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[H.A.S.C. No. 106–7]



FOR FISCAL YEAR 2000—H.R. ????






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(H.R. ???)


MARCH 2, 1999


House of Representatives,

Committee on Armed Services,

Military Installations and Facilities Subcommittee,

Washington, DC Tuesday, March 2, 1999.

    The subcommittee met, pursuant to call, at 2 p.m. in room 2212, Rayburn House Office Building, Hon. Joel Hefley (chairman of the subcommittee) presiding.

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    Mr. HEFLEY. The committee will come to order.

    This afternoon, the Subcommittee on Military Installations and Facilities continues its hearings on the President's request for funding for the military construction and military family housing programs for the Department of Defense [DOD] for the coming fiscal year [FY]. The focus of our hearing today will be on the budget request supporting the programs of the active and Reserve components of the Department of the Navy, including the Marine Corps, and the Department of the Air Force.

    One month ago, the Department of Defense released its budget request for fiscal year 2000 supporting what the Department called a ''robust'' military construction program. In the intervening weeks, I have severely criticized the budget request. Based upon the testimony received by this subcommittee last Thursday and a continuing review of the budget detail and justification documents supplied by the Office of the Secretary of Defense [OSD] and the military departments, I remain deeply concerned about the complexities inherent in this budget request. The ability of the military departments to execute their Military Construction MILCON programs is built upon a series of assumptions that lack precedence and have little congressional support.

    The Department of Defense proposes to shift 36 percent, roughly $3.1 billion, of the MILCON top line to fiscal year 2001, thereby creating a series of significant challenges in the administration of the construction programs of the military services. With the accounts which are exempt from the Department's incremental funding approach, such as military family housing support and the North Atlantic Treaty Organization [NATO] Security Investment Program, excluded, the severity of the budget request becomes even sharper. This budget request purports to fund nearly $4.1 billion in construction requirements directly benefiting the active and Reserve components. Of that amount, only $1.6 billion would be available in the coming fiscal year. The remaining $2.5 billion, or 61 percent, is the equivalent of, in my opinion, an IOU.
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    I suspect the membership will hear today what this subcommittee heard last week. For this one-time request, if the Pentagon is granted full project authorization, advanced authorization of appropriations, advance appropriations, additional reprogramming allowances, and the services amend their contracting and administrative procedures, all will be well. That is an awfully big ''if,'' gentlemen, considering the unprecedented nature of the request. While I am always inclined to keep an open mind, I have heard nothing to this point that convinces me that this approach is in the best interest of the taxpayer.

    That will give you a little idea of some of the reservations that I have, and I think it is shared by a great percentage of the committee here.

    Now I would turn to Mr. Taylor and see if he has any opening remarks.

    [The prepared statement of Mr. Hefley can be found in the appendix.]


    Mr. TAYLOR. Thank you, Mr. Chairman. I join you in welcoming our witnesses to today's hearing.

    In this, our second hearing on the administration's request for military construction and family housing programs, I feel compelled to again express the concern I voiced at the earlier hearing in which we received testimony from the Office of the Secretary of Defense and the Department of the Army. That is, I very much regret that these programs are being held hostage by the administration's insistence on congressional approval of an unworkable budgeting practice. Congress will not approve the advanced appropriations scheme, and many of the projects so vital to the Air Force and to the Navy will be subject to delay under the best of scenarios.
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    The resultant $3.1 billion shortfall hurts everyone, especially those who are typically found at the bottom of the pecking order. In this regard, I speak of the Reserve components. I am particularly interested in the well-being of the Reserves, and I am concerned that as a result of the funding shortfall, the important construction projects will be pushed back even further than they already have been.

    Mr. Chairman, I thank you for yielding me the time, and I look forward to hearing from our witnesses.

    [The prepared statement of Mr. Taylor can be found in the appendix.]

    Mr. HEFLEY. Thank you, Mr. Taylor.

    I want to welcome again to the subcommittee Robert Pirie, Assistant Secretary of the Navy for Installations and Facilities. Secretary Pirie is accompanied by Rear Admiral Louis Smith, Commander of Naval Facilities Engineering Command; Major General Geoffrey Higginbotham, Deputy Chief of Staff for Installations and Logistics for the United States Marine Corps; and Rear Admiral (Select), I guess it is at this point, John McLaughlin, Deputy Director of Naval Reserve.

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    Mr. HEFLEY. Mr. Pirie, it is a pleasure to have you with us here again it, and we will turn it over to you to proceed.

    Secretary PIRIE. Thank you, Mr. Chairman. With your permission, I will submit my full statement for the record and make just a few summary remarks.

    Mr. HEFLEY. Without objection.

    Secretary PIRIE. Thanks, Mr. Chairman. I am pleased to appear before the committee today to discuss the Department of the Navy's fiscal year 2000 budget for shore infrastructure and military construction.

    In many ways, the budget we are presenting this year is better than last year's. We project backlog of maintenance and repair to grow more slowly as a result of real property maintenance [RPM] and demolition programs. We have a more robust MILCON proposal with numerous piers, compliance projects, and quality-of-life projects. Our Base Closure and Realignment [BRAC] request is down, but that reflects the fact that we are coming to the end of the four authorized rounds of BRAC.

    On the whole, we believe this year's budget is a good one, and we hope that you will continue to support us as you have in the past.

    I recognize the concern that the administration's request for advanced appropriations may have caused. I can only refer to what has been said by Dr. Hamre and Mr. Lynn already: This is a one-time expedient to allow the inclusion of high-priority readiness and modernization programs. It was undesirable but unavoidable. We expect to be able to execute the programs we have requested without undue delay or expense.
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    With respect to military family housing, the projects for public-private ventures that we have proposed are not subject to advanced appropriations, and we expect to proceed with them in due course. For fiscal year 2000, we anticipate five projects affecting some 6,600 homes. We currently have five other projects which may affect over 15,000 homes awaiting resolution of concerns by the House Appropriations Subcommittee on Military Construction. We hope to resolve those concerns and proceed with the projects soon.

    Mr. Duncan Holaday, my deputy for Installations and Facilities, is scheduled to appear here next week to discuss the program with you in detail. But I would like to underscore that our Public/Private Venture [PPV] program is not about saving money and not about getting out of the housing business; it is about getting better, more affordable housing for sailors and Marines, and getting it sooner than we could using past practices. The committee has been very supportive of us in this in the past and we hope will continue to support us now that we are at the point of making significant progress.

    In the area of BRAC, we are, as I said, approaching the end of the first four rounds. We have closed 165 out of 178 affected facilities. It is important to note that closure is the point at which we begin to make significant savings. We still have major hurdles to clear in cleanup and conveyance of the property. Cleanup is proceeding reasonably well, as you may note by reference to the table on page 12 of my full statement. We have not delayed any phase of BRAC action because of cleanup.

    Conveyance is more problematical. In many cases, communities are not willing or able to take title to the property when we are ready to turn it over. We are pursuing an aggressive policy of interim leasing in order to allow productive reuse of the property while all the myriad details that go with conveyance are accommodated. But we would prefer handing over the property earlier rather than later in the process.
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    That concludes the few remarks that I had programmed to make, Mr. Chairman.

    Mr. HEFLEY. Thank you, Mr. Secretary. Who is next?

    Secretary PIRIE. If any of my colleagues have prepared remarks, they are certainly at liberty.

    [The prepared statement of Mr. Pirie can be found in the appendix.]

    General HIGGINBOTHAM. Sir, I do not have any testimony for the record, but I would like to thank you for the opportunity to appear before you today to talk to you about your Marine Corps, and I look forward to your questions.

    Admiral SMITH. As always, sir, it is an honor and privilege to be here.

    Mr. HEFLEY. Mr. Taylor, do you have questions?

    Mr. TAYLOR. Gentlemen, I am going to ask you the same question that we asked the panel last week. Since it is apparently not the will of this committee to forward fund, have you drawn up a list of priorities that you would like to see funded with the limited funds that we do have available this year?

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    Secretary PIRIE. Mr. Taylor, the priority list is indeed in coordination in the Department of the Navy and should be with you shortly.

    Mr. TAYLOR. Mr. Secretary, my second question would be: It is noted with great interest the loss of our installations in the Philippines, the very soon loss of our installations in Panama. As a taxpayer, I cannot help but be appalled at the number of things that we leave behind.

    I know the Navy in fairly recent history has purchased a few floating barracks. Given the fact that in many instances those countries where we are able to rent on a lease basis, and we do so on waterfront installations, would it not be wise for the future to try to construct a few more floating barracks, or in the case of Naples, Italy, a floating hospital? That way, should our host in the future ever decide not to let us stick around, we will at least take our things with us when we go?

    Secretary PIRIE. Generally that involves us in fairly delicate and diplomatic discussions with the host nation, and we very often do not want to give the impression of any impermanence in our allegiance to whatever alliance or arrangement and so forth.

    I think, in general, that there are probably places in which floating barracks would be useful. But it is a diplomatic negotiation in which we mere operators of facilities do not get a vote.

    Admiral SMITH. That is exactly right. It is always a sensitive thing with our host countries where the Navy is based overseas, and my own experience would say these are always quite delicate. And Mr. Pirie is exactly right, we do not want to seem like we are thinking about leaving tomorrow or anything, but looking at continuing our long-term commitment.
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    Mr. TAYLOR. Admiral, just based on my personal observations, I truly think one of the reasons that the Panamanians are so enthusiastic about it, at least the Panamanian politicians are so enthusiastic, is because it is going to be a game of razooks for the generators and the air conditioners and the other things that are left behind. I do not think it is going to benefit the people of Panama one iota, but I think some greedy politicians are going to get those things. If we are able to send out the message that in the future we do not leave those things behind, maybe we would be dealing in a better position when it comes to bargaining time. I certainly wish that you would give it consideration.

    I know that because of the Haitian refugees at Guantanamo the past few years, the Navy had to actually charter a cruise ship to house the troops. Again, if we had those sorts of things in the inventory, it is just one more asset that you have and, hopefully, some money that you do not have to squander in the future.

    Secretary PIRIE. Yes, sir.

    Mr. HEFLEY. Mr. Snyder.

    Mr. SNYDER. Thank you, Mr. Chairman.

    Mr. Secretary, I wanted to ask, in your opening comments you refer to the one-time expedient forward funding that our chairman made some comments about that probably reflects the concerns of most members of the committee.

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    One of the concerns I have, when I first heard Secretary Cohen talk about this idea, I had assumed it was a permanent change. I mean, there is a part of me that thinks that I would almost be more in favor of a permanent change than a one-time change. I mean, to do this kind of a quick fix for one budget year seems to me fraught with unforeseen problems.

    I know there are other branches of government that do a similar kind of thing, but they have been doing it a long time. I suppose the appropriate history would be what happened the first year that they moved to this kind of a funding mechanism.

    Do you have any concerns that there will be unforeseen things that bite you because of doing it as a one-time and then the whole process of going back to do the annualized funding?

    Secretary PIRIE. Yes, sir. I think this undoubtedly would have been easier had it been the normal practice and had we been used to doing it, and it very well may be that there will be inefficiencies.

    I think Admiral Smith and perhaps General Higginbotham can speak to some of the practical considerations that we are going to face.

    Mr. SNYDER. I would like to hear your comments.

    Admiral SMITH. Thank you, sir. As the head of the contracting agency, the Naval Facilities Engineering Command, who will actually be executing the projects, when this concept first came forward we had a lot of councils about how would we do this, how could we do this, what are the applicable portions of the Federal acquisition regulations we would use. And quite candidly, the contracting side of this is much simpler than it seems; it is not a difficult matter from a contractual point of view.
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    Obviously, for this to go forward, we would like all of the facets of data that are included in the President's budget to be concluded. But we definitely can execute the program. It is a matter of, are there additional administrative costs involved in here and what would this do to our execution time lines?

    In terms of going back, as your original question implied, in terms of going back to the original way of doing business after a year, I do not think that will be any problem for our executing agents.

    General HIGGINBOTHAM. I would like to address it from the perspective, if we do not get the advanced appropriation, of the impact on the Marine Corps.

    Our MILCON budget is roughly $162 million. And so the first year, or the first increment, would equate to roughly $40 million. And so, if we do not get that advanced appropriations, we are essentially dead in the water. And so, when we think in terms of what we want to do with our quality-of-life programs, we would probably have to take two out of our three barracks as an example.

