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[H.A.S.C. No. 107–34]



FOR FISCAL YEAR 2003—H.R. 4546






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MARCH 12, 2002




ROSCOE G. BARTLETT, Maryland Chairman
JOHN M. McHUGH, New York
WALTER B. JONES, Jr., North Carolina
BOB RILEY, Alabama
ROBIN HAYES, North Carolina
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MARTIN T. MEEHAN, Massachusetts
SUSAN A. DAVIS, California

Thomas E. Hawley, Professional Staff
Dudley Tademy, Professional Staff
Christopher A. Kim, Staff Assistant
Elizabeth McAlpine, Staff Assistant

* Mr. Sisisky passed away March 29, 2001.





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    Tuesday, March 12, 2002, Fiscal Year 2003 National Defense Authorization Act—MWR Programs and Resale Activity Oversight


    Tuesday, March 12, 2002




    Bartlett, Hon. Roscoe G., a Representative from Maryland, Chairman, Special Oversight Panel On Morale, Welfare and Recreation

    Underwood, Hon. Robert A., a Representative from Guam, Ranking Member, Special Oversight Panel on Morale, Welfare and Recreation


    Abell, Hon. Charles S., Assistant Secretary of Defense for Force Management Policy

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    Barnes, Joseph L., Director of Legislative Programs, Fleet Reserve Association

    Brown, Rear Adm. Annette E., USN, Assistant Commander, Navy Personnel Command

    Cole, Rear Adm. Christopher W., Director, Ashore Readiness Division, USN

    Courter, Maj. Gen. Robert J., USAF, Director, Defense Commissary Agency

    Downs, Michael P., (BG USMC, RET.), Director, Personal and Family Readiness Division, USMC

    Maas, Rear Adm. Steven W., USN, Commander, Navy Exchange Service Command

    Mahan, Lt. Gen. Charles S., Jr., USA, Deputy Chief of Staff for Logistics

    Molino, John M., Deputy Assistant Secretary of Defense for Military Community and Family Policy

    Myers, Arthur J., Director, Air Force Services

    Parks, Lt. Gen. Garry L., Deputy Commandant for Manpower and Reserve Affairs, U.S. Marine Corps

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    Raezer, Joyce, Director of Government Relations, National Military Family Association

    Rohrbough, Col. Frank G., USAF (Ret.) Deputy Director, Government Relations, the Retired Officers Association

    Taguba, Brig. Gen. Antonio M., USA, Commanding General, U.S. Army Community and Family support Center

    Wax, Maj. Gen. Charles J., USAF, Commander, Army and Air Force Exchange Service

    Zettler, Lt. Gen. Michael E., USAF, Deputy Chief of Staff for Installations and Logistics



Abell, Hon. Charles S.

Bartlett, Hon. Roscoe G.

Brown, Rear Adm. Annette E.

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Cole, Rear Adm. Christopher W.

Courter, Gen. Robert J., Jr.

Downs, Michael P.

Maas, Rear Adm. Steven W.

Mahan, Gen. Charles S., Jr.

Molino, John M.

Myers, Arthur

Parks, Lt. Gen. Garry

Taguba, Brig. Gen. Antonio M.

The Military Coalition Statement, presented by Master Chief Joe Barnes USN, (Ret.), Col. Frank Rohrbough, Ms. Joyce Raezer

Wax, Maj. Gen. Charles J.

Zettler, Lt. Gen. Michael E.

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[There were no Documents.]

Mr. Andrews
Mr. Bartlett


House of Representatives,    
Committee on Armed Services,
Special Oversight Panel on Morale,
Welfare and Recreation,
Washington, DC, Tuesday, March 12, 2002.

    The Special Oversight Panel met, pursuant to call, at 3:03 p.m., in room 2212, Rayburn House Office Building, Hon. Roscoe G. Bartlett (chairman of the panel) presiding.


    Mr. BARTLETT. Our panel hearing will come to order.

    I welcome my colleagues to our single hearing to review the fiscal year 2003 budget request for Morale, Welfare, and Recreation (MWR) programs of the Department of Defense (DOD) and military services. While the compressed schedule permits only one hearing on the budget, we may schedule other oversight hearings later in the year on deserving issues.
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    At the outset, I would like to recognize—and I am not sure he has arrived yet, so I will recognize him when he comes. We have a new member of our committee, Randy Forbes of Virginia. He is going to fill the shoes of Norm Sisisky, who served so long and so well on this panel. When he comes, we will introduce him to you.

    Last year, there was some concern that the new Administration intended to privatize much of the business activities on military bases, including commissaries, exchanges and MWR programs. I am pleased to note that there is much less talk about those sorts of initiatives today for a number of reasons.

    First of all, this panel took the lead in questioning the wisdom of privatizing MWR and resale activities. The question of privatizing commissaries came down to the business case: How does a contractor make a profit when goods are sold at cost? The answer is that they cannot without raising prices.

    The case for exchanges and MWR programs is more subtle, but just as important. Would a contractor deploy stores at a moment's notice to combat zones and to support relief workers at the damaged Pentagon? Would they provide the sense of community that having our own military brand stores and programs provides? The answer, obviously, is no.

    While the panel's leadership was important in slowing, if not yet reversing, the rush to privatization, the tragic events of September 11 were also a factor. With security on bases tighter than ever, the wisdom of further privatization of base operations other than family housing was questionable.
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    Because the military services are doing a better job of providing on-base housing through privatization, the value of on-base retail and MWR programs are even more important to support those families in times of heightened security.

    I was heartened by the Secretary of Defense's response to my question on his intentions for privatizing commissaries in our full committee hearing just last month. Mr. Rumsfeld said that if any changes were proposed for commissaries, savings and service would not decline. That was good news for all military families.

    That brings me to another point. There has been much discussion of late over the proposed fiscal year 2003 budget for the Defense Commissary Agency (DeCA). The budget proposed by the Administration for fiscal year 2003 of $1.114 billion seems adequate at first glance.

    The panel understands that DeCA has been under pressure to cut costs because the agency no longer has the ability to tap into surcharge funds, which we fenced for commissary renovation and repair. We understand that part of DeCA's cost reduction plan includes fewer workers in commissary stores, about a seven percent reduction at store level.

    I am not sure whether there is enough evidence to determine whether these cuts are good or bad, but I will say that the panel expects the department to live up to Mr. Rumsfeld's promise and that there can be no decline in service at commissary stores. The panel will be attentive to customer complaints on that score and will carefully examine surveys assessing patron satisfaction.
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    In my first year as chairman, I have visited a number of MWR activities, both at the field and the headquarters level. I have been uniformly impressed by the great dedication and creativity of MWR employees at both levels. Everyone I have met is committed to helping military families. These visits have reinforced my views about the importance of these programs and reinforced my commitment to provide them strong support by the panel and the Congress.

    Military families know better than I about the great variety of MWR offerings. But as an example, in a brief but busy trip last January, I saw youth centers, child care centers, marinas, auto hobby shops, crafts shops, framing shops, fitness centers, swimming pools, single sailor facilities, new commissaries and exchanges, a hybrid commissary and exchange, and the Army's hotel at Walt Disney World. And there was much on each base that I did not get a chance to see.

    I do not know of any other part of the Department of Defense that provides such an array of different programs for military families. I continue to be impressed by the depth and variety of support that MWR programs provide to military families.

    We have several distinguished panels of witnesses to hear from today. When our ranking member arrives, I will recognize Mr. Underwood for his opening remarks. But until that, we will move to our first panel.

    We are breaking with tradition today. Ordinarily, the representatives of our families are not our first witnesses. They are usually our last witnesses, and they and a precious few may constitute the attendance at the hearing.
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    But we felt that the reason for everybody else is these families and serving them. So today, we are having the most important witnesses at our first panel. They are Mr. Joseph Barnes, Fleet Reserve Association; Ms. Joyce Raezer, National Military Family Association; and Mr. Frank Rohrbough, Retired Officers Association.

    Mr. Barnes, you have the floor.

    [The prepared statement of Mr. Bartlett can be viewed in the hard copy.]


    Mr. BARNES. Thank you, Mr. Chairman.

    Mr. Chairman and distinguished members of the panel, on behalf of the 32-member organizations of the military coalition, we thank you for the opportunity to express our views concerning the commissary benefit, the military exchange system, and MWR programs.

    I will briefly summarize several issues with regard to the commissary benefit. Then Frank Rohrbough from the Retired Officers Association will discuss the exchange system, followed by Joyce Raezer from the National Military Family Association, who will speak about MWR programs.

    The coalition is grateful to this panel for its strong leadership and effective oversight in preserving and improving the commissary benefit. There is no doubt that the commissary impacts the quality of life and morale of the store's patrons and families and contributes to the retention of highly trained personnel and, subsequently, military readiness, something of utmost importance during the current war on terrorism and other demanding operational commitments.
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    The annual appropriation is a sound investment that pays valuable dividends while strengthening the sense of community within the services. The commissary is consistently ranked as one of the top quality of life benefits, and shoppers can save an impressive 30 percent on groceries.

    Successful reform initiatives include managing commissaries in a more efficient manner, working closely with business partners, controlling operating costs, utilizing new technology, and protecting resources for maintenance and new construction. The coalition appreciates these efforts to improve business practices and develop efficiencies. However, these and other reform efforts should not have a negative impact on beneficiaries.

    The coalition has tracked the Department of Defense's interest in privatizing the benefit and its continuing pressure to reduce DeCA's budget. In response to these plans, the coalition restates its strong commitment to maintaining the commissary benefit as an integral part of the total military compensation package and its continuing opposition to privatizing the benefit.

    The intangible and highly valued aspect of this benefit is not quantifiable solely in monetary terms. If privatized, the profit motive will jeopardize the current level of customer savings. In addition, civilian grocers will be unable to operate stores at a profit in remote locations.

    DeCA's multiyear transformation plan includes an ambitious time line for achieving labor cost reductions. The agency's proposed budget is effectively reduced by $137 million—$90 million to repay the services for funds borrowed as part of the surcharge fund revitalization, with the remaining reductions to be achieved via major staff cuts and store closures. The coalition believes these reductions will negatively impact customer service and the objective of maintaining the benefit at the current level.
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    Industry reps and an increasing number of our members are voicing concerns about the staff reductions that are currently under way and the drastic impact of the proposed budget cuts if authorized for 2003. They are concerned about reduced operating hours, longer lines at the checkouts, less stock on store shelves, and fewer store employees to do significantly more work. The coalition shares these concerns and notes the importance of employee morale and adequate staffing to ensure satisfactory customer service and smooth operations at all stores.

    Now more than ever the Nation relies on active duty and guard and reserve personnel to defend our borders, ensure our security, and sustain our interests throughout the world. Guard and reserve personnel are increasingly important to these commitments, and the coalition continues to support their unrestricted access to commissaries along with gray-area retirees. Eliminating current restrictions will also generate annual savings from printing and administering the commissary privilege card.

    Six commissaries closed last year, and the coalition understands that another list of closures will be announced soon, followed by Base Closure and Realignment (BRAC) closures in 2005. The coalition again stresses the importance of evaluating the impact of closures on guard and reserve personnel and military retirees and survivors. Each beneficiary category is very important, and the commissary is a valued benefit.

    Frank Rohrbough will now discuss the exchange benefit.

    [The prepared statement of The Military Coalition can be be viewed in the hard copy.]
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    Mr. BARTLETT. Let me interrupt for just a moment and welcome Mr. Underwood, the ranking member, for any opening statement he would care to make.


    Mr. UNDERWOOD. Thank you, Mr. Chairman, and thank you for your indulgence. I join you in welcoming all of our distinguished guests to this hearing today.

    It is an impressive listing of individuals representing the diverse interests of MWR activities that are commonplace in civilian communities. Their presence here also reminds us of the profound challenges and opportunities associated with the variety of activities operating under the MWR umbrella.

    Mr. Chairman, MWR activities are indeed an important part of the military culture. That is the way it was more than 100 years ago, and it remains so today. No one should doubt their usefulness. MWR activities are an important part of life enhancers for our military personnel, both active and reserve, and their family members, and thereby contribute to the total readiness of the force.

    Lest we forget, MWR activities are also important to our military retirees and other authorized patrons, like medal of honor winners and some disabled veterans. For them, it represents the practical side of promises made and promises kept. It is because of the importance of MWR programs that I want to take time to share some of my concerns about their sustainment.
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    First, I am convinced that it is impossible to ensure continuity of the desired quality and quantity of MWR programs without being able to anticipate community needs and to develop timely plans to ensure that those needs are met. I am concerned about the ability of responsible personnel and agencies to properly address MWR requirements early in the planning for changes in stationing and basing plans.

    The footprint and character of military communities are constantly changing. Housing privatization and restationing of units are manifestations of those dynamics. We need to ensure that MWR requirements are included early in the process. They should definitely not become the equivalent of a lesser included activity, where they receive little attention.

    Like you, Mr. Chairman, I am pleased that the commissary surcharge account recovery initiative is working. I distinctly remember the challenges of a few years past when the outlook for modernization of existing facilities or the construction of new commissaries was dim. I commend all of you who contribute to the success of this initiative, especially the leadership of General Courter, the DeCA director.

    Thank you, General Courter, for your leadership in the matter.

    I do have some cautions to share regarding full implementation of the recovery initiative. While the organizational reforms impact primarily on commissary operations in the United States, we should not forget that the 100 overseas stores account for about 40 percent of the appropriated fund support. I believe that authorized customers of those stores would tell us that 40 percent is an investment well worth the cost.
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    I also recognize that most of the personnel impact occurs above the store level. However, I am concerned about the unintended consequences stemming from a reduction of the workforce at the store level. Increased savings should not come at the expense of customer service, an integral part of the commissary benefit.

    Therefore, I am particularly interested in learning how DeCA intends to keep its promise of improved customer service while at the same time implementing workforce reductions at the store level. The managerial and cultural changes mandated by the initiative must be monitored carefully to ensure that they do not adversely impact on the gains achieved in the quantity and quality of services provided.

    Mr. Chairman, I am also concerned about the total benefits for national guard personnel mobilized after the tragic September 11 terrorist attacks in support of Operation Enduring Freedom. We know the benefit for those personnel who are mobilized in response to the federally declared emergency and remain under the control of the governor are determined by the particular state. If placed under Federal control, those benefits are essentially equal to those of active duty personnel.

    Finally, Mr. Chairman, while I understand the competition for dollars within the Defense Department, I would prefer that the Department fully fund all Category A MWR programs. It is incongruous to state that Category A programs are essential to the military service and at the same time maintain an appropriated funding level objective of 85 percent.

    Indications are that the level of appropriated fund support to MWR activities, while improved, may still be insufficient to establish and sustain the minimum quality and quantity of MWR activities our service members deserve. For example, since the tragic terrorist attacks of September 11, we find active and/or reserve components providing enhanced security at a variety of locations where MWR facilities do not exist, or existing MWR facilities were not designed to provide the increased level of support needed.
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    Again, I welcome our witnesses, and I thank you, Mr. Chairman, for your indulgence in letting me interrupt at this moment.

    Mr. BARTLETT. Thank you very much.

    I would like to note that without objection, all members of the panel may submit opening statements for the record. I would also like to note that without objection, the full written testimony of all the witnesses will be a part of the record. We appreciate you summarizing your testimony for discussion here.

    The panel may now proceed.


    Mr. ROHRBOUGH. Good afternoon, sir.

    Mr. Chairman, distinguished members of the panel, thank you for the opportunity to testify before this committee again. We do appreciate the support this committee has given to the MWR program over the years and for recognizing its value to service members, active and retired.

    Let me first say that we are pleased that the commander of the Army and Air Force Exchange Services (AAFES) established the Retiree Advisory Council in 1998. This council, which meets semi-annually, serves as a primary advisory body addressing retiree interests. I am pleased to serve as the military coalition's representative. These meetings have been very useful to us and to General Wax and his staff.
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    Exchanges not only provide essential goods and services, but also generate vital funding amounting to over 65 percent of their earnings and dividends to MWR programs. In 2001, the exchange provided $319 million plus another $16 million from ship stores to the services' MWR programs.

