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[H.A.S.C. No. 109–21]









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APRIL 7, 2005




JOHN M. McHUGH, New York, Chairman
JO ANN DAVIS, Virginia
JOHN KLINE, Minnesota
JIM SAXTON, New Jersey
WALTER B. JONES, North Carolina
JIM RYUN, Kansas
ROBIN HAYES, North Carolina

VIC SNYDER, Arkansas
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MARTY MEEHAN, Massachusetts
SUSAN A. DAVIS, California
MARK UDALL, Colorado

Michael Higgins, Professional Staff Member
Debra Wada, Professional Staff Member
Jennifer Guy, Staff Assistant




    Thursday, April 7, 2005, Fiscal Year 2006 National Defense Authorization Act—Military Resale and Morale, Welfare and Recreation Overview


    Thursday, April 7, 2005

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    McHugh, Hon. John M., a Representative from New York, Chairman, Subcommittee on Military Personnel

    Snyder, Hon. Vic, a Representative from Arkansas, Ranking Member, Subcommittee on Military Personnel


    Abell, Hon. Charles S., Principal Deputy Under Secretary of Defense, (Personnel and Readiness)

    Bocook, Tammie L., Spouse of Military Service Member

    Cawley, Sgt. First Class Peter, Army National Guard

    Cowley, Rear Adm. Robert E., III, Commander, Navy Exchange Service Command

    Doughtery, Margaret I., Spouse of Military Service Member
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    Downs, Michael P., Director, Personal and Family Readiness Division, Manpower and Reserve Affairs Department, Headquarters, U.S. Marine Corps

    Frost, Maj. Gen. Kathryn G., Commander, Army and Air Force Exchange Service, U.S. Army

    Gilly, Gunnery Sgt. Alan R., Recruiter Monitor, Manpower and Reserve Affairs Department, Headquarters, U.S. Marine Corps

    Henties, Mike, Chairman—American Logistics Association

    Johnson, C. Lloyd, Chairman, Armed Forces Marketing Council

    Macdonald, Brig. Gen. John A., Commander, U.S. Army Community and Family Support Center

    Myers, Arthur J., Director of Services, U.S. Air Force

    Nixon, Patrick B., Acting Director and Chief Executive Officer, Defense Commissary Agency

    Weaver, Rear Adm. Christopher E., Commander, Navy Installations Command, U.S. Navy

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[The Prepared Statements can be viewed in the hard copy.]

Abell, Hon. Charles S.

Cowley, Rear Adm. Robert E., III

Downs, Michael P.

Frost, Maj. Gen. Kathryn G.

Gilly, Gunnery Sgt. Alan R.

Henties, Mike

Johnson, C. Lloyd

Macdonald, Brig. Gen. John A.

McHugh, Hon. John M.

Myers, Arthur J.

Nixon, Patrick B.
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Snyder, Dr. Vic

Weaver, Rear Adm. Christopher E.

[The Documents can be viewed in the hard copy.]

Bocook, Tammie L., joint with Dougherty, Margaret I.

Cawley, Sgt. First Class Peter

The Military Coalition (TMC)

[The Questions and Answers can be viewed in the hard copy.]

Mrs. Drake
Mr. McHugh


House of Representatives,
Committee on Armed Services,
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Military Personnel Subcommittee,
Washington, DC, Thursday, April 7, 2005.

    The subcommittee met, pursuant to call, at 1:10 p.m. in room 2212, Rayburn House Office Building, Hon. John M. McHugh (chairman of the subcommittee) presiding.


    Mr. MCHUGH. I understand we have had some electronic problems, and I hope they don't impede. Some of the mikes have been going on and off. For those listening, that is probably good news. For those of us who like to hear ourselves talk, it is not. We will have to play that by ear.

    Let me welcome you all here today. I particularly appreciate my two distinguished colleagues joining us. As perhaps most of you in the audience know, there was an unexpected and rather late change in the House schedule, which allowed members to go back to their districts yesterday rather than this evening, and I am afraid—I am certain many took advantage of that. So we did think this hearing, rather than to lose it to the schedule because it would not have been possible to reschedule it, we would have had to scrap. It was far too important. So thank you all. And, in particular, thanks to my colleagues for being here.

    Today the subcommittee turns its attention to military resale stores, the commissaries and exchanges, and to morale, welfare and recreation (MWR) programs. The world of military resale and MWR is complicated in its dynamic. Although the impact of these programs on military readiness is at times difficult to precisely measure, I certainly would submit there are few programs that contribute more to the morale, to the well-being of the people that make up our military and that, in turn, make it so dominant today.
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    There are a great many stories in the military resale and MWR community. Obviously, wartime brings out the best in people, certainly in our people, and the support that these programs provide to our warfighters is truly remarkable, a great testament to the dedication and professionalism of the people in the MWR; and in the exchanges particularly, I would add the Army and Air Force Exchange Service that has led the effort on the ground in both Iraq and Afghanistan.

