level of difficulty. Our assessment indicates that cost savings ranging between $1.4B and $1.6B are do-able with minimal risk. There are no significant political or technical impediments. Cost savings ranging between $3.7B and $4.6B involves a moderate risk. They will be more difficult to obtain due to mild opposition and/or minor unresolved technical problems. Savings between $5.6B–$6.2B will be very difficult to achieve because of either strong opposition or serious technical problems. Anticipated savings in this range involve a high risk.
In the event the anticipated savings do not materialize, contingency plans would be Service-specific. We are expecting the budget to remain at $250B. If no savings accrue, the tooth to tail would remain the same, hence status quo would continue. However, every effort will be made to remove constraints, whether they be legislative, policy, etc.
Mr. SPENCE. In 1988, the DoD Inspector General issued a report to the Secretary of Defense titled, ''Review of Unified and Specified Command Headquarters.'' The report concluded that DoD's annual report to Congress on the number of headquarters personnel significantly understated the true size and cost of the management function. How confident are you in the accuracy and completeness of the management headquarters numbers reported by DoD to the Congress today?
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Dr. WHITE. The Department believes the management headquarters numbers are reasonably accurate. The Department does not have the resources to audit the numbers. We are trying our best to keep the reporting system up to date. For example, the Department just revised DoD Directive 5100.73, ''Department of defense Management Headquarters and Headquarters Support Activities,'' which provide guidance for the reporting of management headquarters numbers in the President's Budget Exhibit 22.
Mr. SPENCE. In 1985, DoD reported about 77,000 military and civilian personnel performing management and management support functions. For 1997, the estimate is 53,000—a decrease of about 30 percent, or 2.5 percent per year. Some of the decrease, however, may have occurred as a result of reclassification. To what extent does the trend represent real reductions in personnel? How was this 30-percent decrease achieved? Did OSD provide guidance or establish goals for reducing headquarters organizations, or did each of the Services and defense-wide agencies develop their own goals?
Dr. WHITE. Real reductions have been achieved. Some of these reductions have been actual end strength reductions. Additionally, a good number of reductions have come from realignments and transfers of functions from headquarters activities to operational activities. Finally, a minimal number of reductions have come from reclassifications when missions have changed. The Department continues to program reductions in management headquarters through FY 1999, and this issue is under continuing study by the QDR.
Mr. SPENCE. During 1985–1997, DoD reported that headquarters staffs and headquarters support personnel at the military services' commands decreased 40 percent while personnel at defense agency headquarters increase 35 percent. Of course, during the period, Congress authorized the creation of additional defense agencies to centrally manage certain functions in a more efficient manner. What are your plans with respect to the future number and size of defense agencies, including their headquarters elements?
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Dr. WHITE. The Department is always interested in improving productivity and increasing efficiency. Occasionally, the Defense Agencies suffer from ''bad press'' because of perceived growth. But this growth is the result of major program transfers from the Military Departments and significant savings made at the time of the transfers. To look at Defense Agency growth without looking at corresponding reductions in the Military Departments is only looking at part of the story. The QDR is specifically looking at future number and size of defense agencies.
Mr. SPENCE. The National Defense Authorization Act for FY 1996 contained requirements for DoD to report on many infrastructure issues subject to reform. The committee has not yet received reports regarding measures to transportation infrastructure and overhead, results of a pilot program to improve travel administration and processing, or plans to outsource certain payroll, accounting and finance functions. What is the status of these reports and when can the committee expect to receive these reports?
Dr. WHITE. As indicated in the attached transmittal letter, the Defense Transportation Reengineering Report was forwarded to the Congress on December 16, 1996 by the Deputy Under Secretary of Defense (Logistics). The report on payroll, finance and accounting functions of the Department is undergoing final review and will be provided upon completion of that review. Section 356 of the FY 1996 National Defense Authorization Act directed DoD to conduct tests to evaluate options to improve the DoD travel process, and submit a report on the implementation of the program. The tests are now complete and data from the various pilot sites are being collected and analyzed, which is expected to take several weeks to complete. The final report to the Congress is planned for the end of June 1997.
