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[H.N.S.C. No. 106–42]



FOR FISCAL YEAR 2001—H.R. 4205






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(H.R. 4205)

MARCH 2, 2000




JOEL HEFLEY, Colorado, Chairman
JOHN M. McHUGH, New York
HOWARD ''BUCK'' McKEON, California
BOB STUMP, Arizona
JIM SAXTON, New Jersey

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GENE TAYLOR, Mississippi
VIC SNYDER, Arkansas
ROBERT BRADY, Pennsylvania

Philip W. Grone, Professional Staff Member
George Withers, Professional Staff Member
Noah Simon, Research Assistant
Rebecca Anfinson, Staff Assistant






    Thursday, March 2, 2000, Fiscal Year 2001 National Defense Authorization Act—Office of the Secretary of Defense, The Defense Agencies and the Department of the Army
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    Thursday, March 2, 2000




    Hefley, Hon. Joel, a Representative from Colorado, Chairman, Military Installations and Facilities Subcommittee

    Taylor, Hon. Gene, a Representative from Mississippi, Ranking Member, Military Installations and Facilities Subcommittee


    Apgar, Hon. Mahlon, IV., Assistant Secretary of the Army (Installations and Environment)

    Hunter, Maj. Gen. Milton, Director of Military Programs, U.S. Army Corps of Engineers
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    Lynn, Hon. William J., Under Secretary of Defense (Comptroller)

    Squier, Brig. Gen. Michael J., Deputy Director, Army National Guard, Department of the Army

    Van Antwerp, Maj. Gen. Robert L., Jr., Assistant Chief of Staff for Installation Management

    Yim, Randall, Deputy Under Secretary of Defense for Installations


[The Prepared Statements can be viewed in the hard copy.]
Apgar, Hon. Mahlon, IV.

Hefley, Hon. Joel

Hunter, Maj. Gen. Milton

Lynn, Hon. William

Squier, Brig. Gen. Michael

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Taylor, Hon. Gene

Van Antwerp, Maj. Gen. Robert L., Jr.

Yim, Randall A.,

[There were no Documents submitted for the Record.]

[The Questions and Answers can be viewed in the hard copy.]
Mr. Hilleary
Mr. Ortiz
Mr. Snyder
Mr. Taylor


House of Representatives,
Committee on Armed Services,
Military Installations and Facilities Subcommittee,
Washington, DC, Thursday, March 2, 2000.

    The subcommittee met, pursuant to call, at 9:35 a.m., in room 2212, Rayburn House Office Building, Hon. Joel Hefley (chairman of the subcommittee) presiding.
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    Mr. HEFLEY. The subcommittee will come to order. This morning the Subcommittee on Military Installations and Facilities opens its hearings on the President's request for funding for military construction (MILCON) and military family housing programs for the Department of Defense (DOD) for fiscal year 2001. We will take testimony today from senior officials from the Office of the Secretary of Defense (OSD) and the Department of the Army and conclude our initial overview of the budget request next Thursday by focusing on the MILCON programs of the Department of the Navy and the Department of the Air Force.

    In one very important respect, the budget request is a marked improvement over the submission made by the Department one year ago. The Department of Defense has heeded the overwhelming rejection by the Congress of outlay rate-based incremental funding, so I guess there's some reason to celebrate that, at least. We will not begin the budget year over $3.1 billion in the hole. Structurally, with a couple of exceptions, most notably the elimination of contingency allowances, this is largely as business-as-usual budget. Unfortunately, there is also continuation of the broad trend that began with the fiscal year 1996 MILCON program. The Department of Defense is once more requesting fewer total dollars for these key infrastructure accounts than was enacted by the Congress the year before. In spite of the President's planned increase of over $11 billion, or 4 percent, in budget authority for the Department of Defense for the coming fiscal year, the MILCON top line continues to erode.

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    The Department's budget request of $8.03 billion for the MILCON program is 4 percent below current spending levels and 5.5 percent below the levels authorized for appropriations in the current fiscal year. Beyond the continued neglect of appropriate resourcing of the construction accounts in this budget request, the near term does not look much better. The military construction program in this budget request in total amounts to about $4.6 billion. The current Future Years Defense Program (FYDP) would see the military construction accounts fall to $3.8 billion, a 17 percent reduction, through fiscal year 2003 before the promise of some relief. Of course, most of the outyear increase is due to the planning wedges assumed to support two additional rounds of unauthorized base closure and realignments.

    The military departments have been able to improve facilities, enhance quality of life and better maintain training and readiness over the past few years through the ability of Congress to increase the defense top line and increase funding for MILCON. The Department of Defense must begin to take on more of the responsibility to ensure that current mission facilities do not continue to degrade. We cannot continue a persistent pattern of departmental underfunding on the assumption that Congress will always ride the rescue. It is a game and one that, in my judgment, entails a high level of risk.

    With that, I would yield to Mr. Taylor for any opening remarks you might have.

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

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    Mr. TAYLOR. Thank you, Mr. Chairman. With that I want to welcome Mr. Yim and Mr. Lynn.

    As I look over the President's budget for military construction I am relieved to see there is no funding scheme along the lines of last year's outlay rate-based incremental funding disaster. Members on both sides of this committee made it particularly clear that that approach is unacceptable, and I am glad to see that we all kind of learned our lesson and did not try it again.

    Although less troubling, I am concerned about the removal of $160 million in contingency allowances for military construction, family housing. I am sure it is going to cause some problems. I am certain, as I know the Chairman is, that such an omission will surely have an effect on the ability to execute certain programs. While the construction industry has needed that flexibility provided by contingency funding somewhere between 8 and 10 percent for the predicted costs of the Department, it has operated on only 5 percent. To eliminate the contingency allowance altogether could only cause a great deal of instability in the military construction program.

    Along with the Chairman I note that the President's request for two additional rounds of base closure and realignment (BRAC) in 2003 and 2005, I remain opposed to that authorization for reasons I have stated several times in the past and I am not going to bore you all with.

    I am also interested in hearing more about the Department's plans for military construction in the post Panama forward operating locations, particularly Manta, Ecuador, where the costs continue to grow. I would hope at some point that you would give me your thoughts on the procedure that, I have noticed here in the last year or so, they have been lumping Department of Defense military construction contracts together, and the net effect of it in my opinion has been to limit competition. The overall price-tag has grown to sometimes in the $25 million category. I have had a number of contractors contact me to say, well, they are only bonded for $10 million and again the net effect has been a reduction of competition, and I have got to believe any time competition goes down, the price to the taxpayer goes up, so I wish you would give me your thoughts on that as well. Thank you very much, Mr. Chairman.
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    [The prepared statement of Mr. Taylor can be found in the Appendix.]

    Mr. HEFLEY. Thank you, Mr. Taylor, and I want to welcome to the subcommittee William Lynn, Under Secretary of Defense, and Randall Yim, Deputy Under Secretary of Defense for Installations to present an overview of the President's budget request for the fiscal year 2001 MILCON Program.

    It is a pleasure as always to have both of you here today, but before we begin I want to note that we have some unfortunate time constraints this morning. I also want to apologize for not more of the committee being here this morning, but as you know we unexpectedly ended up with no votes. Just like a covey of quail, once that happens they rush for the airports, and I am very thankful for the members that we do have.

    Mr. TAYLOR. It is the hard-working Democrats again.


    Mr. TAYLOR. Nose-to-the-grindstone Democrats.

    Mr. HEFLEY. I have to hand it to the Democrats and to the great leadership of their leader over here—


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    Mr. HEFLEY.—to call in the troops, but I want you to know that my one troop over here can make up for all those—


    Mr. HEFLEY. We may have a heavier volume than usual of questions for the record, but this is an exercise that is meaningful to us. It is an exercise that we do need to go through and we will have it on the record for the other members to see what your testimony and your responses are, so Mr. Lynn and Mr. Yim, I would turn it over to you in whichever order you would like to take it.


    Secretary LYNN. Thank you very much, Mr. Chairman. It is again a pleasure to be before this committee and I see you are getting reinforcements here as we speak.

    Mr. HEFLEY. Now we are ready. We have got a very new, fancy timer system up here that we have not used before, we are going to use the five-minute clock, but we want you to do that and you'll kind of know where you are but if you have more that you think we need to hear, go ahead. We are not going to limit you to that.

    Secretary LYNN. If I could, Mr. Chairman, I would like to submit my statement for the record. I think it lays out in detail the budget request in military construction. I would just make a few comments in summary and then turn it over to Mr. Yim for his comments.
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    Mr. HEFLEY. Without objection all statements will be submitted for the record.

    Secretary LYNN. Thank you.

    Let me start with the overall context. This is the second year of a major initiative of the President and the Secretary to increase the defense budget overall, over six years, $112 billion. We have stayed with that increase. In the second year we have actually added to that increase somewhat because of some unexpected costs, particularly fuel costs, and some additional contingency costs in Kosovo. We have added some additional funding, about $4.8 billion to the defense top line in fiscal year 2001 on top of what we had anticipated.

    In addition, there are some additional savings in inflation, and those savings, the White House has again directed the Department to retain with the program so they have been reapplied to that program to support the needs of the Department. This is the first major increase in defense spending since the end of the Cold War. I think as everyone agrees, it is a needed one. It is, I think, particularly needed, as the Chairman pointed out, in the facilities area. I think there is an historical pattern that you alluded to, but I would even go back further, I think, Mr. Chairman, and suggest that the facilities areas tend to be at the end of the table in terms of funding.

    There has been a pattern for decades, frankly, where the facilities tend to get short-changed over time, try to make it up with large increases at different periods of time, but it leads—there are two problems with that. One, it leads to a very uneven planning period. Worse still, I think, is we are out of the era that we were in for many decades during the Cold War which were where we had a feast and famine era of budgets. The budget would go down for four or five years at a time, and then it would go back up significantly for four or five years. If you go back and look at the pattern for 1960 to 1990, I think you will see that pattern of about five year cycles, up and then down.
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    What the departments would try and do in that instance is try and recover on facilities in the feast era and then short them in the famine era. That doesn't work in an era where we have had relatively steady budgets over the past decade. With the recent increase we have tried to add to facilities budgets, but I would agree with the Chairman, I don't think we are still to a steady state budget. We do not have a replacement rate on the construction or in the real property maintenance (RPM) area on the Operations and Maintenance (O&M) side the degree where we would like it.

    The number that I mentioned at the outset is $112 billion. That is what the President increased. That was of course short of what the full recommendation of the Chiefs was. The full recommendation of the Chiefs was $148 billion. The minimum was thought to be $112, but the full recommendation was $148. A significant part of that $36 billion difference, a quarter to a third was actually in the facilities area—military construction, real property maintenance. If we are to get to a steady state facilities budget we are going to have to increase this budget still further in the outyears and we plan to try and address that. It is not—the budgets are not, I think, where we need them in the outyears and we are going to try and address as we build outyear budgets in this Administration and the next.

    Let me turn now to the FY01 budget. As the Chairman pointed out correctly, we did not match the Congressional increase in this area. We did stay with the plan we had last year. In other words, we have not cut back the FY01 budget in any significant way. The program that we had planned for 2001 last year, which was an increase partly due to that $112 billion, that program remains, but you are absolutely correct. We have not matched the Congressional add in this area. We had, as Mr. Taylor pointed out, we have not pursued the split funding technique where we put part of the 2000 funding request in the 2001 column. We have not pursued that in 2001. The 2001 budget is fully funded within the traditions that we have established over the past, oh half dozen years. There is a reason that we have been able to avoid the split funding, and that has been the proposal of the Administration to change the caps. The reason for the split funding was clearly trying to fit all budget within the caps for a given year. By adjusting the caps in line with the much-increased surplus versus what was expected, we have been able to fully fund the military construction account. I agree with both the Chairman and Mr. Taylor that that is a constructive a better approach that we were able to do this year.
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    Let me just close by pointing out three unique features of this budget request, two of which I think were raised in your opening statements. First, contingency funding—frankly, I agree with you. I would like to have contingency funding. Unfortunately we were not able to get contingency funding through Congress last year. All of the contingency funding was struck from the budget. That looked to be a likely pattern and so we essentially followed the direction of the Congress in this area, but I have talked with the appropriators. I would like to talk with this committee. I think the questions that have been raised about contingency funding, whether it is being used appropriately and so on, what I would like to do is answer those questions and go back to a period where we would have contingency funding. Whatever we could agree would be supported, we would certainly fund in the outyears and would abide by Congressional direction of course.

    Second, Mr. Chairman, you mentioned the forward operating locations. We have a budget proposal in the 2001 column of $78 million. That is actually a continuation of a proposal in the supplemental that is before the Congress right now where we have $38 million in budget for the forward operating locations. It is split between the two, $38 million in the 2000 supplemental, $78 million in the 2001 column. The purpose is to pursue the three locations—that is Aruba, Curacao, and Manta, Equador—that would replace Howard Air Force Base in Panama, which we are losing as we pull out of Panama. We need to replace those counter-drug operations with areas around the source zone. The Southern Command has approved these three locations and we are proposing that we expedite the construction of those facilities so we can get on with the counter-drug operations.

    Final point I would make is the final feature in this budget, that is new, is that there is funding in the first year, a first year of funding for National Missile Defense (NMD). It is the first year of military construction funding. That of course is subject to the President's decision, which will come this summary, as to whether to go forward with deployment. But we have included in our request the money that would be necessary to execute that decision should the President decide to go forward with deployment for '05.
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    With those comments, Mr. Chairman, I would ask Mr. Yim to make his comments and, of course, we would be happy to answer your questions.

    [The prepared statement of Secretary Lynn can be found in the Appendix.]

    Mr. HEFLEY. Mr. Yim.


    Secretary YIM. Good morning, Mr. Chairman, Congressman Taylor, distinguished members of this subcommittee. Thank you again for your strong support of our military programs and particularly for your support of the people that defend our country, both military and civilian. I particularly wish to thank you for your recognition of the role that you see that installations and the infrastructure plays in maintaining readiness and of the interrelationship between the many components of readiness and installations.

    Military installations are the foundation of a strong national defense and the platform from which our forces successfully execute their very, very diverse missions. It is where we maintain and deploy our weapons systems and train and mobilize for combat. In short, it is really the foundation for how we project power, but it is also where our people, both civilian and military, live and work, where they become key members of the community. So we have to simply maintain our facilities so that they support, not undermine, readiness, compromise our missions or undermine quality of life.
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    In short, what I am really saying is what you already recognized, that there are crucial relationships between readiness and training and missions and weapons systems and the quality and condition of our facilities, and that we have to recognize these relationships and take the appropriate steps to maintain and improve the condition of our facilities. We are talking about much more than money, although please don't misunderstand me. Money always helps. Our great task is to both become more cost efficient as well as enhance the performance of our facilities as they support our missions. So that means not only not must we maintain proper levels of funding for our facilities but we have an obligation to spend that money as wisely and as efficiently as possibly. We are continually faced with the stark task, stark reality of having to balance facility funding needs with other priorities such as weapons modernization, research and development, quality of life, training, other requirements, so not only do we have to make the best use of the funding we do receive as a result of this balancing prowess, we have to find ways to cut our costs and save money that needs to support other high priority programs.