    I am pleased that the need to ferret out commissaries as candidates for closures has taken what I would call a more moderate tone within the Pentagon. I am also comforted by the new direction in the exchange consolidation process that will emphasize shared services. And I, for one, think that is a very wise approach.

    But all the news from this community is not good, is not positive. Wartime budgets are growing tighter and funding for MWR programs has either already been cut or is in jeopardy. People at installations around the Nation are reaching out to Congress for help to protect these programs that they rely upon and cherish so deeply.

    And let me be clear. While I understand that the demands of budgeting often require very difficult choices, I believe that cuts to MWR-appropriated funding that results in programs that are unresponsive to the needs of the military community will yield a harvest of discontent within the force that we shall regret for many years to come. It is a classic example of eating your own seed corn, and we must turn the budget process around immediately.

    Honestly, I was disappointed that the Army continued with its budget proposal to cut and then eliminate second destination transportation funding for the Air Force and Army Exchange Service. The decision unrepentantly places the burden for these cuts squarely on the backs of the military families that are overseas and was made notwithstanding a very stern warning and issuance of discontent from both Dr. Snyder and myself that the Congress would not tolerate that proposed cut.
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    Another area of concern is the requirement placed on the Defense Commissary Agency (DeCA) to complete several thousand positions for outsourcing before they have had a chance to complete their program to reengineer the DeCA workforce. I don't see the need to rush the contracting process and put commissary programs at risk, but it is well established that DeCA will be so much better structured to provide the benefit and compete with the private sector in just a few years.

    I was also disappointed to know the relatively minor pricing decision regarding gasoline at overseas locations, but it is reflective, in my opinion, of the marketing attitude that I consider unhealthy.

    The case involves gasoline markups in Japan. As we all know, military families living overseas are often buffeted by economic forces over which they have little or no control. And in this case, for once, potentially had a good deal as the cost of gasoline from government sources was protected from increases that we are experiencing here in the United States. But when given the opportunity to stabilize gasoline prices for overseas families, the Army and Air Force Exchange Service and their board elected to increase prices to match those in the United States. And in my view, that is not the kind of pricing attitude that we want to see from our, quote, ''hometown,'' end quote, store; and I hope we see changes in that area very soon.

    With that, I want to get to the hearing. But before I do that, I certainly want to take the opportunity to yield for any comments he may deem appropriate to the distinguished ranking member, a partner in this effort, Dr. Snyder.

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


    Dr. SNYDER. Thank you, Mr. Chairman, and thank you for your statement. And I have a written statement that I would like to have submitted in the appropriate place.

    Mr. MCHUGH. Without objection, so ordered.

    Dr. SNYDER. It makes some comments in there about the importance of commissaries and exchanges working more closely together as we move along.

    I also want to say three quick things. The work you all do is absolutely vital for those of us who visited overseas with our troops. I mean, you all know how important the work is that you do, and we really appreciate that. I also want to acknowledge the presence of Major General Frost and the work she has done through 31 years of service. And I think this is about her last official act in this warm room this afternoon before she retires. And we appreciate your friendship and all your work through the years.

    And then, Secretary Abell, just to put you on notice, this committee has been concerned that we have not gotten back from the Department of Defense recommendations on changing the UCMJ with regard to sex crimes. My understanding is that that is starting to shake loose, but the whole point was to hold off a year to give you a chance to make your suggestions and recommendations and look at it in anticipation of this year's markup in the defense bill, and we are about there.
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    I know the chairman made comments about it a couple of months ago. So if you have any update on that at this particular time, I would like to hear that. But thank you so much for being here.

    [The prepared statement of Dr. Snyder can be viewed in the hard copy.]

    Mr. MCHUGH. I do have one written statement in addition to the statements of our witnesses. Without objection, I would move that additional written statements from the military coalition be entered into the record. Without objection, so ordered.

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

    Mr. MCHUGH. Let me begin to introduce our first panel, and these are not necessarily in the order in which they are seated, but I am going to stick to the script.

    First off is the Honorable Charles S. Abell, Principal Deputy Under Secretary of Defense Personnel and Readiness. Mr. Secretary, thanks for being here.

    Major General Kathryn Frost, Commander, Army and Air Force Exchange Service Command. As my colleague, Dr. Snyder, just said—and she tells me it is, in fact, her last official duty that she apparently asked to be subjected to. So we may grant her insanity pay if there is such a thing. But I think it really reflects, as Vic said, her 30-plus years of dedication to this system and, most importantly, to the military members and families that they serve.
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    And, General, we wish you all the best in the future and our deepest thanks for your past service and for being here. Next, Rear Admiral Robert Cowley, Commander, Navy Exchange Services Command. Also Brigadier General, United States Marine Corps, Retired, Michael P. Downs, Director of Personnel and Family Readiness, Division Headquarters, United States Marine Corps. Welcome. Mr. Patrick Nixon, CEO and Acting Director of the Defense Commissary Agency. Brigadier General John A. Macdonald, Commanding General of the United States Community and Family Support Center. Welcome. Rear Admiral Christopher Weaver, Commander, Navy Installations Command; and Mr. Arthur Myers, Director of Air Force Services. Thank you all for being here, as I said. Let us get right to the testimony.