    Our backlog of maintenance right now, or replacement factor, is roughly every 280 years. So you can at least at that point in time, probably four times that effort, impact upon family housing as well. So I can go on and on and on about that overall impact. And so that is my real concern if we do not get that advanced appropriation.

    Mr. SNYDER. Thank you, Mr. Chairman.
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    Mr. HEFLEY. Mr. Reyes.

    Mr. REYES. Thank you, Mr. Chairman. I would like to follow up, and one thing I am curious about is exactly how does the Marine Corps compete for MILCON dollars within the Navy system?

    Secretary PIRIE. There is a blue-green split of money which has been negotiated, I think perhaps at the beginning of time, but it is an enduring split of money. And so the Marine Corps takes its green dollars and decides how much of those dollars can be put on housing and how much for all of the other things that they need to buy.

    There are other dollars, which are called ''blue in support of green'' which relate to things like development of aircraft and things that is not integral to the Marine Corps. But, essentially, the Marine Corps has got a pot of green dollars and they decide how much they want to spend on housing.

    Mr. REYES. And I am assuming that is predicated on authorized force or on duty force? Or exactly how is that negotiated, or how was it negotiated?

    Secretary PIRIE. The fact is, I do not know, sir. It goes back quite a long time, and it was in negotiation between the Chief of Naval Operations and the Commandant of the Marine Corps and is overseen by the Secretary of the Navy. And once that deal was struck, which is now some time in the past, it has proved to have stuck very hard.

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    Mr. REYES. I ask those questions because oftentimes when we go out and talk to our men and women in uniform there is a perception that somehow the formula is not equal or is not distributed fairly.

    I guess part of what I am asking is, is there any system that reviews it and provides an opportunity for correction, if you will, in terms of, for instance, the Marines being more affected in terms of funds needed for military construction versus the Navy, or vice versa?

    I am just curious. Within the Navy, there has to be some way of adjusting or reviewing that. Because at some point in time there has to be an accelerated deterioration on one side or the other.

    Secretary PIRIE. The amount of money per person, let's say, spent by the Marine Corps on housing is decided on by the Marine Corps within their pot of money. Similarly, the same thing is true of Navy for the blue-dollar side. To adjust the relative budgets of each with respect to trying to level the amount per person on housing would ignore all of the other choices that they have made in both services about whether they prefer aircraft or ships or tanks; and so from that point of view, that kind of leveling would not be practical.

    What we do have are annual program reviews and budget reviews in which my office and others have opportunities to comment on the service budget and suggest to the Secretary that perhaps the balance may not be right between, let's say, funding for the infrastructure and funding for investment in weapons systems and so forth.

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    I have to tell you that the priorities of the Department are pretty clear from the budgets that we have seen in that readiness comes first and modernization comes later and people come after that and infrastructure comes last of all. And that is basically what you see working out here.

    Mr. REYES. So in the area of incremental budgeting, if it is put forth and comes to pass, is it formalized in the same way that the overall budget between the Marines and within the Navy, would it remain constant or would that be adjusted? And if so, how?

    Secretary PIRIE. Well, the increments of funding, the amount that was expected to be spent fiscal year 2000, was basically calculated on the historical outlay rates for the particular service for the particular kind of commodity in the past. That is, if we had spent 10 percent of what was authorized and appropriated in the first year of a project particularly in the past, then 10 percent is what was asked for in the first year of this 2000–2001 thing. But it has to do with the outlay rates of each particular service for each particular thing, whether it is BRAC or whether it is military construction or housing.

    Mr. REYES. So if there were a lag, then I guess there could be a danger of it even falling further behind percentage-wise.

    Secretary PIRIE. Well, certainly having moved a very substantial amount of appropriations out of fiscal year 2000 into fiscal year 2001 provides a very inviting target to people who are looking for money for other purposes in fiscal year 2001, and I have to say I have real concerns about that.

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    Mr. REYES. Thank you, Mr. Chairman.

    Mr. HEFLEY. Thank you. Mr. McHugh.

    Mr. MCHUGH. Thank you, Mr. Chairman.

    Mr. Secretary and gentlemen, welcome. Mr. Secretary, on page 6 of your testimony under ''Family Housing'' you talk about currently in fiscal year 1998 about 74 percent of Navy families and 66 percent of Marine Corps families worldwide live in a home they own or rent in the community.

    Do you have a service standard as to what level is acceptable, what is high; and if so, are you there or do you have any purposeful efforts to try to maximize that number?

    Secretary PIRIE. In an ideal world, the communities would provide adequate housing at a reasonable price for all of our people. If the private sector can provide housing for our people, we regard that as a good thing.

    The fact that 74 percent of Navy families and 66 percent of Marine Corps families do not win the lottery and do not get the subsidized government housing in the current situation strikes me as inequitable. And that was one of the motivations for us asking for accelerated public-private venture authority to try to even the playing field somewhat.

    Mr. MCHUGH. To do even more?
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    Secretary PIRIE. Yes, sir.

    Mr. MCHUGH. You follow on with that and talk about the BAH, and the Navy is at 19.8 percent average out-of-pocket expense and that DOD does have a goal of 15 percent, and apparently your budget maintains that 19.8.

    Secretary PIRIE. The 19.8 percent is kind of an artifact of a number of things which include the fluctuations of market housing rates in the places where our people are, which tend to be high-cost areas. And so that is something that falls out of the surveys rather than something that we put into the budget as a matter of policy.

    As a matter of policy, the 15 percent in fact is not exactly a DOD target. The 15 percent is a number that goes back some way in history. And essentially, I think it began as a congressional admonition that since the allowances for quarters are not taxable, some offset against the tax break was appropriate for people that did not live in government housing.

    Mr. MCHUGH. Just to refresh your memory, and you have a lot of material here, your statement says, ''considering it will be higher than the DOD goal of 15 percent''.

    Secretary PIRIE. Yes, I know.

    Mr. MCHUGH. The last part of this I would be interested in, just a point of clarification: So it was just by circumstance that 19.8 percent has been and remains the percentage of out-of-pocket?
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    Secretary PIRIE. We expect that 19.8 percent to decline over time, all other things being equal, and that means if the housing markets do not change radically where we are. And the reason we expect it to decline over time is that the mechanism for setting BAH is being changed and it is being changed in a way to compensate for the actual cost of housing to people in areas where we are concentrated rather than what our people are paying.

    In the past, the index was calculated on a survey of our people asking what they paid for housing. In many cases our people were paying a lot less for housing than they should have been because they were perhaps living farther away from work or living in substandard housing, and this created kind of a death spiral in the calculation of the index.

    We have now gone to what is called Runsheimer data, which is survey data of what people in comparable economic situations pay for their housing in comparable areas. That is going to have the effect of escalating the cost-of-living component of the basic allowance for housing. So we expect that over time the out-of-pocket expenses of the troops will decline.

    Mr. MCHUGH. How much over time are we talking roughly?

    Secretary PIRIE. Well, I think we would not expect it to decline much below 15 percent.

    Mr. MCHUGH. But in what period?

    Secretary PIRIE. We are talking about in the next four or 5 years.
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    Mr. MCHUGH. If I my might—and this is not a question; I apologize to the chairman—I was unable to make the last meeting, and I apologize to the other members as well, where I know the topic came up. But I just wanted, for the record, to associate myself with those comments that I know the chairman and many others have made with respect to the mechanism of forward funding and the enormous problems, the legal implications of contracting over such a period, et cetera, et cetera, et cetera. It just seems almost, if not altogether, insurmountable to me. And I want to commend the chairman for continuing to bring that up.

    As he said very well in his opening statement, not just he, but I think we are all willing and anxious to listen and hopefully if it is necessary and possible to learn, but I have not, Mr. Chairman, heard much nor learned much either that assuages even a small portion of the concerns that I have with respect to this approach.

    And with that, again, gentlemen, thank you for being here. I yield back, Mr. Chairman.

    Mr. HEFLEY. Thank you, Mr. McHugh. Mr. Saxton. I will point out to our witnesses here that Mr. Saxton is a sailor of great note. I picked up a sailing magazine the other day and there his mug is on the front page in living color. So you are talking to a sailor here.

    Mr. SAXTON. That cost a lot for me to get that picture. Thank you, Mr. Chairman.

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    I would just like to ask a couple of questions about the Navy's perception of the requests that come from the administration from time to time, particularly from the Secretary of Defense's office, relative to base realignment and closure issues.

    Mr. Secretary, has the Navy taken an official position about the future potential BRACs?

    Secretary PIRIE. We support the administration's request.

    Mr. SAXTON. Has the Navy identified excess property and, if so, can you either generally or specifically share that information with us?

    Secretary PIRIE. Well, without the kind of legal backup and mechanisms to do the kind of data calls and analysis that BRAC requires, which ensure the objectivity of the process, for us to go off and just make hit lists would be both predecisional and probably actionable. So we have not made up any such list.

    Mr. SAXTON. Has the Navy information available relative to savings that we have achieved in the past, I guess we have been through four cycles of BRAC? In a general, specific way, can you share that information with us today?

    Secretary PIRIE. For the Navy we put in around $10 or $11 billion for the first four rounds of BRAC. And by the end of fiscal year 2000, we will have recouped all of that money in terms of savings and be making a steady annual saving of about $2.6 billion, very substantial savings for the Navy.
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    Mr. SAXTON. Is there a formal or informal goal that you can share with us as to what you think a future BRAC or future BRACs might save?

    Secretary PIRIE. It would be a wild guess based on past experience, because the way we do it is that—and I was very closely associated with BRAC 95. The Secretary of the Navy said, ''I want you to reduce excess capacity to the full extent that you can consistent with maintaining military value.'' And that was the admonition and that is the way we ran the models. So what fell out of it fell out of it, and it added up to what it did, which for the 1995 round was an annual savings of about $800-$900 million a year.

    So we do not know until we actually do the process how much we are going to get out of the next round. But based on past experience, another two rounds might get us as much as a billion and a half dollars steady state saving.

    Mr. SAXTON. Annually?

    Secretary PIRIE. Annually, after the process had been completed. You recognize it takes 6 years or more to first pay for all the expenses of downsizing and people's relocation and new construction at receiving installations and all that. But after that front-end expense is over, then we might be able to save as much as a billion to a billion and a half dollars a year.

    Mr. SAXTON. From 1988 through the four BRACs there were many questions that came up relative to costs and savings associated with environmental cleanups, and I think it would be fair to say that we did not really get any solid or specific, or really no one was able to give us accurate information about costs versus savings with regard to environmental cleanup. Can you share anything more specific with us today?
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    Secretary PIRIE. One of the things about the environmental part of it is, you do not know what you have got until you go and do the inspection. And so the way that the environmental matters are treated in choosing whether to close a base is that we assume that we are going to clean up whatever is there, whether we keep the base or do not keep the base, so that is not part of the calculation for the cost of the base closing.

    Now, our experience has been in the previous four rounds of BRAC that our early estimates of the cost of environmental cleanup were very big—scary in many cases, but as we got into the projects and got really good inspections and analysis done, the costs of environmental cleanup have come down fairly steadily. And we now believe we have got a quite manageable situation and a cost to complete. I think it is in my testimony. I forget the exact number.

    I am going to let Admiral Smith, who is the world's living, breathing expert on environmental cleanup, and cost to complete, in BRAC, give you some more details.

    Admiral SMITH. Secretary Pirie really summed it up very well. And I was the BRAC guy in the Pentagon on the Chief of Naval Operations staff for 3 years before I came to my current position.

    I remember those early estimates, and they were awesome. In some cases, we estimated almost a half a billion dollars worth of cleanup at one individual parcel, and it turned out to be nowhere near so bad once we got in and actually did cores and took samples. We have had a lot of success working with State and Federal regulators determining the right way to clean these parcels up and to what degree of cleanliness. It really has been a good team effort, I think, to get there. I think that is what makes these BRACs so hard. As you get into them and you look at these parcels of land of which we are going to try to dispose, the early indications always look much scarier than the reality once you get there.
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    Mr. SAXTON. Yes, sir. I had some personal experience with BRAC issues and base closures and so on, realignments and so on, and I asked the question on a number of occasions, well, what about the environmental issues associated with the closure; and in some part was given the answer, well, we are not quite sure yet, because we have not really checked to see what is there.

    And I said, well, why are you checking now? And they said, well, because it looks like we are going to turn this land over to somebody else, and we need to check it.