    But when I talk about cutting costs I don't mean blindly cutting costs or closing facilities. I believe that cutting costs is inextricably tied to finding better ways of doing our business, of process improvements because process improvements really are the key to long-term savings that we hope to effectuate. Finding process improvements, however, involves change can often be difficult, but this is a time of great time in the military and installations has to follow along and in some cases really lead. Just as you are going to hear from our services, substantial reshaping of the force structures—their admissions have changed. We are going to be facing asymmetric threats more and more, rapidly changing technology, globalization and interoperability. So, too, must our installations reshape to match up and support these new missions and requirements.
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    Installations have to constantly infuse better business practices, the best business practices. We have to be interoperable also with the private sector. We cannot afford both in a monetary sense and in a mission sense to be isolated physically and technologically from the communities in which we operate, for instance, by having proprietary systems that do not match or are not compatible with systems that are used elsewhere. We need to recognize this and then we have to take the steps to ensure that installations are viewed as integral parts of new weapons systems that we are fielding and of the training missions that we require. For example, we cannot afford really to field new leap-ahead weapons technology but lack the platforms to support them. We cannot ask our people to perform very complex missions without the facilities to house and train them, and this is precisely why installations will and must play an important role in the upcoming Quadrennial Defense Review (QDR) in 2001 and we must in the facilities management side prepare ourselves to have the proper analytical tools to be able to intelligently participate in these debates.

    Finally, one point I would like to raise for you, just as an overview, just as we are seeking leap-ahead weapons technology, frankly, we need to seek some leap-ahead training and knowledge management technologies for installation commanders to meet these complex goals that we are setting. We need to spend some money and some intellectual capital on devising really new leap-ahead interactive ways to train our installation and field commanders about these very complex management issues, and the military has pioneered these war gaming techniques. We are probably the most sophisticated people in this. We should perhaps look at some of those techniques as ways of training our field commanders because we depend on them to implement these policies.

    Now we have looked at some programs over this past year, particularly to reshape our installation infrastructures. These include privatization of housing, our utility systems, energy management, outleasing of our under-utilized facilities to make dual use of them, competitively sourcing our non-inherently governmental functions and then of course improving the standards of family housing in our barracks and dormitories, and also additional rounds of base closure. The Department must be able to pursue all of these initiatives. They really complement each other and no single one substitutes for another one.
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    The argument for BRAC is relatively straightforward. We are wasting money on maintaining facilities and excess base capacity that we neither need now or will need in the future. We can debate the magnitude of the costs in savings. The Congressional Budget Office (CBO) and the General Accounting Office (GAO) have indicated that our cost estimates are reasonable and credible. We estimate about $14.5 billion in savings cumulatively by 2001 and about over $5 billion per year thereafter, but let me emphasize that it is not just, with all due respect to my comptroller colleague, a comptroller-driven drill. We need the authority to realign our base structure to meet this rapidly changing force structure and mission requirements envisioned by the Army—you are going to hear from them about Vision 2010, when the Air Force comes before you about the Aerospace Expeditionary Force. The 1997 QDR recommended two additional rounds of base closure. Our December, 1999 mobilization report that we presented to you indicated that we had not lost facilities that we could now reconstitute as a result of our first four rounds of base closures, so we are not jeopardizing future missions. We are proposing rounds in 2003 and 2005. That will give us the benefit of having the installations analysis in the QDR, the Quadrennial Defense Review in 2001 to guide then our strategic decision for base closure and realignment in 2003 and 2005. We can make much better use of our RPM and MILCON and O&M funds if we have that authority.

    Let me also take this opportunity to thank the Chairman and the members of this committee for its leadership last year in helping us enact the no-cost property transfer provisions for closing bases. The law was signed by the President October 6th. I issued policy in consultation with the services and the communities October 29th. I received the first application November 1st. We have been moving ahead smartly ever since. The communities, the services, the Department thank you very much, Mr. Chairman and members, for the leadership on that.
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    Let me talk briefly about some of our other reshaping programs. We can really stretch our dollars—again I am talking not only getting enough funding initially but then spending it smartly, and we can do that by really tapping the best possible business practices, whether that be in the private sector or within our public employee sector. So we need to do this by really considering who can best supply us with goods and services both now and in the future, and we believe that privatization, competitive sourcing not only is the best way to infuse new business ideas and practices but it is the fairest way to do so. That is why we are seeking to aggressively privatize our utility distribution systems, combining it with efforts in a smart way, we hope, to look at the economics of energy management, energy conservation and entering into getting the best buy for the commodity in deregulating markets because the economics are tied together. We think that that will through the use of energy savings, performance agreements, incentives really go a long way to spending our limited facility dollars much more wisely.

    Now there are some institutional obstacles. We are confident we can work with our Federal agencies to work through some of those, but we are really going to pursue that very, very aggressively. Same thing for housing privatization. We need to rely on the experts in the field to help us meet our critical housing needs. About 200,000 of our houses are simply just inadequate and we would never, frankly, budget enough MILCON to correct that problem in a reasonable period of time. We need to rely upon the private sector. We hope to obtain at least around an 8-to-1 leveraging effect with what we throw on the table with what the other side can bring to bear for us. That means we can solve problem eight times as fast.

    Let me spend just a minute or two on housing. Secretary Cohen—we were very pleased to have him announce that housing was going to be one of his two main priorities for this coming year, along with reforming the health care system. He proposed a three-part plan that combined a strong housing privatization program with a strong military construction program and then substantial increases in the basic allowance for housing. What we are proposing to Congress is to eliminate this out-of-pocket cost that we put on our military families so that immediately they have more options, more quality options available into the private sector, and because the housing allowance is the primary economic driver for housing privatization it looks like we can get better deals and more housing privatization in the future years. That should also take some pressure out of our on-base requirements, because we are maintaining non-cost-effective things on-base and we really hope that this is a substantial improvement.
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    We are also seeking legislation to make better use of our under-utilized facilities. We would like to out-lease some of the under-utilized facilities that we are not disposing of but perhaps having other private sector interests come on and make dual use of our facilities so we can generate some additional money and most importantly try to keep that money either in in-kind contributions or real money at the installations level because if it goes up the chain it doesn't come back, as you know, down the chain to the installation in the same shape or form. We also are pursuing very aggressively competitive sourcing of non-inherently Governmental functions. We are looking at perhaps studying about 230,000 positions between now and 2005 and hoping to save about $11 billion from that.

    Now that all sounds great, but the other part of it is criticism that I think is justified against the Department. GAO issued a report, for example, this past September that says our real property management is in disarray because we don't have good analytical tools. We agree, and this is what we have been trying to do to really cure that problem.

    First, I chair and have reinvigorated an Installation Policy Board. Many of the people from the leadership, the military, that will be coming here in front of you are members of that. Most importantly, we brought the engineers, the senior military engineers that really tell us what to do. We are serving as a board of directors for installations. We meet every single month for peer review, auditing, trying to get some consistency for many installation issues requirements, how we are going to spend our money, what are the future programs, some strategic planning. I am very pleased with it. This Board is supervising the development of really three very important analytical tools—the Facility Strategic Plan, so we know what types of facilities we will need to have in the future, the information we need to analyze that and feed into the QDR. It is going to be a very important part of our work.
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    It is also developing the Facility Sustainment Model. One of the problems when we ask for money from either our Comptrollers or from Congress is that people say you really can't determine what your facility needs are, and that has been true to a large extent. The Facility Sustainment Model depends on an accurate inventory of what we have, which we haven't had in the past, exactly what facilities we own, and then we are dovetailing that with a commercially benchmarked cost analysis system—what does it really cost to maintain and modernize these systems.

    One of the first products of the Board then was the Facility Cost Factor Handbook, based on commercial benchmarks. It gives us a much better handle on what it really costs to maintain and modernize our facilities, and I think that is a big step forward.

    The Facility Sustainment Model we hope to bring online. We are validating it. We hope to bring it online for next year's budget process, and hope to be able to use it then this spring for the build of next year's budget and it will give us a lot greater visibility on it.

    Let me just conclude with the words of Will Rogers a bit: ''Even if you are on the right track, you'll get run over if you just stay still.'' Now I believe that we are on the right track. We have taken a lot of effort looking throughout the MILCON and there's other aspects of the MILCON that are important to us. We have a lot of work to do. We are trying not to stay still. One of the ways that really could help us is to have that innovation of advanced knowledge training techniques along those war gaming type scenarios. I really thank you for your support of the program. I think we have made some progress but we certainly have some problems and a long path ahead. Thank you, Mr. Chairman.
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    [The prepared statement of Secretary Yim can be found in the Appendix.]

    Mr. HEFLEY. Thank you, Mr. Secretary—both of you. Mr. Taylor is leaving—no? Mr. Taylor, I will call on you to ask some questions.

    Mr. TAYLOR. You are too good to me, Mr. Chairman.

    Again, thank you all for coming. I wish you would in particular give me your thoughts on the concept as to what the details mean. It's called bundling, and that is where on military construction projects, I think, it is something that is being done within the system rather than driven from above, but they have been bundling the construction contracts to a point where the net effect is they have limited competition as far as those people who can afford to do a project that large. I think all of us know that any time you limit competition you are going to end up paying more money. Have you all given any thought to that as far as trying to prevent that? I realize this is more on the day-to-day level but you are the people in charge.

    Secretary YIM. It is of concern to us, Congressman. When we look at our outsourcing program, we call it competitive sourcing for a reason, because we believe that competition is the keystone of it. Not only does competition help assure us that we are going to get the best deals, but the competition allows us to infuse faster, better business practices.

    Now to the extent that we bundle up and limit the field, the number of people that can compete on big contracts, you are absolutely right. That is counter-productive. There are some reasons why our field commanders are doing that. They are trying to get economies of scale. They are trying to streamline the contacting process, for example, so rather than go out piecemeal on ten different contracting actions rolling them up into single ones, but it does have that effect. That is the argument on the other side. It does have that effect sometimes of limiting competition.
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    However, what they are asking, some of the large integrators on some of these contracts is to be sure they bring in a lot of diverse, smaller businesses. For example, on housing sometimes you will have a master developer, for lack of a better term, but the actual housing projects will be broken down into much smaller pieces. In certain aspects of base operations (ops), you may have, if we contract it out we may have an integrator that a lot of the actual work is broken down into smaller components, because a lot of the innovation, as you know very well, comes from the smaller businesses rather than the larger companies that have the same problems as we do as a large bureaucracy.

    Mr. TAYLOR. Mr. Yim, may I make this request? I have got to believe since everything we do is spec'd out anyway, probably in great detail, much more than the private sector just because we are the Government and we face a lot more scrutiny than the private sector, what would be the opposition to bidding these contracts both individually and collectively and then deciding how the taxpayer is best served, whether that one large contract is actually a better deal than the cumulative subcontracts, if you follow me.

    Secretary YIM. I do.

    Mr. TAYLOR. And then at that point let us make the decision, rather than jumping to the conclusion that we are going to save money by having the contract as one large piece. I can't believe it is that much more work and I certainly think it would be to the advantage of the taxpayers.

    Secretary YIM. Well, we will certainly take a look at that. My initial feeling, one of the reasons why that hasn't occurred a lot is that we have not—we have been trying to get away from the theory of contracting through a process type description, saying that we want this piece of the work done this way and we want this piece of the work done this way. We have looked more at outcome contracting, so for example we will say in base ops rather than we want you to cut the grass two times a week to the length of an inch and a half, we are saying we want this place to look decent. They are really performance type standards. It really essentially bundles together a lot of different contracts.
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    Mr. TAYLOR. I am talking now construction projects.

    Secretary YIM. Okay.

    Mr. TAYLOR. Something that stops and starts, so again I am making that request. I do think it is serious enough to bring to your attention.

    The second question would be on the forward operating locations (FOLs) I would like to know—it does not seem to make much sense to have one at both Curacao and Aruba. If my memory serves me correctly, they are only like 40 minutes apart of less by air, and if the idea is to establish an air presence, why would you have two virtually on top of each other and then the third way over on the coast of Ecuador.

    Secretary LYNN. Mr. Taylor, you are correct on the geography there. Quite close together there are several reasons—there are two primary reasons. One is the capacity. The Southern Command's judgment is that they need both and the other is, as I understand, the negotiations, that it was the negotiations with I think it was with the Dutch government, that it was a package deal and we did need a location on that side as well as a location on the other side of the source zone in Ecuador.

    Mr. TAYLOR. Okay, and last question, very quickly, if you can't do this today I would appreciate to hear back. Mr. Yim, you raised a very interesting point on when the DOD leases something seeing to it that the money stays in the DOD to help your many underfunded programs. One of the surprises that I encountered on base closure was to discover that when an installation such as Governors Island, New York, obviously $2 billion worth of real property, that first I think it was sold back to the city for a dollar, and then they reaped the profit, but even had it stayed within the Government to be sold that the proceeds would have gone to the general fund rather than to the DOD, and therefore I think the DOD has one less incentive to try to do away with some of these installations. Have you given any thought along the same lines of what you mentioned on the leases of proposing some legislation to see to it that in the future should there be a disposal of property that belonged to the DOD that at least the benefits of those funds would stay in DOD?
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    Secretary YIM. Well, certainly we'd like them to stay in the DOD from our perspective. There is no question about it. From an installations perspective I would like to have it stay in installations, but that is not also what I think we really need. What we need to do is generate the money from the BRAC savings to fund a lot of other programs within the Department including weapons recapitalization, weapons modernization, increased pay—those type of programs—and allow the facility savings to come from not having to maintain facilities, so we have savings from O&M reductions in the out-years just by not having to heat or light unneeded facilities and certainly selfishly would like to have all the money retained within the Department of Defense alliance, but there is a lot of competing interests for that money.

    Mr. TAYLOR. Well, could you send us your thoughts along those lines.

    Secretary YIM. All right.

    Mr. TAYLOR. Obviously we would like to be working with you all rather than at opposite ends on this.

    Secretary YIM. I would be happy to do so.

    Mr. TAYLOR. Thank you, sir. Thank you, Mr. Chairman.

    Mr. HEFLEY. Thank you, Mr. Taylor.

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    Let me just touch on two or three things right quick and then we will go on to the other members. I would like to emphasize the question that Mr. Taylor brought up about bundling. There is another aspect to that, too. That is that traditionally small business had an opportunity to get started with Government contracts by doing small projects on military bases.

    In my checkered career, I started out that way in construction company. I believe the first project we did was a remodeling of the Officers' Club at Tinker Air Force Base. We did put shops and hangars at Tinker. We built a filling station at Gene Autry—yes, there was a Gene Autry Air Force Base at one point. I worked at Altus, the Air Force Base there in Advance. But it was a small contractor that had an opportunity to do small jobs and then prove themselves, be able to get bonded for more and grow, and bundling shuts out a lot of those small contractors. At least that is what they are telling me, so I wish we would look at that and see from that aspect as well as a cost-saving competition aspect which Mr. Taylor brought up.

    Secretary YIM. I will do that. Certainly.