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| Office of the |
| Under Secretary of Defense, |
| Washington, DC, December 16, 1996. |
Hon. FLOYD D. SPENCE,
Chairman, Committee on National Security, House of Representatives, Washington, DC.
DEAR MR. CHAIRMAN: This letter transmits to Congress the enclosed Defense Transportation Reengineering Report. This report is forwarded in response to the FY 96 Defense Appropriation and Authorization Conference Reports which requested the Secretary of Defense report on initiatives undertaken to streamline infrastructure, consolidate component command structure and reduce overhead in the Defense Transportation System.
As noted in the enclosure, General Kross, Commander in Chief, U.S. Transportation Command is aggressively pursuing efficiencies through reeingineering and streamlining. I will continue to monitor and support these efforts.
Sincerely,
| John F. Phillips, |
| Deputy Under Secretary of Defense (Logistics). |
Enclosure.
Mr. SPENCE. The Department's plan states that you are on track for reducing acquisition personnel by 30,000 in two years. Of the cuts already made, which organizations have they come from? Which job series do they represent?
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Secretary KAMINSKI. In the first twelve months of the reduction period for section 906(d), i.e., during FY 96, the Department reduced the number of covered people by 23,802. The acquisition organizations covered by this mandate and the changes in numbers of people within each one reported to the Defense Manpower Data Center are as follows:
–––––––––––––––––––––––––––
Mr. SPENCE. We have seen some examples in which the acquisition workforce personnel have left the federal workforce on one day and returned as a contractor the following day. To what extent are functions formerly done by personnel in the acquisition workforce being contracted out?
Secretary KAMINSKI. In the context of the Department's initiatives to rely upon the private sector for the performance of acquisition functions, the following data bear on the extent to which work has shifted from in-house to being contracted out. Comparisons are between FY 1980 and FY 1996:
The workforce in DOD acquisition organizations is 24% smaller. Equates to– 127,780 jobs.
Defense-related industry employment is 14% greater. Equates to +270,000 jobs.
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The investment budget is down 7% in constant dollar terms.
Thus, over a period in which the investment budget grew and then shrank to a level below 1980, in-house employment shrank by a net of 24% while industry employment grew by a net of 14%. The inference is that more acquisition work is now being done privately in comparison to work that remains within DOD acquisition organizations. At this macro level, there is clear evidence of privatization.
At a micro level, there are no data available to track the individuals who have left DOD acquisition organizations to determine how many of them are employed in defense industry nor to determine when individuals may have taken particular private-sector jobs. Likewise, there are no data available to track acquisition jobs to see whether the same, similar, or different jobs were added in the private sector in comparison to those eliminated in acquisition organizations. The nature of acquisition work has changed dramatically over the past decade or so, making global statistics on the composition of the in-house workforce vis-a-vis the private sector difficult to interpret meaningfully.
The smaller in-house workforce requires (1) that they be better qualified and trained and (2) that business processes be reengineered to be more streamlined and efficient. The latter is being addressed by acquisition reform, which is essentail to our ability to support the warfighter with a smaller acquisition workforce. Consequently, the reported reductions include jobs that are no longer being done at all, either in-house or in the private sector, because acquisition reform has streamlined the duties as they were once performed. However, just as it is not possible to track jobs that have migrated to the private sector through outsourcing, it is not possible to attribute analytically specific quantified reductions to specific reforms. The former, education and training, is equally essential and will demand even more of our attention and resources in the future.
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Mr. SPENCE. Your report states the Deputy Secretary circulated a memo dated April 15, 1996, to the military departments to review all Acquisition Category One (ACAT I) joint programs to eliminate redundancy and increase effectiveness. What is the status of that effort?