    So I am not sure that we can assume that these cleanups would have been done in any timely fashion should BRAC not have been there. And therefore, I question why the expense was not calculated into BRAC expenses when I did not see a lot of these cleanups going forward.

    McGuire Air Force Base in Fort Dix is an example. There was a Backlog Maintenance and Repair [BMAR] site which is still contaminated today. And during that process my recollection is that the parcel to be cleaned up some day, which is still not cleaned up, was going to be subdivided so that the rest of the base could be dealt with. And I question whether that cleanup should have been, which it never was because it did not work out that way. But there did not seem to be any intent to take care of that situation anytime in the foreseeable future.

    So I guess my question is, were cleanups going on irrespective of BRAC? And if they were not, then shouldn't they be considered a cost of BRAC?

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    Secretary PIRIE. Well, cleanups are ongoing. I mean, we have something over $300 million a year in the Environmental Restoration and Navy Fund, which we use for our ongoing cleanup program. The cost to complete the cleanups of active bases, not BRAC bases—the cost to complete cleanups at active bases has come down from over $6 billion when I took this job 5 years ago to under $5 billion now.

    So we are making progress on that. And if we continue to make steady progress at the rate that we have programmed, we see that we will have cleaned up the existing sites in the Marine Corps and the Navy sometime by the end of the first decade of the next century.

    Mr. SAXTON. Well, thank you. I would just say generally with regard to BRAC, obviously there is resentment around the halls of—not resentment but reluctance is the right word, there is reluctance around the halls of Congress to move forward with BRAC because there are many questions relative to savings and cost of closures. And so I would just suggest that the more forthcoming you can be with information relative to what you experienced in terms of real savings and in terms of as much documentation as you can provide us relative to future savings, it will certainly enhance the opportunities for us to identify and agree to future rounds. Because all of us are searching for dollars, and we know there are dollars out there and we would like to be helpful, but to date a lot of us have some misgivings relative to what savings actually occurred.

    Mr. HEFLEY. Thank you, Mr. Saxton. Mr. Brady. I may have to interrupt you, Mr. Brady, because of the vote. But we will just go on until the next bell goes off.
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    Mr. BRADY. I will be real brief. I have the Associated Press article from the city of Philadelphia I am going to give you for the record and some questions that I will submit for the record.

    [The information referred to can be found in the appendix.]

    But I would like to follow up on a conversation in a hearing where my good friend, Representative Curt Weldon, spoke to Secretary Cohen about a Philadelphia Navy base, the vacancies there. They were having some problems with utilities transfers.

    I understand that you are meeting on Wednesday with some Philadelphia Industrial Development Corporation [PIDC] people in the city of Philadelphia. I just need to impress upon you how important that is. Because there is vacant land that we are attracting new businesses with some tax incentives that they cannot comply with through no fault of their own, partly through fault of ours and some of yours. And if you can rectify that, I would appreciate that, so we can get that land up and having some people on it.

    Secretary PIRIE. We are committed to making this work. And we believe that as far as the Naval Station is concerned, we can convey that or we can convey with a lease in furtherance of conveyance that will satisfy the requirements for the company to get its advanced funding. So I think we can work that out.

    Mr. BRADY. Thank you. I appreciate that.

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    Mr. HEFLEY. Witnesses, Mr. Secretary, I apologize. We had better recess the committee. As I understand it, there is one 15-minute vote and then a 5-minute vote. So we are well into that 15-minute vote. We will ask the committee to be back as quickly as we can after that second vote. Can you stay with us?

    Secretary PIRIE. Our time is your time, Mr. Chairman.

    Mr. HEFLEY. Fine. We will stand in recess until we come back after this vote.


    Mr. HEFLEY. The committee will come back to order. Again, gentlemen, I apologize. But I do not think we will be interrupted any more. So we can proceed.

    My committee, as you see, has dwindled substantially. That is the real reason I hate for those votes to come in the middle.

    I started to say, I do not know if you realize, but I am sure you do realize that we really do have a problem with the way we treat our service personnel. And I spend a good deal of time on military bases and like to sit down with the enlisted folks and see how they are responding. I spent some time with the Navy not too long ago; and the answer is they are not happy, or a lot of them are not happy. And there are four or five reasons they are not happy, but one of them is the way they have to live.

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    The Navy, for instance, they do not mind living on a ship if they are deployed somewhere. They understand that. It is crummy living, but they understand it. But they do not understand having to live on a ship when they are in port simply because there is not enough base housing and they cannot afford to go off base. Many of them are saying they are not going to make a career out of it, many of them that you would have expected to make a career out of it a few years ago.

    The Commandant of the Marine Corps, when I talked to him in hearings we had, I get the impression that he thinks they are proud Marines and they are not going to complain and they are happy and all that. No, they are not. No, they are not. And I want you all to understand that.

    There are Marines who are so fed up with the Marine Corps they cannot stand it. Yeah, it is a proud branch of our service. All the branches are. But they are fed up with the way they are being treated. And part of it is salary and part of it is deployment rate and Operations Tempo [OPSTEMPO] and all kinds of things. But part of it is housing. And by putting off, the way we are doing on this, I think we are compounding our problem, Mr. Secretary.

    As you have made your way around Capitol Hill over this last month or so, I am sure you have run into the serious bipartisan concern that you heard expressed here today about the incremental funding approach imposed upon the services by OSD in this budget request. What you heard here today is nothing new from what you are probably hearing anyway. And you indicated it is not your preferred method. Secretary Cohen indicates it is not his preferred method. The Chiefs have indicated it is not their preferred method. So everybody kind of agrees with that. Bill Lynn admitted the same when he appeared last week.
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    And yet here we are with this method, and we are here, in my judgment, because OSD wants to avoid the fallout from requesting the smallest appropriations for MILCON in 19 years. No one in the Pentagon wants to be accused of calling it a MILCON pause. But effectively that is what we have in my judgment.

    The entire budget rests on an unprecedented request for advanced authorizations and appropriations. Additional program authorities and basic changes in the administration of contracts seems like a lot to go through for a one-time-only exception, particularly when the Department must have known that this request would get little support from Congress.

    So, Mr. Secretary, was the Navy given the option to have a smaller fully funded program in fiscal year 2000, with a significantly larger program to come in fiscal year 2001? Since 64 cents of every dollar you need for the Navy and the Marine Corps construction programs would not be available until October 1st of 2000, wouldn't this be a better approach, even at the risk of admitting the obvious in fiscal year 2000, that DOD is prepared to accept a MILCON pause in order to pay other bills?

    Secretary PIRIE. Well, to answer your first question, Mr. Chairman, it is not an option that was given to us. Essentially, our budget was taken and we were asked what the outlay rates would be in order to move the appropriations part into the succeeding year. And the discussion then centered around whether we would not like to sort of formalize this as a 2-year request, and the discussion centered around, can you give us an additional flexibility, maybe a 5 percent safety factor and some other cushion for execution?
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    So that was the only negotiation that we got involved in.

    Mr. HEFLEY. So that option was not given?

    Secretary PIRIE. No, sir.

    Mr. HEFLEY. The Navy's statement, for the record, asserts that there will be no adverse effect on program execution if the Department is granted everything it seeks in terms of new authority under the budget request.

    Last week your colleagues in the Army were a bit more cautious, as I recall. The Corps of Engineers and the Assistant Chief of Staff for Installation and Management [ACSIM] claimed that they would execute the program under those circumstances. They also acknowledged that there was a risk of delay in delivery and that cost increases were possible. After all, you would be passing the risk on to the contractor, so they are probably going to raise the cost.

    Admiral Smith, from an execution perspective and in your personal opinion, I know you said we could do it, but what do you see as the principal risk associated with this structure of the budget request? Based on the only existing precedent concerning the bed-down of the 10th Mountain Division at Fort Drum, New York, in 1980's, won't this approach encourage cost overruns?

    Admiral SMITH. Mr. Chairman, in response to your question, you are correct, and I would agree with my friends in the Corps of Engineers that there is additional risk from a contractual point of view involved in executing the program this way.
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    When this first came up, we tried to quantify how much that risk might cost us. Because again when you add clauses that say words like ''subject to the availability of funds'' in a contract, you are asking the contractor to assume more risk. So I called the president of the Association of General Contractors, I called the Chief Executive Officer [CEO] of one of the largest construction companies in the world and I asked them point-blank would this increase their bid prices. Both of them said yes, but neither was able to quantify whether this would cost half a percent or a quarter of a percent or exactly how much that would be. So it is a matter of uncertainty to them.

    And there is also a matter to me, as the executing agent, that this would increase my administrative cost and then perhaps increase the level of overhead rate I had to charge my customers. And I think that is also a likelihood because this would entail doing things that we are not currently doing and tracking in the budget.

    In terms of the latter part of your question though, sir, cost overruns, I would just put in a plug that we are actually executing the military construction program at a cost growth somewhere between 89 percent at a time when the industry average, as reported in Engineering News Record, is more like 12 or 15 percent. So I do not worry so much about cost growth as much as getting the best value for the taxpayer, sir.

    Mr. HEFLEY. Admiral, I continue to be a little puzzled by the Department's approach to supervision and inspection and overhead charges. By separating these costs from the project they are designed to support and spreading them out over the 5-year period without indexing them for inflation and placing them in a supporting account that would be a tempting target for future budgetary gains, it seems the disruptions in program management would be almost unavoidable.
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    DOD claims it will save $154 million this year and about $300 million over the Future Year's Defense Plan [FYDP] by doing this. But aren't these must-pay bills? And, Admiral, in your personal opinion, is the annualization of these charges good for public policy?

    Admiral SMITH. Sir, certainly as the executing agent I would certainly agree with you that they are must-pay bills. The military construction appropriation is a little different from our other Navy procurement accounts in the way that these overhead costs are recovered.

    There is no equivalent to Supervision Inspection and Overhead [SIOH], of course, in the shipbuilding and conversion accounts. To annualize these, to put them on a cash-flow basis, from a cash-flow basis makes sense. Again, we don't spend all that money for overhead in a given year or a single year; we spend it over the life of the projects. Certainly all MILCON projects are different, and we have more than 2,000 active MILCON projects with the Naval Facilities Engineering Command [NAVFAC] programs right now.

    So yes, it gives us yet another thing to track and another thing to worry about. I can't speak to what future budgeteers might want to do to those numbers when they set their sights on them, but again, anything that causes me to hire more people to do things and track things that we currently do not have to track is a subject of concern to me.

    Mr. HEFLEY. Mr. Secretary, I asked your colleagues in the Army why the Army chose not to incrementally fund their Base Realignment and Closure Construction [BRACON] projects. As I recall, there was a concern which may also be shared by the Air Force that the demands of operational closure and the legal requirements to meet deadlines meant that no risk could be taken with incrementally funding those projects. The Navy has chosen to incrementally fund its limited BRACON projects in this budget request.
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    Why did you decide to proceed this way, and how would you explain the difference?

    Secretary PIRIE. I would defer to Admiral Smith, but I believe that the only BRACON projects we had were already big ones that were incrementally funded. Isn't that correct, Admiral Smith?

    Admiral SMITH. Yes, sir. We have done, over the course of the four rounds of BRAC, several projects. There are like seven or eight that we incrementally funded. For example, the headquarters of the Naval Air Systems Command in Patuxent River was funded over 2 years, incrementally funded. It has worked well for us, and again the thought has been, as we look at all of our large projects, projects costing generally over $50 million, would it make more sense to incrementally fund them and try to go after a single large appropriation?

    Mr. HEFLEY. OK. Mr. Secretary, I am sure you remember well the sharp criticism the Navy came in for last year because so much of the funds previously authorized, appropriated for military family housing construction sat idle while you studied privatization options, and we talked about that off the record.

    Can you give us some sense of how well you are executing those funds now that the Navy and the Marine Corps have made some basic decisions about which locations will be in the PPV pot and which ones will be in the regular MILCON pot?

    Secretary PIRIE. As I indicated in my summary statement, Mr. Chairman, we have finally broken the log jam on these projects and we have some five projects affecting, quite probably, more than 15,000 units, now before the House Appropriations MILCON Subcommittee, which as far as we are concerned is the last stage of the process before we issue requests for quotations and proceed to select a developer and a partner.
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    So I think we are making good progress. As I indicated in our previous conversations, it took quite a long time to line up all of the bureaucratic wickets that needed to be negotiated to get acceptance of this way of doing business. We have one more wicket to negotiate. I think in the course of the next year we are going to see some really excellent progress.