    The coalition recognizes this great value and that it provides a very tangible non-cash portion of the total pay and benefits package to service members. As a reminder, these funds are provided at no expense to the taxpayer.

    The coalition is pleased to note that the exchange system is more aggressively marketing product lines and merchandise geared to the needs and budgets of young families, single service members, and retirees. For example, following a small demonstration in 1999, AAFES expanded a special recognition day to retirees, known as Retiree Appreciation Day, to over 100 locations in 2000. Over 170,000 retirees, or about 20 percent of the target population, participated in this very popular event. This participation far exceeded the seven percent participation forecast used in industry standards.

    Unfortunately, the celebrations for 2001 were only a few days after the September 11 terrorist attacks, and this clearly had an impact on the success of that day. But despite the increased security, sales from the Retiree Appreciation Day celebration were just shy of those from the year before. We speculate that shoppers living and working on base made up for retirees who could not get on base or decided not to participate in the event because they thought the security checks would be too taxing for them.

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    The coalition is pleased that exchanges are still serving products for retirees and other special product lines prominent in store displays, thus giving them greater visibility. This all helps to attract value-conscious shoppers to the exchanges.

    The military Star Card, which began in September of 2000, offers two million cardholders a number of shopping benefits, the most notable, of course, being the low interest rate of 9.5 percent. But for those who are on deployments, the Navy Exchange provides an option of lower interest rates, six percent, or if they ask for it, a zero interest rate. There are conditions associated with that.

    Coalition support of the Star Card program is an effective way for eligible customers to purchase exchange products while providing customers a financially sound credit option for managing their financial affairs, especially while they are on deployment. We are pleased that the committee's position has been to keep the exchanges separate while adopting resource sharing where efficiencies are viable. Our interest is to maintain and/or enhance exchange services to all service members, active, retired, and reserve, that best serve their needs.

    The coalition continues to oppose any initiative that will compromise services to customers or that will increase the out-of-pocket expenses to patrons. It is also essential that the funding for the MWR programs be maintained and not compromised in any way.

    Mr. Chairman, thank you for the opportunity to address this panel.

    Joyce Raezer from the National Military Family Association will now address MWR programs.
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    [The prepared statement of The Military Coalition can be viewed in the hard copy.]


    Ms. RAEZER. Thank you, Mr. Chairman, for the opportunity today to discuss the importance of MWR programs not only to the quality of life of service members, military retirees, their families and survivors, but also to the readiness of the force.

    Readiness hinges on the strength of the military community. MWR activities, single service member programs, family support programs, childcare, youth programs, and religious programs draw beneficiaries to that community. They promote esprit de corps, enhance educational opportunities, and provide support in times of high Personnel Tempo (PERSTEMPO).

    Service members on lengthy deployments depend on MWR activities as a lifeline to home and a respite from arduous duty. Their families depend on MWR for wholesome, affordable, safe activities while the service member is away. Retirees view MWR programs as part of the benefit package promised to them and their survivors when they first entered active duty and as a major component of their connection to the military community.

    The high Operating Tempo (OPTEMPO), deployments, and security concerns of the past six months have highlighted like never before the importance of MWR programs. Heightened installation security has proved a mixed blessing for some MWR facilities.
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    On the one hand, increased security makes it difficult for folks living off the installation—and remember that over half of our military families do live off the installation—makes it difficult for them to access on-base recreation facilities, clubs, and restaurants. On the other hand, on-base facilities provide community members with a greater sense of security and convenience to folks already there.

    Although many MWR facilities saw an initial drop in usage after 9/11, those that responded to the changing needs of their communities recovered faster than those that pursued business-as-usual operations. The military coalition supports DOD and service efforts to create measurable standards for each activity and hopes that outreach and the use of beneficiary input to enhance program delivery is part of those standards.

    The Military Coalition (TMC) is pleased that this panel and the DOD and service leadership speak of the link between MWR programs and the readiness of the force. If we are sincere, however, that MWR programs for both service members and families are readiness enhancers, then the coalition believes there is an obligation to provide the total force with access to the programs most essential to readiness, that is, fitness, family support, and childcare.

    We thank the Congress for including language in the fiscal year 2002 Defense Authorization Act providing DOD with the authority to enhance family support, childcare, and youth programs for families of deployed service members during this fiscal year.

    We are especially pleased that the report language emphasizes the importance of these programs for guard and reserve families and believe that this authority must be made permanent and expanded to include much of the direction in the report language, and that funding for these programs is provided.
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    The readiness of the total force in today's environment depends on installation and service family support personnel for more than just planning wonderful programs and then sitting back and waiting for folks to come to family centers. Because all active, guard, and reserve families, no matter where they are located, must have access to essential morale and welfare programs, the delivery of these programs may have to radically change.

    Our guard and reserve families tell us they need better information about benefits, such as health care, and sometimes education and assistance in dealing with changed financial circumstances. They tell us their state and unit family program coordinators are stretched too thin to provide all the assistance needed by geographically dispersed families. They also tell us they need the same kind of access to childcare as their active duty peers who can use installation child development centers and family care providers.

    The military coalition is pleased that many installation child development centers increased their operating hours, and that the services have sought additional family childcare providers to meet some of the demands stemming from the increased PERSTEMPO of the wartime mission. We are concerned, however, that almost all of the increased services seem directed at current users of the military childcare system and not for other affected families.

    In the fiscal year 2000 defense authorization, Congress provided DOD with the flexibility to increase the availability of childcare and youth programs through partnerships with civilian agencies and other organizations. Although the services did set up some pilot programs under this authority, we believe that few of these initiatives actually opened up access to quality childcare at a reasonable cost for active duty, guard, or reserve families at more remote locations.
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    These families need assistance not just with finding quality care near their homes, but also, in some cases, paying for that care. When a military family enrolls their child in a military child development center (CDC) or family childcare home, the cost of that child's care is shared between the government, through appropriated funds, and the service member. When a military family who cannot access childcare through the military system places their child in a civilian facility, the family bears the entire cost.

    I heard today at a meeting of the Army's General Officers Steering Committee about a guard member activated several years ago, a single parent, who had to take out a personal loan to pay for childcare. We are hearing the same kind of financial stories coming out of the current deployments, and that greatly concerns us.

    The coalition believes that, given the importance of guard and reserve members to the mission, the childcare needs of these service members must be calculated in DOD and service estimates of demand for childcare services and assistance given to some of these families in accessing and paying for needed childcare.

    Mr. Chairman, changing demands on our military force requires changing methods of delivering the MWR programs and other support programs necessary for quality of life and the readiness of the force and its families.

    The military coalition is grateful to this panel for its oversight of resale and MWR programs, its emphasis on quality standards and value to the customer, and its realization that commissaries, exchanges, and MWR activities are vital readiness and quality of life components for today's force.
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    Thank you very much.

    [The prepared statement of The Military Coalition can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you all very much for your testimony.

    Let me now yield to Mr. Underwood, our ranking member, for his questions and comments.

    Mr. UNDERWOOD. Thank you, Mr. Chairman.

    This is for all of you. What is your assessment of how the commissaries and exchanges and MWR programs have provided support to military families in the wake of the events of September 11? What have you seen since September 11?

    I will start with you, ma'am.

    Ms. RAEZER. I think it varies according to service and location and the program that we are talking about. I think in terms of the commissary, we have seen increased information going out to guard and reserve families, for example, about what their benefit is. We see a real effort by the commissary and, I think, the exchange leadership, also, to make arrangements with installation commanders to work some of the security issues so that shelves are stocked and the goods are available when the families come onto the installation.
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    I think some of the MWR programs have struggled with this. There are some that have provided wonderful service to folks on the installation, but do not quite know how to meet the needs of some of the folks who maybe are reluctant to go through all the installation security or sit in the lines.

    But I know there are some places that are making a bigger effort to look at their community and what the community needs. If you have got a high deployment tempo, you need a place where moms and kids can come, to the club, for example, on a Thursday night and have kids' activities and a special dinner for families. We have heard good stories that some installations are doing this, and that kind of support is wonderful.

    There is less connection than we would like to hear with the guard and reserve, however, and how to reach those. We are still hearing about too many places where even guard or reserve units who are tenants on an installation are not having good working relationships with the family support folks serving the active duty side of the house.

    Mr. UNDERWOOD. Very good. Thank you for those comments.

    Mr. BARNES. Congressman, with regard to concerns we are aware of, with our association, the primary concern was access during the first few weeks, and we heard a great deal of concern from the retired community on that. That has eased, and my awareness of the commissaries is that they have been very responsive and very creative in trying to address that challenge with regard to getting products on base and what-have-you and keeping the shelves stocked, as referenced by Ms. Raezer.
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    Mr. UNDERWOOD. Mr. Rohrbough.

    Mr. ROHRBOUGH. Thank you, Congressman. I think the main thought here in terms of the exchanges are that they have been very responsive. Yes, they had a waning of the use of the stores during the initial period there in September, but they quickly tried to provide the services to the degree that they could, considering the limited access to the bases.

    I think that their response with the field exchanges in deployments in support of the deploying troops has been phenomenal. They have gone to a bit of an extreme in order to make sure that those resources are available to the deployed troops, operating out of field tents, out of trailers and other kinds of trucks and equipment. So I think they have been very responsive in trying to be there whenever and however they can.

    Mr. UNDERWOOD. Well, maybe this is a question aimed more at later panels, but there must be some concern about the fact that force protection issues might have permanently affected the customer base. I mean, once you lose some customers, they just do not come back. Have you been getting any feedback on that?

    Mr. ROHRBOUGH. Not necessary from our perspective. Our retired community is aware of threat conditions and the challenges we face. Many of them have come through similar conflicts in the past and have worked through those challenges. And I think that there is a—at least, we are aware of an understanding of that, and they are returning, and I think that is referenced in sales and customer traffic in both commissaries and exchanges. At least, that is my perception.
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    Ms. RAEZER. I think a lot of the initial first reactions after September 11 and the access problems were related to just the process of getting through the gate, getting the word out about how you get an automobile decal on your car so that you can show your ID card and get through a little faster. There were some retirees that did not have their decals, did not know how to get the decal.

    We have seen better efforts by the installations to get the word out about how folks go through this process so that they can work through the security system a little easier. We would like to see more of that, to touch both the retiree side and the guard and reserve side, because we have been told by some guard and reserve members who have come to drill on an installation that they did not have a decal and had to go through some problems.

    So we see those problems being worked and things getting better. We hope that folks are compiling a list of lessons learned for the next eventuality of a shutdown like this.

    Mr. UNDERWOOD. Thank you.

    Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you very much.

    Mr. Schrock.

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    Mr. SCHROCK. Thank you, Mr. Chairman.

    Again, I thank the three of you for coming. Let me make a follow-up on what Mr. Underwood talked about regarding force protection. I am privileged to be a retired naval officer, and I go to the bases in Hampton Roads north of Virginia Beach a lot. In the initial days after 9/11, it was horrible. I mean, you could be in two mile long lines. It is nothing now.

    As a matter of fact, those that live in Hampton Roads will tell you—and when I go to the commissaries and the exchanges, I ask questions. Is the business coming back, and they say yes. I used to go into the barber shop, and there was no one there. I loved it, but it was not good for business. But that is back now, too. So I think the force protection thing has kicked in pretty well.

    Mr. Barnes, you commented on the 30-percent savings from the commissary. If there is a reason that we should keep it in the current hands it is in, I think that is it. I think that is an average of $2,400 a year for an average family of four. And every time I hear words of privatizing, I am bothered, because there is no way those on the outside could do it any better than it is done on the inside, and I think we need to keep it that way.

    There was one comment you made about staff reductions. Maybe this is the wrong panel to ask, but help me understand what that is all about.

    Mr. BARNES. As we understand, the agency is going through a multiyear transformation process, and as part of that, the surcharge fund is being revitalized. And over the course of this period, funds from the services are to be reimbursed, and that accounts for $90 million. Of the $1.14 billion, $90 million of that will go back to the services as part of this multiyear effort.
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    In addition, savings are being achieved via other streamlining initiatives, improved management practices and what-have-you, and staff levels are being revamped and looked at. There is a template plan, master plan, for the various sized stores and what-have-you.

    This is ongoing, and the ultimate objective, as we understand it, is to eliminate 2,600 staff positions over a multiyear period. That assumption with regard to the balance from the $90 million to the $137 million—that entails these staff reductions, as we understand that, in fiscal year 2003.

    Mr. SCHROCK. That has got to impact service.

    Mr. BARNES. That is our perception of that, and that is a concern that we are hearing from our members.

    Mr. SCHROCK. Maybe another panel can talk about that.

    Colonel, the Star Card is a great idea. You said some folks could qualify for zero percent interest. Help me understand that. It is too good to be true.

    Mr. ROHRBOUGH. Well, it is a Navy initiative, but as I understand it, the benefit there is that if an individual who is on deployment would like to defer any payments and not have any interest gain, they can make that choice. They have to give up their card while they are gone at that time, so as not to incur any additional credit line. But as I understand it, it is one of the two options that they are given, and it is the member's choice as to what will best serve their needs.
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    Mr. SCHROCK. Oh, I see.

    Ms. Raezer, you were right on track with everything you said, every word. I could not have written it better myself.

    Ms. RAEZER. Thank you.

    Mr. SCHROCK. I agree with your comments on the reserves. That is a whole new element we need to take into consideration, and it will probably be with us for a long time, so I certainly agree with that.

    And childcare support is important, too. I know in our area, we tried to get budgeting for a childcare center at Naval Air Station Oceana. We were not successful, but we have got to keep trying, because that is an absolutely vital part of this thing.

    In every one of the services you have talked about, it is absolutely vital to the servicemen. If mom and kids are not happy, pop is not going to stick around long, and I say that a lot. If we do not have the quality of life issues, the good housing, we are going to lose these kids. If we do not pay them right, we are going to lose them as well. So I absolutely agree with everything you have all said, and I thank you for being here.

    Ms. RAEZER. Thank you, Mr. Schrock. And on that child development center issue, because of the importance attached to this, we were a bit concerned that there are only two child development centers in the military construction request for this year, both of them overseas. The one in Oceana has come up before as a likely candidate.
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    Mr. SCHROCK. It is going to keep coming up as long as I am there.

    Ms. RAEZER. Thank you.

    Mr. SCHROCK. Thank you.

    Mr. BARTLETT. Thank you very much. In my opening remarks, I noted that we have a new member of our panel. Mr. Forbes has now joined us.

    Welcome, sir. We are very glad that you are on our panel.

    We now recognize Mr. Andrews.

    Mr. ANDREWS. I just want to thank the witnesses for their testimony and their service. You are terrific advocates for the families affected.

    I would yield back, Mr. Chairman.

    Mr. BARTLETT. Ms. Davis, do you have comments and questions?

    Mrs. DAVIS. Thank you, Mr. Chairman.

    I appreciate you all being here. I want to follow up with the next panel with a few issues regarding childcare as well. But I am just wondering the extent to which you all do, I think, have some focus on the construction budget in terms of childcare, because we are finding—I know in the San Diego area I represent, two childcare centers recently closed down, because they did not have the resources available to repair the building. That is a real concern, and I am hopeful that you all can rally and be very involved and active with this, because we need to provide more funding in the next budget for that.
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    Ms. RAEZER. Thank you. We could use all the help we can get on this one. The prospect of closing child development centers down and forcing families to find other alternatives is a horrible prospect. The other prospect is keeping a child development center open when it is unsafe simply because there is no place else for the children to go. That is horrible as well, and we really need—we had hoped that DOD would have identified more child development centers for construction.

    Mrs. DAVIS. Thank you. Perhaps I might just follow up on one of the issues that I think we have all been talking about, the need for the commissaries to be available and be accessible.

    One of the issues I want to raise with the next panel as well is the need to provide mini-marts, to provide for smaller markets in areas where we have gone to public-private partnerships. Is that something that you all see as a need? And how do you really lobby for that if, in fact, you believe that we need to provide more centers?