Secretary KAMINSKI. The memo encouraged the Services to eliminate redundancy through jointness but did not require them to report back. Currently 23 of the 100 ACAT I programs are joint efforts. They are:
Joint Surveillance and Target Attack Radar System (JSTARS)
Joint Stand-Off Weapons (JSOW)
V–22 Osprey Joint Advanced Vertical Aircraft
Joint Air-to-Surface Standoff Missile (JASSM)
Joint Direct Attack Munitions (JDAM)
Joint Tactical Information Distribution System (JTIDS)
Joint Services Imagery Processing System (JSIPS)
Joint Primary Aircraft Training Systems (JPATS)
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Chemical Demilitarization
Global Broadcast Service
Joint Strike Fighter (JSF)
Joint Precision Approach and Landing System (JPALS)
Tactical Unmanned Aerial Vehicles
National Airspace Traffic Control System
National Polar-Orbiting Operational Environmental Satellite
Advanced Medium Range Air-to-Air Missile (AMRAAM)
All Source Analysis System (ASAS)
Blackhawk Helicopter
Defense Meteorological Satellite Program
Javelin Missile
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MILSTAR Satellite
NAVSTAR Global Positioning System
SINCGARS
Mr. SPENCE. What additional benefits can be gained by looking at cross-service solutions to eliminating duplication of functions and maximizing consolidation opportunities to cut overhead? To what extent will the QDR address this?
Secretary KAMINSKI. Cross-servicing and consolidations offer valuable solutions to cut overhead costs. The QDR is looking at strategies to reduce infrastructure costs and many, such as Vision 21 for acquisition infrastructure and base closures in general, would likely involve cross-servicing and consolidation. However, the QDR will not address precise cross-servicing solutions. That will be left to implementation.
Mr. SPENCE. Why is it that more than two years after receiving the micro-purchase authority to use credit cards, DOD is still processing so many purchases under $2500 as regular procurements? To quote Dr. Hamre, why is it that in 1997 there are ''opportunities that we haven't already really explored adequately'' in this area?
Secretary KAMINSKI. There are a number of factors that have contributed to the purchase cards not being used in all cases where practicable and feasible. These include reluctance by many DoD activities to disseminate the purchase cards outside of the contracting office or supply office to end-user organizations; the reluctance of middle managers to accept the risks of mis-use by employees in their respective organizations; many small business companies do not accept the purchase care because of the cost associated with the credit card use; our internal procedures for purchases and financial and reconciliation are burdensome and time consuming.
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In spite of these factors, overall the Department's use of the purchase card has grown since the enactment of FASA. For FY 95 purchase cards were used for 1.7m transaction valued at $796M; in FY96 purchase cards were used for 3.1M transactions valued at $1.4B; and thru February of FY 97, purchase card transactions are 1.7M valued at $711M.
The Department has undertaken a number of initiatives to further increase the use of the purchase card for items under $2500. First, a joint acquisition and financial management integrated product team was established to look at ways to promote the use of the purchase card for micro-purchases, intergovernmental sales/transfers, and for purchases over the $2500 threshold. The report included 58 recommendations and an implementation plan that address the concerns noted above and will provide for streamlined procurement and financial and reconciliation processes. The report has been favorably reviewed throughout the department and is currently under review by the Service Secretaries. Once approved, the Department will move very quickly to implement the recommendations. [NOTE: All the Services have concurred with the report except AF].
Second, on 20 March 1997, the Principal Deputy Under Secretary of Defense issued policy that requires SES, Flag Officer, or General Officer approval for contracts or purchase orders for commercial items under $2500. Contract or purchase orders may only be issued in those circumstances which the source does not accept the purchase card and/or the supply or service necessitates a written document so that terms and conditions can be specified. This policy will be effective on 1 October 1997.
With regard to Dr. Hamre's statistics, the 4000 contracts processed by DFAS under $2500 were for commercial parts that required government source inspections prior to acceptance. The aforementioned memo of 20 March directs that the Commander, Defense Contract Management Command establish a process action team to conduct a comprehensive review of requirements for government source inspections and to identify process and procedures to eliminate unnecessary inspections.
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As the new policy and recommendations are adopted, I believe there will be a dramatic increase in use of the purchase card throughout the Department with associated efficiencies and savings.