    General HIGGINBOTHAM. Mr. Chairman, may I make a comment about that?

    Mr. HEFLEY. Surely.

    General HIGGINBOTHAM. First, just going back to an initial comment that you made, in the Marine Corps we are all about making marines and winning battles, and so it is all about people, it is not necessarily about things, you know, equipment or weapons systems. It is all about people, so quality of life is extremely important to us, and that is why we are on a track right now to take care of our Bachelor Enlisted Quarters [BEQ] problem. So at the steady state of funding at $50 million a year, by 2005 we will eliminate our inadequate barracks, you know, for our marines.

    I just took a trip visiting all of our sites on the West Coast and all of the sites on the East Coast, and I have seen some of these facilities that you are talking about. Certainly it is not a good situation, but we are on a fast track to fix that problem.

    The same thing for our family housing. So we are on a track there to eliminate our backlog, our revitalization backlog by the year 2012, and that includes both MILCON and also public-private venture. I think we are taking a very smart approach as it relates to PPV as it exists right now.
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    This month we will make our first award, which will be at Marine Corps logistics bases all up in Georgia, so we are doing that real soon. There we are getting out 419 existing houses and the property for 160 units that will be built on the base. The same thing out at Camp Pendleton: 512 different housing units that will be privatized, given to the—for PPV management, along with 200 new homes.

    We have seven other projects as well, which will ultimately represent somewhere between 40 and 47 percent of our housing. So I think we are taking the smart approach about that, but here again looking out for the welfare of our people and trying to revitalize, you know, both BEQs and housing as quick as we can.

    Mr. HEFLEY. That kind of leads me to my next question, because one of my principal concerns, everywhere I have traveled with the Navy and Marine Corps, is the basic condition of housing, the availability of military child development programs, the adequacy and availability of physical fitness centers, those kinds of things. We have made some progress over the last few years. Is that progress enough to show up in retention, or are the pay and benefits and retirement and the OPSTEMPO and so forth, do they overwhelm even the progress we have made?

    I might mention, General, when we started this process the Marine Corps evidently didn't care much about the people where it came to these kinds of things, because you were the farthest behind, by far the farthest behind than anybody else. That is why I was glad the question was asked by Mr. Reyes or Mr. Snyder somewhere over here regarding, you know, when you plan to get it done and that kind of thing.
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    You really have fallen quite a ways behind, and I asked the Commandant at one time, I said, ''What the heck, don't you care about your people? Because you are letting them live in conditions where the Air Force and the Army and the Navy, they have begun to pull up.'' Well, I am glad to hear your statement that you are making this an emphasis now.

    But is what we have done so far making any impact or do we need to do a great deal more? I don't know who should answer this.

    Secretary PIRIE. Well, let me take on it, Mr. Chairman. I would very much like to do a great deal more. We have made progress, as you point out. The retention problem is a complex one that has to do with pay, it has to do with quality of life, it has to do with individual motivation and leadership of the people; it has to do with quality of life in the workplace. It has to do with being given a job and the tools to do the job, in a world in which you give a sailor or a marine a complex piece of equipment and tell them to maintain it, but you don't give them the training and the tools and the spare parts. Pretty soon those people get frustrated and decide that they are working for a second class outfit and so forth. So it is many of these factors.

    I do not think that the absence of child care centers, recreation facilities, or decent housing is a major dissatisfier in this spectrum, and so forth. But could we use more help here? Yes, sir. There is no question about it. We are now programmed to come up to the DOD mandated standard by sometime in the 2007, 2008 timeframe. I have been in my job now for just about 5 years. I don't expect to be around here in 2007.

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    General HIGGINBOTHAM. Mr. Chairman, may I add to that, please? I think one of our biggest challenges today is certainly aging equipment, and so we have, you know, vehicles such as our amphibious assault vehicle that is now 27 years old. We are about ready to put it through what we call a reliability, availability and maintainability program, spending $309 million to extend the service life of that piece of equipment out to 36 years, until we receive the advanced amphibious vehicle. The same thing for many of our other items of equipment, whether it is trucks or other armored vehicles, so that is some of our challenges today.

    So when you think in terms of quality of life, it is that young mechanic, that young marine now that has to spend 12 to 14 hours a day, 6 and sometimes 7 days a week, to maintain that aging equipment. So I think that has a bigger challenge than anything.

    Mr. HEFLEY. Well, I would agree that is very important. And my contacts, the idea that I have to take parts off of this airplane to make this airplane fly is very discouraging to these guys, very discouraging. They are doing the job twice, and then they bring in another plane and then fix this one up, because they just took the parts off. It drives them nuts.

    Admiral SMITH. Yes, sir. If I may, I would have to say, to go back to your original two questions, the answer to both of them is yes and yes. We have done a lot and we do have a lot more yet to do. Admiral Mike Boorda used to be fond of saying that the quality of life is the last thing that happened to you today.

    That is why if you look at the Navy program, we found that as we got into things that were quality of life, things such as barracks, we couldn't just do them targeted at one group; perhaps the one-plus-one group we talked about before. You will see our request this year has them for recruits at a recruit standard. We have them for students at a two-plus-two. We have them for transients because, again, this is all part of their quality of life. We have funds in here for training facilities, maintenance facilities, again, all things that not only improve quality of life but help keep sailors in the Navy.
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    Mr. HEFLEY. You know, if we can move from quality of life just a minute, and I have not been to every Navy and Marine base but I have been to a number of them, and I am always amazed at what you do with what you have. You really do a heck of a job with that.

    But I am disturbed when I understand that 57 percent of your pier space—now, when you think Navy, you think of pier space—when 57 percent of the pier space and 40 percent of the wharf space is classified as substandard or inadequate, and we are tying up some of the, I guess, most valuable military assets that we have when you talk about carriers and various things.

    Is there a comprehensive plan, master plan of some kind, to take care of that deficit? Now, we have been talking a lot about quality of life things and there are some plans for that, but what about these operational things? Is there a plan to take care of that deficit, and if so, do we have a number out there when we will have these up to date? I am looking at you, Admiral, but anybody can jump right in.

    Admiral SMITH. I would like to jump in on that, because 3 years ago I sat before this committee when I was on the Chief of Naval Operations [CNO]staff and we talked about an upcoming focus area for us on piers and runways. Because regardless of what we outsource and privatize, we are always going to be the Navy and we will always need those types of facilities.

    I think in last year and this year's program we see that program beginning to blossom. We see the second phase of a pier-up program at Norfolk, another huge pier replacing three World War II destroyer piers. And I know, sir, that you have gone down to Norfolk and looked at those brand-new ships tied up at those aging piers and it is just an awful sight.
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    We are replacing those. We are putting our money where our mouth is. There are new piers there, not just in Norfolk, but also in San Diego and also in Hawaii, out at Pearl Harbor. So we are emphasizing those operational facilities and I think that is a big start at where we are going.

    We are embarked on a long-term study, what we call our global-to-shore plan 21 study, to look at the Navy worldwide and where our capacity is and maybe where we need to replace this aging infrastructure. But we are just coming out of the chutes on this program now, and I think are seeing some of the good fruits of those early efforts we did three, 4 years ago, as we came out of four rounds of base realignment and closure to put a really 21st century Navy infrastructure there for our 21st century ships.

    Mr. HEFLEY. You all share my concern about that.

    Admiral SMITH. Yes, sir, absolutely.

    Secretary PIRIE. Absolutely.

    Mr. HEFLEY. General Higginbotham, as you know, this subcommittee has been concerned with the safety of ordnance handling at Marine Corps Air Station Yuma, and I was gratified that the Marine Corps has programmed $14.4 million for land acquisition that will resolve these safety concerns. However, I am concerned that this project is incrementally funded in your budget and only 25 percent of the cost, or $3.7 million, is provided.

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    It seems to me that you are only going to delay the acquisition and needlessly allow a hazard to the safety of the public and the Corps to persist. The Army Reserve has programmed a land acquisition at Orlando, and they did it at full funding because of the difficulty of incrementally funding a purchase. Why did the Corps not make the same kind of an exception?

    General HIGGINBOTHAM. I suspect that is because the first increment really equates to only $40 million for us, and so that alone is $14.4 million. So I think we would have to have a creative effort to be able to fund for that particular acquisition, perhaps in the fourth quarter, to make arrangements for that procurement and then pick it up the first quarter of the next year. That may be how we will have to do that.

    Mr. HEFLEY. Admiral Smith, if we could focus on one exception in the regular MILCON program to the roughly 25 percent rate of funding that we have been talking about, the berthing wharf at Naval Air Station North Island will cost about $54 million to complete. In the fiscal year 2000 budget you are requesting $41 million. Why is this project the sole exception to the Navy Department's incremental funding formula?

    Admiral SMITH. Again, sir, as was our practice, it is a very large project, over $50 million, and we looked at phase funding, just as we phase-funded the pier in Norfolk last year and this year again we are asking for the second increment of that project. Not an unknown thing as we build large piers.

    Mr. HEFLEY. Admiral McLaughlin, in previous BRAC rounds the Navy Reserve lost roughly four dozen Reserve centers and other facilities across the country. Has the loss of these facilities caused you any difficulty in recruiting, training or managing reservists to support the Navy and the Marine Corps? I ask because our friends in the Army, the National Guard, talk about their facilities, particularly readiness centers, as providing the Army with direct access to the community. I know the Guard and the Naval Reserve are different institutions with different missions, but I do wonder about the effect of the lack of presence in communities across the country for your service.
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    Admiral MCLAUGHLIN. Some challenges, Mr. Chairman, but clearly a conscientious effort on the part of the Naval Reserve leadership. I think we have gone from about 210, considerably dropped down to below 200, and we are not finished yet. It is our intention to keep a presence in all of the 50 States, but to be quite frank, when we took a look at the buildup that we had during the Reagan years and took a look at where we needed to go to better support our Navy, we saw a lot of opportunities to reduce our infrastructure, consolidate in a number of different places without really negating the overall impact of our Naval Reserve program.

    Now, that is not to say that there are not individuals that are negatively impacted any time you consolidate and force a reservist to drive a little bit further to get to his drilling site. But I think overall, when you look at the entire spectrum of our Naval Reserve, our readiness has never been as high as it is right now; our support of fleet operations as never been as effective, certainly in the 20 years that I have been a naval reservist. So I would have to say that this has not been a downsizing that has been forced down our throats; it has been a well-thought-out consolidation, and we will continue to do that where it makes sense to save resources and yet still give the Navy the active support.

    So probably some individual cases, Mr. Chairman, but overall from a programmatic stance, I think the Naval Reserve is in the best shape it has been in in the last 20 years right now.

    Mr. HEFLEY. Good. Mr. Secretary, before I close out my questions today, I have to go to BRAC. I know, as you always are, you are being a good soldier and forcefully advocating for two additional rounds, and that is, you know, the Secretary of Defense's position, that is the administration's position, and that has to be your position.
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    But let me tell you why I am having some difficulty with the request. I have listened very intently to what the Service Chiefs have to say on the subject and this is what I hear. They all acknowledge some requirement to dispose of excess infrastructure, but the Army doesn't want to surrender any major maneuver space, the Navy does not want to surrender any waterfront. The Air Force is the most aggressive service for BRAC, but it does not want to do anything that implies surrendering existing military airspace. And the Marine Corps does not appear to be willing to give up anything.

    So at the same time DOD asserts that the department has about 23 percent excess base capacity, and spends a lot of time trying to tie the number of uniformed personnel to plant replacement value, square footage, or whatever measurement most effectively demonstrates the need for broad BRAC where all installations are put up on the chopping block. Just last week the Secretary suggested that there may be more berthing space in the Navy than the number of ships in the fleet can support, particularly in light of the operational concerns of the CNO.

    I don't think there is any magic ratio. It is a question of adequacy, not necessarily numbers, and if you have an inadequate pier and it serves no useful purpose, then I suppose you demolish it, but that doesn't mean you would close the installation. More to the point, in the military and in the prosecution of war, a little redundancy is necessary sometimes, even desirable. It makes strategic sense even if the bean counters wish it were different.

    So my frustration is that we will launch into another BRAC round and make it a solely budget-driven exercise. Given the position of the Chiefs on most of their basic, most important infrastructure, I don't see how you get the 21 percent reduction and still be in an acceptable level of military risk.
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    If any or all of the witnesses would like to comment on that, I would appreciate it.