    Mr. HEFLEY. Okay. You know, I think you guys have done a good job, Secretary Lynn, the problem with MILCON. We all know that it kind of comes to the end of the line when it comes to handing out money. You seemed to express some hope that in future years we can do something better. Part of that hope is built on the backgrounds, it seems to be, but do you see any genuine hope that—if you guys are touring the same facilities that I am, we have a mess out there. Now I don't know anybody that does a better job with the mess than the military does. I mean they take over World War II buildings and they paint them up, but when you can't put a tank in a bay to do maintenance on it and shut the bay doors because we have bigger tanks nowadays, something is bad, wrong. Of course, we have worried the problem of military housing to death and I don't want to bore you with that right now, but that is still a problem and all kinds of facilities problems out there—old sewer systems and old water delivery systems and utility systems and so forth. Do you ever see this rising in emphasis or is it always going to be, well, next year, next year, next year?
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    First, we have as part of the $112 billion increase, some of that funding went into increase facilities budgets, both in the real property maintenance side, as well as on the construction side. As I said, I don't think we're there yet; but, I think we've made progress.

    You indicated BRAC. I know it's a message that the committee is not in favor of, but it—I don't think we are ever going to fund military construction adequately, until we get the base structure that matches the force structure, and we need a BRAC to do that. So, I think that that is going to be a continuing problem, as long as it exists.

    We've taken a third step that Mr. Yim indicated. On the family housing side, we're pursuing, with the support of, I believe, of this committee, privatization. It gets the kind of eight to one leverage that we need to get after the 200,000—the backlog of 200,000 inadequate houses. We will never get there in traditional—with traditional funding mechanisms, but with the support of Congress, in general, and this committee, in particular, I think we can get there with privatization.

    Finally, the Secretary initiated a new step this year with the elimination—or the proposed elimination of all out-of-pocket costs for off-base housing. That will equalize the financial considerations in off-base versus on-base housing; will give more service members the opportunity to live off base within their means and that will reduce the overwhelming demand on on-base housing.

    So, I think those four steps taken together will have a significant impact on our facilities needs.
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    Secretary YIM. If I may add, Mr. Chairman?

    Mr. HEFLEY. Oh, yes.

    Secretary YIM. One of the things that the Department and the services have not supported, for example, is a floor, a minimum level for the property—or MILCON, for example, because we needed the program flexibility, frankly. However, what we were doing in the facilities side is trying to raise to a credible auditable state the visible—the visible effects—or visible consequences of the funding decisions through use of the facilities, the Sandman models or having installations play a part in the readiness reporting reports that we will be submitting to Congress this spring. So to the extent that we're not going to create a floor, but we can make for our senior leaders the consequences of funding or not funding better quantifiable, better auditable to them and how that impacts readiness for the services, then I think I've made maybe a step toward breaking the cycling of under funding.

    Mr. HEFLEY. Thank you. And as for BRAC, let me just touch on BRAC a moment. Out our way, we've got what they call grouse strutting grounds and this is where at a certain season of the year, the grouse come out and they do this intricate bounce dances, and I think they are mating dances, so I don't want to carry this analogous too far. But 2212, there is the grouse strutting ground for BRAC. Secretary Yim comes in and he does his intricate dance, then the Committee does it's intricate dance, and we understand that.

    And I don't want to carry it too far here, except to say that, you know, we talk about all this savings and, yet, the Army doesn't want to surrender any major maneuver space and I think they are probably right in that. And the Navy doesn't want to give up any waterfront and I know they're right in that, after the BRAC rounds we've had. And the Air Force seems most aggressive about the BRAC and, yet, they don't want to give up any maneuver space, that's for darn sure, in the air—I mean, any training space in the air space. The Marine Corps doesn't want to give up anything. And so, I don't see how we get from here to where you all are projecting, even if we had two more rounds of BRAC.
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    But, repeatedly, the committee has expressed, I've expressed to you, that I think we might be able to come to some kind of an agreement, if we would agree to take off the table the things that you are absolutely not going to give up. Take them off the table. Mr. Snyder is interested in this whole area, and we've talked about it. You're not going to close West Point. You're just not going to do it. Take it off the table. You're probably not going to close Space Command. Take that off the table. And then let's look for a way to deal with what might or might not be excess beyond that, after we know.

    I've had encouragements from Secretary Hamre and others, from time to time, that, yeah, we are working on a plan to look at that and so forth. I don't get any response back. But, I would suggest that if you are serious about wanting to move us off the dime on this thing, we ought to spend some time this year looking at innovative ways to look at BRAC. Now, we didn't invent a holy grail with the BRAC process before. It worked. We made mistakes; but, it basically worked. But, we need—if we're going to do any more, I think we need to do it a little bit differently. So, I've done my dance; you've done your dance; get on with our business. Mr. Buyer? Mr. Buyer is gone. Mr. Snyder?

    Mr. SNYDER. Thank you, Mr. Chairman. Mr. Lynn, I just wanted to ask a question. You may be the wrong person to ask. It's a specific question regarding the housing assistance fund that the Army manages. Is that something you're familiar with?

    Secretary LYNN. Not in any—No, sir.

    Mr. SNYDER. I'll save my question for the Army. I don't think I have any questions at this time, in the spirit of time here, Mr. Chairman.
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    Mr. HEFLEY.All right. Mr. Underwood.

    Mr. UNDERWOOD. Thank you, Mr. Chairman. To add to that dance, maybe if you would agree to take all of the bases that are represented up here off the table—


    Mr. UNDERWOOD.—we could even move a little bit further.

    Mr. HEFLEY. You're very perceptive, Mr. Underwood.


    Mr. HEFLEY. Can you put that in a form of a motion?

    Secretary LYNN. That's, of course, exactly the problem we see with follow—

    Mr. UNDERWOOD. I think we all fully understand that and appreciate it. I appreciate your appearance and your testimony here, and I have a question for—a couple of questions for Secretary Yim. You raised the issue of the privatization of utilities. Under DRID 49, indicated before many of us, DRID all your goods—your various goods and Defense Reform Initiative Directive 49 requires that all services divest themselves of utilities. And I know you've outlined before, in response to a question for the record, the various security concerns that would require the services to continue to have—continue to possess utilities and continue to manage utilities. Now, what I wanted to know is are you allowing individual services flexibility in creating a kind of unique privatization arrangement? For example, in the case of privatizing military water systems and, in particular, our water systems are a little bit difficult to flow it out, because the water table may be under combined federal, local land. And are you allowing the services to develop flexibility in these privatization arrangements, where the service could privatize the infrastructure, but, in a sense, because the—most of the water is under their land, continue to retain ownership over the water source? How do you see that happening and how are the services—individual services allowed to deal with that?
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    Secretary YIM. We are trying to give flexibility to the services on how they go about this. The DRIDs are notoriously inflexible, because they set the hard and fast deadlines. And so, for example, in this area, where you may be wanting to privatize a utility distribution system, you need to combine that or at least consider how it affects the purchase of the commodity. That particular state is not deregulating as rapidly as other, so that the commodity rates are not stable. We've signaled to the services we'll give you some flexibility about some of those deadline dates on how you go about in such a different environment. We're letting them make use of the—of various tools, whether they need to convey interest in utility distribution systems or not. Some services are experimenting with a variety of different techniques. But, the key—the underlying key is that the statute requires us, if more than one utility company shows an interest, is to competitively dispose of the utility distribution systems. There are some differences in that, the purchase of the commodity—the electric commodity, there's a separate statute that seems to say that we need to pry from the state recognized electric commodity provider. So, there's a variety of interplays that do create this flexibility, I think, for the services—

    Mr. UNDERWOOD. So, the individual services do have the flexibility to make various arrangements on this? They could—

    Secretary YIM. Yes.

    Mr. UNDERWOOD [continuing]. Conceivably—if they own the land and the waters underneath it, they could conceivably privatize the water or make an arrangement with the surrounding community, regarding—
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    Secretary YIM. They could. Now, we are providing the oversight, because we don't want them to make, frankly, short-sighted decisions and jeopardize longer term goals. Now, it's not because they are nefarious or they're dump—

    Mr. UNDERWOOD. Understood.

    Secretary YIM [continuing]. This is just an extremely complex area for them. And so, what OSD is trying to add some value, if we ever add value, and trying to give some general overall principles about where and when certain techniques best work, but then give them flexibility—because they own the systems, we don't.

    Mr. UNDERWOOD. Let me ask you: have you ever heard of a base or a property that has been BRAC'd, where the property is going over to the local community, that the military and any individual service wants to hold on to the utilities in that? That seems kind of a—that seems kind of odd, because, you know, first, the BRAC has put the community through a lot of difficulties; and, second, the Department of Defense is moving towards privatization, yet -- have you ever heard of such a thing? Would that seem unusual to you?

    Secretary YIM. The area where I think that may apply is, for example, during the BRAC process, the federal government may have retained an enclave, so that either another federal agency or actually a military entity retained a guard to reserve enclave or some other sort of part of the base. And there may be some security reasons or economic reasons why they wish to retain ownership of the portion that they retained the distribution system within that footprint or some of the lines leading up to that footprint, which may be an integrated part of it. So, I don't know if any specifics off the top of my head here, but I can envision that scenario that you outlined.
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    Mr. UNDERWOOD. Okay, thank you. Thank you, Mr. Chairman.

    Mr. HEFLEY. Mr. Ortiz.

    Mr. ORTIZ. Thank you, Mr. Chairman. I think that both of you made some good points about bundling. And, of course, being a Navy town, Corpus Christi, we happen to be at the mercy of Charleston and sometimes they forget that we do have a small business district, who can come up with the bonding. There's a perception that companies within my district or any other district don't have the bonding capacity, so they are ignored. And another problem that has come up has been that many times, you get a big contractor that comes in. They subcontract the work. They leave town and they don't pay them. That's a problem that we have encountered. But, I think if I'm correct, Mr. Chairman, that we have set aside a certain amount for small businesses, and small businesses happen to be the backbone of our country. In fact, small businesses create more jobs than any of the big industries in this nation. We cannot afford to neglect them. They are qualified. And I'm talking about small business people that are qualified, that have the capacity to bond, can perform; but for many reasons, they are ignored. And maybe what we need to do is to get Small Business Administration (SBA) and our committees to work together. We have a company that for years have been trying to get and they have done every kind of job, except when it comes to—construction. And maybe we can look into that.

    I did a lot of traveling when we had the base closures and they shut down a bunch of facilities. And I was dismayed to see that a lot of the facilities that were built with taxpayer's money, once—and I'm talking about foreign bases, once those bases were shut down, we didn't get a penny back, you know. And I know maybe this is the State Department deal. But, if we are going to spend some money in Ecuador, in Aruba, and some of the other, what kind of contract are we going to have, so that we can keep an eye, you know, on the monies that we are spending in foreign countries, because we don't recoup any of that money.
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    This really disturbs me, especially when—and this is another area—unappropriated funds, soldiers monies. We had bowling alleys. We had theaters. We had a bunch of facilities that we lost money. We were never able to get that money. And, you know, I don't even have a form of a question. But, in the future, maybe we can look at those areas. They are very disturbing for most of us. And my thing would be to look at the small business. Do you know if we have been able to meet the criteria of -- what is it, five, seven percent?

    Secretary YIM. I know that we have set asides. I don't—I think what I'll need to do, I know my staff will cringe when I do this, is that because of the widespread interest on this, let me do some specific work on the bundling issues. I will be happy to come back to the committee or individually—

    Mr. ORTIZ. Thank you.

    Secretary YIM.—and—

    Mr. HEFLEY. It will be very helpful.

    Secretary YIM[continuing]. I will do that.

    Mr. ORTIZ. And we welcome both of you all here. Under the circumstances, you all do a lot of work. And I know that we try to look for money and it's scarce. But, I know that you're trying to do the best with what we have and we appreciate that. Thank you, very much, Mr. Chairman.
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    Mr. HEFLEY. Thank you. Mr. Buyer? You.

    Mr. BUYER. Am I last?

    Mr. HEFLEY. You're next.

    Mr. BUYER. Has anybody else hasn't gone yet?

    Mr. HEFLEY. Yes; sure. You'd rather postpone yours?

    Mr. BUYER. Yes.

    Mr. HEFLEY. Mr. McHugh.

    Mr. MCHUGH. I'd rather postpone back to him.


    Mr. MCHUGH. Let me—under the heading of alls well that ends well, let me commend the Secretary for his new position on housing and to ensure that we don't have in the future out-of-pocket expenses. I think that is a vitally important initiative and I do commend him for it. It's an interesting change of tact, however, because it was just two months ago that we had new basic—new Basic Allowance for Housing (BAH) that would have across most bases and in most categories dramatically reduced the funds that we currently give to our men and women in the military. So, I don't want to look a gift horse in the mouth, but that is going to be a big change.
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    Secretary Lynn, you commented, I think correctly so, that this will hopefully have an alleviating effect on the need for on-base housing. I wonder if you've had a chance to clarify that a bit more. What kind of relief might we expect in the military housing construction projects from this new benefit?

    Secretary LYNN. We have not been able to quantify it, in terms of how does it change the demand. Clearly, a 15 percent increase in housing is going to change it somewhat. I don't know—Mr. Yim, I know, is working on that, but it's a very difficult calculation. But, let me assure you one other thing is that we did not reduce the housing budget because of this. We think we needed—we need the house budget we have to even meet a reduced demand. So, we have continued the housing budget as it was before and we've added on top of that this housing allowance initiative.

    Mr. MCHUGH. No, I understand that and I think that's a good thing and, frankly, I think that would be a poor excuse for a construction allocation cut. And I wasn't accusing you of doing that. I was just trying to see if there was any indicator, as to what the savings might be, which means, in this case, not savings, but added resources, really.

    Secretary YIM. That's right. We really are looking at that. There's a recent Rand study, for example, that indicated that if we could increase the housing allowances, that an increasing percentage of our people would prefer to live off base, particularly those with working spouses, for example. And we believe, although it is a very different—difficult algorithm to try to create, that increases in BAH, because it will make more housing available to people off base, will actually then reduce the waiting list time, reduce the amount of pressure being put on on-base requirements. It's never going to eliminate them. There always will be—each service will want to maintain a core on-base housing requirement. But, it should help and what we hope it helps is take the pressure off the really old housing stuff that frankly we should tear down. It's not worth sticking more money into that stuff. But, we do, because we don't have any other alternative right now. If we can get rid of the cost inefficient stuff, then we could use the remaining MILCON—and I think we did have a plus of about 17 percent or so in family housing MILCON this year—if we can use that remaining MILCON more wisely on base or overseas, because we, also, have to fund our overseas housing, and the BAH increases doesn't, in fact—doesn't benefit our overseas, that personnel at this time.
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    Mr. MCHUGH. I agree. You're never going to eliminate the need for base housing. I don't think you should. There are a variety of reasons for that. For instance, many troops will always prefer that understandably. Security reasons, of course, are another. But, I do think that this kind of effort and whatever else over time you might develop to engender further enhancement of off-base housing interests is beneficial not just from the military side of the equation, but from the civilian side, as well.

    I represent Ft. Drum, that community. It was, for a variety of reasons, one of the first to really aggressively utilize off-base housing. And it has been a tremendous boon to the community and has integrated Ft. Drum and its personnel into the population in ways that I think are only beneficial. And the community and base relations are just superior, been a big part of that, as that kind of initiative. So, that's the long way of saying keep up the good work, in that regard.

    I'd like to dance; every year, I like to sit here. I haven't thought about it in those terms, but, frankly, Mr. Chairman, if you think about what those—were doing, you're probably right, all the way to the end of the day.