Mr. SPENCE. If Dr. Hamre's figures are correct and representative of the ratios across the Department, more diligent use of this authority could eliminate over two thirds of the paper contract transactions that the acquisition system has to routinely handle. What are the potential savings to be realized in taking such a step in terms of reduced positions, bureaucracy and operating expenses?
Secretary KAMINSKI. The potential savings to the department through automation and reduced manpower is significant. Recent studies and reviews by the Army and Navy have substantiated reduced costs when the purchase card is used to the maximum extent practicable. Use of the purchase card has also contributed to a reduction in the lead time for the receipt of needed items which has allowed us to more timely and efficiently meet the needs of the warfighter.
Mr. SPENCE. For the record, why did Colleen Preston leave the Department of Defense?
Secretary KAMINSKI. In her letter of resignation, Mrs. Colleen Preston indicated that she felt the time was right to take a much needed break from the constant challenges of the acquisition reform effort in the Department of Defense.
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Mr. SPENCE. What is your assessment of the message that Colleen Preston's departure sends to the defense acquisition community?
Secretary KAMINSKI. Acquisition Reform has been a total team effort within the Department from the beginning. The magnitude of change that has been accomplished required cooperation and commitment. By definition, no single individual is responsible for success, it actually depends on how the team, both staff and line management, performs. The fact that we are sustaining the momentum while moving full speed ahead on all reform initiatives is a testimony to the Department. The message is that we have a large sector of our DoD workforce that understands the importance of acquisition reform and is energetically carrying on. The task of institutionalizing reform is our priority and it requires everyone in our workforce to continue to dedicate themselves to its achievement.
Mr. SPENCE. How will her departure affect the vigor with which the Department implements acquisition reform initiatives?
Secretary KAMINSKI. Our recent AR Week ''Sustaining the Momentum—While Moving Full Speed Ahead (March 17 through March 21, 1997) activities in which the entire workforce involved in acquisition (over a hundred thousand people) in the Department took time to focus on applying your acquisition reform initiatives demonstrated department-wide the priority that the Secretary of Defense as well as myself (Under Secretary of Defense (Acquisition and Technology)) place on the importance of acquisition reform. It is clearly one of the top priorities of the Secretary and myself. Vice President Gore in a video to our work force emphasized DoD's leadership role in acquisition reform and reinventing government. Additionally, as part of Acquisition Reform Week, I sponsored a series of real time electronic ''chat'' sessions. These sessions provided the Department's worldwide acquisition workforce with an opportunity to ask questions of and dialogue with senior leaders in the Pentagon. The twelve sessions held during AR Week featured senior leaders from a broad spectrum of acquisition organizations, including myself, Defense Procurement, Comptroller, Joint Staff (Operational Requirements), Logistics, DARPA, Command, Control Communications and Intelligence Acquisition (C3I), Science and Technology, Operational Test and Evaluation, and Program Appraisal and Evolution. Over a thousands members of the acquisition community from as far away as Ankara, Turkey and Howard AFB, Panama participated in these real time sessions. A commercial off-the-shelf software solution was utilized and we leveraged an existing communication infrastructure namely the Internet. We recognize the enormous potential of real time ''chat'' and plan to use this technology to improve both interdepartmental business practices and both internal and external communications.
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Mr. SPENCE. In the committee's report accompanying the FY96 Defense Authorization bill, the committee raised concerns over the tensions created by bifurcating responsibility for acquisition policy between Ms. Preston's office and the office of the Director of Defense Procurement. To my knowledge, no action was ever taken to address those concerns. To what extent did this arrangement contribute to Ms. Preston's departure?
Secretary KAMINSKI. Mrs. Preston's resignation letter made no reference to tensions in responsibilities noted in the concerns raised by the Committee. Acquisition Reform and Defense Procurement are working closely together to institutionalize our many acquisition reform initiatives while also continuously improving the way we do business. This is a team effort. Morale is quite high, and an air of excitement pervades the acquisition workforce, boding well for the future. Acquisition policy, however, which includes procurement is my responsibility as the Defense Acquisition Executive.