    I think, certainly, when it comes to security on bases, having some facilities outside the bases in communities where we know there is a large population—especially in the public-private partnerships, we just have not built enough of those services. How do you see that?

    Mr. BARNES. Those are excellent points, Congresswoman. The X-mart or hybrid store concept is a combined store, and the coalition has been monitoring those facilities and supports those, but only at BRAC sites and not at fully operational bases.
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    We also support some creative approaches to providing the benefit and monitor that very closely. I would defer to some of the other panelists to speak more specifically about where that issue is.

    Mrs. DAVIS. Thank you. We were under the understanding that in some of these public-private housing developments—the military housing going out with the private developer—community activities, such as retail mini-marts or whatever, should and would be included in those plans and have been encouraging the services as they look at housing privatization to think community and not just a group of houses together.

    Mr. BARNES. May I just add to that, please? Last year, I think the question came up about providing those kinds of things, and I know that we have had some concerns about the loss of revenues to the MWR program and the dividends that were associated if those kinds of services went to the private sector. So there was an agreement, I think, that this committee came to that would allow for the exchanges to have the right of first refusal to provide those kinds of marts inside the privatization housing areas, and we agree with that.

    Mrs. DAVIS. Yes, good. Thank you. We are actually seeing a number of the developments come forward that do not have them still.

    Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you.

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    Mr. Forbes.

    Mr. FORBES. Mr. Chairman, I will just be brief, but I want to thank you for the comments that I know you made. And listening to the questions, I think this is a vital area.

    Saturday, I had the privilege of flying out to Truman, which, as we know, came in under budget and ahead of time, which was great. But in talking with the pilots there and the men and women on board, when you ask them what they want, they say nothing. The only thing they tell you is ''Take care of our families while we are away. We can put up with being away 10 and a half months out of 14 months. The pay is important, but that is not the big key. Just take care of our families.'' So we thank you for the issues that you are raising.

    Mr. BARTLETT. Thank you very much.

    Mr. Barnes, thank you for your comments on your opposition to privatization. I hope that you keep that call loud and shrill so that it is understood.

    I also have a question about your comments on the reduction in DeCA staffing and the effects on service. Is this a reality or a fear?

    Mr. BARNES. We have had the same concern. Within the last probably six to eight weeks, we are increasingly hearing from members via e-mail, and we understand, and we have discussed this with DeCA representatives with regard to the ongoing efforts, with regard to their staffing restructuring and what-have-you. So I think the further into this plan we get, the more we are going to hear, and I try to couch my comments to reflect that. So at this point, I would say it is a combination of both.
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    Mr. BARTLETT. Your people are telling you that there is a decrement in service, and they are concerned that there will be an increasing deficit as the reductions increase?

    Mr. BARNES. That is correct.

    Mr. BARTLETT. What is your understanding of the percent of the reductions that have taken place by this time?

    Mr. BARNES. I do not have a good grasp on that. I do know that they are ongoing.

    Mr. BARTLETT. Thank you very much.

    Mr. Rohrbough, I appreciated your reference to Retiree Appreciation Days. We are glad that your people appreciated that, and we would hope that this sort of thing would make you better recruiters. We know that if we treat our retired people right, we can probably significantly reduce our expenditures for recruitment, because you should be our best recruiters.

    What else do we need to do so that you will be more aggressive in helping us recruit and retain?

    Mr. ROHRBOUGH. Thank you very much for that question. I think the retirees are a very loyal group. They very much want to continue to come back to the bases and are very much interested in using the Post/Base Exchange (PBX) and commissary services. So even with 9/11, they remained loyal and wanted to come back.
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    I think the main thing that they were after in terms of support—and this gets into another area—was having the promise of lifetime health care made to them. And, of course, the Congress' implementation of TRICARE for Life this past October has been a significant advancement toward that.

    Many of the folks that were sending messages to us, calling us, asking in meetings I attended and presentations I gave—many of them, earlier, were making comments to the effect of how can we go out and be good recruiters when you will not even fulfill your promise to give me lifetime health care. Some of them want it free. That is a bone of contention and one that is very much in debate at this point. But I think as long as they now recognize that that promise is being fulfilled for the most part, then they become good spokesmen for recruiting and retention of not only their sons and daughters, but now grandchildren.

    Mr. BARTLETT. Thank you. You sound like my echo. Thank you very much. I have been saying for several years that we need to keep our promises to our retired people.

    I was very pleased to be joined by Mr. Gene Taylor from across the aisle when we pushed and were successful in removing medicare subvention on the floor of the House, after it was very difficult to get this done in the committee, and it passed by an absolutely overwhelming vote on the floor of the House. I thought that that was a very encouraging signal of how supportive our community is of our veterans.

    Ms. Raezer, you mentioned including the guard and reserve. Clearly, we have a total force, and once they are out there, unless you ask them, they are pretty much indistinguishable from regular service people. If that is true, then, the service to them back home needs to be indistinguishable as well.
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    I am concerned about one of the problems that you mentioned, and that is childcare for our guard and reserve people. Frequently, they are not near enough to a base. I do not know if those facilities are available to them on the base or not.

    But I have a concern that we are now asking these young families to do something that they did not really expect when they volunteered. They expected to be called up in a major war, and now they have been called up for six months. They are going to be extended for perhaps another six months. It is tough on families, tough on employers, and so far, both the families and employers have been just magnificent.

    But to the extent that we impose an additional financial hardship on these young families when the mother—and it is usually the mother—is left with the young children without adequate help for daycare, I think this represents an issue that we need to address. Thank you for bringing this to our attention.

    I want to thank the panel very much. You need to know—and I know you know without our telling you—that we are always here for you. Any concerns that you have, please feel free to communicate them. I do not hide. My name is in the Frederick phone book. If you want to call me at home, you may do that.

    Thank you very much, and we will excuse this panel and convene our next panel.

    Our second panel of witnesses are Department of Defense senior policy makers from military resale and MWR programs. They are The Honorable Charles S. Abell, Assistant Secretary of Defense for Force Management Policy; Lieutenant General Charles S. Mahan, Jr., Deputy Chief of Staff for Logistics, U.S. Army; Lieutenant General Michael E. Zettler, Deputy Chief of Staff for Installations and Logistics, U.S. Air Force; Lieutenant General Gary L. Parks, Deputy Chief of Staff for Manpower and Reserve Affairs, U.S. Marine Corps; and Rear Admiral Christopher W. Cole, Director of the Ashore Readiness Division, U.S. Navy.
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    Let me note for my colleagues that Generals Mahan, Zettler, and Parks serve on the Commissary Operating Board as well as on their respective military exchange board of directors. They and Secretary Abell are well placed to answer policy questions involving commissaries and exchanges.

    Secretary Abell, you may proceed.


    Secretary ABELL. Thank you, Mr. Chairman. I am pleased to be here today to appear before this panel to discuss the Department of Defense commissary, exchange, and morale, welfare, and recreation activities, three important, non-pay compensation items. I would like to note for the panel that I appear not only as an assistant secretary of defense, but also as a patron and a beneficiary of all these programs.

    I was pleased to be able to hear the concerns of those who represent the beneficiaries in the previous panel. I think the order of testimony you have organized today demonstrates our shared concern for these important programs. Quality of life and military readiness, as you heard in the first panel, are linked and together contribute to recruiting and retaining the strong military force we have today.

    As you know, Mr. Chairman, in the wake of September 11, the MWR and resale programs stepped up their support for the force. We saw them supporting rescue operations, deployments, and homeland-based military operations. They are in Afghanistan and in support around the region and around the world wherever U.S. forces are on duty.
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    The war on terrorism has caused the services to increase security, carefully monitor access, and to deploy active and reserve forces quickly. All of these events have resulted in dampened sales, increased expenses, and reduced profits for our commissaries, exchanges, and MWR activities.

    These activities have responded by extending hours, adjusting their stocks, and reacting to the needs of their communities, just as you and I would expect them to do. You will hear more details on the impacts and the adjustments in later panels, but I would like to take a minute to publicly acknowledge the tremendous service that our commissaries, exchanges, and MWR folks are providing every day. From the commanders, who are here today, to the local managers, they are a team focused on providing services to and meeting the needs of our service members and their families.

    The fiscal year 2003 budget demonstrates President Bush's commitment to taking care of the department's greatest assets, the men and women who serve. We have not been distracted from the important work needed to secure the future of these important benefits.

    We have developed a strategic approach to providing for the quality of life for our service members and their families. We call this strategic plan our social covenant. It is a roadmap to guide us as we support the transformation of the military to remain dominant in the 21st Century.

    As part of transformation, the Department is reviewing all of our business practices and our infrastructure in order to enhance our capabilities and to free resources to support war fighting requirements. We are asking hard questions, eliminating redundancy, and looking for ways to use technology more effectively.
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    As we explore these opportunities, we are mindful of the need to preserve the benefit and to remain true to our beneficiary population. As we continue our reviews and find ways to improve efficiency while requiring fewer resources, we will continue to consult with the beneficiary and industry groups and, of course, Mr. Chairman, this panel and your staff to keep you apprised of our ideas.

    I look forward to working with you to continue to provide the best quality of life possible for our military families and the military members. I know you and this panel are dedicated to supporting the men and women in uniform and their families, as are we.

    I am prepared to respond to your questions, sir.

    [The prepared statement of Secretary Abell can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    General Mahan.


    General MAHAN. Thank you, Mr. Chairman and honorable members of the panel. It is my pleasure to be here today to report to you on the military resale programs.
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    I would like to thank you, Mr. Chairman, for your leadership of the panel over the past year. I also thank the members of the panel for your support and this valuable oversight, and I congratulate Congressman Forbes on his appointment to the panel.

    Welcome aboard, sir.

    Our soldiers, family members, and retirees are most appreciative of the benefits we receive from the morale, welfare, and recreation programs. I believe that AAFES and DeCA contribute considerably to our soldiers' and families' wellbeing. Both organizations ensure that these vital benefits are provided to our deployed forces and family members worldwide, sometimes in very trying conditions. In that light, our force's morale is heightened and their welfare enhanced, and all of our customers are benefited.

    For fiscal year 2001, the Army and Air Force exchange projects dividends to the services totaled $235 million, or 65 percent of the total earnings. On a per capita basis, that dividend represents a $281 cash dividend per active duty soldier and airman.

    AAFES also offers other programs, including a four-ways-to-save price strategy program that returns millions of dollars in savings directly to active duty, reservists, retirees, and their family members. The Defense Commissary Agency's savings already highlighted today to the customer is an average all-time high of 30 percent, saving a family of four approximately $2,400 annually. It is essential that we continue to support our MWR and resale programs and remain committed to the quality of life of all service members and their families.

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    Mr. Chairman and members of the panel, I have submitted my full testimony for the record. I thank you again for the opportunity to appear before you today. I look forward to working with you in support of these benefits for our people, and I look forward to your questions.

    [The prepared statement of General Mahan can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    General Zettler.


    General ZETTLER. Mr. Chairman, I am pleased to be here to speak with you today about the vital roles of the military resale system and the Air Force morale, welfare, and recreation programs and how they support our national defense through our people.

    However, I would first like to take this opportunity to extend my congratulations to the newest member of the panel, Congressman Forbes.

    Sir, from me, too, welcome aboard, and I am sure you will find your work on this panel will have a lasting impact on the quality of life for our military and their families.
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    Sir, over the last 22 months, I have learned a great deal about the retail industry and the MWR programs, along with their unique challenges. I have two take-aways that I shall always remember.

    First, these organizations bring tremendous value, both in economic terms and in the quality of life for our members, retirees, and families, all of whom are privileged to have these benefits. Second, the employees of DeCA, AAFES, and the Air Force MWR programs are warriors in their own right, fully committed to serving our airmen, soldiers, sailors, and marines.

    My roles with respect to these three organizations have led me to appreciate even more the interwoven threads that link these important agencies and combine to improve the quality of life for our forces and their families.

    Mr. Chairman, this will probably be my last opportunity to appear before you as chairman of both the commissary and AAFES boards, as the normal rotation will no doubt put others in these positions before your next hearings. I personally thank you and the members of this panel for the challenges you have forced us to think through. Your advocacy has provided us the tools needed to become more effective in providing for the quality of life for our people.

    Our plans are aggressive, and we will need your support. But with your help, we will continue to build and sustain strong and viable resale and MWR programs.

    General Courter from DeCA and General Wax from AAFES and their counterparts will cover their operations in much more detail in the following panel. And you will hear from Mr. Myers and his fellow MWR expert in today's last panel. For now, let me just say that I appreciate your continued support and welcome your questions.
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    [The prepared statement of General Zettler can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    General Parks.


    General PARKS. Mr. Chairman and distinguished members of the committee, thank you for the opportunity to make my first appearance before you today. I have submitted for the record my written testimony on the state of the Marine Corps resale system.

    In brief summary, it is germane to highlight several relevant facts. First, the Marine Corps is a young force. Two of every three Marines are under the age of 25. More specifically, approximately 16 percent are teenagers. We diligently work to provide these young Marines the quality benefit they seek through our exchange and our morale, welfare, and recreation programs.

    Next, in conjunction with the Marine force composition, our family statistics reveal that we have the youngest median age of all the armed forces. The average age of our married enlisted Marine is 28.7 years. Forty percent of Marine spouses are under the age of 25 years, again youngest among the services.
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    To serve this predominantly youthful, mobile force and their families, we have simplified our service support organizations to increase accessibility and awareness. All community service programs, such as exchange, MWR, family services, voluntary education, and child development, have a single point of contact for our Marines and their families, the Marine Corps Community Services (MCCS).

    And as the Marine Corps' deputy commandant for manpower and reserve affairs, I am the single point of contact for quality of life programs as a part of our human resources development process. Therefore, the synergies inherent within our programs afford the Corps key insights toward developing an effective human resources strategy, thereby directly impacting our recruiting and retention.

    Mr. Chairman, this completes my brief remarks, and I welcome the opportunity to answer your questions.

    [The prepared joint statement of General Parks and Michael Downs can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    Admiral Cole.

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    Admiral COLE. Thank you, Mr. Chairman and distinguished members of the panel. It is an honor for me to be here today to discuss the Navy's MWR and resale programs.

    Admiral Clark, the chief of naval operations, has challenged Navy leadership to ensure that the soldiers, sailors, airmen, and marines whom we host on our Navy bases and in our ships enjoy the quality of service they deserve. The Navy Exchange Service Command (NEXCOM), the Defense Commissary Agency, and the Navy morale, welfare, and recreation program are indispensable parts of the answer to that challenge.

    The Navy Exchange Service Command, continues to do a first-rate job supporting the Navy community around the world. NEXCOM is focused on implementing industry best practices and committed to working with other service exchange commands on becoming more efficient and effective.

    Leveraging technology, NEXCOM is capturing and applying critical management data to formulate policies that simultaneously allow them to reduce costs, sell for less, and generate more dollars for MWR. As a customer shopping at their stores and as a member of the oversight committee, I can tell you that, without a doubt, NEXCOM is on the right track.

    The Defense Commissary Agency's commitment to enhance the commissary program has been equally impressive. The results of the latest commissary customer service survey determined that patrons, as you have heard, currently save an average of 30 percent on purchases compared to commercial prices, while at the same time DeCA has been reducing operating costs, unit costs, and store overhead.
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    As long as we keep our service standards up, this is good for military families and good for the taxpayers. I believe DeCA is also on the right track.

    The Navy MWR program has been working extremely hard to ensure that every sailor and marine, every soldier, airman, and coast guardsman who serves on our bases and in our ships has the same great MWR opportunity as any other. Given the wide variance in our ships and bases, that is a tall order, but it is clearly the goal we should always have in mind.

    Navy MWR today is meeting that challenge with unprecedented support for deployed forces, special recognition of our families, innovative single sailor programs, top-notch child development programs, a new service for military parents, and the list goes on and on. The availability of these other services are an important quality of life benefit that increases readiness. Navy MWR is on the right track.

    I would like to close my remarks by reiterating my thanks to you for your consistent support of our service members and these great programs. I will be pleased to respond to your questions.