    Secretary PIRIE. Well, Mr. Chairman, to a large extent BRAC is not about real estate but about people. The measures of excess capacity really, in the final analysis, roll back to how many people do you have and how many can you afford.

    In BRAC 1995, which I was the Navy's principal officer, I believe we did a good job of getting to about the right size in naval stations and in pier space. I don't think we have any excess of adequate pier space. We got to about the right size in naval air stations and the squadron hangar modules and things of that kind. I agree emphatically with the Army and the Air Force that we shouldn't give up any range space or training space or access to any of these areas. We should hang onto them determinedly.

    But we do have very large technical establishments. In fact, our technical establishments in some ways were designed to support a much larger Navy. And we have a lot of facilities that don't have runways and hangars and piers, where people do technical and industrial work, and I think we need to take a careful look at whether we have more of that than we can afford.

    Mr. HEFLEY. Any other comments? Well, I have advocated, as you know, if we are going to do this, a more focused BRAC process. For instance, what in the world sense does it make to put Mayport on the table in another BRAC round and get Jacksonville all excited about Mayport maybe going. You are not going to close Mayport; you are not going to close Norfolk or San Diego. There are places you are absolutely not going to close.
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    I think you made a horrible mistake, we made a horrible mistake by letting Cecil Field get away from us at Jacksonville. Where else does the Navy have that kind of airspace that they can get to, where no one complained about noise or anything? But we did.

    So it seems to me if we could come up with some kind of a more focused—and maybe the focus is not to say here is where we have too much excess, we have too much, but maybe to say more like you phrased it, such as here are some things that we are going to take off the table. This is not going to be in a BRAC round. These are the kinds of facilities. If the Navy gave up any more pier space, wharf space, I would be so disappointed because I just don't think we can afford to do it. I don't want the Army to give up maneuver space that they can never get back again.

    So you know, I wish we could work together to come up with some kind of a more focused BRAC, and I think you would find a lot more support up here for it.

    Secretary PIRIE. One of the things we confront is generally the issue of fairness and equity, and to exempt some group of things from the beginning might seriously raise questions among the people who were not exempted but yet had facilities at risk. That would be my concern, Mr. Chairman.

    A bunch of smart people could sit down in a room and look at the list and work over the list and decide, well, we can take this slice and exempt it and take this slice and put it at risk. The whole BRAC process, it seems to me, is designed to prevent anything like that from happening.
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    You know, the way the Navy ran back in 1995 was the Base Structure Evaluation Committee, two Generals, two Vice Admirals, two SES–6s and Mr. Nemfakos and myself, 300 hours of deliberative session which was verbatim recorded, in which we had an auditor and counsel present for every minute of it, completely in the sunshine and completely available to the public. Unless you have a process like that that is accessible, I think you are really open to questions about whether you did it fairly.

    Mr. HEFLEY. I understand that concern, but I guess I don't care about those kinds of acquisitions at this point. We have gotten through the easy question. I mean the easy closures, if there were any, have been done, and now you are fine-tuning, and it seems to me that we need guidance from you guys that work at it every day, when you come to this fine-tuning and say these things are simply not going to be on the table.

    Mr. MCHUGH. Mr. Chairman, would you yield?

    Mr. HEFLEY. Yes, Mr. McHugh.

    Mr. MCHUGH. Mr. Secretary, I appreciate your comments and I think they are very politic, and I mean that as a compliment. Sometimes in this town, in this day and age, that isn't taken as such.

    But I really share the Chairman's concerns, because I have seen in a BRAC process very intimately how, absent that kind of guidance from the department and from the services, it becomes a budget-driven process: three Training and Doctrine Command [TRADOCs] and a depot equal a maneuver base; four pier stations and a naval air station equal something else. It becomes a matter of how much money are we saving, not what are we doing to our ability to support the end strength and the force structure.
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    I just think that as we go forward on this, and it is clear that the services feel they do have excess capacity, that we have to take every step possible to ensure that whatever we shut down is indeed out of excess capacity.

    Mr. Chairman, I support your initiative, but I don't support your confidence that bases, and you named a few out of the Navy menu, won't be closed for one reason or another. Because the fact of the matter is, we have now on the books a number of bases, and I won't go into particulars because I have said it before before this subcommittee, that were closed over the objections and without the suggestion of the services.

    So when you have this arbiter called the Base Closure Commission, with virtually no rules and no boundaries that keep it from going anywhere and making any decision it wishes to, you can indeed place at very real risk irreplaceable facilities. I share your caution, and I just wanted to get that on the record as well. Thank you, Mr. Chairman.

    Thank you, gentlemen.

    Mr. HEFLEY. I want you to know how great minds think alike. Mr. Hilleary, did you have any questions?

    Mr. HILLEARY. I do for the next panel, but not this one.

    Mr. HEFLEY. Mr. Abercrombie.

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    Mr. ABERCROMBIE. No, sir, you have covered it.

    Mr. HEFLEY. Panel, I thank you. This has been above and beyond, we have kept you a long time, but you have done a commendable job of responding and we appreciate it, and we will be working with you as we go along through the year. Thank you very much.

    Secretary PIRIE. Thank you very much, Mr. Chairman. Glad to be here.

    Mr. HEFLEY. This next panel is making themselves comfortable and we will begin. Our second panel this afternoon will provide a brief to the subcommittee on the budget request for the Department of the Air Force. Our principal witness will be Ruby DeMesme, Assistant Secretary to the Air Force for Manpower, Reserve Affairs, Installations and Environment. Secretary DeMesme is accompanied by the Civil Engineer of the Air Force, Major General Eugene Lupia; Brigadier General Craig McKinley, Deputy Director of the Air National Guard; and Brigadier General Ralph Clem, Deputy to the Chief of the Air Force Reserve.

    Before you begin, Madam Secretary, I would like to note that I believe this is your first appearance before this committee.

    Secretary DEMESME. Yes, it is.

    Mr. HEFLEY. And we will try not to make it too painful. Now I won't promise that for all of your appearances, but for your first one we will try to make it not too painful. I think it is a little unfair, it is kind of like sitting in on the final examinations in a college class while you watched others being asked the questions. You all got to kind of prepare yourselves during the last inquisition there. But we are delighted to have you, and we will turn it over to you at this time.
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    Secretary DEMESME. Good afternoon, Mr. Chairman and members of the committee. Let me begin by thanking this committee for its continuing support of our uniformed members and their families. As you are aware, this is a difficult budget, and we have worked very hard to ensure that the needs of our people are met, the equipment that they operate is modernized, and where they live is safe and secure. I have submitted my written statement for the record, and would like to take this time to highlight a few areas in our fiscal year 2000 MILCON request.

    The Air Force is striving to maintain facilities and infrastructure to preclude weakening unit readiness, impairing mission accomplishments, or degrading our people's ability to work and live in a quality environment. Our corporate strategy to accomplish these goals includes several things: first, ensuring that our MILCON program places emphasis on supporting new mission beddowns and current mission activities; ensuring continued access to critical ranges and airspace; reinvesting in the few remaining bases overseas; funding critical environmental compliance projects; and maintaining our operations and maintenance programs to protect the quality of life of our personnel and their families.

    We recognize the integral role the Air Reserve components play in our total mission, and therefore our program assures that their construction needs are addressed along with those of the active force. Mr. Chairman, for the next few minutes, I will in very concise terms review our total force MILCON program, to include military family housing and base realignment and closure.
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    The Air Force total force MILCON budget request for fiscal year 2000 is $1.77 billion. Our current mission program includes runway and ramp repair projects, additions and alterations to existing facilities, and two composite support complexes. It is important that our people operate in an environment designed to help them accomplish their missions. Our new mission program supports weapon system beddowns such as the F–22 fighter and the C–17 airlifter, the B–2 bomber, the KC–135 tanker, the Joint Primary Aircraft Training System, or JPATS, and the construction of the Enhanced Training Range in Idaho.

    Achieving and maintaining military readiness is an extremely high priority with the Air Force. While modern technology enables our forces to perform their missions more effectively, technology cannot substitute for high quality people. So to retain our people, we must meet their needs, and our program funds enlisted dormitories, fitness centers and community support facilities at various locations.

    We must also invest in force protection, safety, and quality of life facilities in our overseas bases. We now have 11 overseas main operating bases, and regrettably, the reduced MILCON investment along with inadequate host nation funding means that we cannot fully meet our overseas MILCON requirements.

    Family housing is one of our most important programs, and we are very appreciative of this committee's strong support in this area. Our MILCON program reflects efforts to continue to revitalize or replace worn-out housing units that are no longer economical to maintain.

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    Our BRAC request supports the 1995 decision to realign Kelly Air Force Base, Texas, as well as supporting final design costs for the fiscal year 2001 program. I also note that the Air Force strongly supports Secretary Cohen's request for two additional rounds of base closures.

    Despite the challenges, we have another good news story. For example, this past year, we awarded the Department of Defense first privatized housing project at Lackland Air Force Base, Texas. We are also the proud recipients of one-third of the Department of Defense's 42 environmental awards.

    In conclusion, Mr. Chairman, this committee's continued support is vital if we are to accomplish our program's goals. Our MILCON submission reflects the corporate priorities supporting our weapons systems modernization, while also providing for our people and their families. They need a secure and safe place to work, to live and to play.

    That concludes my statement, Mr. Chairman. I am ready to answer any questions. I don't believe any of my panel members have statements to make, sir.

    [The prepared statements of Ms. DeMesme and General Lupia can be found in the appendix.]

    Mr. HEFLEY. Well, I have to say, Madam Secretary, I am terribly disappointed that I didn't convince you on the BRAC thing. I thought surely you would overhear my statement on that and be convinced, but I have failed again.

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    General Lupia, I have to recognize the fact, unlike the Secretary, you are a familiar figure to this committee.

    General LUPIA. Yes, sir.

    Mr. HEFLEY. And we understand that you will be retiring later this year. When is it going to be, in the summer?

    General LUPIA. June or July, sir.

    Mr. HEFLEY. June or July. Well, I want to tell you personally that I am disappointed in that decision and we are going to miss you here, and that we have enjoyed very much working with you over these years. And I—you know, there comes a time when you must go on to other things, but we wish the decision was different. And we hope that the Air Force will replace you, and I am sure they will, with a top quality person, but you are certainly that and we have appreciated the way you have cooperated with this committee.

    General LUPIA. Thank you very much, sir, for your kind remarks.

    Mr. HEFLEY. Mr. Taylor.

    Mr. TAYLOR. Mr. Chairman, in keeping with the Chairman's compliments, I also wanted to inform you that in keeping with the administration's budgetary plans, we will be sending you half of your retirement check this year, with a promise, a very strong promise that the rest will be there next year.
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    General LUPIA. Well, Mr. Congressman, I did have an Air Force civil engineering coin to give you to add to the collection in your office. It is still in my pocket, and I will believe I will deliver it with the 01 appropriation.

    Mr. TAYLOR. Madam Secretary, I appreciate that you are not taking much of the committee's time with this, but really, I just have to say in the strongest possible terms, this is bad government. There are already too many critics of the military budget. These are for all of the wrong reasons.

    Mr. Hefley and a number of other people have pointed out time and again the fear of a scenario where buildings are half completed, funds don't come along, and then 60 Minutes, 20/20, whoever, comes along does a story on it, and an enraged American public responds by cutting the military budget even more. This is really bad government.

    I certainly wish you would go with the administration in very short order and revise this plan or scrap it entirely, because it is not a good way to treat the men and women in uniform. I think it is entirely irresponsible that now, when we are at least coming close to balancing our books, that we decide to take one last ounce of blood from the troops, as far as the housing.

    And I just want to echo the Chairman's remarks. I just can't believe that the administration would propose such a foolish scheme. I am sure you wouldn't want to get half a paycheck this year and the other half next year, and the people that are counting on this for their housing, they deserve better. I wish you would propose better.
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    Secretary DEMESME. We appreciate your concern, and we will do our utmost to make the program work to the best of our abilities.

    Mr. TAYLOR. Nothing further. Do I have some questions for the record, Mr. Chairman.

    Mr. HEFLEY. Mr. Snyder.

    Mr. SNYDER. Thank you, Mr. Chairman. I wanted to ask, if I might, about the level of real property maintenance. Did I read the numbers right, that you have had a decrease, is that correct, for this budget? That seems to me to be in conflict with what your statement said about the importance of maintenance of the facilities and the quality of life. I mean if people don't get their roofs fixed, isn't that a real problem for you?