QUESTIONS SUBMITTED BY MR. EVERETT
Mr. EVERETT. Secretary White, in your efforts to outsource data processing operations, are you still proposing to outsource DoD's megacenters? Have you taken into consideration the military essential activities that these megacenters provide (like ammunition delivery and combat service support); shouldn't these activities remain within DoD?
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Dr. WHITE. The Quadrennial Defense Review is currently assessing options for effectively and efficiently providing global information processing services to meet warfighter requirements. These options include outsourcing the operation and maintenance of general purpose/administrative logistics data processing centers, to include the Defense Megacenters (DMCs). Another alternative being considered is the procurement of data processing services in the same manner as we acquire communications services for DoD. As you know more than 95 percent of the communications services are already acquired by Defense Information Systems Agency (DISA) from the commercial sector. Neither the prime warfighting mission nor the combat support functions could be executed without the commercial communications support that DISA already provides. The DoD is still deliberating on how to implement the outsourcing of data processing services and no final decision has been reached on which strategy to pursue.
The effective and efficient performance of the DoD mission, support to our warfighters to include information security, as well as other essential factors associated with the execution of the DoD mission continues to be paramount in all of our deliberations.
Depot Maintenance
Mr. EVERETT. What savings have you either assumed in your budget request, or hope to achieve with elimination of 60/40?
Dr. WHITE. We have assumed no savings within our budget request, based on the elimination of ''60/40'' or 10 USC 2466. However, as we have previously stated, increased outsourcing through competitive procedures would be expected to achieve saving in the range of 20 to 30 percent of current costs. We would of course return savings generated through this process to the Services for their modernization accounts.
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Mr. EVERETT. What impact does 60/40 have on the private industrial base, and is there a concern of loosing vital sectors of the industrial base if 60/40 stays in place?
Dr. WHITE. The elimination or reduction of the 60/40 restriction would allow the Department more flexibility to obtain the best value for the government. It could also possibly increase the money spent in the private sector industrial base which might help stem the continued decline in the industrial base. However, every dollar diverted to the private sector is a dollar taken from the public depot sector, the corresponding affect.
Mr. EVERETT. Beyond meeting the military's ''core'' capability needs, is it still the Pentagon's policy to NOT compete against the private sector when they can provide the goods or service at a competitive cost?
Dr. WHITE. We fully intend to comply with the provisions of 10 USC 2469 and 2470 which provide, respectively, for competition when changing the source for workloads that exceed $3 million currently performed by DoD and authority for DoD depots to engage in competitions. However, the principle workloads that will support required core capabilities at our maintenance depots will be those assigned as the result of the core methodology.
QUESTIONS SUBMITTED BY MR. LEWIS
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Mr. LEWIS. What priority will DoD place on guaranteeing contractor commitment in wartime? Are specific requirements currently in place?
Dr. WHITE. The Department has issued specific policy for continuation of essential DoD contractor services during crises. This policy includes developing and implementing plans and procedures to provide reasonable assurance of continuation of essential services during crisis situations using contractor employees or other resources as necessary. In those situations where the cognizant DoD component Commander has reasonable doubt about the continuation of essential services during crises by the incumbent contractor, the Commander is required to prepare a contingency plan for obtaining the services from alternative sources (e.g. military, DoD civilian, host-nation, or other contractor(s)).
Mr. LEWIS. In keeping with the goals of acquisition simplification, and headquarters streamlining, does DoD plan to implement more joint or regional consolidations of administrative and logistical functions?
Dr. WHITE. Opportunities remain to achieve substantially greater integration across the supply, procurement, maintenance, automated data processing, and transportation functions. The Services have developed initiatives to deal with many elements of these opportunities, such as the Navy's regionalization objective. The intent of this objective is to establish comprehensive, unified below whole-sale activities along geographic lines linking material management, maintenance, transportation and procurement activities with other activities through common goals and objectives, systems and shared data bases to effect coordinated workload and resource allocation and optimum use of capacity.
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Examples of functions which we are reviewing for regionalization include:
Installation level inventory storage activities
Installation supply management activities
Installation procurement offices
Installation maintenance facilities
Installation Transportation Offices (ITO's) and Traffic Management Offices (TMO's)
Logistics related ADP services activities.