    Mr. MCHUGH. But, we, on this panel, I would admit, at least most of us do have a personal interest. And Secretary Lynn noted that's one of your primary challenges. I don't disagree with that, but I think it's fair to say the vast majority of members of Congress do not represent military facilities. And the hesitancy of the Congress to adopt another round of base closures is deeply seated in problems that have been experienced. And we can sit here and point fingers, and I don't think that's productive and I'm not going to do that. But, at the end of the day, I'd like to associate myself with the comments, particularly the Chairman. Conceptually, I agree, intuitively, we have to understand that we're in excess with respect to facilities. But, the things that many of us concern ourselves about are making mistakes in the past that happened here and there and concentrating them into one massive mistake in the future. And I think the big part of the equation of success for you, as the Chairman indicated, has to be around in the future that is well defined. We're not dealing with this massive universe that we were when we went into to BRAC I. We've lost a lot of facilities. Frankly, many I don't think we should have, but they're gone, they're off the table, and the possibility of doing damage is far more concentrated now. And I think this has to be done with a surgeon's knife, not with a machete. And, frankly, if you, as the folks who are most supportive of the initiative, don't take the lead and don't come in with a new way of doing it, I think it's going to get harder for you, rather than easier. And I'd like to be able to support a future round, because I do think it's necessary. But, to just throw it out there again, as we have in the past and have the services off just looking—I'm sorry, Secretary Yim, I've got to disagree with you. It think BRAC has been a controller drive process. We are looking for the bottom line. We can't afford that anymore. And we can't allow to have a BRAC commission that, for no other reason than they felt like it, replace the opinions and the considered expertise of the secretaries of the branches of the various militaries of the Secretary of Defense; that's just wrong. And I'll never support a future round that approaches it in that way again. I'm only one vote, but I just thought you would like to know.
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    I'm through dancing, Mr. Chairman. Thank you.

    Mr. HEFLEY. Thank you and a lovely dance.

    Mr. LYNN. If I—

    Mr. HEFLEY. Oh, excuse me.

    Mr. LYNN [continuing]. If I could dance a little, Mr. Chairman. I understand the desire to try and, as you say, pick a more surgical approach, Mr. McHugh, that would—it would certainly involve less pain and less widespread pain. But, let me just make the case as to why we haven't been able to do that.

    The process that was come up with under BRAC is certainly imperfect, but it is the best and more successful, I think, than we've ever had, and part of the success was insulating the decision-making process from political concerns, as much as could be. Now, I understand the qualm on that and I'll come back to that. But, if we were to exclude a series of bases, that would take that away from the commission and you would be putting that back in the political realm. I think the criticisms that are—and I don't want to get into finger pointing either, but I think the criticisms of the last round had to do with politicization and I'm afraid that if you go to an exclusion approach, you'll actually go further in that direction. What I think what you would want is to further insulate it from politics. So, our concern there is that we want to have everything within an objective overseen by GAO process, that a commission is able to make all of the judgments without any undue influence from the Department or any of the political actors.
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    Mr. MCHUGH. May I, Mr. Chairman? I don't disagree with your overall premise, but maybe I didn't make myself clear. I don't think the Congress should be the one defining what is off the table.

    Secretary LYNN. Oh, I didn't think you were, but essentially the compact in the original BRAC was that the final recommendation would be made by the Commission, not by either the Department or Congress; that it was a delegation to that Commission. As you may remember, the initial BRAC came after the Secretary developed a list of potential closures, and it was suggested that that may have been possibly untrue, but it may have been politically motivated. And it was in response to that list that a process was developed with the Commission being the arbiter, rather than the Department.

    Mr. MCHUGH. Well, if anybody thinks the Commission hasn't politicized it, they're crazy. And I will be happy to talk to them a lot of times.

    And that's another part of the problem. Any future Commission cannot have the power to reverse. You've got to trust somebody, and if you're asking me do I trust the Commission, do I trust Congress, or do I trust the Military, I'm going to pick the Military every day of the week. What that means is that we've got to have a process that reasserts the authority and the intelligence and the integrity of the Military to do it right the first time, and can really be overturned by a Commission or whatever the process is in there where there's a demonstrable error in what the Military is legally charged to do.

    We had a Commission that made up new rules, made up new determinants as to what a military value in a base was, totally reconfigured the law. And at the end of the day, the court said, well, you know what they did. But, you know what? We don't have any power to overturn it. And it was a terribly written law. I just say, from my perspective—and that's all I'm offering—we've got to have a system in the future that reestablishes confidence that what we are doing is correct, militarily, not budgetarily or politically.
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    Secretary LYNN. I don't think we went we went beyond the goals.

    Mr. MCHUGH. I think you're right, and I will, too. I enjoyed it, and thank you very much.

    Mr. HEFLEY. I think you do see, though, that we do need some serious discussion with this, not like this in the Committee, probably. We need to sit down and discuss whether there are not possibilities there. I would like a system whereby the ones taken off the table would be taken off the table by the best experts we've got. I mean, we pay these guys to be experts. They spend their lives, their careers, dealing with defense and wearing the uniform and so forth. I'd like the best experts to take off the table, what it is, and then let the—go through some kind of an objective process that leaves us out of it, again, still.

    I don't see that you're politicizing it. Well, I know -- if you took us and the President out of that taking-off process, then it would seem to me that we could come up with a way to get things off the table that you know, and logic and data dictate that you absolutely are not going to give up. You're not going to give up Fort Hood; you're not going to give up Mayport.

    Mr. ORTIZ. Corpus Christi.


    Mr. HEFLEY. All right, Mr. Thompson.
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    Mr. THOMPSON. Thank you, Mr. Chairman. I have one comment to make, and then one question to ask.

    When you're talking about the off-base housing issue, we just went through a rather alarming situation in my District, the area around Travis Air Force Base where the no-out-of-pocket costs proposal was floated. It became apparent that the data that was used or the methodology in getting at the amount was questionable, I guess, at best. And it really sent a chill through the community, both the Military community and the civilian community. I think it did some damage, although not unrepairable, to our credibility. So I would just suggest when we do this that we get input from the community, we used the best and most accurate data available, and have a methodology that's defendable.

    The question I have relates to National Guard armories. In California—and I suspect that this is true in other states as well—there is a desire to go into joint partnerships with the Guard on the building of the new armories that we need, so they could be used for community centers or whatever the locality or the state feels would be appropriate in conjunction with the Guard. And I'm just wondering if this is feasible and are you doing anything along those lines, and if there is anything that we can do to help move forward that process.

    Secretary YIM. We would like to encourage some of this joint use, joint building. For example, the Air Force is looking at Brooks Air Force Base in Texas, direct partnerships with the community there, and, in fact, perhaps even transfer of ownership, and then leaseback type of arrangements, so that there is a sharing of overhead, sharing of costs. I note that there are issues about that, but other Services are investigating ideas like that, or enhanced out-leasing proposals where if we already own the facility, we can then share that in some manner with the outside community. That is an area that we're investigating, so we very much would like to look at that.
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    I'd like to make one comment on the housing, just so it's clear: There were two independent housing allowance proposals that had that convergence around the first of this year. But they were independent.

    First there was a reevaluation of how the BAH Rates, the Basic Allowance for Housing Rates, were calculated, and there was some adjustments then. In areas that went up, they got higher cost of living increases, and there were some areas that went down. That was independent of Secretary Cohen's initiative to then eliminate, in addition to that, those changes, eliminate the 15-percent average out-of-pocket expenses.

    Sometimes people are blending those two together. I think now what the Secretary has announced is that we're revisiting the issue where the BAH adjustments that kicked in in January of this year, so that there are no losing geographic areas; that to the extent the BAH rates were recalculated based on experts and they went down, that we would be funding. Mr. Lynn talked a little bit more about that. We are funding so that there are no geographical losing areas now as a result.

    Mr. THOMPSON. I think that's important. The area that I was talking about, new folks coming to Travis would actually get less money. And the geographical area that was surveyed included a county that I also represent, but a county that's two counties away from Travis Air Force Base, and a county that you really can't get to from there.

    Secretary LYNN. One of the reasons we're not reducing any of the allowances in any of the areas for incoming members is because we want to reevaluate those surveys. I think the theory was good, that what we want to do is connect the housing allowances better to housing costs in the region. But the execution is not all there yet, and we need to ensure that we do have those housing costs measured correctly. So in the interim, what we're doing is, there will be no reduction of anyone's housing allowance at this point or in the future.
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    Mr. THOMPSON. Mr. Chairman, if I may, when you determine things like the region, do you do that independent of the local folks? Is it done in Washington someplace, rather than in, in this case, California?

    Secretary LYNN. No.

    Mr. THOMPSON. In this case, anybody you talk to—my office, the folks at Travis or anybody else—could tell you that you can't take housing prices in a county that's two counties away and incorporate that in your study. And maybe we could save some time and some pain for everybody if we tried to get together on these before.

    Secretary LYNN. I agree with you, and that's the intent. This is not done in Washington; we do hire contractors and send them out to the region to do it. But I don't think it was done right in every case, and that, as I say—there are several reasons to do this, but one of them is to make sure that we have the housing costs right.

    Mr. THOMPSON. Thank you.

    Mr. HEFLEY. Ms. Fowler.

    Mrs. FOWLER. Thank you, Mr. Chairman. I just want to associate my remarks with those of Mr. McHugh. I know the Chairman probably while I was gone, said this earlier, but I'm not concerned for BRAC, and I'm going to wait until we evaluate the rounds we've before I'm going to say we need another one, because I think we need to get this last one completed, and see what we've saved and what we haven't. But having been involved with them very intimately since my first year in 1993 when I had a base closed, and then in 1995 when we kept one open, they're politicized. There isn't anything in this town that isn't political.
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    So, you know, John said we could give you examples. In 1993 when our Navy base was closed—and that was a budget-driven process—the Services were told, take this much money out and get it out however you can. And the Navy keeps coming to me, saying, oh, gosh, we shouldn't have closed that base. Our city is benefitting. It's going to be an economic engine, but the Navy lost their only master jet base in the southeast, and will never have that back.

    So it's a problem, and how we work out a way to make it work, and hopefully we can through coming years, but I first want to see some evaluations. I get very concerned when the Administration is building, ''savings into future budgets'', you know that aren't going to exist. We just have to be careful about that.

    I want to go to something on the forward-operating locations. I understand that Mr. Taylor has already covered some of my concerns about Aruba and Curacao, because I was down there in December, and I have some real concerns about duplication. I know they say, well, it's only $10 million. Well, $10 million here and $10 million there, and it starts to add up, and you get ongoing costs. So I just share his concerns with that.

    And I noted, though, that the budget request is seeking $78 million for the forward-operating locations in Aruba and Curacao, and in Ecuador, but the supplemental, you've also got $38 million in there, for Ecuador. Could you give us a rationale for splitting these requests, in other words, you've got Ecuador split in two, part in the supplemental and part in the budget, and then you've got the Netherlands Antilles in the budget.

    Secretary LYNN. The question was urgency. We need to—the Manta effort is more extensive and needs to be started earlier, so we broke a piece of that out, a little bit more than half of the Manta money is in the supplemental as an emergency expenditure to try and get it started this year. The bulk of the requests, the remaining Manta expenditures as well as Aruba and Curacao are in the 2001 request.
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    Mrs. FOWLER. Just to get it straight, I hope people do understand that it's going to end up being $60 million plus, because some say, oh, it's $38 million, but then if you start looking in here, it is a bigger expenditure. And once going there, I think we probably need to do it. I'm concerned about the money we're spending. We need to make sure they get a more stable situation in Ecuador, but I think we need it, but I am concerned about Aruba and the duplication.

    And I would hope that we're making efforts to go back in Panama. The new government there wants us there. We don't have to reestablish Howard Air Force Base in its entirety, but instead of putting something in Costa Rica or somewhere else that's being looked at, we've got infrastructure already in Panama that we should be working with that new government there to put whatever we want to call it, multinational, anti-drug force using that great infrastructure that we left, rather than trying to build it somewhere else.

    Mr. Chairman, I noted that the budget request contains $1.2 million for a Special Operations Command, Boat Maintenance Facility at Roosevelt Roads in Puerto Rico. And I know it isn't a lot of money around here, but I do think we should give very careful consideration about further investments in Puerto Rico, in light of the unresolved status of the Viequez issue.

    I know that there are quite a few of us that, depending on what happens with Viequez, since 85 percent of the functions of Roosevelt Roads—and I was just there two weeks ago—are dependent upon Viequez, or directly related to Viequez. There are a lot of us that are thinking that if we end up losing Viequez, then there is no need to keep Roosevelt Roads, at least certainly not in the status of which it is now. And a lot of that could be certainly moved and downsized.
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    So I would think we need to look at that very carefully until we have hopefully something worked out with Viequez, because this is a critical facility for the Navy. I think it's been politicized, and I'm deeply worried about our young men and women who are going into harm's way in the Navy. They get a lot of them out of my Mayport Naval Station, and I talk to them firsthand, and they're not getting the training they need to get because of what's happening at Viequez.

    One of the alternative sites is in my state, Ocala National Forest, where they are bombing. You know, the citizens there live five miles from the bombing range. At Ft. Sill, Oklahoma, they live a mile and a half away. In Nevada, they live about three miles away. In Viequez, they live nine and a half miles away.

    I got up on that tower and I looked. You can't see a soul in sight, except the squatters that are there now. But the citizens are further away than citizens in this country are.

    We have 47 live-fire sites in this country. And if the Puerto Ricans don't want to participate in the price of freedom, then they can't participate in the benefits, either. And so I think we need to look very closely before we put more money into Roosevelt Roads and what happens there. Thank you. I'll quit.

    Secretary LYNN. If I could just clarify one thing, Congresswoman Fowler, back on your comment on BRAC. We have not built any savings into the FYOP for BRAC. In fact, we have put the costs of the rounds in 04 and 05. The savings wouldn't occur until after.
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    Mrs. FOWLER. Thank you.

    Mr. HEFLEY. Mrs. Fowler, you made a very eloquent statement in regard to Viequez and Roosevelt Roads, and I'm not in favor of putting another dime in there until this is settled. And if they shove us out of—for whatever reason, political or whatever reason, of Viequez, then I would hope you would join with me in doing everything we can to close Roosevelt Roads and move those functions somewhere else.

    Mrs. FOWLER. I will.

    Mr. HEFLEY. The Puerto Rican politicians love to demagogue this issue, and it sells well with the folks back home, but I feel very, very strongly about this, and the Navy has convinced me that this is an indispensable training facility. And if politically we're shoved out, then I think we need to take action. Thank you for your very eloquent words.

    Mrs. FOWLER. Thank you.

    Mr. HEFLEY. Mr. Reyes.

    Mr. REYES. Thank you, Mr. Chairman. I have a couple of areas that I would like the Secretaries to cover for me. The first one deals with some of the comments that have already been mentioned regarding small business and bundling and all of those types of issues.

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    In my first term, I had the privilege of awarding or giving one of the small business contractors an award on behalf of DOD for exemplary service. About a year and a half later, this same contractor came to us and was in the dispute with the Air Force regarding some work that he had done. And ultimately, here we are, over a year and a half later from the initial contract, and the issue is now just barely being resolved.