    [The prepared statement of Admiral Cole can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much, and thanks to all the members of the panel. Let me now turn to our ranking member for his observations and questions.

    Mr. UNDERWOOD. Thank you, Mr. Chairman, and I thank the witnesses for their testimony.
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    I was very struck, Secretary Abell, by your discussion about a social covenant, a new social covenant, that you referred to in your oral testimony. I am trying to understand this in terms of the social compact as an effort to provide more effective services, given the changing demographics of our people in uniform.

    My question that comes out of that is does DOD regard the commissaries and the exchanges as critical non-pay benefits that must be preserved as part of that social compact?

    Secretary ABELL. Absolutely, sir.

    Mr. UNDERWOOD. And would the rest of the services say the same thing?

    General MAHAN. Yes, sir.

    General ZETTLER. Yes, sir.

    General PARKS. Yes, sir.

    Admiral COLE. Absolutely.

    Mr. UNDERWOOD. In your testimony, Mr. Abell, you note that DeCA will same some $85 million during fiscal year 2003 from streamlining headquarters, region, and store operations. It is my understanding, based on looking at the figures, that the total budget reduction for fiscal year 2003 is actually about $137 million. Can you explain the difference?
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    Secretary ABELL. Yes, sir. I think there has been a number of folks discussing that $137 million. That is an issue that I think General Courter will explain to you in great detail.

    That number represents savings, not a cut. It also represents reductions that should be invisible to the patron and not reduce the service or the benefit in any way. Those are overheads and business improvement suggestions that General Courter and his team have been able to implement, based on their business case review of their activities.

    Mr. UNDERWOOD. So the difference between the $85 million and the $137 million is——

    Secretary ABELL. It is essentially accounting, Congressman.

    Mr. UNDERWOOD. It is in accounting?

    Secretary ABELL. Yes. We are talking about from a budgeted difference, and then the $137 million that General Courter will, I am sure, explain in great detail——

    Mr. UNDERWOOD. Will make up the difference.

    Secretary ABELL. Yes.

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    Mr. UNDERWOOD. General Courter will explain the difference.

    Secretary ABELL. Yes, it is different—apples and oranges.

    Mr. UNDERWOOD. Okay. Thank you. The panel also recently approved the closure of seven commissaries in response to DOD's request. Do you anticipate that there will be any more additional closures recommended? Or should I ask that of General Courter as well?

    Secretary ABELL. No, sir. Every year, the commissaries are reviewed by the Commissary Board. I have asked General Zettler to look at some few additional ones as well, to provide us another look at the ones that were not cut this year that perhaps we could cut in the future, again, looking at the business case and determining whether the cost of providing the benefit outweighed the cost of running the store.

    Mr. UNDERWOOD. General Zettler, as I understand it, the Air Force is the executive agent for armed forces entertainment shows overseas?

    General ZETTLER. Yes, sir.

    Mr. UNDERWOOD. In recent years, the panel was told that these shows have dropped off considerably due to funding shortfalls. Is there a more adequate budget this year?

    General ZETTLER. This particular year, the budget is very tight. But in future years, and in the one that you are considering right now, the Air Force has plussed that up to about $6.2 million. And then with the contingency funding that comes in during the course of the year, we should get close to $10 million, and we think that is adequate.
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    We took your message last year and went back home and worked it, and we think we are in pretty good shape. This year, I think we are up to about 130 tours that have already gone out. Obviously, the troops love them, and we have got a lot of troops out there to see them, and we will continue to support that.

    Mr. UNDERWOOD. And we would expect that some of these would go to Guam.

    General ZETTLER. Yes, sir. All of them will go through there, sir. [Laughter.]

    Mr. UNDERWOOD. Just curious.

    General Mahan, is the Army's budget for second destination transportation expenses adequate for fiscal years 2002 and 2003? You know, the panel obviously supports that, and there is always some concern that it looks like a very enticing item to cut.

    General MAHAN. Congressman, if I were to tell you that we had adequate amounts of second destination transportation already identified, I would be misleading you. It has been recognized as an issue for us. Our vice chief of staff of the Army has committed to making sure that we have adequate amounts to get done what we need to do.

    As you understand, there are multiple areas that second destination transportation involves, to include readiness, movements of munitions for overseas, and repositioning and cascading of equipment throughout our force. So when there is a short budget, I am going to err on the side of readiness.
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    However, I assure you that we are looking at the requirements to move other materials, to include MWR materials, through second destination trans, and we will make that whole. We will ensure that we do what is appropriate.

    Mr. UNDERWOOD. Thank you, General.

    Thank you, Mr. Chairman.

    Mr. BARTLETT. Mr. Schrock.

    Mr. SCHROCK. Thank you, Mr. Chairman.

    Mr. Secretary, Generals, Admiral, thank you very much for being here.

    Mr. Secretary, I agree with Admiral Cole when he said NEXCOM is on the right track. However, NEXCOM submitted a fiscal year 2002 construction request to renovate the distribution center in the second district that I represent.

    It is my understanding that the Department deferred the package pending the final results of the Exchange Cooperative Efforts Study. This study has been going on for a long time, and I can tell you this project is badly needed. What it will do is allow NEXCOM to move out of some pretty decrepit-looking places and combine their operations under one roof with one set of employees.

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    I am just wondering if you can tell me when you think this thing might come to fruition.

    Secretary ABELL. I hope soon. I understand the concern. Admiral Moss was kind enough to walk me through his facilities, so I saw their condition. I am also waiting for that report to come from our services. They are reviewing it right now, as I understand.

    Mr. SCHROCK. You have no idea what the timeframe is? I know in the Pentagon, that is hard to predict.

    Secretary ABELL. No, sir. I wish I knew.

    Mr. SCHROCK. Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you very much.

    Mr. Andrews.

    Mr. ANDREWS. Thank you, Mr. Chairman. I want to thank the witnesses for their testimony and especially for their service to our country at a time when it is a grave need. It is truly appreciated—each one of you and the individuals you represent.

    I want to associate myself with the remarks and concerns of the chairman and the ranking member with respect to the DeCA funding and personnel issues. I want to embrace what each one of them said.
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    I have a very strong concern that we ought to be approaching this issue from the point of view, ''if it ain't broke, don't fix it.'' And I think the committee wants to convey in a very sincere way, but a strong way, that we understand the need for efficiency. But we do not want a diminution in the value of this benefit for the families being masqueraded as an efficiency change.

    Mr. Secretary, to that end, I read page 12 of your statement, and I want to read from it. You start by saying in the last paragraph on that page, ''As an alternative to privatization''—I would prefer that we say because we have rejected privatization, and those are my words, not yours—''we are looking at the practices and systems used by other government entities and the private sector. DeCA is analyzing changes that could yield significant savings—produce and meat procurement, alternative personnel systems, merchandising, and pricing.

    ''This review may make some uncomfortable.'' That is correct. ''However, be assured that in assessing the opportunities for cost reduction, the Department will carefully consider the impact on commissary customer savings, service to the authorized patrons, exchange sales, and dividends to MWR.''

    And you go on to say, ''As we explore these opportunities, there is no intent''—and I know this is true—''to endanger the benefit or change the population served. If any of the initiatives appear feasible and desirable, they will be pursued in consultation with the Congress.''

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    Now, it seems to me that one of the changes that would be most significant is already being pursued, and that is a significant reduction in personnel in the agency. Can you tell us how many fewer people will be working in DeCA a year from today versus today, what the plan is?

    Secretary ABELL. No, sir. I do not have those numbers.

    Mr. ANDREWS. Who has them?

    Secretary ABELL. General Courter has them in detail, and that is the right guy. I will speak as the chairman of the Commissary Operating Board.

    The board has reviewed General Courter's plan in great detail, and he is prepared at the hearing today to give you those broad numbers, and if you wish, come walk you through it. There is a need to look at the agency with respect to where it is been historically and where it can go in the future. And I think that is what General Courter, the DeCA staff, and the Commissary Operating Board has done.

    It is probably best said that we have not kept pace with technological innovation that allows the stores to progress and keep pace with the marketplace. I think that there is room there to do that and maintain the benefits for the beneficiaries and not further burden the DOD top line, and I think that is what you would like for us to do.

    Mr. ANDREWS. That is what we would like for you to do, and you may be right in that conclusion. But you may not be. The question that I am asking—for the secretary or anyone else who cares to answer—is are not we putting the cart before the horse here?
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    It seems to me that a program that will reduce significantly the staff at DeCa—and we will find out just what that number means in the next panel. But a program that is going to significantly reduce the staff is going to make these changes before we have had an assessment of what impact they are going to have.

    I do not mean this as a rhetorical question, but why are not we making this assessment first, and then if the assessment justifies the reduction in personnel, making the reduction in personnel later? And, again, I do not mean that as a rhetorical question.

    Mr. Secretary, why do not we make this assessment, consult with the panel, make an assessment as to what impact this might have on the benefit? And if the answer is none, and that is a credible assessment, then you go forward. But if the answer is that it will have a negative effect on the benefit, isn't the horse already out of the barn?

    We have got some number of people—1,000 people, 1,200 people—no longer there, and rehiring those people is not something I suspect we would or could do. So why are not we studying it first, and then making the personnel reductions later?

    Secretary ABELL. Congressman, I believe that is what we are doing. I do not believe there is any personnel cuts or staffing reductions being made without a thorough assessment and a careful vetting of that assessment. As General Zettler has said, General Courter and his staff review it, they bring it up to the Commissary Board, who, acting in their capacity as the oversight, do a careful vetting of that as well.

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    It ultimately comes into my office and that of Dr. Chu's. We all look at it, and then it is implemented. There is consultation with the staff over here as well.

    Mr. ANDREWS. In terms of consultation with the panel and with the Congress, what is the plan? I mean, are we going to find out after 1,000 people are let go that they have been let go, or is it going to happen before that? What is the plan? What do you mean by consultation?

    Secretary ABELL. It is my intent to keep this panel informed of what our plans are, not how we have executed. We will do that as well, but not to advise you after the fact, but before the fact.

    Mr. ANDREWS. I am sure the chairman would agree—and that is the conclusion of my questions—that we—I have great faith in the chairman and the ranking member, and I am confident that if they are given adequate notice and adequate information, they will protect the values the committee has.

    But I want to be very sure, Mr. Chairman, that we make sure you get that adequate notification, that if there is going to be consultation, it is at a time and in a way that you can have an impact on what happens.

    I thank the panel and yield back.

    Mr. BARTLETT. Thank you very much for your shared concern over this issue.
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    Mr. Forbes.

    Mr. FORBES. Thank you, Mr. Secretary and members of the panel.

    General Mahan, you had mentioned that there were a number of store infrastructure improvements that were already funded and underway. But you also mentioned some major technology changes that might be forthcoming that would help reduce costs.

    Are they funded, and if not, can you just give us a brief overview of some of those that you are looking at? And I think General Zettler commented on some of those.

    General MAHAN. As a board member, both in the Commissary Operating Board and the DeCA board, we go through and evaluate the way ahead that would get at most of those efficiencies. We are talking about many different technologies, to include sharing of software so that we can have a retail financial perspective that is more current. We are looking at new ways to swipe individuals' ID cards so that you can get away from putting your social security numbers on your checks to protect the security and, obviously, the identity of the individual patrons.

    But in terms of all of the materials that are done, we could go in detail with that. And we would be glad to come and lay it out for you. But rest assured that every time we go to a meeting, all of the voting members review past projects, future projects and not only capital construction, but also any of the process changes that we are about to take under our advisement and say, ''Does this make sense or not?''
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    So, yes, sir, we do—we look at that very, very diligently in conjunction with the commanders of both DeCA and the AAFES.

    So, specifically, we can give you several and we would be glad to come and lay them down if you would like

    Mr. FORBES. Thank you, Mr. Chairman.

    Thank you.

    Mr. BARTLETT. Thank you very much.

    Ms. Davis.

    Mrs. DAVIS. Thank you, Mr. Chairman and thank you to all of you for being here and also for service to our country. We all appreciate that.

    I wanted to ask Mr. Abell the issue that we raised earlier about access to many markets, especially in communities that are enjoying the public/private partnership, but where we have a lot of families living there. I am also concerned about the service men and women who live very far from base. And in San Diego we have some housing issues and so we have folks who are living beyond, probably, the mileage that they should be living, certainly.

    What steps are you taking to try and address this issue—to look into those communities and to make some changes so that we do provide more access to those support facilities for our families?
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    Secretary ABELL. Well, we try to have a very aggressive program within each of the services where the individual installations identify their needs and those are fed up through so that we can make sure we either construct or maintain the appropriate number of facilities—appropriate sizes and the appropriate places.

    I have visited a number of the housing—privatized housing initiative areas and I was pleased to note that in—as the progress of the privatization and the upgrades occur that there were both MWR and, in some cases, exchange mini-mart facilities included in the master plans. Of course, they are not always built on the same schedule of the housing—because it is a private developer may be able to move a little quicker than some of the government funded or non-appropriated funded items. But all of the master plans that I have had the privilege to look at included community facilities inside them. So I am confident that we are taking care of folks in that regard. Perhaps not at the same speed as the housing is being developed. But the fact that the housing is being developed quickly is a good thing.

    Mrs. DAVIS. Have you found that they are basically good, efficient facilities that they, you know, that they are able to return to the MWR program the dollars that they need to keep running. I mean, is it——

    Secretary ABELL. Yes.

    Mrs. DAVIS. So it is a high priority in terms of——

    Secretary ABELL. Yes.
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    Mrs. DAVIS [continuing]. Funding.

    Secretary ABELL. Yes. Clearly where we have got pockets of housing, we want to have the stores that provide the milk, bread, diapers, ketchup, mustard—those kinds of things. So that family members do not have to drive all the way on to the main part of the base to the exchange or to the Commissary just to get those things that you would get at your neighborhood——

    Mrs. DAVIS. Yes.

    Mr. ABELL [continuing]. 7–11, if you will.

    Mrs. DAVIS. Okay. All right.

    Secretary ABELL. That is a goal of ours.

    Mrs. DAVIS. Yes. Thank you. I continue to hear concerns about that. And so we will, maybe share with you some areas where they have been, you know, families have been there for years and years and years and they still have no facilities in their area.

    Secretary ABELL. I would appreciate knowing them.

    Mrs. DAVIS. Okay. Thank you.

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    And, Admiral Cole, I wonder if we could return to the issue of child care for a second——

    Admiral COLE. Yes, ma'am.

    Mrs. DAVIS [continuing]. As well. And I am wondering what the Navy is doing to accommodate families in communities that have lost child care. And San Diego, as I mentioned, on Coronado they just closed two child care centers because they did not have the resources. When will that be a high priority in the budget?

    And, you know, can you share with us the discussions that are going on about that?

    Admiral COLE. Well, that is a very high priority. Child development centers and child development homes—I am not specifically up to speed on the situation in San Diego. My understanding is that the—any shortage that we have with child development centers that we generally try to make up with child development home programs so that the parents have child care available, although not necessarily in a child care center, which many people desire.

    Mrs. DAVIS. Do you anticipate that there will be more funds requested in the 2003 or 2004 budgets for this?

    Admiral COLE. I would anticipate that there will be some more. The Oceanna—I am very familiar with that issue, as well, with the child care center at Oceanna. So I do anticipate that we will be taking a careful look at child development centers, as well.
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    Mrs. DAVIS. Okay. I think we would all appreciate that, especially now because of the increased hours that people are serving. It is a major problem. And we need to work with you so we can try and be sure that the funding is there.

    Anybody else want to comment on that and how we can make it, perhaps, a higher visibility issue?

    Ms. RAEZER. If I may, I think the good news is that there are two child development centers in the construction budget this year. And the part that you cannot see, to follow up on what the Admiral said, is the great effort that, again, I have seen as I have traveled around, to increase the number of in-home care families. And that is how we will meet the need. We know we just cannot meet the child care need by constructing child care facilities.