    Secretary DEMESME. It does pose a lot of challenges for us, sir. We did have a decrease. We were struck with the need to balance our modernization efforts with our pay efforts, with all of the other quality of life initiatives. We are trying real hard to increase our ability to meet the infrastructure needs, and we are looking at this program the best we can. It is not where we want it to be funded.

    Mr. SNYDER. That is kind of a robbing Peter to pay Paul kind of thing, is it not? You have some base commanders out there that really struggle to maintain facilities. I think I am correct, Mr. Chairman, I think the Air Force is the only branch of the service that had that dramatic decrease in the real property maintenance this year. I would think it would add to your expenses down the line, I mean if we believe that property maintenance saves money by keeping roofs from leaking and all of those kinds of things, not to mention the quality of life.
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    General LUPIA. Mr. Congressman, we for the second year in a row have brought a budget to the Congress that has real property maintenance funded at 1 percent of the plant replacement value, which we call the preservation maintenance level. Kind of keep things as they are, fix a leaky roof, but don't replace a leaky roof, as we have done in the past.

    In terms of the quality of life, what happened this year which should protect that for our airmen, is that very late in the budget cycle we got a budget decision that took for the total Air Force $475 million and put it into a quality of life account at OSD, and so we do know that as we execute the 00 budget, there will be a good portion—the whole account is $1.6 billion, so almost $500 million of that is in an account with a fence around it that says quality of life.

    Mr. SNYDER. I guess another way to ask my question is, if we didn't have budget caps and we added substantially more money into your budget, would the real property maintenance budget be restored to the higher levels?

    General LUPIA. Absolutely, sir. But the requirement for additional money for real property maintenance is included on the Air Force unfunded priority list.

    Mr. SNYDER. I wanted to ask too about this incremental, we are calling it incremental funding, the biannual funding, what we have been talking about. Help me with the legal requirements for the Air National Guard. I thought they had some—explain that with regard to this issue of the 2-year budget cycle for MILCON. I thought that there were some special requirements that the Air National Guard had to have projects funded on an annual basis. Am I wrong on that?
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    Secretary DEMESME. I will defer to General McKinley for that.

    General MCKINLEY. Are you referring, sir, to the SIOH portion?

    Mr. SNYDER. Please don't use those letters. I will get confused.

    General MCKINLEY. That is the only thing that we do differently, because we have the United States Property and Fiscal Office in the States, in which the States contribute some funding to our projects. We have to ask for more of that up front. Yes, it does require a different funding stream, and it does make the execution a bit more challenging. However, that has been our tradition, and that is what we have done.

    General LUPIA. Congressman Snyder, when a project comes to market, 6 percent of the cost of the project goes to our design and construction accounts for supervision, inspection and overhead. The Air Force Reserve and the active Air Force program has a very small portion of that funded in the first year because we don't have much to supervise and inspect in the first year, our agents don't; then a very large percentage in the second year, and then we spread it out over 5 years. For the Air National Guard, they are going to get their full 6 percent with the appropriation, with the advanced appropriation.

    Mr. SNYDER. I understand. I wanted to ask about Mr. Hefley's discussion with Mr. Smith about—or the previous Secretary, and the Chairman's comment that could there not be a more restricted form of a BRAC, and the Secretary's response was that fairness and equity would require that everything be on the table. But I would think you can make just as strong an argument that fairness and equity, I mean the most basic part of fairness and equity, is being honest about things. I mean if you flat out know that there are certain facilities that never would ever be on the table, I don't think that there is anything fair about saying it is going to be on the table when you know it is not on the table.
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    I know the Air Force has been probably most aggressive about wanting a round of BRAC. Do you have any comment? You heard the Chairman's comments, too, about having something more restricted.

    Secretary DEMESME. I don't believe under the current rules we could have a restrict BRAC.

    Mr. SNYDER. We could write anything we want, I think.

    Secretary DEMESME. We have not identified any particular locations that we would hold sacrosanct. There are of course locations that are more key to our ability to deploy and meet specific needs, which we hope will be pretty much discussed when we talk about BRAC, but to this point we have not tried to BRAC-proof any specific locations.

    Mr. SNYDER. Thank you, Mr. Chairman.

    Mr. HEFLEY. I think Mr. Snyder is really correct. The reason you are asking us for two more rounds of BRAC closure, we have to enact legislation and we can do it in any form that we choose, so we could do one that would allow you to say these kinds of—these facilities we are not putting on the table. And if we get two more rounds of BRAC anytime soon, I would guess that is probably the direction; we might begin thinking in those terms.

    Mr. Hilleary.
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    Mr. HILLEARY. Thank you, Mr. Chairman. Thank you all for coming here. Good afternoon.

    Secretary DeMesme, you talked to me a little bit about the Reserve component budget request, and as I understand it, it is about $33.5 million for the Guard and the Air Force Reserve. Could you tell me a little bit about what the actual requirements you think are that you all have identified?

    Secretary DEMESME. I am going to defer that to General Clem.

    General CLEM. As you know, Congressman, we participate in the total force MILCON process. The Guard and Reserve are at the table, and the Air Force corporate structure, from the development of the original list right through to the submission of the President's budget request.

    Clearly the Guard and Reserve, like the active Duty Air Force, have a list of projects both in the FYDP and in the command which ultimately we would like to see funded and we think that the troops and the operational requirements could use. But like everybody else, we get in the queue and we make our argument and hope to get as much as we can. I think that that is probably just again a microcosm of what the Air Force process is.

    Mr. HILLEARY. Does anybody have a dollar amount, of the amount of the projects that you have identified that you really need money for? It is more than this $33.5 million, isn't it?
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    General LUPIA. Congressman, I can give you that in a macro perspective. The requirement from our major commands, total Air Force now, active Guard and Reserve, for this year's program was $2.2 billion. The program you have in front of you is just about $700 million for authorization. So we are able to fund about one-third of the requirements, and again I will say that is active Guard and Reserve from our major commands.

    Mr. HILLEARY. Well, my notes here indicate that the National Guard MILCON is about 71 percent short and the Air Force Reserve is about 55 percent short, and that includes both real property maintenance and MILCON money for new facilities.

    General LUPIA. My number was strictly MILCON. $2.2 billion was the number requested for the military construction program, active Guard and Reserve. The real property maintenance program itself, that really has two components to it. One is called real property services, and that is about a $1 billion a year program for the Air Force; and then the real property maintenance part of it is about $1.6 billion, as I mentioned earlier. So that is another $2.6 billion a year that we spend on the upkeep of our plant, active Guard and Reserve.

    Mr. HILLEARY. How does this simultaneous sort of limited funding, constrained funding of both the RPM and the MILCON, how is that going to affect your readiness, both the Guard and Reserve, how badly?

    General MCKINLEY. Well, you know, sir, the Air National Guard works primarily off civilian-leased property at commercial airports, so most of our quality of life initiatives are where we work.
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    Our facilities are in fairly good shape and we will continue to remain in extremely high states of readiness. We are going to need to take a look at the funding streams to make sure that some of our projects in the northern tier get started and get funded early, due to the building season that we have. So while challenging, we will be able to execute it.

    I would agree with the previous panel that the Reserve components and the Air Force are probably at their most ready state that I have seen in my 24 years in the United States Air Force and Air National Guard, so we will continue to work this problem collaboratively in a corporate way.

    Mr. HILLEARY. Is the Reserve the same deal?

    General CLEM. Because the Reserve MILCON budget is relatively small, the challenges that we would face are a bit more difficult than the larger Active Duty budget. The operational readiness aspect, as General Lupia said, both with real property maintenance and with MILCON, you do what you can with what you have. You repair the leaky roof instead of replacing the roof.

    We are exactly in the same position with our Guard and Reserve bases. Is readiness ultimately impacted? It is if this occurs over a number of years with reduced MILCON spending, as the Chairman has noted. We just have to in this particular case, again, go with what we have.

    Mr. HILLEARY. It just seems like an awful lot, a lot more money needed for this issue, Mr. Chairman, and I would just echo all of the comments that we have heard here in a bipartisan way, that this seems like a funny way to do business, especially when our troops are involved and we are asking them to take one more bite of the bullet for the rest of the budget. It seems very unfair. Thank you.
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    Mr. HEFLEY. Thank you, Mr. Chairman. Mr. Abercrombie.

    Mr. ABERCROMBIE. Madam Secretary, I don't want to pick on you, I sincerely don't, but there is not much sense in me coming to, Mr. Chairman, coming to the hearings and going through this if we are not going to have any impact.

    Is it your position and those of the other Secretaries or Assistant Secretaries that will be coming here, that despite the repeated assertions by the Chair, with no contradiction that I have heard from any members of the committee, that we are not going to go for this advance funding, and that the likelihood of a BRAC renewal at this stage is slim, if not none; that we are going to go through the fiction of having these hearings. Are you folks just irrevocable in your approach here, and it is just up to us to figure out what to do?

    Secretary DEMESME. At this point, sir, we do not have the ability to reprogram any moneys. We don't have any excess funding. The option we had was to develop a program that could be executable, realizing that it would present some challenges.

    Mr. ABERCROMBIE. OK. Fair enough.

    Secretary DEMESME. That is what we are trying to do.

    Mr. ABERCROMBIE. What you are saying is, what some of us on this committee had predicted for a long time has come to pass, that we would come up against a situation that we don't have the money to do what we say we are going to do. It is not there, right? That is because we are cash financing everything.
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    Secretary DEMESME. That is true. We don't have enough money.

    Mr. ABERCROMBIE. I have asked the administration again and again to consider capital budgeting, bringing in a capital budget, separating it from an operating budget, and that is generally met with a smile and a nod from people who expect us to come and work miracles.

    Is it correct for me to conclude that if we fail to do what you are suggesting, that you in effect will be immobilized?

    Secretary DEMESME. We will not be immobilized, but we will not be able to do all of the projects that we need to do. Some of them will be slowed down, and to the extent possible, we will try to work within the budget we have. It will take us longer to get there. Overall, it could cost us more money in the long run. But we believe we could execute, not at the level that we would like, but at a satisfactory level.

    Mr. ABERCROMBIE. And you said that. This is ostensibly with the advance funding of a one-time request, right?

    Secretary DEMESME. Yes.

    Mr. ABERCROMBIE. Inform me again, and if you would for the committee, why is this a one-time request? Because the way I see it, if we went ahead and did this, you would be back next year of necessity, possibly with bowed head and sadness in tone of voice, saying, you know, it is going to turn out not to be a one-time request. This is going to start a series of requests.
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    What leads you to conclude that it would be one time only, if by definition we are advancing funding, and are required next year then to come up with the next increment on top of a new budget request?

    Secretary DEMESME. I think, sir, we have met our most pressing immediate needs for readiness in this current budget. We are now focusing as much as we can on the quality of life additions that we must have in our military construction areas. It is our intent to make it a one-time deal. We know what we need to do to make that work. We know how difficult it is if we don't make it work. It is our intent to work with people——

    Mr. ABERCROMBIE. With all respect, I understand what it is you want to do, but tell me how. How are you going to come back for the next increment and at the same time present, simultaneous with that, your new budget request, and pay for both?

    Secretary DEMESME. We have identified what would be needed in the next budget request, and we will try to hold to that line. I guess I would have to ask you to trust us, sir.

    Mr. ABERCROMBIE. That is fine. That is a perfectly reasonable thing to ask. I am not going to make any sarcastic comment or anything in return. Believe me, I understand. It is not that I do trust you, trust your intention and your goodwill and all the rest. But what I don't trust is the capacity, the ability to be able to do that without coming back and saying well, look, we need the next increment, plus we need this particular amount of money to accomplish what we need to do, and unfortunately, it is higher than what is going to be allowed under these budget caps.
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    What is missing in all of this—and I will conclude with this, Mr. Chairman—what is missing in all of this, and in fact I can't really find it in any of the testimony, it only comes out when I ask the question or when one of the members asks the question, is how do you do all this and stay within budget caps?

    Secretary DEMESME. It is difficult.

    Mr. ABERCROMBIE. You need advance funding. Don't you run up against budget caps next year, then?

    Secretary DEMESME. It is possible, because we have a lot of needs, sir. But people are our No. 1 priority.