    The point that I want to make is that these are small business people that cannot afford to have a million or so dollars tied up. There are 200 jobs from the district that are in jeopardy. This individual literally had to mortgage his own house and do all kinds of things, just to stay afloat and keep those 200 people employed while they were involved in this very lengthy dispute with the Air Force.

    My question is, is there a process, or could we get a process in place where there would be expeditious review for small business people? Oftentimes their margin of operating is very narrow, and yet, at least in my district, like my colleague's district, about 80 percent of the jobs generated are generated by small business people. So that's one question that I have.

    The other one involves with—I had the opportunity to travel to Korea Christmas week, and to tour some of those facilities. And I was amazed to see that in one camp, the one-third of the soldiers were still living in Quonset huts from World War II. In fact, I was told that they still needed to have a solider up all night on fire watch because of the heating systems. But when I was there, the temperature hovered around 18 degrees, and it was—to say that they were living in primitive conditions was an understatement. So I—my interest is where are we going? Originally, when I asked the question, why are we still requiring our troops to live under these conditions when they're virtually under threat of attack 24 hours a day, I was told that because our time in Korea was temporary. We have been on temporary status for the last 50 years, and to me, that's incredible. So what are we doing, specifically, to address the troops in Korea, and then, if you can, maybe help me out with the small business dispute resolution system.
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    Secretary YIM. No one supports terrible living conditions when we put people in deployments and the operating tempo (OPSTEMPO) that we put them through. I believe that in Korea there are some flooding issues that also exacerbated some of the problems for us. We have a combination of not only putting our military construction overseas, but also there is host nation building programs where when we're providing facilities that defend a region, we ask the host nation also to contribute to the construction and the cost of construction and maintenance of some of those facilities. So, those are, in general, the strategies that we're employing. Do we have enough money? Are we doing it on a rapid enough timeframe? Those are budget balancing issues for us. But certainly no one wants to put our military families or our military soldiers in inadequate conditions.

    On the bundling aspect of it, or the small business, there is—you're getting into contracting issues. Out of my shop, out of the Under Secretary that I work for, Jack Gansler, Acquisition Technology and Logistics, we actually do have a small business shop. We are trying to meet the small business goals and be sure that we actually provide that opportunity. I agree with many of the comments. That was the backbone of a lot of innovation, as well as the entry point for a lot of the businesses, and smaller businesses in our country.

    I will include that, a review of the small business program, as part of the rollup of what I will give back to this Committee. I think that I owe it, given the interest, to really have a good laydown of our program, and how we're addressing the concerns, and the good, bad, and the ugly, and I will bring that back to the Committee in some shape or form.

    Mr. REYES. Okay. Just to follow up briefly on the Quonset hut living conditions, I had a group of parents that came to see me after I made the trip to Korea, whose young men are living in those Quonset huts. So what do I tell them? Just that we're mired up in a quagmire of bureaucracy dealing with host nation support? I'd like to be able to tell them something different.
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    Secretary YIM. I think that you can legitimately tell them that it is a great concern, seriously a great concern to many of us. One of the things that really is hard when we all go visit overseas, too, is to see those conditions and come back. There is no way we can justify that. There's now way we're going to come back and say, well, they just have to put up with it, they just have to suck it up; they're in the military. We are not saying that at all. And I think that you will find that at the senior leadership level, we are very concerned with that, and that's what I tell them; we're trying to make as much progress as we can.

    Secretary LYNN. Let me add something here. The Army has a major initiative to try and upgrade all their barracks by 2010 to the new 1+1 Standard. Korea is part of that. There are two new barracks facilities in this year's budget request. I don't know whether they address the specific areas you visited, but we are trying to move forward on Korea as well as worldwide on the Army barracks issues. And as Mr. Yim indicated, there was a flooding problem, and we have asked and received some emergency funding to try and deal with that, that immediate issue. Again, I'm not sure which area you were in, and whether that was affected by the flooding, but that certainly is exacerbating the problem.

    Mr. REYES. Yes, it was, but I guess my point is, in 50 years we haven't been able to do anything about those conditions? That's amazing. That's difficult to respond to when you have parents whose 20- and 22-year old kids are living in those conditions. They had had a problem where one actually caught fire. And could I get somebody to come by my office? I'd like to share some specific information with you.

    Secretary LYNN. I will personally do that, come by. I think that our barracks goal is actually 2008, if I can correct my comptroller colleague. And in each of the Services, that was one of the priority scrubs that we made of the services from my office during the summer program reviews, to be sure that they are -- each indicating to us that they are on a glide path to correct the barracks problems, and the central latrine, the open bay and the central gang latrine issues by the 2008 deadline that we imposed upon them.
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    Mr. REYES. All right, thank you, Mr. Chairman.

    Mr. HEFLEY. Thank you, Mr. Reyes. Mr. Buyer?

    Mr. BUYER. Thank you. I just have a quick followup to Mr. Reyes. I believe—I don't think the State Department negotiates some of these agreements very well with host nations, whether it's Korea or Germany. And I don't believe that there is a good level of cooperation between DOD or whether DOD even gets to sit at the table during these negotiations. So we put pressure on DOD for increase in burden-sharing, yet the State Department doesn't put the screws to the host nation, and it doesn't get done.

    So we go over there and see our soldiers, and we see them in the conditions that they're in. The host nation, goes, you know, America's not going to stand for it; they're going to step in; they're going to fund for it, and we end up bailing it out, and we're doing it again.

    When you look at the Army which is going to testify next, 42 percent of our total barracks requirement will go to those who are assigned in Korea and Germany. So here we're going to take more money and pour it into Germany. Germany is now cutting their defense budgets. So I compliment the Secretary of Defense for taking on Germany, but you've hit a really good issue, Mr. Reyes. It's one that drives a lot of us to the edge here.

    I also want to share to—to General Plewes and General Squier—I know you're testifying in the next panel. I have to leave and I apologize to you. I have read the statements, and Mr. Hilleary's got some really inquisitive questions with regard to reserve components, and I'll permit him to carry the water.
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    The other thing, politics was mentioned around here.

    Mr. HEFLEY. No.

    Mr. BUYER. Can you imagine that in a place like this. Let me mention this one: It sounds good to stand up and announce an initiative to eliminate Service members' out-of-pocket costs for off-base housing, it sounds like something that just was created.

    Let me go back to 1994, November 10th, of 1994. This right here, this is Secretary Perry's announcement, in cooperation with the Joint Chiefs of Staff. He announced a plan to add $2.7 billion over six years for initiatives aimed directly at improving the quality of life for members of the Armed Forces and their families. Then it goes on that the plan calls for increasing the Basic Allowance for Quarters (BAQ) to defray the cost of offbase housing for military members. Congressional intent has always been for soldiers living in the local economy to absorb up to 15 percent of their housing costs, with the remainder offset by BAQ and variable housing allowances.

    That was 1994. We then move in 1995—I'm going to take one at a time—work on the 1996 budget. So when we get the 1996 budget, because of my work on the Personnel Committee, we find out that Committee notes that the President—this is the conference report in 1995 for the 1996 budget. So we would have announced it in November of 1994. We work in 1995 on the 1996 budget. The budget then that is sent over to us after the public announcement is, as we noted, the President's budget request included a provision designed to incrementally reduce the out-of-pocket housing costs for Service members. But that proposal is inadequately funded to achieve the intended level of benefit. According, Congress then stepped in, and we increase it by 5.2 percent.
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    Now we go to the next year. This is the 1997. Now we're in 1996 working on the 1997 budget. The Committee notes that the President's budget request did not include an increase in the BAQ above the level of pay raise, as was included in the President's Fiscal 1996 budget request. The Committee is disappointed that the Secretary of Defense has elected to defer his promise to continue a six-year program of incrementally reduced out-of-pocket housing expenses from members and families from the 20.6 percent in 1995 to the Congressionally-established objective of 15 percent. Congress stepped in an increased it 4.6 percent.

    We go to the next year. This is the 1998 budget. Now we're in 1997, working on 1998. The Committee is also disappointed that the President's budget request did not include increased housing allowances above the level of pay raise. This is the second year that the budget request failed to keep the Secretary of Defense's promise to continue a six-year program included in the fiscal 1996 budget request to reduce the out-of-pocket housing costs to the Congressionally-established standard of 15 percent for members and their families. Even if you're on the right track, you'll get run over if you're standing still. I suppose it wasn't necessarily a quick start the next year. This is 1998. This is the 1999 budget. As I looked at this one, standing still. There is nothing.

    We go to the next year. Now we're into 1999, working on the 2000 budget. The Committee was disappointed that the Secretary of Defense abandoned the multiyear strategy to restore out-of-pocket housing costs to the Congressionally-established standard of 15 percent, just one year following its introduction in the Fiscal 1996 budget. Congress stepped in, and we then threw over $400 million into it. So now I guess we're supposed to get all excited because there is this new initiative now on the housing allowance. Three billion dollars, it's supposed to be, and we're going to pay it down. Let's see, the action will reduce Service members' costs of housing from approximately 19 percent in 2000 to 15 percent in 01, with continued reductions each year thereafter, eliminating those out-of-pocket costs entirely by 2005.
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    Now, that's going to cost $3 billion over and above. What did you do in this budget, in the 01 budget? A hundred and sixty million. A hundred and sixty million, that means that over the next four years, it's going to require $2.84 billion over the next four years to achieve that goal, which means you're going to be plus'ing it up now in 02, 03, 04, 05, by $700 million.

    Now, the reason I just went through this exercise is, are you committed or are you not? This looks like the commitment of a Kamikaze pilot on his 13th mission. That's not commitment.

    So what I get upset about is, when DOD—if you're announcing an initiative, and the force gets excited, and we think we're going to do something for people, then hold true to the commitment, and Congress will be there, and we'll help. That's my message to you. It's very clear.

    So, even if you're on the right track, you'll get run over if you stand still. I concur with that statement. What do you think, Secretary?

    Secretary LYNN. Congressman—

    Mr. BUYER. Secretary Yim.

    Secretary YIM. The increase in BAH for $160 million in the first year takes us down to the Congressionally-mandated limit that we can go at this time without additional legislation. We budgeted $160 million, because that takes us down to what we can do without new legislation. We are simultaneously seeing new legislation so we can take it below the 15 percent cap.
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    There is no question that Secretary Perry's initiative and the quality of life funding that has been provided to us over the years was a big plus for us. You're talking to a facilities guy, and that was a big plus-up. We used it for a lot of different reasons, for morale, welfare, and recreation programs, to improving family housing. It's was certainly a big plus-up for us. The commitment we made then, because we're at about a 19.9 percent average out-of-pocket now, and that varies in regions. There are some people that are paying 30 percent out-of-pocket. It depends on the region.

    We just didn't think it was fair that we were expending -- that were subsidizing on-base entirely, and not providing the same type of benefits to our offbase people. So we budgeted a substantial amount of money. It's in the budget. Assuming Congress gives us relief from the 15-percent cap, it is a significant benefit, and I hope that it's more than just good words. We actually then backed it up with the budget.

    Mr. BUYER. I concur, but I have to be very harsh to say that I think that's a non-statement. Because, if you're going to back up your words, how are you going to be able to achieve these goals if you're not going to have to plus-up in excess of $5-600 million in order to achieve the $3 billion? Secretary Lynn.

    Secretary LYNN. That amount is budgeted.

    Mr. BUYER. In the outyears. I'm going to die sometime in the outyears, too. Or maybe I'll live forever.

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    Secretary LYNN. I'm not going to touch that. As Secretary Yim indicated, we have budgeted in the 01 column, the amount to take us down to 15 percent, which is the legal limit, as you indicated in your statement. We've requested that you change that limit. If you change that limit, submit a budget that will take us down to 11 percent. That budget in 03 that will take us down to 7.5 percent, and then down to four percent and then down to zero in 05. And that money is in the program now, Congressman.

    Mr. BUYER. One quick followup. I want to get to the intent here. Are you finally bored with this? Because this is what—these monies are the inducement that's necessary to get the commercial sector involved to build these projects?

    Secretary LYNN. I think we had three reasons. That was one of them, Congressman, one that—the primary one is, of course, to put more dollars and tax-free dollars in the hands of military families.

    Mr. BUYER. You're speaking of mine last year. What's your third one?

    Secretary LYNN. The third one is one we indicated, I think, while you were out of the room, which is that it will reduce the demand on on-base housing and make the—as was indicated, although we'll always have the need for on-base housing, there are many members who, if given the opportunity, and if the financial incentives were equalized, would choose offbase housing.

    So those three, money in the hands of the troops, better inducements for privatization, and reducing demand for on-base housing, were the three reasons.
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    Mr. BUYER. Thank you, sir.

    Mr. MCHUGH. Will the gentleman yield?

    Mr. BUYER. Yes.

    Mr. MCHUGH. For my own clarification—I don't have the—well, before we started, I would have said, the honor, but now I don't have the burden of serving on the subcommittee chaired by my friend from Indiana. No, he did a great job.

    I do not know. Is the 15-percent a target, or an absolute limit in law? In the report language I'm reading from the fiscal year 1997 bill, it says reduce out-of-pocket housing expenses for members and families from the Congressionally-established objective of 15 percent.

    Secretary LYNN. That is a legislated limit.

    Mr. MCHUGH. So it says you are precluded from extending beyond that?

    Secretary LYNN. Yes, sir.

    Mr. MCHUGH. Okay, thank you. I thank the gentleman.

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    Mr. BUYER. I yield back. Thank you, Mr. Chairman.

    Mr. HEFLEY. Mr. Hilleary.

    Mr. HILLEARY. Well, just for the sake of time I don't think I'm going to say a whole lot, other than his frustration, Mr. Buyer's frustration is shared by me on so many budgeting items that we get coming down the street from the White House in all the areas, it seems like I call it soundbite budgeting. You get the good soundbite, and you're going to do all these things with the initiative and whether it's 100,000 new teachers or 100,000 new cops, it's over five years. And then eventually someone else has to pay for it, and blah, blah, blah.

    And in this case, it's the poor troops that get caught in that crossfire of the soundbite budgeting. You know, the commitment is there or it's not. And it hasn't been, obviously, over the last several years. But, specifically, my question is—I'm just sitting here reading in my notes. It says your budget request is $140.8 million for military construction in the reserve components, Guard and Reserve for the Department of the Army. This says it's a reduction of 58 percent compared to current spending levels. What I don't have information in front of me on, which maybe I should but I don't, do you know what your request was last year before Congress?

    Secretary LYNN. It was roughly that. I don't have the Army one, in particular, but the Guard and Reserve funding request was about the same last year as this year.

    Mr. HILLEARY. I mean, your request was about the same as this one, $140.8?
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    Secretary LYNN. The overall Guard and Reserve request, I think, was in the low 200's, but that would include the other services, and that's what this one is.

    Mr. HILLEARY. Okay. Just to make a comment, we always, you know, have been talking about dancing all day long. Well, this is the tango dance that I sure do get tired of. And it's time to plus-up these things, and then maybe have to look like the mean-spirited Republicans that we are, of course, in all these other areas, because we have to plus-up these final areas because of we don't often get it as a baseline to start out with from the Administration. But we're going to have a bunch of folks here in the next panel, and I guess we'll take this up further, but thank you all for being here.