    So the way to expand—to be able to meet the need that is out there—is in-home care. And I have had, again, the privilege of visiting families in these homes who are providing that care—wonderful families—very excellent care—monitored by the installation to the same standards as a child develop facility—and care provided by, in most cases, mothers who are taking in others—wonderful care—very loving attention. And the parents—folks who take their children to these in-home centers, again, I have had the privilege of talking with them and other than the fact that the socialization is limited to a smaller group, are very delighted with the service they are getting there.

    Mrs. DAVIS. Thank you. I know that there certainly are—I think that the services have done a very good job in creating the standards for the centers. But I do continue to hear that there are long waiting lists—that families really do not have that access. It is very, very expensive, obviously, for them to do it in the private sector. And so——
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    Ms. RAEZER. Do not want to mislead you——

    Mrs. DAVIS. Yes.

    Ms. RAEZER [continuing]. There is a long waiting list——

    Mrs. DAVIS. Yes.

    Ms. RAEZER [continuing]. On many installations.

    Mrs. DAVIS. Okay. Thank you very much.

    Thank you all.

    Mr. BARTLETT. Thank you.

    I want to thank all of the witnesses and the panel members for the good discussion.

    Secretary Abell, on 9/11, we shut down the airlines and—for several days and their profits were impacted. And the Congress recognized that that was not an action which was of their choosing. And so we voted a lot of money to bail out the airlines.

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    On 9/11, we had much increased security at our facilities that kept a lot of people from coming to shop. That impacted the sales and that reduced the profits of our military stores. Those reduced profits now mean a reduced quality of life for our service personnel because the dollars just are not there.

    Would you concur with us, sir, that our military personnel are as important and deserving as airlines? [Laughter.]

    Secretary ABELL. Mr. Chairman, at the risk of alienating any friends I may have in the airline industry——


    Mr. ABELL [continuing]. I would tell you that our families are much more important than the airlines.

    Mr. BARTLETT. Thank you very much, sir. And I agree.

    Now, if it was appropriate to bail out the airlines with appropriated money because the shutting down the airlines was not of their choosing—not something they did, wouldn't it be equally appropriate to help our stores with appropriated funds because their loss of profits was not a result of something they did?

    Secretary ABELL. Mr. Chairman, I am pleased to hear you raise that question. It is the same question that I and others around me in the Pentagon have raised, as well. We are, within the Pentagon, looking at such a proposal. I would be less than candid if I did not tell you that it is not receiving universal acclaim within the Pentagon. The cost of this war on terrorism is pressuring the budget in many ways, as you and the members here know. But it is something that is under consideration within the Pentagon. And once we have completed our deliberations in the Pentagon, then we would have to take it to our friends in the Office of Management and Budget (OMB) and elicit their support, as well.
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    Mr. BARTLETT. Thank you.

    Keep asking them if they do not think that our military personnel are about as important as airlines.

    Secretary ABELL. Yes, sir.

    Mr. BARTLETT. General Mahan and Admiral Cole, both of you mentioned the savings that our service personnel receive in our stores—$281 per active duty person—$2,400 savings for a family of four. That is pretty impressive. Admiral Cole, you mentioned that there were 30 percent savings.

    I would like to ask the two of you if you have a high level of confidence that we could maintain these savings for our military personnel with privatization of these stores.

    General MAHAN. Sir, I would like to reflect on the same comment that you made before. The only way that we could privatize and keep that level of savings would be to have people sell at no profit. Sir, they are not going to do that. Therefore, I do not see how we could unless there was some significant amount of offset with other funds.

    Mr. BARTLETT. Do you concur, Admiral Cole?

    Admiral COLE. I concur, sir. I have no confidence that that could happen with a privatized commissary system.
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    Mr. BARTLETT. That would seem, I would think, to end the discussion of whether or not that we ought to privatize them. [Laughter.]

    General Zettler, you mentioned that this was your last hearing. Thank you very much for your service to your country and to our personnel.

    You were asked and answered quite extensively a question about the DeCA cuts.

    General ZETTLER. Yes, sir.

    Mr. BARTLETT. We would like to have your commitment, sir, that as long as you are there that any cuts in DeCA will not degrade the quality of this service.

    General ZETTLER. Mr. Chairman, the Commissary Board will continue the deliberations that we have taken to this point and look at everything that DeCA does to insure that when we shop, and when all of our people shop, they have full access, same types of hours, same quality of produce, same quality of meats and reduce check out lines that allow them to enjoy the benefits of DeCA.

    We think it is a great institution, I do think there is room for reform. I say that with great conviction. And I think that General Courter's actions that he has taken over the last two plus years have the commissary system on the right track. He has got the right staff in place. And that word is going down through all the stores that this is a business that provides a benefit and we intend to do both.
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    Mr. BARTLETT. Consistent with the old adage that an ounce of prevention is worth a pound of cure, we would prefer that attention be given to this in anticipation of a decrement in service, not trying to fix the problem after there is a decrement in service. Is that consistent with your philosophy?

    General ZETTLER. Yes sir, fully.

    Mr. BARTLETT. Thank you very much. General Parks, the Marines run their stores a bit different than other services. Your base commanders have far more flexibility and autonomy in how the stores are run. Is this serving your interests well?

    General PARKS. It is serving our interests very well, Mr. Chairman. The flexibility that a commander has to influence the particular community that they have, whether that be one that is oriented more toward an operational environment or more toward a recruit training environment or toward a logistics site, have the flexibility to orient it to the market they have in the surrounding retired community that is so needed to be supported.

    Mr. BARTLETT. Thank you very much.

    Just one last question, Secretary Abell. We understand that you intend to limit the use of non-appropriated fund construction pending the 2005 base closure round. I understand the argument that you might use because they closed a base in my district where we—as a matter of fact, I think they paved the parking lot of the commissary after they closed the base. [Laughter.]
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    And that left one other base in my district with a very inadequate commissary and other facilities there. And we cannot get that money.

    Now I am sure that you want to maintain quality of life for service personnel. And can you help us in making sure that if you spend money on a base that is going to be closed, that we will be able to recoup that money so that we can, then, build a facility on a base that remains? I would imagine that that is your concern about using these non-appropriated funds in anticipation of that round because you do not know what the BRAC will choose to close.

    General PARKS. Mr. Chairman, I would like to correct your premise—and I have no plans, nor have I issued any instructions to reduce the non-appropriated fund construction projects in the future. If they have—if those instructions have been issued in my name, I apologize. I have not issued that. We are mindful of BRAC. But, Mr. Chairman I am not smart enough to second guess BRAC. So we are going to continue the non-appropriated fund construction program, trying to be smart about it. But we are not going to try to second guess BRAC and deny a facility to an installation.

    I think if you look at BRAC, it starts in 2005, the closures will take three—four—five years after that. I am prepared to continue to build facilities that will have a 10-year lifetime. And then work aggressively to follow up on your second point, to get reimbursed to those accounts when and if a BRAC installation forecloses on a MWR or exchange or commissary facility that has a residual value.

    Mr. BARTLETT. Thank you very much. And I am very pleased that we were given misinformation. Thank you——
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    General PARKS. I hope you were.

    Mr. BARTLETT [continuing]. For setting the record straight.

    I want to thank the witnesses very much for your testimony. Thank you for your service. We will now excuse you and convene our third panel.


    Mr. BARTLETT. Our third panel of witnesses are distinguished resale chiefs. The panel welcomes Major General Robert Courter, Director of the Defense Commissary Agency—welcome, sir—Major General Charles Wax, Commander of the Army and Air Force Exchange Service; Rear Admiral Steven maas, Commander Navy Exchange Service; and General Michael Downs, Director of Personnel and Family Relations, U.S. Marine Corps.

    Welcome. Welcome all of you.

    General Courter, we will begin with your testimony.


    General COURTER. Thank you, sir.

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    Mr. Chairman and members of the panel, it is my pleasure to, once again, appear before you to provide an update on the defense commissary agency.

    I would like to welcome Congressman Forbes and also to say thank you to all of the previous folks that have deferred questions to me.

    We are clearly on track in terms of achieving our strategic objectives. Today we are providing greater savings to the customers or equity back to the stockholders than at any time in our history. We are also operating the agency more efficiently and effectively than ever before.

    Our unit costs and total costs are down and customer satisfaction is at an all-time high.

    Along with that, capital investments and facilities and Information Technology (IT) systems have more than doubled. We compare well and on the average beat our commercial competitors in terms of cost and output performance.

    The 9/11 attacks really reinforce what commissaries are all about. They are about family readiness in that they enable families to locate and live around the world with military members. They are about consistent delivery of U.S. grocery products and prices world wide. They are about extending the purchasing power of military families by providing substantial savings on grocery prices over the commercial sector. They are about quality of life and providing a sense of community that is especially important when military members deploy and families are left behind.
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    In short, our commissaries provide a continually important core military family support function. The culture change for DeCA of operating more business like and staying in touch with our customers is well along the way. However, this benefit must continue to be justified in readiness, quality of life, fiscal and business performance terms.

    I want to, on behalf on myself and our DeCA employees worldwide, thank you for your enormous support of both the commissary benefit and military families.

    And I will take your questions when you are ready.

    [The prepared statement of General Courter can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    General Wax.


    General WAX. Mr. Chairman and honorable members of the panel it is a great pleasure to be here again before you.

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    I also welcome Congressman Forbes to the panel. I look forward to working with you, sir, on matters of mutual interest.

    I thank you all for the opportunity to report to you on the accomplishments of the Army and the Air Force exchange service during this past year. 2001 was a very difficult year. But, in spite of the difficulties and in some respects in response to those difficulties, 2001 was a very successful year for the Army/Air Force exchange service.

    My prepared statement covers our success in some detail in response to many of the questions the panel has had already during the course of the panels today. And I would ask that it be entered for the record.

    And I look forward to responding to your questions.

    [The prepared statement of General Wax can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    Admiral Maas.


    Admiral MAAS. Good afternoon, Mr. Chairman and distinguished members of this panel.
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    Mr. Forbes from our neighboring district, it is good to have you here.

    It is my great pleasure today to address you again as Commander of the Navy exchange service command on behalf of our associates and customers.

    The retail sector had a rough year. It was more difficult than ever to read the mood of the customer and predict the state of our economy. Several national retailers filed for bankruptcy or closed their doors. Throughout this period, the Navy exchanges held strong.

    Our sailors, soldiers, Marines and airmen, retirees and their families know that they can always count on the Navy exchanges, lodges and ship stores to provide quality goods and services at a savings and that the dollars they spend in our stores directly support quality life programs. This resulted in increases in our sales and customer satisfaction last year. Our service men and women serve knowing that they and their families can rely on their needs being met by the many Navy exchange programs. This peace of mind—this Navy family feeling—is vital in achieving the Navy's recruitment and retention goals.

    The events of last September have had a great effect on the exchanges, primarily as result of increased security and new traffic and parking restrictions. This slowed our sales during the early fall, but as our patrons became accustomed to the inconvenience, our sales returned and increased.

    In the spirit of continuous improvement, the Navy exchange is in the process of implementing several best business practices. Automatic merchandise replenishment has been installed worldwide and is already improving the merchandise pipeline while reducing labor requirements. We are in the process of implementing the Re-tech retail management system, which will ensure consistent accurate data across all of our retail and disciplines. Through cooperative efforts with DeCA and the other military exchanges, we sent over a half-a-million customers a joint mailer reintroducing them to the commissary and exchanges.
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    In July, all of the military exchange systems will roll out a new private label line of Exchange Select health, beauty, household goods and cosmetic products. These and other initiatives listed in the written testimony have energized our associates. The better technology at their fingertips, the more productive and satisfied they are. This was directly reflected in a four-point increase in the associates satisfaction index.

    I want to thank the committee members for their interest and continued support. A number of you have visited our exchanges and lodges. Your presence means a lot to our associates.

    My sincere appreciation, also, to my partners in industry in Generals Wax, Courter and Downs. Nothing in my tour has been more gratifying than being apart of this great military/civilian team.

    Thank you for the opportunity to be here today. I am ready to respond to your questions.

    [The prepared statement of Admiral Maas can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    These four gentlemen have all appeared before our panel before.

    Thank you very much for your service to our service people and your country. Although it is not officially announced, I understand that General Courter will be retiring this summer. I did not want to miss an opportunity to personally thank him, publicly, for his commitment and dedication and his hard work for our service people.
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    Thank you very much, General Courter.

    Let me now turn to Mr. Underwood, our ranking member——

    Mr. UNDERWOOD. Mr. Downs.

    Mr. BARTLETT. Oh, I am sorry. General Downs—yes.

    Mr. DOWNS. Good afternoon, sir.

    Mr. BARTLETT. I am sorry.


    Mr. DOWNS. I, too, want to thank you for the opportunity to be present here before you today.

    Like the other exchange services, it is been a challenging year for Marine Corps exchanges. However, we have weathered the storm. We are going to end the year with a one percent increase in same store sales compared to last year.

    We are aggressively pursuing cooperative efforts with our sister services where it makes sense. And we are also aggressively pursuing a modernization initiative that will allow us to run our stores more effectively and efficiently.
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    We really appreciate the support that you and this panel has provided to us. It is important. It is important to those of us who have the privilege of leading and it is important to the Marines and sailors—the retirees and the families that we serve.

    I am prepared to respond to any questions you might have.

    [The joint prepared statement of Mr. Downs and General Parks can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much, General Downs.

    I want to comment very briefly on your reference to working where it appeared productive with the other services. We believe that the sense of community is a very important facet of our military stores and that the uniqueness of one service as compared to another contributes greatly to this sense of community.

    Whatever benefits, financially, that might accrue to making all of our stores look alike, we are not sure that that is in the best interest of our services.

    If we can help you in integrating your back room functions so that you can be more efficient there, we want to do that. But I do not think that we want to be a part of forcing any commonality where the customer interfaces with our stores because we believe that not only the savings, but also the sense of community—I think it would be kind of hard to decide which of those was more important to our service personnel. Maybe the savings to the fresh recruits, but sense of community has to be important to everybody.
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    Thank you very much.

    And let me turn, now, to our ranking member, Mr. Underwood, for his comments and questions.

    Mr. UNDERWOOD. Thank you, Mr. Chairman. And thank you for your comments on identity and community. I thought it was going to be another pitch why we do not support privatization. [Laughter.]

    That is because we want to make sure that there is lots of identification and there is lots of community.

    I cannot, you know, help but notice that in this—and you mentioned this earlier, Mr. Chairman, about the kinds of resources that were given over to the airlines in terms of helping them out at a time of national crisis and also the time that we are plussing up the entire Department of Defense by some $48 billion why we continue to seemingly mess around with smaller numbers. And these are—the kinds of activities that we are looking at today are probably one of the few sectors of the Department of Defense that is experiencing some decreasing support rather than increasing support.

    I know, General Courter, you have been anointed to answer a number of questions regarding DeCA. [Laughter.]

    So I will jump right into it. And it is two figures that were given to me—one is the fact that there is an $85 million cut, but it is reported as $137 million saved. Another figure that has been given to me is the fact that as a result of some of the programs and policies that you are implementing at DeCA that there will be a cutback in some 10 percent of the employment force—workforce—in the commissaries. And some have indicated that that actually comes out to 17 percent if you go back to unfilled positions in the past.
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    So, perhaps you could explain what is the real picture? And what is really going on in the commissaries?

    General COURTER. Well, first of all, the $84 million or $85 million is part of the $137 million. There is three years that contribute to the $137 million—2001, 2002 and 2003. And so, in 2001 we had about $9 million—2002 is about $43 million and then the final phase comes in 2003 at $84.4 million. And that totals up to the $137 million.

    That amount really has sources from various areas. It involves some stores that we closed. It involved some overhead reductions, which I will talk about in a minute, if you would like. And also, it does impact the levels of manning at our stores.

    Now, the second area you mentioned was the number of positions, I believe.

    Mr. UNDERWOOD. Yes.

    General COURTER. And if you deal with it on a labor cost basis—if you deal with it on authorizations, many of those positions were not filled. So the better way to take care of it is to—or to actually assess it is to look at it in terms of cost. And so at store level, there was a 7 percent reduction in costs—in labor costs—20 percent above store. And overall, throughout the agency, there is a 10 percent reduction. Not just from labor costs, but from all sources.