    Mr. ABERCROMBIE. Sure.

    Secretary DEMESME. And people are related to readiness, and our intent in the Air Force is to continue to address these issues, because one thing doesn't work unless you are focused on the others. So we have to have the proper housing, we have to have the tools.

    Mr. ABERCROMBIE. You don't have to convince the members of this committee.

    Mr. ABERCROMBIE. Let me say, Madame Secretary, you are a very effective spokesperson for the difficult position you find yourself in, and I appreciate your commentary and observations.
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    Thank you, Mr. Chairman.

    Mr. HEFLEY. Mr. Taylor, did you have a question?

    Mr. TAYLOR. Just a follow-up. General Lupia, we now are 60 days out from closing Howard Air Force Base. And Mr. Withers and myself went and looked at some of the potential for operating locations. We were very much impressed by the willingness of the different countries that we visited with to become those locations, and the only conflict that we noticed was the inter-service conflicts as to what would actually be required to put the bases together.

    It is my understanding that the Air Force is the lead agency in making this decision. And since time is so short, I was wondering if the actual requirements for the Forward Operating Location [FOLs] have been spelled out and, since all this will eventually have a budgetary price tag associated with it, if you have decided how much of that you will be able to take out of hide and how much will you asking in this year's budget?

    General LUPIA. Sir, the Chief of Staff of the Air Force wrote a letter to the chairman of the Joint Chiefs of Staff [JCS] saying that he would like the opportunity to review the Southern Command [SOUTHCOM] plan before the Air Force was able to fully commit to it.

    Mr. TAYLOR. When did that happen, sir?

    General LUPIA. The 19th of January, 1999, sir. And what he asked in the letter is request a U.S. SOUTHCOM presentation addressing these and other pertinent details in the tank so that we all understand, we the services, all understand what the South Com plan contains.
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    I know you know of the FOL locations, the sites. The site surveys have not been completed. There were some initial amounts of money required for military construction for operations and maintenance, but I do not believe that those numbers have in fact been validated by actual site surveys yet.

    Mr. TAYLOR. Is there within the service or within the DOD a time line for reaching these decisions? Obviously, we are only 60 days from having to move those assets from Howard Air Force Base someplace else.

    General LUPIA. Sir, I am not aware of a specific deadline or date that has been proposed to reach the decision, but I can take that for the record and try to provide a more specific answer. But I am not aware of any today.

    Mr. TAYLOR. I guess my last question would be, do we have an understanding with any of the sites or all of the sites to be able to operate temporarily until a more permanent arrangement can be reached, No. 1 within the services as to what we have to have there; and then, No. 2, within the status of forces and other agreements?

    General LUPIA. Sir, I would have to take that for the record as well. I do not know what the State Department has done, what U.S. SOUTHCOM has done in terms of arrangements with the other countries involved.

    Mr. TAYLOR. Thank you, Mr. Chairman.

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    Mr. HEFLEY. Thank you. I think Mr. Taylor has stated it very well, as did Mr. Abercrombie, and I will not ask you to be responsive.

    We already have your response, Madame Secretary. But I think it ought to be becoming very clear that probably the incremental funding approach is not going to go. And in the military you all know better than I do that you plan the best possible way to accomplish a mission but you also plan some contingency plans in case maybe the weather gets bad and you cannot accomplish it the way you thought or whatever from an Air Force standpoint.

    I would suggest to you that you begin your contingency planning because this Hill may not be taken with your first choice and you need to figure another way to take the Hill. Because you see, again, bipartisan, up and down the line, Appropriations Committee, Authorization Committee, subcommittee, full committee, you are getting these kind of responses. So I just say that at the outset.

    Madam Secretary, in your statement, you say that the risk of incremental funding is acceptable in order to fund other higher priority Air Force needs in the coming fiscal year. Yet you go on to say that the maintenance and repair of and I assume the construction and investment in Air Force installations is essential to the ability of the Air Force to carry out the national military strategy.

    If installations are central, why take on the risk? Wouldn't a smaller, fully funded program for Fiscal Year 2000 with a bigger program in Fiscal Year 2001 be a better approach?

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    Secretary DEMESME. We believe that, given the way we generally finance projects, many of them are only begun in the first year, with the outlay being in the later years, that we could probably commit a smaller amount of money up front with the follow-on in the coming year to actually build and construct whatever we need to do.

    As we mentioned earlier, this is not the maximum way that we would like to provide this kind of MILCON or infrastructure repair. But given the position that we are in and the funding that was available, this was the best way to meet the many needs that we have of our men and women to look at quality of life across the board. And we are just continuing to try to look at the challenges and see how we could make it work a little better. As you said, we should look at contingency plans, and we are doing just that.

    Mr. HEFLEY. Well, I do not envy your position, nor do I envy our position, given this kind of a budget. But it is not the desired way to go for anybody I do not think if there was a way around it.

    General Lupia, this subcommittee continues to hear assurance from the OSD that the Fiscal Year 2000 MILCON program as presented can be executed without delays or added costs. In your opinion, is it likely that the Air Force can avoid delay in the delivery of facilities or avoid unnecessary cost increases due to the fact that over 660 million, or 68 percent, of the resources supporting the 2000 construction program would not be available until after October 1st of 2000?

    General LUPIA. Sir, my personal opinion, this will all provide a tremendous challenge for us. And I think I would be being less than honest with the committee if I told you we were going to be able to execute our program as well as we have been able to execute it in the past.
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    Let me tell you, sir, very specifically that the fiscal year 1998 program given to the Air Force, we executed 99.8 percent of that program in the year of the appropriation. I think it would be extremely difficult for us to award 99.8 percent of the 2000 program in fiscal year 2000 with advanced appropriations. I think we would be in a position where we would have to put a number of projects on the street. And I think you heard this from General Milton Hunter, who is our design agent in the Corps. We would have to put a number of projects on the street very late in the fiscal year.

    We would almost be using kind of a straddle-bid process to see what we could get awarded in 2000 and what we would have to carry over into 2000. And all of this contingent, Mr. Chairman, on the fact that we would get the full authorization for 2000, we would get the full advanced appropriation on the 1st of October of 2000 for the 2001 program, and that we would get a little bit of flexibility or maybe even a change in the way we would have to reprogram now when we know a project is in trouble.

    Right now, we do reprogram based on the amount of the appropriation. I think what we would be asking is for some help that would allow us to reprogram based on the amount of the authorization and not, as we do it today, on the appropriation. I do not know if I said that exactly right.

    But today we can make a reprogramming action. We typically have—an authorization and an appropriation are the same. We get in trouble on a project in the design phase or even during the come instruction phase and we reprogram based on the appropriation that we have.
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    In order to execute this program, we have to get authority to reprogram based on the authorization of the full number as opposed to the smaller number. For example, we have a line item in the program that is a $23 million facility at Whiteman Air Force Base, and we are only asking for an appropriation of $5-plus million. If in the design phase we run into some problem and we know we cannot bring it home, we have to come back and ask for authority to reprogram based on exceeding the $23 million, not the $5 million. And our thresholds are all determined by not being allowed to exceed 25 percent of the appropriation or $2 million, whichever is greater. So with a very small appropriated amount, we would have a difficult time with that.

    Mr. HEFLEY. General Lupia, the Air Force relies on the Army Corps of Engineers and, of course, the Navy Facilities Engineering Command as your construction agents.

    What, in your opinion, are the principal problems with the annualization of supervision charges and separating these costs from the specific project that they are designed to support? And do you expect to be charged more for projects managed by the Corps and NAVFAC? Are not charges reduced if the proposal is enacted?

    General LUPIA. Sir, the real specific problem for the Air Force I think is going to be that we are going to be concerned, one, that our agents do not run out of the money to do the supervision inspection overhead, that they can keep the people on the payroll to do that. And I think Admiral Smith was very candid with you when he said he is going to raise my SIOH rates. He may not have said that exactly that way, but he said he is going to hire more people to track costs.
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    I am going to have to spread what I do now in 1 year's appropriation, somebody is going to have to keep book on spreading that money out over 5 years and by line item in the program keep track of how much money was spent each fiscal year for that project over a period of 5 years.

    It is going to take more bookkeepers. I do not care how you cut it. And, right now, I pay 5.7 percent SIOH to the Army. They just reduced their rate pay. I pay 6 percent to the Navy, and Admiral Smith has already told me if he had to do this I am going to get a bill. And I would suspect it is going to be the same for the Corps, though I do not know that specifically.

    Mr. HEFLEY. That is what I was afraid of. Madam Secretary, I note the plan that you put forward to improve training in Idaho, and there are a number of important military land withdrawals involving the training of the Air Force that are due for renewal over the next year or so. Can you provide some sense of where we are on that and when we might expect legislation to that effect?

    Secretary DEMESME. We have been working on that. I spent a very good joint working relationship with the Department of Interior, Bureau of Land Management [BLM]. We have almost come to closure on exactly how we are going to look at land withdrawal.

    Does anyone have specifics here on that one?

    General LUPIA. I think if you will allow us to use the expert in the room, I have a staff member here who is the head of my environmental division. She has briefed enhanced training in Idaho on the Hill many times. I would like to ask Ms. Pohlman to answer that question, sir.
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    Mr. HEFLEY. Ms. Pohlman, would you go to the microphone and introduce yourself for the record?

    Ms. POHLMAN. Sir, my name is Teresa Pohlman; and I run the Environmental Division for the civil engineer, General Lupia.

    As Ms. DeMesme and General Lupia have indicated, we have several processes going on right now. As you know, in addition to Nellis and Goldwater ranges, there is a package proposed for legislation which also includes McGregor range for the Army in New Mexico, Greeley in Alaska also for the Army, Wainwright in Alaska also for the Army, and the Bravo 20 range in Nevada. These are all affected by Public Law 99–606 land withdrawal legislation.

    The excellent working relationship that was referred to by Ms. DeMesme is extremely true. We have been working very closely with the Department of Interior and Fish and Wildlife Service, Bureau of Land Management officials. What we have come to is this: We expect to have the Air Force portion of the draft legislative Environmental Impact Statement [EIS] completed in April 1999. That is in a couple of months. We are working with our counterparts in the other agencies to have the package put together hopefully by the first session of Congress. That is our goal.

    Mr. HEFLEY. All right. Thank you. General Lupia, could you provide a little more detail about the Texas regional demonstration project in the area of utilities privatization and what are the constraints on the feasibility of a multi-service statewide approach to the privatization of utility systems?
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    General LUPIA. Yes, sir, I can. Our utility privatization program is a very big one. For the Air Force, it is a total of 463 utility systems that we are looking at privatizing between now and 2003.

    We started out in 1997 with just four pilots projects. Our next endeavor was to partner with the Defense Energy Support Center and analyze our seven locations in Texas. That is Brooks Air Force Base, Dyess, Goodfellow, Lackland, Laughlin, Randolph and Sheppard. And of course our approach here was to see if we could bundle, in effect, some of these systems, how much savings we might have.

    At the very beginning when we started this we partnered with the Army and the Navy, and they were really on different paths, and so we did not quite get out of the starting gate together. But since them I am happy to tell you that the Army and the Navy have, in fact, joined us. I have a list of their specific facilities that are going to be a part of this.

    For the Army it would be Red River, Lone Star, and some of Fort Bliss, all but the natural gas at Fort Bliss, and the Navy added the naval air station at Fort Worth. So the total demonstration now in the State of Texas would be some 40 systems at 11 different installations.

    This packaging or bundling helps us in two ways. First is up front. There is quite an investment that the government has to make in order to decide if this is an economically feasible deal. So we hire contractors who do in effect for us an economic analysis and feasibility study that helps us decide for each utility system if it is a go or no go for privatization.
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    Once we make the decision that it is a go, then we are required to do two things. One is an environmental assessment to look at the impacts on the environment of our action, and then to do an environmental baseline survey, which basically is a look at the system that we would convey to industry and in I guess due diligence is the best words I can use to determine what it is that we as service can be passing to them in terms of maybe a contaminated site, maybe some Poly Chlorinated Biphenyl [PCBs] that have been spilled someplace near an electrical substation. And all of that cost we think can be driven down by bundling these up-front studies.

    And then we are hoping at the back end of this that if we could bundle the systems that we want to sell that we will also attract more proposals and maybe make some more money for our government in the process.

    Mr. HEFLEY. Do you feel good about the way the process is working so far?