    Mr. HEFLEY. Mr. Abercrombie.

    Mr. ABERCROMBIE. With respect to this housing allowance, how is it going to work? Are you going to do it regionally, or is this going to be across-the-board? If this ends up the way it did in Hawaii, with simply being a windfall for landlords who don't put a dime in their properties, who simply drive the price up, with then seeing a chance to shove three, four, five, soldiers into a one- or two-bedroom place, who end up competing and being put in a situation where military families compete with civilian families for nonexistent rental housing, or rental housing which is inferior, while the officers are taken good care of with nice housing on the base, I don't want to see that happen again. And I don't want to see a situation come up where you say, hey, we're doing this great thing out there, and it's all the rhetoric that was just recited over here, and we end up with a situation like that.

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    Now, I don't know how many times that was duplicated across the country. Maybe there are economies out there or places different than Hawaii where you don't have competition for rental housing, or you have a place where there are people building lots of rental housing at reasonable prices, but you sure didn't have it in Hawaii.

    I worked ten years, as the Chairman well knows, and as a result of the cooperation and help of this Committee, we've been able to alleviate that in Hawaii. Prices, rental prices have come down in Hawaii, have come down. I know, because I've got landlords complaining to me that they can't gouge people the way they used to be able to, as if they had some kind of right to do that. I'm talking civilian and military alike. Now, I'm concerned that we're going to go right back into that same syndrome of activity that I think was antithetical to good order, both for civilians and military alike.

    Secretary YIM. That has been one of our fears, because our BAH rates, of course, are fairly transparent, that people would—that certain landlords would simply magically adjust the rents to match the increases in the BAH rates.

    We found—and I think that will occur in hopefully just very, very isolated situations. We found that the military housing market doesn't dominate, the housing demand doesn't typically dominate the market that much, so that there would be other competitive forces that—

    Mr. ABERCROMBIE. Excuse me, Mr. Secretary. You see, that's where I get really upset with macro economics and ideology. You have to put it in specific instances. You know, when you say, the market, there's no such thing as the market in the United States. Maybe there is in George Will's idea, you know, somebody that lives in rarified ether, but most of us don't live in those circumstances.
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    If you're talking about the market on the Kaneohe Marine Base side of Oahu, or you're talking about the market in Waipio area where Schofield and Pearl Harbor and others are, there is no market.

    Secretary YIM. I agree. I think that was the point that hopefully I inarticulately was trying to make, is that there are certain areas where we are very fearful that the landlords would take advantage of the BAH increases.

    Mr. ABERCROMBIE. What are you going to do to stop that? I understand that. I'm not trying to throw you a curve. I just want to know what do you have in place to stop that, or is this something—do you have discretion, is what I'm trying to drive at. Or do you have to apply this across the board?

    I guarantee you that if you're going to do that, Hawaii can't be the only area where this is taking place. There have got to be areas like San Diego and the rest where you've got your zoning problems and everything else, or you've got to drive people—or people have to go way out on a long commute or something like that. It's probably going to be the ones that are least able to afford it.

    Secretary YIM. I think this is one of the reasons why we're reevaluating how the BAH rates are set, as Mr. Lynn indicated. Again, I'm going to answer in theory. In theory, the experts that are out there are supposed to look at the locality and look and see what people at particular grade rates need to spend to afford the type of housing that they're entitled to under the BAH rates. And if we cannot prevent the private sector from gouging our people, of course, we will try to exert whatever influence we can. But we are not patterning the BAH calculations on the presumed action of people trying to gouge our military people.
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    Mr. ABERCROMBIE. Why not? That's the record.

    Secretary YIM. Well, hopefully, it won't continue to be the record. It is designed to be a market analysis, and in many cases—and I agree with you, I can't make a statement that applies every single place. I'm not intending to do that.

    In most cases, the military does not dominate the size, so that people would depend upon our BAH increases or artificially drive up the rates because they would be then noncompetitive in the vast majority of people that want to rent in that area. And we hope that is the situation. I'm sure that we're going to hear where that is indicated.

    Mr. ABERCROMBIE. Would you like us to write in something in the way of legislative direction, in language then, to direct that those differentiations be made?

    Secretary YIM. I'm not sure how that would actually help us.

    Mr. ABERCROMBIE. I'm trying to give you the flexibility. I'm saying that if we directed you to do it, otherwise we're in a situation where we've got to specify it ourselves and figure it out ourselves, and we're not about micromanaging. Nobody's ever tried to do that on this Committee.

    But these are genuine concerns, and while I live in hope as well, I don't think that I can ask my constituents, let alone do I think it's the intention, at least to my knowledge, of the Chair and the way this Committee has operated, to simply go off on abstractions like hopefully.
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    Secretary YIM. Again—

    Mr. ABERCROMBIE. I'm not trying to fight with you; I'm bringing up a real situation that needs to be addressed.

    Mr. HEFLEY. I think he's answered the question as far as he can.

    Mr. ABERCROMBIE. All right.

    Mr. HEFLEY. I don't know how we can go any further with it.

    Mr. ABERCROMBIE. I'm reluctant to approve of this, Mr. Chairman. I guess what I'm driving at, Mr. Chairman, is that the record that Mr. Buyer and others have pointed out, is not exactly something that we can point to with pride. And if it doesn't really work, if you have unintended consequences of what something on the surface appears to be a noble endeavor or good intentions, I think it's up to us to say, well, maybe we ought to think twice about putting it in in the first place.

    By the way, parenthetically, I appreciate your indulgence for letting me go through this. I'll bet in other places, it happens the same way. They end up going out there and bringing two, three, four single soldiers and put them in a house, and all that, and then they go and get -- it's not supposed to happen, but it happens. Then they all get their allowance, and they pump that in, and you end up with a place that should be $1,200 or whatever, pick the number, and they're paying $2,000, $2,500, $3,000.
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    To me, you know, it's white collar crime, as far as I'm concerned. People are talking about nothing is too good for our troops and all that, that's a lot of bull. What they mean is, they see them as cows to be milked, and the system is something to be taken advantage of. I mean, I like it when people come up and tell me that I've screwed them out of the gouging that they've been able to get off of GIs and lower middle class working families all these years. I mean, that's good news to me, if that happens. And we did that. So, okay, I'm just very reluctant to approve of this until we've got some better handle on it, Mr. Chairman.

    Mr. HEFLEY. Thank you, Mr. Abercrombie. Thank you, Mr. Secretaries. We appreciate it, and we will have more opportunities like this, I'm sure, before the year is out.

    Our second panel this afternoon will provide a brief to the Subcommittee on the budget requests of the Department of the Army. Our principal witness will be Secretary Apgar, Assistant Secretary of the Army for Installations and the Environment. Secretary Apgar is accompanied by Assistant Chief of Staff of the Army for Installation Management, Major General Robert Van Antwerp, as well as Major General Milton Hunter, Director of Military Programs for the Corps of Engineers, Brigadier General Michael Squier, Deputy Director of the Army National Guard, and Major General Thomas Plewes, Chief of the Army Reserve.

    Once they get seated, we're going to welcome them and go from there.

    Gentlemen, we do welcome you to the Committee. I apologize. I am going to have to leave, and my Vice Chairman of the Committee, Mr. Hilleary, is going to take over. It's not because of a lack of interest in what you have to say, but I have to make a flight. But before we do, I want to step out of our normal pattern, and then we'll get back into it, because I have a question that I want to put before you, and I don't know if you have an answer to it, but at least I want to make you aware of it, Mr. Secretary.
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    Yesterday, I had the opportunity to meet with the Lord Mayor of Kaiserslautern, Germany, and a delegation from that community. It's one of the biggest concentrations, I think, of American forces outside the United States. And these folks, at least their expression to me was, these folks are like many military towns here in America. They're tickled to death with the military presence. They want it to continue being there. They want a closer relationship with the military, and the Lord Mayor has some plans for liaisons between the military and the civilian community. But to make a long story short, the main thing they're concerned about are some pollution problems, particularly of the water table.

    And this is a—you know, I come from an area where it's dry and water is very, very important to us, so I understand when a water table is polluted that you know it's a very serious problem. And I want to know if you all are aware of this problem. I don't know whether, Sandy, I ought to address it to you or to the Corps or who, but if you're aware of this problem, if you know what the contaminations are—they indicate to me that it's everything from pesticides to motor pool residue, but they've had to shut down some of the wells, and require that people at some of our facilities, even, not drink that water, and water is being hauled in now. But they are also worried about it from their own community. This is something that we need to pay attention to, if that's the case. Are you aware of this, Mr. Secretary?

    Secretary APGAR. I'm not personally, but may I ask any of my colleagues, General Van Antwerp or General Hunter, if they are and can speak to it?

    General VAN ANTWERP. Sir, I will just say that I wasn't aware of that particular location, but we are having groundwater, ground water table issues due to unexploded ordinance. One of the areas in the Massachusetts Military Reservation, for instance, we have shut down a lot of the firing that goes on up there because of the water table underneath the Cape.
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    We have 12 installations in Continental United States (CONUS) that have watertables underneath our installations. One of the things we're doing as far as the unexploded ordinance is, we put together what we call a range rule where we will go out in this next two years and survey every single firing range, and those things that impact.

    The issues of other things like motor pool oils and things like that, that is a different issue here, and there is very strict, certainly in CONUS, very strict regulations on that. And our installations are observed and fined if we have situations like that. We'll definitely check into the particular case that you're talking about.

    Mr. HEFLEY. Would you do that? We want to be good neighbors overseas as well.

    General VAN ANTWERP. Absolutely.

    Mr. HEFLEY. And in most ways, they think we are, as to what they express to me. Would you get with someone, and let's see. Let's take a look at this, because if this problem really does exist, this is something we might want to pay attention to, sooner rather than later.

    General VAN ANTWERP. Right.

    Mr. HEFLEY. I apologize, Mr. Secretary, and I turn it over to you.
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    Secretary APGAR. Thank you, Mr. Chairman, distinguished members of the Subcommittee. It's a pleasure to appear before you to discuss the Army's military construction request for fiscal year 2001. As you've introduced my colleagues, our combined written statement provides details of our military construction budget request, and with your permission, Mr. Chairman, I'd like to submit the full statement for the record.

    Mr. HEFLEY. So ordered.

    Secretary APGAR. Before we answer your specific questions regarding the legislation, I'd like to highlight a few initiatives in the Army's Active and Reserve components.

    Forty-seven percent of our budget, $427 million, is dedicated to providing facilities that help the well being of our soldiers, their families, and civilians. This includes our top priority to get soldiers out of inadequate barracks, and to provide new or upgraded barracks to over 136,000 soldiers.

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    The fiscal year 2001 Military Construction Account (MCA) budget request of $367 million for barracks will provide modern housing for over 3100 soldiers worldwide. Our Strategic Mobility Program is on track for completion in fiscal year 2003. We realize that we will be examining our entire strategic mobility requirement as part of transforming the Army to a more strategically responsive force. But based on current plans, our MCA program has been responsive to Army requirements.

    The Army's Family Housing Program contains a total of $154 million, over $100 million for the construction of new or replacement housing, or revitalization of current housing within the United States, and $54 million to improve our housing overseas. Together with our housing privatization initiative, and Secretary Cohen's initiative to eliminate Service members' out-of-pocket costs for offbase housing in the U.S., this MILCON funding will help improve the living conditions for our married soldiers.

    The Army National Guard Fiscal Year 2001 MILCON budget request focuses on training, site modernization, readiness centers, and Army National Guard Division Redesign Study Projects. The Army National Guard's participation in Army Division Redesign Study or ADRS, will better provide needed forces to the Commanders in Chief. ADRS will convert some National Guard combat forces to combat support and service support forces that are needed by the Army to implement the national military strategy.

    The Army Reserve budget provides the essential military construction resources for Army Research Centers, their backbone for training, readiness, and mobilization.

    Mr. Chairman, our fiscal year 2001 budget permits us to execute the Army's military construction programs. Our long-term facilities strategy can be accomplished only through balanced funding, reduction of excess capacity, and improvements in management.
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    We plan to work closely with you, the Committee, to streamline, consolidate, and establish partnerships that generate resources for infrastructure improvements and contingent services. We look forward to working with you to help us manage installations as strategic assets, and to fix a fiscal model that is not well suited to the long-term management of unique and valuable military real estate assets. With the support of this Committee, and approval of our budget, we will be better able to support the Army and the soldiers and their families who serve our nation. Thank you, Mr. Chairman. We are ready to answer your questions.

    [The prepared statement of Secretary Apgar IV, Maj. General Milton Hunter, Maj. General Robert L. Van Antwerp, Maj. General Plewes, and Brig. General Squier can be found in the Appendix.]

    Mr. HILLEARY [presiding]. Thank you. Does anybody else have an opening statement they'd like to make before we get started?

    [No response.]

    Mr. HILLEARY. Nobody.

    General VAN ANTWERP. I think we're prepared to take your questions.

    Mr. HILLEARY. Okay, Mr. Taylor.

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    Mr. TAYLOR. General, I want to thank all of you for being here. And I would just like to make a couple of observations. You just happen to be sitting here, and I quite frankly wish the comptroller was still here.

    In the disposal process, I've got to admit my great disappointment in how the withdrawal from Panama was handled. And I realize we're talking after the fact, but there will be other installations closed in other places, and I would hope that during your tenure and our tenure, that we could set up a framework to where that mistake doesn't happen again. I was particularly appalled at the probably billions of dollars worth of things that were just taken to the landfill in Panama. I am told that there is actually a cottage industry where the good that were still in the boxes—we're talking about refrigerators, stoves, taken to the landfill, some Panamanian throws it on the back of his truck, takes it in town and sells it. I sure don't want to see that ever happen again. I know the taxpayers don't want to see it again. I know the Army doesn't want to see it happen again.

    And, again, if anything, I would love to see within your organizations, a process developed where those goods would go to the Morale Welfare and Recreation (MWR) folks, and let them have some sort of a bargain basement where the troops could get these things, and let the funds flow to the MWR fund, so that if anyone is going to get a bargain, let it go to the men and women in uniform.

    And it kind of came back to mind this week when I visited some installations in Colombia. As you know, we're getting ready to vote on approximately a $2 billion package for them. And as I'm walking through the barracks in Colombia, I see that they're taking old pallets and making bunks out of them. How many thousands of bunks do you think we threw away in Panama? You know, sometimes it's great big things, and sometimes it's little things. And how much good will could we have created in some of these countries if we had just tried to be a little better managers?
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    We have ships that belong to the Government and 13,000 pass right in front of Howard Air Force Base every year. I would just really encourage you, while you are the decisionmakers, to emphasize to your folks to let's try to be better business managers. Let's, above all, try to look out for our guys.

    We can never pay them enough. If we can give somebody -- let's remember what it was like when we were 18, 19, and just starting out, and the purchase of a refrigerator is a big deal to an E-3 or an E-4, and if we can help them out on that, I guarantee you that is worth something. That good will is going to serve us well, and I'm sure that—and I'm saying this in a way—we're—about what happened in Panama, but just ask, let's just don't let it ever happen again.

    I hope that during your tenures, that you will set down some procedures that will stay with us, so we can do a better job in the future, as other installations are closed in other places, and that's all I'm going to ask of you.