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    As I will mention later——

    Mr. UNDERWOOD. So it is not ten percent——

    General COURTER. No.

    Mr. UNDERWOOD. [continuing]. Positions lost——

    General COURTER. No.

    Mr. UNDERWOOD [continuing]. Or FTEs lost?

    General COURTER. No.

    Mr. UNDERWOOD. You know, you outline a progression of savings that went from $9 million in 2001—$43 million in 2002 and 2003—$85 million. At what point in time do you make a judgment call and what process do you make the judgment call that perhaps you have cut too much—perhaps you are sacrificing something that will not surface until some time later? That is a key element because once you have made the cut—and I think it is been an issue raised by some other members of the panel—what point in time do you know that—well, maybe the cuts are too deep?

    General COURTER. Well——

    Mr. UNDERWOOD. And, you know, and when are we going to expect a similar amount? Or is this it? Or what is the general trending in this process?
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    General COURTER [continuing]. Well, I think we are at a point now where our approaches have produced a unit cost which I think is reasonable. And I think our leadership in the agency feels we are at that point.

    If you will let me go back for a minute to about two years ago—I think it is important to understand where we were. We were, essentially, in a capital infrastructure crisis and we were also in a fiscal crisis. We had allowed operating expenses to move into the sir charge account. And it was done, in most cases, just for convenience.

    It amounted—when we asked for the sir charge legislation, that, essentially, returned about $90 million back to the appropriation. At that point in time, we asked ourselves, ''Do we just come to the services and ask for an additional $90 million? Or do we need that $90 million? Do we even know what our costs are?''

    At that time, we found that we were really budget and input driven. We were not cost and output driven. We had not a really good idea of what our costs were. We had no basis to really assess whether we should ask for more money or not or burden the services.

    So we went to the commissary operating board and we said, ''If you will increase, by $90 million for two years,'' and I mentioned that last year—that we would work on reducing our costs of operation. And we would work on reducing that in a way that I think is fair. We would use a unit cost basis. We used activity-based management principles and we, essentially, started to drive the agency on a business area basis.

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    We established four business units. Each one of the business units have their own unit costs. And one of the key business units involves store operations. And so we, over time, changed from an input budget-driven operation to a cost and output-driven operation.

    The proposed reductions are well thought out and they were tested. It was not like we just threw it out there and said, ''Well, gee, I hope this works.'' Because that is not what we did.

    We also made one of the key criteria for establishing this objective—we established an objective to reduce our unit costs by seven percent, originally. And we said one of the rules of engagement must be that we would not impact customer service or output at the store level. That was one of the rules of engagement. And we would measure that by the customer satisfaction survey that looks at 14 different areas in terms of customer service and attributes of our store operations.

    We take that test every six months. Plus, we have business reviews every month at our regions that assess output and cost. And output in terms of a store is customer service—it is customer satisfaction—it is shelves being stocked. It is all those things that are common practice in a real efficient grocery operation.

    And if you will give me another minute, I would like to go through the process that we use to actually test. Is that okay?

    Mr. UNDERWOOD. Sure. Yes.

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    General COURTER. First of all, at the store level, we went through a means analysis. We looked at all elements of expense in the cost of running our stores. We found pretty screwy results. [Laughter.]

    We found that I was paying utility bills for my partner over here——

    Major General COURTER [continuing]. Which they enjoyed. [Laughter.]

    We analyzed all the elements of expense by supply, equipment, utilities and so on. And then we benchmarked. And we used the means analysis to figure out which stores really had high elements of expense in different areas. We also instituted an income statement and expense statement. They now manage by that approach.

    We also started to manage by unit cost. And so what we did in figuring out what we were going to do with our stores is, essentially, use a process that has been used throughout the Department for a long time and that is—it is competitive outsourcing process—A76 process.

    And what this does—it brings you through a process that allows you to produce a statement of work—a performance work statement. You actually, then, go in and you determine the skills required and numbers to, in effect, produce a bid.

    We field tested all these at three stores. We developed templates, as was mentioned earlier, for different sized stores. Again, though, the overriding concern was not to produce any output or service impact to our customers. And I think, overall, we have done that.
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    The reduction in labor costs at our stores resulted in about 7.3 percent reduction. And above store, in terms of layers of overhead and so on, we reduced 20 percent.

    And I think it is important to keep in mind that we are going to continue to monitor the outputs and service. It is part of our normal business practice now. Because when we use a unit cost approach, you just do not look at costs and you do not produce any cost reductions arbitrarily. You have to look at it in terms of output.

    Mr. UNDERWOOD. In the—well, you know, some of us have had a very bad experience with A76 in other areas. So using A76 in DeCA was not exactly a good news approach for many stores. [Laughter.]

    But in the process of vetting these changes, you talk about the commissary advisory board and then you talk about customer surveys—what is the general feedback that you get from commissary operators—from the managers of your commissaries?

    General COURTER. We have gone out and asked all our store directors. And when I make a visit, I make sure that that is part of our discussion. And we have certain locations where the template has not fit. It is not perfect. I will tell you that at least one of our region directors came in and said that the template for certain size stores in his region still provided too many people. And in other cases, it does not fit. It is a general standard that we will probably deviate from at certain locations.

    But we look at the customer satisfaction survey that comes back—we have our business reviews and we will continue to monitor customer service and satisfaction.
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    Mr. UNDERWOOD. Well, I still, you know, and I think I understand everything you have outlined. I am not sure about all the details of it. And certainly I congratulate you for your service and your very diligent effort in trying to reduce costs. And certainly I do not think you will find anyone that is unsympathetic to the idea of reducing costs. It is just that it has been at such a level and with such intensity that I think it has raised a lot of very serious concerns on the part of many panel members as to when exactly—what are the benchmarks for that? I know you have outlined unit costs as a benchmark. What are the benchmarks for that? And when is it going to stop?

    And, of course, you know, we are getting the sense here, at the same time, when you look at the commissaries and you look at exchange services and you look at the whole picture of these services—these benefits that are provided to our men and women in uniform that, given the nature of the national crises that we have been for the past few months, one would assume that there would have been an effort to increase the level of funding for these. Instead, we have continued to decrease, although, you know, I am not saying that that, in and of itself, is a bad idea or indefensible. It just seems that as we recognize that there needs to be greater attention to these and that we hear all the kinds of needs that we have heard across the board—admittedly, many are beyond the commissary—that it just gives us—it gives me an uneasy feeling.

    General COURTER. Sir, in the October/November timeframe, we took a customer satisfaction survey. And this measures 14 different areas.

    And keep in mind that about 40 percent of the reductions are already taken. And we use the same statistical basis—it is a high confidence level—it is randomly sampled and all that. And we had the highest ratings ever in terms of customer service. As a matter of fact, the highest rated areas were customer service and lower prices. And 14 areas were evaluated. And the biggest improvements were in produce and meat.
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    So I think we are getting the correct feedback. But our intention is not to break anything, that is for sure.

    Mr. UNDERWOOD. Thank you.

    Mr. BARTLETT. Thank you very much.

    Mr. Schrock.

    Mr. SCHROCK. Thank you, Mr. Chairman.

    General, Mr. Underwood pretty much hit on everything I wanted to talk about. I just need to understand a couple of things. We heard in the first panel that there were 2,600 positions that are being eliminated. I am just wondering, are they just in the stores or is it at the headquarters level? Who are these people—not by name, but by title? What impact will it have on the store?

    And I think the thing that worries me is if the service starts to deteriorate, the patrons are going to say, ''To heck with this.'' And they will go to Wal-Mart and Target and others. And then you have a situation—well, they will not care whether things are privatized or not. And I worry about the privatization thing probably as much as anything in this situation. And I am just trying to get a grip on that—how that is going to impact the whole operation.

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    General COURTER. We are in touch with store directors every single day. We have had cases where this template and this structure I talked about is not going to work for various reasons. And those will be fixed.

    But in the majority of the locations, we have not got any negative feedback.

    And when you use a number, whether it is 2,300 or 2,600, keep in mind that, as you probably recall, they were authorize-required positions. And you know in the military, authorized required—many of those were never filled and we never intended to fill them.

    So a better way to look at it is, essentially, at the store level you are seeing about a seven percent reduction. And that is not across every store. And we are going to adjust it based on what we hear and what we think we—and, you know, the basic thing is going to be the feedback from our store directors and feedback from our customers.

    Mr. SCHROCK. Who will these people be? Will they be floor people, office people——

    General COURTER. It is a varied——

    Mr. SCHROCK. Okay.

    Major General COURTER [continuing]. Group of people.
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    I do not see—I mean, if you look at what has happened to our stores—our lines have decreased. Our in-stock rates are higher than they ever have been before. So every measure that you could look at in terms of output has improved. As a matter of fact, we did a competitive measure of ourselves versus industry. We did it on a cost and output basis. And our current and projected output in terms of sales and all the performance measures that you would use—sales per person—sales per square foot—will be better than industry. And our unit cost is going to be considerably better than industry.

    So it produces a very good business case for our operation.

    Mr. SCHROCK. When will these reduction in force (RIFs) begin? Or have they begun?

    General COURTER. They have begun.

    Mr. SCHROCK. They have? How——

    General COURTER. Now, also, I would like to mention about that—we are concerned about the people, obviously. And we have tried to avoid any kind of RIF. We have used voluntary early retirement authorizations. We have used voluntary separation incentives.

    And so our idea is not to hurt people. And only at the last resort are we going to use a RIF.
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    And in terms of the actual number of people, it is hard to judge right now because we have not got that number. That is going to change as time goes on here.

    Mr. SCHROCK. I agree with you that, you know, savings are wonderful. And I am as conservative as anybody else. But I, you know, I just want—I just do not want that effort to create problems that will just totally ruin the system. That would bother me. That would bother me a great deal.

    General COURTER. I agree with you and we have that same concern. That was the criteria to start with. And using the unit cost basis for the actual reductions that we took, it should take care of that. And where it is not, we are going to take care of it—we are going to go back.

    Mr. SCHROCK. If the commissary would ever go away, my wife would kill me. You have got to think of that. So——


    All right. Thank you, General.

    Mr. BARTLETT. Thank you very much.

    Mr. Andrews.

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    Mr. ANDREWS. Thank you, Mr. Chairman.

    Again, thank the panel for your testimony—for your service—particularly General Courter—we are very proud of you from New Jersey. And we know that your family has a distinguished history of public service of your country. And I very much appreciate what you have done. I echo the chairman's remarks that you will be severely missed.

    And I also understand that you have been given and very difficult job to do by us, since we appropriate the funds and have called upon you to meet a financial mandate.

    I would say to my colleagues I think we have a responsibility in the context of a $48 billion defense increase to see if a piece of that could not be allocated to guarantee the quality of this benefit for people who serve and their families. That is a responsibility of ours, not yours.

    I did want to ask General Courter about—more to follow up on the line of questioning of Mr. Underwood and Mr. Schrock—how many positions are authorized out in the stores today?

    General COURTER. I think there is probably—let me find out—somewhere around 13—14,000.

    Mr. ANDREWS. And how many of those are filled by people today?

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    General COURTER. You said authorizations or did you say positions, originally?

    Mr. ANDREWS. Well——

    General COURTER. I would say on the—I do not have the exact number of authorized versus assigned. But I think it is probably somewhere in the 80—85 percent.

    Mr. ANDREWS. So if there were—how many—you said 13,000 positions, roughly?

    General COURTER. Yes.

    Mr. ANDREWS. So the number of people we are talking about would be 80 percent of 13,000—that is 10,400—10,500.

    I understand because you are looking at a labor cost reduction program not a person elimination—position program you have to give me an estimate, but what is a fair range of estimates as to how many human beings would not be working in the stores at the conclusion of this seven percent program?

    General COURTER. I could not give you that estimate right now because in the process—in the civil service system, you would have people that would——
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    Mr. ANDREWS. Sure.

    General COURTER [continuing]. Bump other people and I——

    Mr. ANDREWS. I do understand.

    General COURTER [continuing]. Do not have the exact number that would be affected.

    Mr. ANDREWS. I do understand. But I am right in assuming that we are going to have a labor cost that is seven percent lower than——

    General COURTER. That is right.

    Mr. ANDREWS [continuing]. We do today for that——

    General COURTER. That is right.

    Mr. ANDREWS. —13,000 positions. That is your goal.

    General COURTER. Yes, sir.

    Mr. ANDREWS. And I commend you for trying to accomplish that by early retirement and incentives. I know that you mean that. And I appreciate that very, very much.
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    I am concerned about the way that the decision was reached. If I understood your answer earlier, the way you went about this was to—using the A76 process—generate a template of what an efficient store would look like and then laid that template over three stores. Is that right?

    General COURTER. It was—no, it was laid over most—or all our stores by our regions. But it was field tested at three stores.

    Mr. ANDREWS. Now, when you say it was field tested in three stores, what does that mean? Does it mean you ran a computer model of what——

    General COURTER. No.

    Mr. ANDREWS [continuing]. Would happen? Or actually——

    General COURTER. No. We actually went out and did it. We actually set up—went through and put together a performance work statement. It said what our standards of operation would be in terms of——

    Mr. ANDREWS. Yes.

    General COURTER [continuing]. What is going to be on the shelves in the morning and the afternoon and so on. And then we actually did an assessment of that. We actually went out and reviewed that through a team to look at both the risk and benefit analysis.
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    Mr. ANDREWS. But let me understand what you did. If the template said that you should have, you know, seven meat cutters and there were nine in the store, what did you do with the other two? Did you lay them off? Or did you——

    General COURTER. We just had them do other—we did not have them stay in that store.

    Mr. ANDREWS. So they went—they physically left the store. So they did not——

    General COURTER. I am not sure where they went, but whatever—but if the template said that we were going to have this number, we tested that amount of——

    Mr. ANDREWS. Okay.

    General COURTER [continuing]. Folks at the store.

    Mr. ANDREWS. For how long a period of time?

    General COURTER. I would say it was a matter of months.

    Mr. ANDREWS. Two months—three months?

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    General COURTER. That sounds good—two—three months.

    Mr. ANDREWS. Okay. And then you conducted a survey of the customers after that two or three month period and asked them—what?—their feelings about service?

    General COURTER. Yes.

    Mr. ANDREWS. How many people were in the sample of the survey that you took?

    General COURTER. I could not tell you that right now.

    Mr. ANDREWS. Was it a statistically significant sample?

    General COURTER. Yes. It was a 95 percent confidence level.

    Mr. ANDREWS. 95 percent confidence for what margin of error—3 percent—5 percent?

    General COURTER. Three percent.

    Mr. ANDREWS. Okay. And did you, then, compare that to similar results from the store before you made the change?

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    General COURTER. Yes, we did.

    Mr. ANDREWS. From the same stores or in stores in the aggregate? In other words——

    General COURTER. Same stores.

    Mr. ANDREWS. The same stores?

    General COURTER. Yes.

    Mr. ANDREWS. So, in other words, you took a public opinion sample of shoppers in the store for a period of time prior to making the template changes.

    General COURTER. Well, what we also did is look at the performance that we had said we were going to generate in terms of shelves being stocked and hours of——

    Mr. ANDREWS. I understand. In other words, how long the lines were and how——

    General COURTER. Right.

    Mr. ANDREWS [continuing]. Readily the shelves were restocked and what not.
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    But it is accurate to say there was a statistically significant sample of customers in the store before the changes were made and in the store after the changes were made.

    General COURTER. I would say it was fairly good. Yes. It was a very good sample.

    Mr. ANDREWS. Is that a record that the committee presently has?

    General COURTER. No.

    Mr. ANDREWS. Is that something we could have?

    General COURTER. I could generate something for the record on how we measured the performance before and after at the stores.

    [The information referred to can be viewed in the hard copy.]

    Mr. ANDREWS. I would very much like to see that. I think that is a very important evaluative tool.