    General LUPIA. Yes, sir. I am a little bit concerned from a more macro perspective that there will be 2,300 utilities systems put on the market by the Department of Defense within the next 2 to 3 years, and I do not know that civilian industry will be able to absorb all of that. But all of us are in the pilot stage.

    We have a total—as I mentioned to you, we have some pilot projects, we have the Texas regional, and we have some projects we funded in the 1998 program all under study at the same time. Just this past week we got back from the contractor the first package that said it looks to us like privatizing the four utility systems at Maxwell Air Force Base in Alabama is the right way to go. And so we made the go, no-go decision for that installation and will now begin the environmental assessment and environmental baseline survey. Within the next week I hope we will make the same decisions for Bolling Air Force Base. We are supposed to get the information back from our contractor.
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    All of our 55 systems that are part of the first effort for us we will make go, no-go decisions on by the end of May, 1999. We have 204 systems in 2000, a huge program, and another 204 systems in 2001. So lots of work here.

    Mr. HEFLEY. A lot of work. Madame Secretary, you discuss in your statement an initiative with the State of New York and local communities concerning Rome labs. In your statement you talk about the acquisition, I guess by lease, of new facilities. Do you require any new legislation to give you the authority for that initiative, and are there scoring problems with that kind of an approach?

    Secretary DEMESME. We would require some new legislation. We are in the process now of staffing that up through Department of Defense, OSD, and we will come over to the committee to sit done and talk about it when we have gotten to that stage. It would require legislation. It would be a pilot program, and we have not worked out all the particulars of it yet. But it does have the possible advantage of giving us some more efficiencies in the way we operate.

    Mr. HEFLEY. Madame Secretary, I note your very broad description of the city base concept and the proposed pilot projects at Brooks Air Force Base. I await with some interest the report of the Secretary of Defense on this subject. But I have yet to hear a good explanation of why section 2667 of title 10 is materially deficient. It seems to me that providing broad authority for the services and especially local commanders to engage in acquisition of new facilities to manage cash-flows without authorization or appropriation by Congress and the identification of leases against environmental liability does raise a number of serious questions.
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    I also know there is a concern in the Air Force about being perceived to be BRAC proofing installations. But isn't what you propose at Brooks essentially BRAC proofing, because you would basically convey the entire base and lease back only what you need at a nominal rate?

    Secretary DEMESME. No, it has no connotation for BRAC proofing for us. What we are trying to do is determine the best and most efficient way to operate a base. We have been asked to explore different product public sector ventures. We have been asked to look at a more activity-based way of managing our resources at bases.

    So what we are trying to do really is just study to see exactly what we can accomplish and if we can accumulate some savings by looking at all the assets that we have available, whether these are facilities, whether these are programs, or if there are certain other issues on the base.

    I will let General Lupia give you a little bit more detail about the Brooks project. Because I think it has some possibilities of being a good thing for the way we operate for our people there, that we can get more out of our facilities and our programs at a lesser cost.

    General LUPIA. Sir, the Brooks initiative is kind of a first of a kind for us, so I would have to admit to you that we are learning as we go. But we call it kind of the Brooks City Base Initiative. It is an asset management form of privatization where existing land and infrastructure and facilities are available for leasing to private industry which has business functions related to the missions of Brooks Air Force Base.
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    Payments from the lessors can be in the form of payment of kind, infrastructure upgrades for us, maintenance on Air Force-owned facilities, or cash money. Part of this initiative would be a lease-back option for facilities where the Air Force leases or sells a facility to private industry and they perform the ownership actions, and private industry will lease the facility back to the Air Force.

    I think this is the trouble with 2667. I think under 2667 leasing the facility back to the Air Force would be the problem. Some of these actions require new legislation or waivers to existing legislation such as a waiver to the Office of Management A–76 process, the McKinney Homeless Act, contracting for municipal services, which includes security and fire protection, and the permit for the Air Force to lease facilities to private industry to care for them, then lease the facilities back to us to perform or mission. And I think that is the difficulty with the legislation that you mentioned, sir.

    Mr. HEFLEY. Madam Secretary, I am pleased to note your acknowledgment that housing privatization, to use your term, is a tool; and I agree with that concept. With some of the services I think that has been distorted a little bit. I am pleased that the Air Force program retains a balance between privatization and MILCON, which by the way was the way we intended it to work, not to replace MILCON.

    What is the Air Force's current time line to buy out the problem of inadequate housing? And if the current privatization authorities are not renewed next year and you know they come up again and we have to do something about that, if they are not renewed next year, what will this do to affect your plan?
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    Secretary DEMESME. First of all, I thank you for acknowledging the fact that you believe that we are moving in the right direction, because we take this very seriously. We have moved cautiously and we have moved at a slower pace than our system services because we want to make sure that we are doing what is best for our men and women and that we do take into account accessibility, security, and affordability of these homes.

    As far as our program, I am going to let General Lupia give you our time line as to how we would like to buy these out.

    General LUPIA. Mr. Chairman, we intend to meet the Defense Planning Guidance, which says to take care of the homes we have or demolish them by the year 2010.

    The Air Force approach to that is kind of three-pronged. One is privatization, as you mentioned, much smaller than the other services. Right now, we only have 12 projects that we are proposing for privatization under the 1996 legislation. I am happy to tell you that, to date, we are the only service that has had a contract awarded under this legislation. On the 4th of August of last year we awarded our Lackland Air Force Base project for 420 units. It is a sample of one, but for the Air Force it is a very good sample.

    We had $17.7 million in appropriation that we had intended to use as seed money for this project to do about $43 million worth of work. When all was said and done and we signed the contract, the Air Force only had to put up $6.3 million. But we had $10 million we saved, not cost avoided but saved in essence, that we were able to roll into another project.

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    We have the first draft of a family housing master plan. We have testified before your committee in previous years that we had a dormitory master plan which we put to use every day in our Air Force to prioritize our dormitory work and to attract resources to be able to get dormitories taken care of. We thought that was working so well for us that we put together a family housing master plan to address this 2010 issue. It has the privatization component. It has traditional military construction, and it is accomplishing as much as we can with the Operations and Maintenance [O&M] money that is provided in the housing account. For us that means tackling a problem with 61,000 houses out of the 110,000 in the Air Force inventory. And, as I say, our plan calls for to us do that within a defense guidance by 2010.

    Mr. HEFLEY. If we do not renew these initiatives, then that would push that date back, I assume.

    General LUPIA. Sir, no. The answer to that is no. Because if we only use these 12 projects for privatization we will get through about 12,000 of the houses and we, the Air Force, are committed to put the money into the MILCON account to take care of the other 50,000 houses nominally through the O&M program and through traditional military construction.

    In fact, Ms. DeMesme and I attended a meeting of all of our four stars at MacDill Air Force Base this past month where the commitment was made to solve the problem, that is to say take care of the resource to take care of the 61,000 houses, by either increasing the basic allowance for housing so more people do go off base and we demolish more houses or making the investment in the houses or going the privatization route. So the Air Force is committed to do that.
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    Mr. HEFLEY. Madam Secretary, you are also well aware of the concern of local communities that have gone through the BRAC process and suffered the closure of an installation. Their concern must be for the timely economic reuse of that property. I am concerned about the scope of environmental remediation requirements at BRAC location that this administration proposes to defer by incrementally funding the BRAC account.

    The Air Force proposes to fund $130 million or 75 percent of $173 million requirement in fiscal year 2000. And although this ratio is significantly better than that proposed by the other military departments, I am concerned that even at this level reuse may be disrupted or postponed. Do you have some sense of what types of projects and what locations will be deferred for a year?

    Secretary DEMESME. We acknowledge that it would be very difficult to continue the program at the speed we are right now in terms of environmentally taking care of our reuse issues. We are working that very hard with our local communities. We do have a plan in place, and I am going to let General Lupia explain that to you.

    General LUPIA. Sir, I will go on record as saying I am not the BRAC expert. Mr. Jim Dishner is the BRAC expert. But I do know that the rules now allow us to transfer property before all necessary environmental remediation work has been taken care of in certain limited cases, and so we may find ourselves having to use some of those waivers. I guess I will use that terminology.

    If it is consistent with the protection of human health and the environment, it is possible to do that. The deed must have assurances that human health and the environment will be protected and all necessary environmental remediation actions will be completed without disruption. The Air Force provides public notice of the proposed transfer and the opportunity for the public to comment. The deferral and the transfer of the property will not substantially delay any necessary environmental response action that is required at the property. So it will be difficult.
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    As a matter of fact, I think one of the biggest difficulties for us with incremental funding in the BRAC account, and again I am speaking for Mr. Dishner here, is that 72 percent of his BRAC expense is for salaries and so he is trying to figure out how he can incrementally pay salaries. And once he gets an amount of appropriation from the Congress, I think he will have to figure out how many employees he can keep.

    Secretary DEMESME. That is the biggest issue, how you would pay the personnel, both our employees and the State folks that we use to help us with environmental rules. But we are working on that issue. We know that it will be a challenge, and we are actively trying to pursue every course of action to ensure that we meet all the legal requirements and that we take care of our people and that we work with the local communities and we reuse, and we are going to continue to do that.

    Mr. HEFLEY. Since Mr. Taylor is suggesting we are only going to pay General Lupia half of his retirement, then you will have that money.

    Mr. TAYLOR. And the Secretary as well. We are going to take this on the road.

    Mr. HEFLEY. Finally, let me raise the BRAC issue again, and you heard me raise it with Mr. Pirie.

    We know beyond a shadow of a doubt that the Air Force is not going to close Lackland. Let's pull Lackland off the table. And then we know that there are others we are not going to close. Let's pull those off the table.
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    Would you respond to that approach to a focused BRAC process? There is nothing, I might add, about the BRAC process. We did not have the BRAC process until a few years ago, and there is nothing to say that we structured the BRAC process perfectly when we did structure it. It is just that there had not been a facility closed since the 1970's and we needed to do something and we did it. And mostly it has probably worked pretty well. But there is nothing to say that we cannot change it for another round.

    Comment on that. Could you pull off the table the things that you absolutely know you as an Air Force are not going to give up?

    Secretary DEMESME. Sir, if we had the opportunity to provide to you a list of bases that are very essential to our mission, that we know we need to maintain and retain, that we know we have capabilities that we could not get at other places, we would certainly provide that list to you.

    Mr. HEFLEY. So if we structured it that way, you would be able to do that?

    Secretary DEMESME. We could respond, yes, sir.

    Mr. HEFLEY. Mr. Taylor, do you have any follow-up questions? You have been sitting patiently there as I ramble on, but do you have any follow-up that you would like to ask? I hate to let the Secretary off this easy on her first visit. She will think it will always be that way.
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    Secretary DEMESME. I will forgive you if do you that, sir.

    Mr. HEFLEY. Well, then, OK.

    Mr. TAYLOR. Madame Secretary, again I want to express my great deep disappointment. I do not think this is your plan, and I do not think it is any of the General's plans. But I think it is a really crummy way for the administration to try to do business. I think the American people should expect a better proposal coming from the administration. But at this point I think if you are not going to give us a better list of suggestions, then I think you really have no standing to criticize the plan that the chairman of the committee puts together.

    Secretary DEMESME. We will appreciate any assistance you can provide us. Whatever we have we will make sure we do the best we can with our people. We are committed to that. We do not have a lot of options right now. If options are available to us, we certainly will look at each of them.

    Mr. TAYLOR. Thank you, Mr. Chairman.

    Mr. HEFLEY. Well, I will follow up to that. I will say what I did to the earlier panel, that what you do with what you have is nothing short of amazing and you are to be complimented on that. I go to facilities all over the country and the world and see you operating out of inadequate World War II temporary wood and making it work and making it look pretty nice and not ideal by any means, but you do make it work. And we appreciate that. And in no way with our criticism of this plan do we intend to demean your ability to do with what you have got.
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    I guess our frustration is we want to help you more then we are able to do under this plan and we really have serious concerns that this plan will leave us with a lot of unfinished structures and that kind of thing, which will not help you and will not help anybody.

    Any other comments?

    Well, thank you all.

    General LUPIA. Mr. Chairman, I will just say that last year I thought the line item veto was exciting, but that was a piece of cake compared to this.

    Mr. HEFLEY. I would agree, General.

    Thank you very much, all of you. The committee stands adjourned.

    [Whereupon, at 4:47 p.m., the subcommittee was adjourned.]

March 2, 1999
[This information is pending.]