    Mr. HILLEARY. Thank you, Mr. Taylor. Mr. Snyder, do you have any questions of the panel?

    Mr. SNYDER. I just wanted to ask one question of whoever is the authority on the Housing Assistance Fund. We've heard that there have been some problems with, apparently, some military personnel who receive funds from that source, that the Internal Revenue Service (IRS) has then treated that as taxable income. Have you all heard any instances of that?

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    General VAN ANTWERP. Sir, it's the Homeowners Assistance Program we're talking about, and I am not aware of any tax problems. We will have to get back to you on that.

    Mr. SNYDER. Okay.

    General VAN ANTWERP. I do know that this year there's no MILCON in that program, but the program is alive and well, mostly at BRAC locations, but I'm not sure of exactly how that's handled for tax purposes when they get that additional money. We'll get back to you.

    Mr. SNYDER. Thank you. That's all, Mr. Chairman.

    Mr. HILLEARY. Okay, Mr. Reyes.

    Mr. REYES. Thank you, Mr. Chairman. I'm going to ask, were you in the room when I asked the Secretary about the living conditions of our troops in Korea?

    General VAN ANTWERP. Yes.

    Mr. REYES. Do you have any additional information that you might be able to share with me in that regard, and, in particular, why it takes us 50 years to get out of those kinds of living conditions for our troops?

    General VAN ANTWERP. Sir, I'll take the first shot at that. We appreciate the problem that you're in, and I have personally seen that, too. We are moving in Korea to take them to the 2+2 standard by 2008. This year, we have $37 million in the program. Right now, in Korea, they have about 54 percent of their barracks are at that standard. So you've got almost an equal amount that's very much substandard, as you observed.
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    In CONUS we are at about—with the 01 budget, we'll be at about the 70 percent mark of having all of permanent party soldiers in 1+1 barracks. So Korea is lagging, and because of that, this year and for the next four years, we're putting a considerable amount of money in both Korea and Europe to bring that up. By 2003, we'll be up around the 86 percent mark, 2008, at the 100 percent, so we have a good buyout program. We recognize it. There is $37 million in this year for two barracks projects, and there was one more also in the Korea supplemental, so three barracks projects.

    But it's recognized. Why we didn't do this in earlier years, all we can say is, when we really got the plan together in about the mid-90s, we're going after it and going after it in Korea.

    Mr. REYES. Could I get somebody to come by my office and lay that project out. The biggest reason is, I met with a group of 12 parents that have their sons living in those quonset huts, and they wanted to know why, and what was being done to replace it, so I would like to get somebody to come by.

    General VAN ANTWERP. Part of it, we need to make sure that the word gets out to them. We'll definitely come by and do that, along with Mr. Yim. He took a note to do that.

    Mr. REYES. All right.

    General VAN ANTWERP. And then we need to make sure the word gets out over there, so they're able to tell what they're going to have.
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    Mr. REYES. All right, thank you. That's all, Mr. Chairman.

    Mr. HILLEARY. Thank you. Mr. Abercrombie?

    Mr. ABERCROMBIE. Mr. Apgar, you have a very impressive background with respect to housing. You worked with the Rouse Corporation and so on, and I think you're a person to ask this of. You heard my inquiry to the previous panel. Are you familiar with that kind of problem existing where we have good intentions, and on the surface, it looks like a terrific thing. We're going to have some housing assistance for people, but there are not only people who will take advantage of that, but institutionally, we see it—haven't come to grips with how we actually get done what the intention of the legislation is. Do you have an observation you could make, or a commentary or perhaps some illumination at this point? I'm not asking you for anything necessarily definitive, but do you think the question is legitimate, and if you do, do you have any observations as to how we might come to grips with it, legislatively or otherwise?

    Secretary APGAR. Mr. Abercrombie, I fully agree that it's not only a legitimate question, it's profound one. And it's very important to the design of the legislation and all of the ensuing processes that we might set up to carry it out. And it has a long history in housing policy in this country, in general. Whenever there is a bump-up of any kind, the market reacts instantly, and in some respects with the excesses that you've described very eloquently.

    As to what to do about it, no, I frankly have not thought in this context about it, because, to be frank, until a few months ago, we didn't expect the increase to be as rapid and robust as it is. And now that it is there and with the reality that you have described, I'd like to volunteer that we will, together, of course, with OSD and Mr. Yim's office, give very specific thought to what can be done.
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    I think it is important, though, to reflect as we do that, and ruminate, as you suggest, a little more intellectual dimension than the dense that occurred earlier, that when housing policy, at the federal level in particular, tries to micromanage to local markets, it tends to fail. And it's a very difficult balance. That's why the answer is not going to be an easy one or a simple one.

    Mr. ABERCROMBIE. I understand.

    Secretary APGAR. But on the other hand, I do fully agree that we should step up to the issue in trying to figure out with you, what—

    Mr. ABERCROMBIE. I won't ask you to go any further. I appreciate your remarks, and I would ask you, in turn, or I'll take you at your word, that you'll consider this and get together and let's think about it. We've got some time.

    My instinct tells me that if we could, in a sense, localize the application where Commanders could have some—could be remonstrated with perhaps with a bit to say, look, take a look at the local context, the local situation. See whether we're actually really going to accomplish what we want to do here, and if it turns out that it can't be done, you know, may there are some local solutions that are—in other words, flex—you're not going to hurt my feelings if you come up with some policy where you're giving flexibility to local Commanders to maybe try and make some decisions as to whether or not to utilize such funding, or in what manner they might utilize it, or whether we could write possibly legislation in the sense of—I don't want to say fair housing, exactly, but where we kind of admonish you or the appropriate administrator to be able to say to people, look, if you take advantage, we'll prosecute you or something like that, put some kind of affirmative requirement into those who receive it.
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    It's public dollars, after all. It's not as if landlords or landowners or apartment complex operators or something, have some right to this money. It's not an entitlement by any means. It's public dollars to be spent for a public purpose, and nobody has a right to take undue advantage. So there may be even some kind of legal restrictions—not restrictions, but legal guidelines or something that might help give some direction. But I will leave at that for today, if that's okay.

    Secretary APGAR. If I may, Mr. Chairman, there is one other dimension to this which I would urge both on the Committee with respect, and certainly intend on our own arena to do, and that is to partner with Housing and Urban Development (HUD) and the respective Committees on this.

    One of the curious aspects coming into this Department from outside in a role which is concerned with housing, is that there is relatively little interaction between the housing experts, both policy and professional, in one part of the Federal Government, and ourselves. And I have opened discussions, both with Secretary Cuomo and with Assistant Secretary Apgar, a cousin who is an Assistant Secretary for policy at HUD, to see where these lines interact. And this is one in which HUD at the federal level, and particularly cities and states who have had similar either allowance or tax-related policies, have considerable experience in how to strike this balance that I mentioned. So, that is part of our intent as well, and maybe set up a task force as well.

    Mr. ABERCROMBIE. Maybe this is a happy confluence of interests then, and you can do some pioneer work here and help us. I can assure you that this Committee is open on that. That's the record of the Chair and all the members. I'd be happy to do that.
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    I have just a couple more quick things, if I might, Mr. Chairman.

    General Plewes, I'm pleased to see you again. Are we going to be able to square away this dual technician—dual status technician anomaly? You know, there are a few—I think one of the hallmarks of a democracy is that sometimes mass solutions are not fair to everybody, and I give you credit. I'm grateful to you that the Army—the Army Chief and yourself and others are concerned with even the fate of a small number of people. And this has to do with—I won't go into all the details. There are maybe people in the audience who don't even know what we're talking about. But there are some individuals who need a little bit of some breathing room to carry out their careers, I think, in the proper way. And I just wondered if that issue can be resolved?

    General PLEWES. Mr. Congressman, we're still working on the resolution of the issue. And the final decision has not yet been announced to the folks who are involved in the involuntary separations that we face coming up this April. We hope to have an announcement coming out within the week, and we'd like to share that with you at that point. I think I'm not prepared this morning to say that we're able to either take care of their problems or to suggest to them that we'll help them find additional, different work in different places, which is our alternate plan.

    Mr. ABERCROMBIE. Okay, I'm not so much asking you to be definitive with me this morning, but it is March. April is kind of the deadline. And I just want to, I guess, reiterate for the record, if it's not established already, that there are members here in the House who would very much like to see this resolved.
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    I don't think anybody is trying to tell you what to do about it, but just that the problem is recognized. My own preference is to not go to a Congressional resolution of the problem. I would much prefer to have you folks square it all away yourselves, and simply let us know that it's been taken care of.

    General PLEWES. We continue to try to work with your staffs on the internal Department of Defense procedures. If we have to go ahead with, for legal purposes, the layoffs, we will do everything we can to assure these folks that we will help them find other jobs in other places; that, I can promise you.

    Mr. ABERCROMBIE. Thank you, General. For the record, I want to indicate to you that I believe this is a question of fairness. This is not a question of simply trying to take care of live bodies.

    General PLEWES. Right.

    Mr. ABERCROMBIE. I mean, I'm as strong a supporter of a warm-body policy as anybody else in my political career. But there is also a matter of equity here and basic fairness towards people who have devoted their life to service.

    And so I would not like to see somebody get ground up in what is otherwise an institutional requirement. I'm not arguing about the requirement; I'm not arguing about the retirement; I'm just simply saying, let's cut people a little equity slack on this. I guess I'm taking advantage, General, of your appearance here, to hope that message filters on up to the august levels of Mr. Apgar and his colleagues.
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    General PLEWES. Sir, I'm sure it has been already, and we'll continue to carry forward.

    Mr. ABERCROMBIE. Thank you. Last thing: I am a very strong supporter of the Army Corps of Engineers, if only because right after my election ten years ago, the first people to help me figure out what I was going to do on this Committee and all the rest of it, was the Corps of Engineers. I'm not going to forget that. When you first find yourself in this position and all of a sudden you realize that you, in fact, have to make decisions that affect everybody's well being and all the rest of it, it was a source of inspiration and comfort at the same time to me to run into the professionals in the Corps of Engineers, civilian and military.

    I think, in fact, that that's one of the things that forms my view about the A-76 business. I think we should have a very strong civilian component in the Armed Services to form a base of institutional memory and expertise and reference points. That said, then I'm very concerned about this rash of publicity that has come out about the Army Corps of Engineers and these projects in Mississippi. It's very disturbing to me, and I don't think that this is covered much in here in the statement. And I would like to know whether this is going to be resolved. I don't like to draw conclusions based on newspaper stories. I've been the object of too much of that myself to pay much attention to what the hell appears in the newspaper about what is and is not reality.

    But to the degree and extent the Corps of Engineers has come under this particular kind of criticism, it's one thing to get pasted because somebody doesn't like the project that you're involved, because you've got people on both sides, three sides, five sides on those issues. But this involves accusations of misappropriation, misleading, et cetera. Is that going to be resolved? Is that a real issue? Is it something that's hyperbole?
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    General HUNTER. Let me speak to that since I represent the Corps in the Headquarters. I think it will be resolved, and I think there's a lot of hype in this allegation. It's being totally investigated. It is an extensive formal review process for very complex projects, in fact, all the projects and studies.

    The upper Mississippi has been a longstanding, very complex system, and there's a study that has been ongoing for quite awhile. Therefore, there are a lot of interests related to what's going to happen in the upper Mississippi. There are a lot of groups that are related to it, whether they're environmental, whether they're interest groups of the industry on the Mississippi, whatever the case may be.

    But I can assure you that at the end of the day when all this is done, the integrity of the Corps of Engineers will be intact.

    Mr. ABERCROMBIE. That's what's at stake; is it not? That's the question.

    General HUNTER. That's the question.

    Mr. ABERCROMBIE. I'm very reluctant to even bring this up, because I have people with whom I have come into contact, particularly the leadership of the Corps. I think the are absolutely the top people.

    General HUNTER. Well, we are very dismayed to see this kind of negative publicity against an organization that's been around about 226 years with very high integrity and very high standards. Only about 16 percent of the studies actually go to projects, as was alleged in some of the articles. I read them all.
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    However, the study in question is not even in the formative stages of getting to the headquarters level and to the Assistant Secretary of the Army for Civil Works, and to the Office of Management and Budget, to the Administration, and over to the Congress. So there's a leap of faith between the allegations being made, and you will find that technical experts will disagree, which is our right to do so. But when all of this has come to light—and there are a series of public meetings and hearings that go along with this process, this study process before you get it to anyplace that it's even near recommendation beyond even the Headquarters.

    Mr. ABERCROMBIE. Well, this hearing is not the time for us to pursue this further, but I felt I was honor-bound to raise it, so we could get it on the table. If you would kindly keep the Chairman and the Committee informed as to where this is and where you're going with it, I personally would be grateful, and I know the Committee would.

    General HUNTER. Sir, we will do so. As you know, there was a hearing called by Senator Voinovich, just a few days ago, where the Chief of Engineers came to testify for that particular incident or series of allegations that were raised. And we clearly will be following this. We expect to come to some resolution very soon.

    Mr. ABERCROMBIE. Thank you very much, and thank you, Mr. Chairman, for the grant of time. I'm very grateful to you.

    Mr. HILLEARY. Mr. Abercrombie, that's just fine.

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    Just real quickly, you know, we weren't supposed to be here today, a lot of us. We thought we would be voting all day long, and so I apologize for so many empty chairs up here. But I did have a couple of questions I'd like to finish up with before we adjourn. In particular, the National Training Center, the proposal to expand the training ability there. That was a tremendous asset for the Army and for the Army's future. What is going on there as far as our ability to maybe get more land or where are we headed with that?

    Secretary APGAR. Mr. Chairman, the status of the National Training Center land acquisition is that the acquisition, itself, is currently on hold, pending resolution of boundary and mitigation issues for the expansion area with the Department of Interior. Our goal is to meet requirements in a way that's both economically sound, but, also, environmentally safe in a reasonable time frame. And we believe that the withdrawal of public land that's managed by the Bureau of Land Management (BLM) is the only reasonable alternative to meet our requirements.

    We're now engaged with the Department of Interior in attempting to resolve with the U.S. Fish and Wildlife Service the mitigation issue to protect the dessert tortoise. And so, we will be happy to report to the committee, as you wish, on the status and on the ongoing—but it is one of our highest priorities for reasons that you've alluded to.

    Mr. HILLEARY Do you have a timetable on this?

    Secretary APGAR. I do not, but we'll be happy to provide it.

    Mr. HILLEARY Okay. And, also, Mr. Secretary, you, in your prepared statement, you refer to a white paper development that talked about guiding the future management of our Army installations, and you discuss at one point the important, I think in your words of unlocking the value of the Army installations. And I just wondered if you would just flush that out a little bit. How do you plan to accomplish that, especially with regard to balancing the needs of security and force protection? And, then, specifically, how does this work with the Army National Guard, with the different statuses of the land and the facilities that they may have, you know, whether it's the state zoning part of it or whatever? How do you plan on going about all of that?
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    Secretary APGAR. Well, to glorify it with the word ''plan'' is, at this point, a bit far reaching; but, let me just try briefly the background. In concert with the secretary and chief's development of the new Army vision beginning last summer, I began a parallel process within the installations arena, to look at our situation from a broader perspective, and that has led to the white paper, which you refer, which is still an internal document now, but should be published shortly and clearly will be shared with the committee and staff.