    And I say this, again, in full recognition of the fact that Congress has set the parameters within which you must operate and that you are making an absolutely good faith effort to operate within those parameters while, to use your term, under the rules of engagement, there is no diminution in customer——
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    General COURTER. Right.

    Mr. ANDREWS [continuing]. Satisfaction.

    I do think, though, that the best laid plans of mice and men sometimes go asunder. And I am concerned that we are going to generalize this experience of the template in situations where it may not work. And, again, I am not accusing you of that, I am making that observation. And I want to be sure that the committee takes into account whether these are sufficient data—whether they were properly derived. You know, models do not always work the way they are supposed to in the real world.

    And I know—I take as an absolute given that you want this benefit to be platinum plated for everybody who enjoys it. And I think we are working for the same thing. But I think it is incumbent on the committee to look very carefully at the way the study was done and take it under advisement.

    I thank you for that.

    General COURTER. I would like to mention that the survey was done in October——

    Mr. ANDREWS. Right.

    General COURTER [continuing]. Which would have been after the fact. And then, you know, before the fact is what—that is the survey we used for that particular store.
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    Mr. ANDREWS. Yes. The only thing I would say to you—the importance of looking at the survey—and we all who have hired pollsters understand this, but when you are in the margin of error, you do not really know what you have got.

    And, you know, the other issue is how these things will play over time. There is a fatigue factor—there is a wear-out factor. And if you have got a smaller staff doing the same work maybe for the initial couple laps around the track they are just as fast as they used to be. But they have got to run more laps and if their optempo is higher than it ought to be—we have experienced this in a lot of other areas of the Department—there is a wear-down factor. And I am concerned about how that would play out later on down the line, as well.

    General COURTER. Okay.

    Mr. ANDREWS. Thank you.

    Mr. BARTLETT. Thank you very much.

    Mr. Oritz.

    Mr. ORITZ. Chairman, I do not have any questions.

    But I just want to say to each of you, I have read your written statements. I just want to thank you for doing what I believe is a great job under very difficult circumstances this year and just tell you how much we appreciate what you have done.
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    Mr. BARTLETT. Thank you.

    General Courter, do you harbor any illusions that the panel is not concerned about the DeCA cuts? [Laughter.]

    General COURTER. No, I do not harbor any illusions. [Laughter.]

    I think, in part, though, it probably is somewhat of an illusion. And I think that the service levels we see are very good.

    Mr. BARTLETT. Thank you. Then I will not need to ask any more questions.

    One of the nice things about deferring your questions to last is you may not have to ask some questions so you can end up looking like the good guy. [Laughter.]

    Thank you.

    Thank you, fellow panel members.

    Mr. UNDERWOOD. Why do you have to say thank you for that, Mr. Chairman? [Laughter.]

    Mr. BARTLETT. I understand that the exchanges are working on cooperative ventures. This was mentioned in prior testimony. Is there more that can be done to consolidate buying for all three exchanges or for some items or for all resale agencies to further reduce prices? That is a question for any and all of you.
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    Admiral MAAS. Well, as the leader of our cooperative efforts board in the previous year—I have turned that over to General Downs now—but we have, as I mentioned in my testimony, the one joint health, cosmetics, beauty aids, household products—we are going to buy those together. We are going to have the same name. Currently, you know, I have got NEX brand—AAFES has got AAFES brand—they are all going to have the same brand name. It is going to be called Exchange Select.

    And that is just one example of where we are putting your combined buying power together in order to both provide good quality at the best price for our patrons.

    General COURTER. And sir, that was merely one—there are 72 different cooperative ventures going on, 45 of which include all of the exchanges. That list is growing continuously as we see better efforts—or better business practices amongst the three of us.

    Mr. BARTLETT. Admiral Maas, I know from your testimony that you are concerned with the continued loss of domestic manufacturers of fiber for uniforms. What are the implications to your uniform program?

    Admiral MAAS. Yes, sir. I am concerned. I do not know whether that concern will translate into crisis over the next few years. But there have been a number of both closures and reorganizations in the—not just in the textile factory sector, but also in shoes. There is really only one or two manufacturers of uniform-type shoes that are made in the United States. In fact, a familiar brand to all of us, Florsheim, has gone offshore now. So we cannot sell those in the exchanges as uniform items. We can still sell items, obviously, that are manufactured offshore.
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    So, in the near term, I do not think we are going to have a problem getting fabrics and shoes that are manufactured in the United States. I do not know what the long-term prospects for that are. I am concerned over it because of the prohibition against buying uniform items that are manufactured outside the United States.

    Mr. BARTLETT. General Downs, your testimony describes your efforts in instituting centralized buying. Please give us more detail in the benefits of this program. And have the changes been supported by your main store managers who may have lost some flexibility under this new arrangement?

    Mr. DOWNS. Yes, sir. Our cooperative or centralized buying initiative is at its early stages. Currently, we are centrally buying from four stores. Some of them are small stores that have not yet been the beneficiaries of a new merchandising system. For the larger stores, we must implement the merchandising system before we can effectively buy centrally, so it will be a slow process.

    But I would tell you that the cooperation of local store managers has been very good and is growing as people understand the benefits that this can have to them and the ability and attention that they can now pay to, in fact, the management and operation of their stores rather than focusing on the buying aspects.

    So we are very encouraged, as is our industry partners. And we will be pressing on as quickly as the implementation of our merchandising system will permit.

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    Mr. BARTLETT. Thank you.

    And I want to thank all of the panel members for your commitment and dedication.

    A couple of years ago when the family representatives testified last in a long, long hearing—there were very few people left in the hearing room—I looked out and it was hard not to notice because of those big gold bands on Admiral Maas' sleeves—he was still there. And I thought that was indicative of the commitment that you all have to your customers.

    Thank you very much for your service. And we will excuse this panel and convene the next one.

    Thank you.


    Mr. BARTLETT. I would like to note, for the record, that when our hearing began, there was an overflow crowd and we had to provide audio services in another room. I would also like to note that on convening the fourth panel, that the witness room is still full. I think this is adequate testimony to the importance of MWR programs to our military community.

    I would like to welcome our fourth panel of witnesses who are the Department of Defense policy makers and operators of military MWR programs. They are Mr. John Molino, Deputy Assistant Secretary of Defense for Military Community and Family Policy; Brigadier General Antonio Taguba, Commander, U.S. Army Community and Family Support Center; Rear Admiral Annette Brown, Assistant Commander, Navy Personnel Command; Mr. Arthur Myers, Director Air Force Services; and General Michael Downs, who reappears on his second panel, Director of Personnel and Family Readiness for the U.S. Marines Corps.
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    This is Mr. Molino's first appearance before the panel.

    Welcome, sir.

    Secretary MOLINO. Thank you, sir.

    Mr. BARTLETT. We also welcome his colleagues who have appeared before us on previous occasions.

    Mr. Molino, you may begin.


    Secretary MOLINO. Thank you, Mr. Chairman and members of the panel. I am honored that you have invited me to appear before you today, along with the morale, welfare and recreation directors from each of the military services, to testify on the Department's MWR program.

    My current nine-month tenure with the Department has only served to heighten my appreciation for the importance and impact of these MWR programs, garnered during my career on active duty. Today, these programs are offering needed support to our service members deployed overseas, as well as their families back home.
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    Excellent MWR support in deployed locations has become the norm, not the exception.

    During a recent trip to the installations in Bosnia and Kosovo, I was impressed that many of these programs are available to service members twenty-four hours a day, seven days a week.

    To support the families of military personnel involved in Operation Enduring Freedom, the military departments activated long-standing deployment support programs. The military services have increased hours of operation and extended services in many areas that are most needed, such as child care, youth activities, fitness facilities and recreation centers.

    Family support centers have extended support by increasing hours of operation—by increasing family team-building programs and by making video teleconferencing resources available to communicate with deployed family members.

    I will keep my oral statement brief, but I unhesitatingly stress the continued importance of MWR programs as a key component of the Department's efforts to enhance the quality of life of our service members and their families.

    This special panel on MWR has always recognized and supported these efforts. Your oversight and direction continues to strengthen the ability of our programs to fulfill their mission.

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    Thank you for your leadership and for this opportunity to share our successes, our shortcomings, our progress and our vision for the future. Your strong support helps us build the MWR programs that military communities will need in the years ahead and that our service members and families deserve.

    Thank you, again, Mr. Chairman. I stand ready to respond to your questions.

    [The prepared statement of Mr. Molino can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    Because I almost forgot General Downs at our previous panel, and because the Marine Corps is not my least favorite service, I will recognize General Downs now. [Laughter.]


    Mr. DOWNS. Thank you, sir. It is, once again, a pleasure to be able to appear before you and to discuss MWR programs.

    For the past year, our emphasis has been on program standards. We recognize that the monies associated with MWR programs is not the perfect measure of meeting the needs of our Marines and their family members.
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    We think that the development of the standards—that we are in good posture to move forward and to enhance those programs that meet the expectations and needs of our family members. We have had some special consideration to the Marines who serve on independent duty to make sure that they are not left out. We are talking about our recruiters and those associated with the reserve establishment.

    We are happy to report that through the efforts of the Marine Corps exchanges and also revenue generation activities within the MWR community, we were able to increase our per capita dividend to Marines by $21 from 2000 to 2001. We did that, in part, through overhead concerns, but also through increased support of appropriated fund dollars where it was warranted.

    The force protection issues that we discussed in exchange has certainly had its impact on MWR. And we are doing all in our power to make sure that those Marine families that live off the installation and our retired communities can have access to these important recreation and other service activities for them.

    I am prepared to respond to questions when necessary.

    [The prepared statement of Mr. Downs can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    So that there will be no hint of the chairman's ranking of the services, we will now return to protocol. And protocol is that we recognize the services in the order of how long they have been here. And the senior service is, of course, the Army.
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    So we recognize, now, Brigadier General Antonio Taguba.


    General TAGUBA. Thank you, sir.

    Mr. Chairman and members of the panel, it is, indeed, a pleasure to appear, again, before you and to update the status of Army MWR.

    And, before I continue, I would like to extend my welcome to Congressman Forbes as a new member of the panel.

    I have submitted my statement for the record and would like to make a few brief remarks. Sir, I am proud to report to you that Army MWR continues to perform superbly. In their response to the 9/11 attack, professionals across the Army mobilized programs to accommodate the heightened security and increase operating tempo.

    We have continued to provide MWR support to our forces deployed in the Balkans. And have begun to serve troops deployed to Operation Enduring Freedom.

    And, of course, our non-appropriated fund financial results this last fiscal year exceeded that of the previous year and fiscal year 2000.
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    And with a nation at war, MWR is even more important to the Army. We expect operating tempo to remain high. Soldiers and families, indeed, need our programs to relieve stress, reduce the conflict between duty and parental responsibilities and help maintain contact between those deployed soldiers and their families back at home.

    In support of our soldiers deployed during Enduring Freedom, we have sent force provider recreation modules and paperback book kits to the theater. We have additional force provider kits that are pre-positioned in the region to support them later on.

    We plan to increase the support once the tactical situation permits and in coordination with the effective commands.

    We also have 38 civilian MWR professionals that are engaged in supporting the 9,000 service members in the Balkans today.

    Of course we operate a range of recreational facilities such as fitness, library and other recreational facilities at nine major base camps, as well as services through our remote sites.

    We are proud to say that we have a satellite-based communications system that provides video teleconferencing capability between our deployed soldiers and their families at home.

    We realize that installations have expanded services in programs from fitness to child—in youth—to clubs to match the increases in our operating tempo that we are experiencing today. And we have activated several family assistance centers at installations and in our communities with our reserve components.
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    We do face new financial challenges in this fiscal year. As noted before you, increased services has resulted in increased appropriated and non-appropriated fund costs. We have experienced that first quarter non-appropriated fund revenue and income are down from last year, although we are encouraged by their recovery from the days immediately following the attacks. And we closely monitor these trends.

    The success of Army MWR has largely been due to reinforcing standards, reducing overhead at every opportunity and listening to our customers and delivering quality programs and services. We have also institutionalized our response to deployments and taken every opportunity to remind our leaders of MWR's importance to revenues and our soldiers and families' well being.

    Our principle focus remains unchanged today and that is providing the best MWR services and programs to the best Army in the world.

    We thank you for your steadfast support. It makes our success even more possible.

    And, sir, I will be happy to answer any questions that you may have.

    [The prepared statement of General Taguba can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

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    Admiral Brown.


    Admiral BROWN. Mr. Chairman and members of the panel, thank you for this opportunity to appear today and to discuss Navy morale, welfare and recreation. I have submitted a written statement for the record and will quickly summarize.

    With the dramatic increase in operational tempo since the start of the war on terrorism, our focus in MWR has been heavily oriented toward our deployed forces and their families. During times like this, the quality of life portion of what our Chief of Naval Operations (CNO) calls the quality of service equation becomes even more vital.

    I would like to share just a few examples of how MWR has been a crucial part of that effort.

    Navy MWR has provided over 500 pieces of enhanced cardiovascular fitness equipment to accommodate accelerated ship deployment schedules. Navy MWR placed civilian recreation fitness specialists aboard ships to deliver programs. All of our carrier battle groups now have these professionals on board and we are placing them, now, on our amphibious groups to support our Navy/Marine Corps team.

    We sent fleet units over 300 holiday recreational programming packages containing over 300,000 items. These packages included appropriate holiday decorations and promotional resources that allowed sailors to celebrate the holidays at sea.
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    We have stepped up live entertainment for our forces afloat with a wide variety of options on ships and for our folks on the ground in forward areas. We have received a great deal of very positive feedback from the fleets telling us how important these visits have been for their morale.

    With the help of Navy exchange, and in conjunction with AT&T, we obtained over 430,000 free phone cards for every active duty sailor and activated reservist in the Navy. Additionally, we arranged for penny-a-minute phone calls for sailors to communicate with their families at home from every ship afloat over the December holiday period.

    Sailors and their families are very special people who give up a great deal to serve their nation. To recognize this dedication, we developed a program called Saluting Sailors and Their Families. This program consists of a series of events aimed at encouraging our folks to share their Navy experiences and learn more about the quality of life programs available to them through the Navy. The prizes involved opportunities for trips of a lifetime that they would never have experienced were they not part of the Navy.

    Last year was certainly challenging. But it is been a very gratifying experience to be associated with the thousands of dynamic professionals in the MWR business during these trying times. Time after time our professionals have overcome major challenges with little notice to ensure that wherever our sailors might be on duty, they have access to the best quality of life programs.

    Mission first—sailors always—this is our motto. Great MWR programs supporting sailors on the front lines and their families at home prove that this is more than just a catchy phrase.
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    Mr. Chairman, thank you for your leadership and the ongoing support for Navy MWR by the entire panel.

    I look forward to answering your questions.

    [The prepared statement of Admiral Brown can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you. Thank you very much.

    Mr. Myers.


    Mr. MYERS. Thank you, Mr. Chairman and members of the MWR panel, for the opportunity to appear before you today. On behalf of the entire Air Force Services community, let me thank the panel members for your support over the last year. We greatly appreciate your strong interest in MWR programs and the service they provide to the military community. And I know you will continue this interest and support in the coming year.

    Let me also congratulate the newest member of the Panel, Congressman Forbes. We look forward to working with you.

    The events of September 11 significantly affected most aspects of american life. From your earlier comments, Mr. Chairman, I know that you appreciate the funding impact on the MWR programs due to increased force protection conditions and contingency response—activity hours curtailed, programs terminated, facilities closed, non-appropriated fund employees used for force protection requirements like identification checkers and escorts—many employees put on administrative leave, others furloughed. In some cases non-appropriated funds were used to provide force protection and base operations in support of the war efforts.
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    Worldwide, the Air Force program showed an approximate $11 million or 17 percent decline in deposit for the month of September alone. The hardest hit bases literally saw income cut in half, making it virtually impossible to adjust programs to make up.

    Since September, worldwide profits dropped 55 percent below last year.

    In short, the events of September 11 have caused significant drain on available Air Force MWR cash, prompting bases to defer NAF reinvestments and curtail programs.