COST COMPARISONS
Mr. LEWIS. Have privatization efforts included cost comparisons for using local community contractors as opposed to command wide contracting?
Dr. WHITE. The contracting offices that are soliciting proposals are required by the federal acquisition regulation (FAR) to put the information in the Commerce Business Daily. Local and national firms are free to bid on the work. Most of the OMB Circular A–76 cost comparisons are handled through the local or regional contracting office which look to the local community contractors for proposals.
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Mr. LEWIS. Since the 1995 CORM, what efforts have been taken to reduce Headquarters staff? Which major headquarters have been reduced or consolidated as opposed to being transferred to other commands?
Dr. WHITE. Then-Deputy Secretary of Defense Deutsch directed a five percent reduction per year for the years 1996–2001 in WHS, OSD, and defense support activities that is now being implemented. Additionally, I can assure you that headquarters will be a major area of emphasis during ongoing QDR deliberations.
Mr. LEWIS. Will plans to streamline headquarters include combining like commands, as defined by missions, as well as reducing personnel?
Mr. WHITE. The QDR is looking at various ways to streamline headquarters and is taking a comprehensive approach that includes looking at missions and reducing personnel.
Mr. LEWIS. According to GAO, the Army has been successful in their reorganization efforts. They report that over 60% of Army active duty military are assigned to mission functions compared to only 14% DoD wide. What efforts are being made to get the same results from the other branches?
Dr. WHITE. I am unaware of a GAO report that states that over 60% of Army active duty military are assigned to mission functions compared to only 14% DoD-wide. However, the mission to each Service differs so markedly, that it is not reasonable to assume that each Service could, or should, be organized in exactly the same way as another Service.
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QUESTIONS SUBMITTED BY MR. JONES
Civilian Personnel Management
Mr. JONES. Secretary White, as you know it is the Department's responsibility to ensure that the remaining depot facilities operate efficiently, and yet I see a continued effort to cripple the very infrastructure that has kept this nation sound and safe from harm's way.
Congress has asked the Defense Department to reduce personnel to achieve savings and efficiencies. We did not ask the Department to act in violation of Title 10, Section 129 which demands that we not manage by end strength. Why does the Department continue to operate in violation of the law?
Dr. WHITE. Section 129 of Title 10, U.S. Code supports the Department's longstanding manpower management policy that the size of the DoD workforce is determined by the workload that must be accomplished and the funding that is made available. DoD issues manpower guidance subsequent to, and in conjunction with, its President's Budget and accompanying Future Years Defense Program. This guidance is adjusted as necessary, during program and budget reviews. The Department's actions are consistent with 10 U.S.C., Section 129, as amended by Section 1031 of the National Defense Authorization Act for FY 1996; to force management guidance includes adjustments driven by workload and budget. The depot maintenance workforce reflects the manpower required to perform funded workload in accordance with established maintenance and repair schedules.
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Mr. JONES. Secretary White, NADEP Cherry Point is in my district. The Depot has distinguished itself often, and recently it met a challenge posed by the Marine Corps to quickly complete swashplate repair for the H–53s—they saved the Corps $1 million in transportation costs. Unfortunately, the Pentagon does not appear to value the Depot's contribution. Instead, it seems intent upon ''farming out'' the very backbone of this nation's defense. Today, I can tell you that NADEP Cherry Point can just barely handle the workload with their current workforce. Any further drawdown will be devasting. And yet I understand the budget shows a large draw down of civilian employees at Cherry Point—from 4,203 employees to 3,391 employees by 1999. Mr. White, can you tell me why DoD is cutting jobs from places like the NADEP Cherry Point, instead of eliminating duplication of functions and staff within the acquisition work force, the Office of the Secretary of Defense, and headquarters staff?
Dr. WHITE. Elimination of duplicative functions and staff remains a top priority in the Department of Defense. For example, significant savings are being realized through reductions in the acquisition work force and OSD.
"The Official Committee record contains additional material here."
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