    Basically, our situation, from my personal point of view, is that we have an enormous asset—asset value. The accountants tell us it is booked at $220 billion, which is about twice the value of our entire equipment stock at book, but market value clearly is considered the greater. We don't have numbers yet, but Price Waterhouse has been commissioned through Secretary of National Management Fuller, to look selectively at what the market value of those assets. In places, of course, like Hawaii and others, it may be incalculable, in some respects.

    Now, that context gives us some pause against the following fiscal model, if you will, which, as I alluded to in my opening remarks, I, personally, believe is broken. That's a personal view, not necessarily a corporate or official view. Incidently, I would footnote, the white paper, by definition, is intended to be a platform for debate and raise questions, not resolve any, at this point, and that's why we put it together.

    But, here's the situation. We have more real estate than we need. We pay for long-term assets with short-term financing. We don't incentivize savings and reinvest those savings in our installations, as the earlier discussion with the Secretary of OSD reflected. We're heavily restricted in the basic real estate actions we can take. We routinely defer maintenance projects until things break, when it then becomes more costly to fix them than it would have been to maintain them in the first place. And, finally, we allow, and allow is almost a permissive word, we migrate installation funds to other critical priorities on almost a routine basis.
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    Now, seen from my perspective as a professional in this arena without government experience, except in sporadic cases, over the last 18 to 20 months that I've been in this office, that model strikes me, personally, as a formula for inaction or disaster. It simply doesn't work. And many of the discussions that have taken place in this room and others, which I've been party, are about incremental changes to what is essentially an economic model that can't work.

    So, the issue with respect to a longer-term vision and strategy for the Army, as an institution, bears on the question of what are real estate and facilities, and they are our critical fixed assets. This isn't the time, though I would be happy, as soon as the white paper is published, to begin a dialogue with the committee, certainly intend to, on what we do do about this.

    There are a number of things we have already identified that we can do within our existing system. We are working now within the Planning Programming & Budgeting System (PPBS) system, the Army's basic management model, to look at improvements that we can make within our current budgeting procedures and our way of doing business, and there is a good deal that can be done. We're looking at these new leasing initiatives, which Secretary Yim mentioned, specifically, and have a pilot project at Ft. Sam Houston to use the Section 2667 authorities in a broader way, to improve under utilized assets; in other words, utilize them better. We're looking up and have set up a value improvements program, to look at how we design, build, and manage projects, paralleling the best practices of the private sector.

    If we were to be able to—working with this committee and others, to design new authorities, we could begin to tackle the conundrum that I've summarized, that is to say funding new facilities and major renovations against a long-term capital budget, rather than an annual and five-year program; reinvesting more of the savings that we generate from improving installation asset management and efficiencies in facilities modernization upgrading and maintenance; trading excess land and buildings in selected locations with developers, using long-term leases, shared equity arrangements—very conventional tools in the private sector that are historic and are done everyday, in return for modernizing or constructing facilities with equivalent value for us; extending the military housing privatization initiatives to other classes of real estate for which there is an outside dynamic market, and the same economics apply where we would use market-based building standards instead of Military Specification (MILSPECs), where we could adapt ancillary and supporting facilities to the local community, etc.
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    As a footnote, Abercrombieercumby, I've opined before your earlier point that, in my view, the military housing privatization imitative legislation is the most robust housing—piece of housing legislation in this country since World War II. The fact that it came from the Department—this committee for the Department of Defense is ironic, in a sense, but it is very powerful, if we can figure out how to use it to its full advantage. And the principles in it and the techniques for both financing and management can be applied, I believe, to other sectors of real estate—recapitalizing our enormous stock of historic properties, such as in your district, where we now can't afford to maintain within our current budgeting structures and procedures this unique class of assets, and there are other aspects.

    But without digressing any further at this point, we are trying to take the long view and, frankly, mobilize our intellectual capital, as well as all of the talent around we can, to more fundamentally look at this whole issue of installation management and the economics which drive it, in parallel with the day-to-day work that we and you do together.

    Mr. HILLEARY. The way the Guard facilities fall into this overall plan is just simply what—just be more limited with the Guard or what?

    Secretary APGAR. Well, because the guard real estate assets are technically owned by the states and not by us, that we are users and managers as an institution, the application of some of these principles will have to be tailored. And to be frank, we have not looked at that part of the program. Looking ahead is to set up internal task forces to do just that, with both Guard and Reserve centers, as well as our own active installations. One of the unique features about Guard properties, of course, is that many of them are centered in town centers, city centers, and have high real estate value, which we do now not monetize, in any way. But, the ''we'' is a collective we and together with the states, we would have to develop a joint initiative.
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    Mr. HILLEARY. I appreciate that. Real quickly, General Squier, as far as the budget for the Guard, the request is $59.1 million MILCON budget; correct?

    General SQUIER. Yes, sir, that is correct.

    Mr. HILLEARY. What was the request last year?

    General SQUIER. Last year, we had a request of $16 million for five projects. It was incrementally funded. The request was—Congress actually fully funded all five of those projects.

    Mr. HILLEARY. But your initial request was?

    General SQUIER. About $57 million.

    Mr. HILLEARY. Fifty-seven, okay. And, of course, we plussed up all of that a lot and, in fact, this request is basically 73 percent lower than the current spending level in the Army National Guard MILCON?

    General SQUIER. Yes, sir, that is correct.

    Mr. HILLEARY. Do you have a reaction to that?

    General SQUIER. Well, sir, as Mr. Apgar's white paper discussion here, this is a strategy of the Army, of which we're going to participate in. We, in the Guard, have three kinds of facilities. We have stationing. We used to call them armories. We now call them readiness centers, and, yes, there is a state-federal government collaborative share of that process. We, also, have sustaining forces requirements facilities, our maintenance facilities and supply facilities and training facilities.
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    The process, the way it works is to get, through the Army standards, validating requirements that goes into the PPBS system, as Mr. Apgar talked about, and then through that, figure out how we can resource the full requirement. This new process that Mr. Apgar is referring to, which is a developmental piece, of which we will be a participant in, is supposed to give a bigger look at the infrastructure needs of the Army for the future. So, we wholeheartedly support that and see an avenue towards trying to improve our posture. We worked very hard over the last four years to get our standards to the Army standards, of validating our requirements. Yes, we have a growing infrastructure shortfall, but I think this is the way forward to try to solve that problem.

    Mr. HILLEARY. General Plewes, do you have anything to say about your budget? It was cut not as much as the Guard budget, but quite a bit—at least your request represents a cut.

    General PLEWES. Well, that's correct and, again, it's hard to compare between two years and the basis for making the decisions on two years. Let me just say that the money we have this year funds about 41 percent of our requirement, on the same basis that we had talked about in terms of the future requirement. That portion of the requirement that we meet is somewhat from last year; so, in that play, we're quite successful. The fact of the matter is that we are all constrained in this military construction budget area and that we would like to have more. Certainly, this budget reflects, I think, what the Army leadership and I agree is a good budget for us to go forward with to the Congress.

    Mr. HILLEARY. It seems to me, if I could disagree just a little bit, that we always get saddled with the responsibility of plussing up the Guard and Reserve, and it's a time honored tradition, I guess. But, it doesn't make any much—any better, in my view, that we're the ones that are required to do this and, therefore, we end up either having to take money from some other area in the budget to do it or we have to take some money from some other area of the Department of Defense. And we talked about dancing a lot in the previous panel and this is just a dance that gets kind of tiring to me. But, I wish it didn't happen. I suspect this administration is not the first one that has done this; but, it, nevertheless, makes it no less tiring.
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    But, I have no further questions and if no one else does—

    Mr. TAYLOR. Chairman, real quick.

    Mr. HILLEARY. Mr. Taylor, yes, sir?

    Mr. TAYLOR. Mr. Apgar, I'm curious, with the loss of the Jungle School in Panama, and I did read your statement. I know we've got the FOLs in Manta, the FOL in Aruba, in Curacaos. Does the Army have any plans to try to establish another one? I know the Ecuadoreans have made an offer. One site that comes to mind would be the western end of the island of Vieques, which we already own; would not have to go out and possibly lose in the future to some country—host country. What is the Army trying to do to replace that very vital installation?

    Secretary APGAR. Mr. Taylor, I do not know, but perhaps my colleagues—

    General VAN ANTWERP. You've given some great suggestions of things we're looking at. Right now, we've folded the POI, the program of instruction, into other programs. Part of it is in the Ranger School instruction and that. But, we don't have a solution to replace that school. There are some options being looked at, but—

    Mr. TAYLOR. General, may I make this request of you, and, again, the Administration has already offered up the western end of the island of Vieques, but I would think this committee would have to sign off on that. Before that happens, I would certainly make the request that the Army take a look at it. I realize it is impossible to duplicate what you had in Panama, but I do think the advantage is, in this instance, we would be dealing with our own country, because as we have learned in Panama, sometimes your host asks you to leave, and I would hate to go through that again. So, I would hope the Army would look at it before any decision is made as to giving away that portion of the island. Thank you, sir.
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    General VAN ANTWERP. Thank you, sir.

    Mr. ABERCROMBIE. Mr. Chairman?

    Mr. HILLEARY. Yes, sir?

    Mr. ABERCROMBIE. I know you've been around here a long time, but it's a couple more things I need to get on the record. I'll try to make it as brief as I can.

    Mr. HILLEARY. Yes, sir. Go ahead.

    Mr. ABERCROMBIE. You've been very generous with your time and I am appreciative. Mr. Apgar, if you don't mind, I'd like to get together with you subsequent to this hearing, because I think your summary—actually, your analysis, closer to it than a summary, of what is possible in housing and the ancillary activities that you recited and what we're doing short of that, I think was terrific. It's as good an analysis as I've heard. Maybe that's because I agreed with every point in it. So, that probably colored my view of it quite a bit.

    But, nonetheless, particularly with regard to capital budgeting, having a capital budget for housing—you may not be aware, but I'm an advocate. I'm working on putting together a bill that will pick up the question of capital budgeting for the Department of Defense, having an operating budget and a capital budget, with respect to the acquisition of capital assets, which—in which I include housing and related real estate activities. And I think you're quite right that this is not an invention. This is not the Apgar theorem that has suddenly manifested itself, right. It's tried and true well understood economic activity from the accounting side to the acquisition side, that I think could have particular usefulness in the Department of Defense.
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    We're underway right now with—I'm going to call it an experiment—I'm not sure that's the exact—or I don't really see it that way, but demonstration is probably closer to it, at Ford Island in Pearl Harbor, and I commend that to you. If it's all right, I'd like to bring that to your attention, as to what the possibilities to demonstrate capital budgeting for housing could be.

    And I know there's been some argument against it and we don't need to pursue it today, again, but maybe ruminate a bit on it, why we haven't gone further with actually treating military housing as—like—I'm not going to say like any other development project, but as a development project—long-term development projects. Maybe it has to do with base closures and that kind of thing. But, nonetheless, I think there's some real opportunities here to do something for the 21st century housing needs of the armed services that we haven't maybe fully explored, and I'd like to do that. I will follow up. In other words, your summary didn't fall on deaf ears, I can assure you.

    In that context and following up on the Chairman's inquiries, General Van Antwerp, there could be seen, just as the Guard and Reserve have found themselves often in the past, right up until the present time, actually, in a situation where the Congress is expected to do the budget. We run the budget up, in part, Mr. Apgar, I can say, also, with procurement sucking up so much of the oxygen in the room, that the quality of life side and all the rest of it finds itself struggling, or the Guard and Reserve struggling just to be able to—to be able to get a little fresh air at the end, and the Congress ends up doing that.

    Now, some members of Congress are ungenerous enough to call this pork barrel. That's what happens. And it's unfair, because we all know that what happens is that members of Congress are expected to deal with this at the margin and try to take care of what otherwise can't be budgeted for. And the big drives out the small, right? The aircraft carrier drives out the housing unit, etc., that kind of thing—billions drive out millions, let alone hundreds of thousands.
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    And so, General, I—in this particular budget, there are some big expenditures that—for example, Schofield Barracks, not only for housing, but for the whole barracks renewal program. And I simply want to get on the record that this isn't—that I would like to have your assessment of the importance of executing these projects. Schofield Barracks, you know, for example, is in the middle now of a long-term expenditure, is it not, that will, in the end, renew or actually build anew thousands of units that, essentially, were built in 1927 and haven't been dealt with since that time. Essentially, when the barracks renewal started at Schofield barracks and we accelerated that, we were still dealing with From Here to Eternity, weren't we? It wasn't any different than when Private James Jones was there on December 7, 1941; is that a fair statement?

    General VAN ANTWERP. That's a fair statement. Sir, just to address your question, we have the barracks renewal program. By 2008, we intend to have every permanent party soldier in one plus one barracks. There's two long poles in the tent: one is Schofield Barracks, the other is Ft. Bragg, North Carolina. In order to make that—right now, Hawaii, Schofield Barracks, in particular, about 35 percent of the soldiers are in one plus one barracks. The rest of the Army, after the 2001 budget, will be at about 70 percent; after the 2000, it will be at about 64 percent. So, it's an absolute must that we continue at this pace in Hawaii, if we're going to make the 2008. It has nothing to do with politics or anything else. It's a matter of buying out this program and keeping faith with our soldiers. It just happens that the backlog is very great there.

    Mr. ABERCROMBIE. Okay, I appreciate that, because I don't want it seen—this committee has been very generous, I think, in responding to that, and I think we've got a pretty good record of trying to meet needs where they are. And if that happens to be in somebody's district or how it works, that's just the way it is. It's not a matter of trying to shove other people out of the way or take unfair advantage. If anything, I think I can make a case that—especially where Schofield is concerned, that they were way behind the curve for a long time and we're just trying to get back on track there.
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    So, I appreciate that very, very much. And I would commend to you—by the way, if you haven't had a chance to visit there recently, have you?

    General VAN ANTWERP. I visited it fairly recently and I have a son that is a lieutenant there and one that is going to be. So, I get firsthand reports.

    Mr. ABERCROMBIE. Okay, good. But, I was going to say that I don't know whether you had a chance to visit the eternity room there—

    General VAN ANTWERP. I haven't seen that.

    Mr. ABERCROMBIE.—in quadrangle D—have you seen it, Mr. Apgar?

    Secretary APGAR. Yes, sir, I have.

    Mr. ABERCROMBIE. I'm very, very happy about that and proud of it and commend the Army for doing it. In honor of James Jones, a room has been set aside, put together by the soldiers there, that actually gives the present day soldier, who maybe doesn't have a clue as to what the history of the Army is all about. Particularly there in Hawaii on December 7th, it has a—from the archives of the—of Schofield, a record of how From Here to Eternity came about. And with the advent now of the third part of Jones's trilogy on World War II, From Here to Eternity, the Thin Red Line, of course, has been made, and now Whistle is going to be underway. I think it speaks well of the Army and helps create that continuity, so that when 2008 comes, we'll be able to have an historic record there, I think that the Army will be proud of and all America can relate to.
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    Thank you, very much, Mr. Chairman.

    Mr. HILLEARY. Thank you, sir. Gentlemen, thank you for being here today. Thank you for your service to our country.

    [Whereupon, at 12:15 p.m., the subcommittee was adjourned.]


March 3, 2000
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