    More significant than funding issue, though, is the need to continue these well-rounded quality of life programs when our communities need them the most and not reduce service. Along with the other services, we have requested consideration of a policy that would allow us to treat category C programs as category B during force protection conditions Bravo or above. This is similar to the allowance for remote and isolated status at bases that meet the exacting DOD criteria that you approved, one of which is increased security petitions. Providing some utilities and similar support for category C programs under increased force protection conditions could help bases keep programs open longer to support the needs of the community.

    No matter what happens to this proposal, though, we must continue to provide programs and services, even if we must mortgage our future to do so. Our troops must be able to focus on a mission wherever they are assigned knowing their families are being properly cared for. Also, our overall MWR programs are key ingredients that ensure our troops are fit to fight and win.

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    We appreciate your strong support of these and other programs that contribute to military readiness and quality of life.

    I have respectfully submitted my formal statement for the record and welcome your questions.

    [The prepared statement of Mr. Myers can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    And as I stated earlier, without objection, all of your prepared testimony will be a part of the record.

    Let me now recognize Mr. Underwood.

    Mr. UNDERWOOD. Thank you for your statements and thank you for your continuing service. And thank you for your hard work on behalf of families. You know, some of these families are experiencing some very difficult circumstances, especially reserve units. I have an entire reserve unit called up and they are totally confused about the family support services that they are supposed to get. And it is been a very difficult and trying time. And, of course, even people who are in uniform day-to-day experience that, as well.

    But it is important and you hit it right on the mark, Mr. Myers, that we need our people to be concentrating on their jobs. And they cannot concentrate on their job if they are worried about maintaining regular contact—if they are worried about child care—if they are worried about all the issues that many of you work so diligent—all of you work so diligently on.
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    The question I have for the MWR chiefs is—and each one can respond in kind—is are you satisfied with the portion of exchange dividends that you receive? Or do you believe that your programs should receive a larger share? And I ask that question in light of the fact that, as you pointed out, Mr. Myers, there is declining revenues.

    Mr. MYERS. Sir, I am a member of the Air Force/Army Exchange Board and work closely with all the members and General Wax.

    I believe the exchange is doing a great job meeting the needs of the community. And consequently, making the revenue and the profits needed to sustain their programs to help us. In fact, even with September 11, they were able to meet their budget and exceed it to help us. So I am more than satisfied with our exchange dividends and the great work they are doing.

    General TAGUBA. Sir, likewise, I sit on the board and we partner with AAFES, which is our biggest benefactor. And it is totally impressive that, with heightened force protection, that they were able to meet their plan.

    And we are very, very happy that our share of the dividends from their earnings—from the proceeds—have increased somewhat. We received about $145 million this year, which is an increase of about 2 or 3 percent from last year. So we rely on their plan. We rely on their success to help with our MWR programs.

    Mr. UNDERWOOD. Thank you.
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    And I want to also, publicly thank you for bringing the Army show to Guam. [Laughter.]

    That was a nice event, you know?

    General TAGUBA. Yes, sir.

    Mr. UNDERWOOD. We had a typhoon and an earthquake and a day-long power outage just before the arrival of the Army show, so there were a lot of factors working against us.

    General TAGUBA. Yes, sir. You are very welcome.

    Mr. UNDERWOOD. Rear Admiral Brown.

    Admiral BROWN. Sir, I do not know that anyone would, in this position, not take the opportunity to say we would like more——


    Admiral BROWN [continuing]. Of our exchange dividends.

    Mr. UNDERWOOD. Well, the first two did not. [Laughter.]

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    Admiral BROWN. Well, perhaps I am breaking with my fellow MWR chiefs here.

    However, that which we get, we know is a constant and we are able to make plans to continue to support the program support that we have for our sailors and families with that contribution that the Navy exchange makes.

    We are in routine conversations with them. And we have a Flag Level Executive Board—FLEC—which meets periodically—once a quarter. And we take that opportunity, always, to bring up discussions where we might improve that distribution of exchange profits.

    Mr. UNDERWOOD. General Downs.

    Mr. DOWNS. We think that the Marine Corps organizational structure is the strength to this issue in that I am responsible for both the revenue generation and the MWR programs that it serves—more importantly, also, our installation commanders. So they are continuously making the judgments and decisions as to the cost of the MWR programs and the revenues that are necessary to do that. And we have the opportunity to adjust as we move through the year.

    As I indicated in my opening remarks, our dividend per marine went up $21 between 2000 to 2001 and we think that is evidence of suitable support from the exchange system.

    Mr. UNDERWOOD. Thank you.
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    I have no further questions, Chairman Bartlett.

    Mr. BARTLETT. Thank you very much.

    Mr. Schrock.

    Mr. SCHROCK. Thank you, Mr. Chairman.

    Thank you all for being here. Thank you for what you do for the troops and their families. It is absolutely vital.

    I will just make a quick comment. On a trip I made around the country with three other Members of Congress in August, in four days we visited 12 states and 25 bases. And your comment, Admiral, about the fitness equipment is so keen because kids are really into that. I mean, all ages, frankly, are all into that, as are their spouses and some teenaged kids. And that is real important. And I think to keep physically fit in this time is very, very important. So I really appreciate that aspect.

    I just appreciate what you do. I use the services. I did when I was active duty. I still do. And I appreciate what you do. And thank you for what you do for the troops.

    Admiral BROWN. Thank you, Congressman.

    Secretary MOLINO. Sir—Mr. Chairman, if I may?
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    Mr. BARTLETT. Sure.

    Secretary MOLINO. Mr. Schrock, when I visited Bosnia and Kosovo, which I mentioned in my statement, we noted that the sensitivity is there with the fitness facilities in that they keep them open 24 hours a day. And not only that, but they are utilized 24 hours a day. Because the soldiers and sailors—airmen, Marines are working shift work, it is a very vital benefit. And they really do take advantage of it.

    Mr. SCHROCK. Yes. They do. Great. Thanks. They are building—at the Naval Air Station Oceanna—they have just opened one that is so incredible—you cannot believe. And they are getting ready to open one at the carrier piers in Norfolk. And I cannot wait to see what that looks like. It is going to be a star. There is no question about that.

    Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you very much.

    Mr. Forbes.

    You have no questions?

    Mr. Molino, last year, DOD witnesses testified that OSD had established the goal of reaching 80 percent of the Department's potential need for child care by fiscal year 2007. Since there are big waiting lists at many of our facilities, this seemed to be a difficult, but very laudable task. Are we still on course?
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    Secretary MOLINO. Mr. Chairman, I do not know that I would say we are on course. I know one of the questions I asked when I was briefed on the fact that the goal is 80 percent—it struck me that I did not understand why we were setting an 80 percent goal for ourselves and why our goal was not 100 percent. And I have, in fact, questioned the manner in which we come up with—the formula we use to come up with the need—the statement of need for child care. And we have initiated the program with the Rand Corporation to have them come in and analyze how it is we quantify the need for child care to see if that is correct. It seems to me we ought to be pointed in the direction where we have appropriate care for the population.

    What we are trying to do to meet the need—because military construction does not appear to be the solution—is to do more of the in-home care, which is much cheaper to establish. But we can still maintain the standards—require the commanders to visit and do all of that. And Mr. Abell talked about that a little bit in his testimony. And we would be able to get more for the investment if we do that.

    But I must confess to you that I am somewhat disappointed with the speed with which we are moving toward that goal and intend to do some management—take some management actions to see if we cannot re-emphasize that and our fitness facility construction to meet our goals.

    Mr. BARTLETT. Thank you for your reference to the in-home child care. I had the opportunity to visit in-home services. One home I went to was particularly impressive. There were lots and lots of glass knick-knacks all over the house. And the lady took care of several children. And they were within easy reach of the children. And we wondered, ''How can you do this?'' And we asked her and she said she just explained to the children that they had their toys and she had hers and——
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    Mr. BARTLETT [continuing]. These were her toys and they were off limits—they were off limits for the children. I thought that was great training for the children.

    I do not know why we should not have—if we can sponsor more of these in-home daycare facilities—why we cannot have a goal of 100 percent. You know, why should one out of five of our children not have the opportunity to be in one of these facilities? And why should parents of one of five of our children not have this benefit?

    Thank you for your commitment to a more robust goal.

    Let me ask a question of Mr. Downs. Is the Marine Corps still on track to meet the DOD goals for appropriated fund support of MWR in 2004, as you testified last year?

    Mr. DOWNS. Yes, sir. We are. And, as you would note, in my written testimony, we have increased category A support by 6 percent to 82 percent. And we have increased our category B support from last year to this year by 7 percent from 52 to 59. And we intend to meet the 85/65 goal by 2004.

    Mr. BARTLETT. Oh, thank you very much.

    I have a question for all of you. I would just like for the record to contain a little anecdote from each of you relative to the commitment to your MWR program. All of you note the outstanding support your programs have made to the war effort—both the deployed forces and those at home. Please describe, for the record—and I would ask each of you to describe one of the extraordinary steps your MWR professionals have taken at home stations to support the war effort.
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    Mr. MYERS. One program we have done to support families—a lot of our troops have to work extended hours—have to work weekends and so forth. We set up contracts at bases and we actually contract family daycare homes. So if a troop all of a sudden finds that he is working longer hours the rest of the weekend, the family daycare home will pick up that child and take care of that child so that person can focus on the mission—at no cost. We pay that out of our appropriated funds.

    We have gotten e-mails throughout the Air Force with families telling us because of this they can really focus on the mission, especially dual member families where one is deployed. So that has really been a key thing that we have done and it is been well received by our military personnel.

    Mr. BARTLETT. General Taguba.

    General TAGUBA. Sir, likewise, today we have several installations that are operating with extended hours. And we are capturing the costs of those extended hours and making sure that we get the appropriate level of funding for them.

    And we have identified, at least, a request for supplemental and submitted that through our Army channels.

    We have several installations that are operating family assistance center, which is an expanded portion of our Army community services. We have—in close link with about 112 of our reserve component—family assistance centers that are operating today.
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    We have activated our mobilization and contingency plans for child and youth services. That includes, of course, those who are family child care providers—our in-home. We have 3,000 of those in the force today that are providing services to about 24,000 of our precious little children.

    All of those are in place today. And, obviously, we will require additional funding for those. And we have several installations who have taken active measures to send letters out to their local communities apologizing for the inconvenience, of sort, because of access controls at our installations. That is kind of an active marketing to ensure that they are welcome in the installations today. Some of our installations have given them special passes so they could go through the long lines and to ensure that they are welcome.

    We want to ensure that our communities are a precious part of our prospect here in making sure that we accomplish our mission during this time of war.

    Mr. BARTLETT. Admiral Brown.

    Admiral BROWN. Sir, I take the opportunity to come back and speak highly of my friends in Navy exchange. Because of an increase in the distribution that we receive from them or are projected to receive from them—perhaps with some modifications now—we were able with that, if you will, additional funding to sponsor what I eluded to in my opening remarks called the Saluting Sailors and Families program.

    It started off with an attempt to recognize the families immediately after 9/11 and had them, on the Web, submit to us what was important about being a Navy family. The entries that we received came from around the world. They were judged. The winners were brought from around the world—West Pac, Europe, et cetera—and brought to Norfolk for a Garth Brooks concert. They were treated, you know, with kid gloves—the limousines—real first class treatment.
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    That led to a series of events that we have done and are still projecting to do over the next year since then. It included a New Year's Eve in New York City where families, again, talked about what was important about being in the Navy. We, then, sponsored Super Bowl and Mardi Gras for sailors who had recently—within the past six months—re-enlisted off of units in the 5th Fleet. That was a big success.

    We are going to sponsor another group of families to Ireland in honor of St. Patrick's Day. And the list goes on.

    We will wrap it up in—a year from now—in September.

    That has garnered a considerable amount of interest—not only from the sailors and their families, but from the leadership, as well. It is created, if you will, the WOW factor in MWR that we like to repeat as often as possible.

    Moreover, it caused folks to learn more about MWR programs and the wider quality of life programs. So, if you will, in addition to all the other great things that we do on a daily basis at MWR in the Navy, this was a particularly high point for us.

    Thank you.

    Mr. BARTLETT. After hearing that, Mr. Schrock says he thinks he will re-enlist.

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    Mr. SCHROCK. Yes. [Laughter.]

    Mr. BARTLETT. Mr. Downs.

    Mr. DOWNS. I would——

    Mr. BARTLETT. General Downs.

    Mr. DOWNS. Yes, sir. I would only comment that deployment is a way of life for Marines. And this is not a unique in numbers situation for us. And we have standard recreation, education, fitness packages that are available to commanders as they deploy. And depending upon the circumstances of their deployment.

    Also, we are very fortunate that most of our deployments are on Navy ships. And we have the opportunity to take benefit of those activities in fitness and telecommunications—e-mail—opportunities equally with the sailors aboard—and some of the other recreation programs that they offer.

    And, last, as is also a way of life with us, we pay a lot of attention to the families left at home and make sure the connectivity with them and their deployed members—military members—and so I would characterize it as business as usual.

    Mr. BARTLETT. Thank you.

    Secretary MOLINO. Mr. Chairman, if I may?
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    Mr. BARTLETT. Sure.

    Secretary MOLINO. At the DOD level—the OSD level, we do not operate any of the facilities. So I cannot cite any——

    Mr. BARTLETT. You provide the color.

    Secretary MOLINO [continuing]. Examples. I know that sir. But——

    Mr. BARTLETT. But thank you for your comments.

    Secretary MOLINO [continuing]. I am happy to say that we were able to play, if you will, the role of the rich uncle in one part. We got some piece of the emergency supplemental as it was distributed within the Department. And we were able to distribute $20 million to the services, which was fenced for additional child care. And it enabled some installations to provide child care to some of the reserve components.

    Mr. BARTLETT. Thank you very much.

    Mr. Molino, can you be more specific about what the new social compact may mean for MWR programs?

    Secretary MOLINO. The social compact, sir, is the term we are using to describe a recognition on the part of the Department that there is a reciprocal relationship—it is a three-way relationship, if you will, among the service member, the service member's family and the Department representing the american people.
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    And so it is recognition of the fact that service members, when they enlist or get commissioned, accept certain types of duty—accept the military lifestyle that requires certain arduous duties of them. And it is a recognition by the Department that we have a responsibility to provide certain services. Some of them have been provided for many, many years and for many generations. It is just that we are trying to say that this is the Department's recognition of the fact the it is a reciprocal relationship. The service member does his or her share, the family does their share and the Department needs to do its share.

    In many cases, it means a commitment to underwrite that support where, in the past, the quality of support would vary from base-to-base, depending on the degree and the amount of volunteers that could come out. Well, to some extent, the Department needs to pony up and provide the funds so that we can assure that programs meet a minimum standard.

    Mr. BARTLETT. Thank you.

    This is a good segue to my last question. I was going to ask you if you thought that the MWR programs needed a bail out because of the losses they sustained as a result of the increased security after 9/11. But I know that your answers on that would be, ''Certainly.'' So let me ask the question differently——


    Mr. BARTLETT [continuing]. And that is will you document, for the record, the actual dollar amount that we need to come up with to make these programs whole for your different—for your four services? Can you do that for the record?
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    I know that they are talking about this in the Pentagon. And I would like to have on our record the actual dollars that you think need to be appropriated to make these programs whole.

    Secretary MOLINO. Mr. Chairman, we could certainly document for the record the impact of the events of September 11. And what impact it had on the individual MWR programs, providing my colleagues would be willing to share that information with me. But we would certainly be happy to do that.

    Mr. BARTLETT. Well, thank you very much. And we will look for that. We will look for that in the record.

    Let me ask my colleagues if they have any additional comments or questions.

    Let me thank this panel and all the other panels and thank, also, those visitors to this hearing. Thank you very much for sitting through more than three hours of hearing. I think that a full room is adequate testimony to the commitment that this country has to these programs as a very essential part of our support for our military.

    Thank you very much.

    This panel is in adjournment.

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    [Whereupon, at 6:09 p.m., the panel was adjourned.]