    Secretary Abell, good to see you.


    Secretary ABELL. Thank you, Mr. Chairman. I appreciate the opportunity to testify today on commissary, exchange, and morale, welfare and recreation programs.

    I would like to commend the subcommittee for hearing from combat veterans and family members today. They represent the multifaceted community that we serve, active, guard and reserve families, both experienced members and those who are new to the military lifestyle. What they share is the Nation's gratitude for dedicated service and sacrifice. And I add my personal thanks to Gunnery Sergeant Gilly, Sergeant First Class Cawley, Mrs. Dougherty and Mrs. Bocook for their testimony.
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    Military service represents special challenges to military families. The Department is committed to delivering resale and MWR benefits to bolster the quality of life of military families well into the future. Commissary and exchange benefits are not just a form of nonpay compensation. The resale benefits and MWR programs, including child care and fitness, form the military community support structure and contribute to mission readiness. Further, we recognize that many retirees rely on the resale programs as a supplement to their incomes.

    With the help of Congress, the commissary benefit is better than ever. It improves each year. The Department's senior military and civilian leadership continue to evaluate ways to guarantee the continued viability of these programs into the future. With strong oversight, firm direction and the commitment of good leaders, the Defense Commissary Agency is sustaining customer savings and improving customer service while controlling the taxpayer subsidy and maintaining robust capital investment. It is a tribute to DeCA that not many customers remember or care that each armed service ran its own commissary system 15 years ago.

    In May, 2003, the Deputy Secretary of Defense set the exchanges on a similar course of action. I believed then and I still believe that full integration of exchanges is the right thing to do.

    We sometimes refer to the exchanges as a benefit, as a nonpay compensation, and as part of the fabric of service culture. They are all of these things, but they are also businesses and must be managed using the best practices of private sector business. When shopping at Hecht's or Macy's or Lord & Taylor, consumers do not know or care that they are owned by a single corporation or care how their back office services are provided. Our exchanges should be no different.
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    There has been resistance to change as there often is to any change. We have tried to accommodate alternative views and are moving along a course towards a shared services environment for the exchanges. This concept, first suggested by Admiral Cowley, should reduce the risk associated with major organizational change and will continue to ensure a viable exchange benefit well into the future.

    I have sent the Deputy Secretary a package that will move us in that direction quickly. As we approach these changes, we must be mindful that the MWR programs depend on a steady stream of exchange dividends and appropriated funding. Transformation is changing the MWR programs.

    MWR programs are reaching out to the communities to improve the availability of services, especially fitness and child care. We have an Operation Military Child Care that was launched in early March to meet the needs of deployed parents including the guard and reserve. More than 500 service members have submitted on-line applications since the program began and about 300 children are receiving subsidized civilian child care as a result of that program today.

    Last year, we shared concerns about reductions to the Army and Navy MWR budgets. The fiscal year 2006 budget restores appropriate levels of appropriated funding to the Army and Navy MWR programs. I am proud that Navy and Army leadership responded to our calls to fully support these programs.

    The Army is planning reductions of Army and Air Force Exchange Service (AAFES) second destination transportation costs, as you mentioned, Mr. Chairman. In making these reductions, the Army is counting on savings from global restationing and inventory management by AAFES. I have expressed my concerns about these cuts and the assumptions on which they are based to the Army budget office and to the Army leadership. The Department will hold the Army to their promise to restore the funding if those expected deficiencies do not materialize. Whether operating programs for today or transforming for tomorrow's challenges, our overriding priority will continue to be supporting our troops and their families.
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    The resale and MWR programs are doing an incredible job of supporting troops fighting the war on terror and taking care of families back here at home. We are making changes to guarantee these benefits continue to be relevant to the retention and readiness of our Armed Forces.

    Mr. Chairman, late yesterday, while discussing our testimony, I discovered that my colleagues have concerns about the way their data is portrayed in my prepared statement. The integrity of my statement is as important to me as it is to the members of the committee, who rely on accurate testimony. I would request the indulgence of the committee to submit a corrected copy of my statement next week. I will work with the services and exchange commanders to ensure that the data in the statement is presented in a manner that is accurate and precisely reflects the context of the service and exchange data.

    Mr. Chairman, thank you for your sincere care and attention to these important programs. And I look forward to your questions.

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

    Mr. MCHUGH. Thank you, Mr. Secretary.

    I was made aware of the topic in the closing part of your statement, and I am sure you would agree it is an unusual situation. And I appreciate your interest in accuracy; that is what we all want.
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    But we are going to treat it as a unanimous consent request just because we believe that is how it should be on a change of submission of alternate testimony. And I will order that the Secretary's resubmitted testimony be entered in the record in its entirety in replacement of his original statement, without objection.

    And hearing none, so ordered. So we appreciate that.

    Next, General Frost. Again, the best in the future and thank you so much for the past. We look forward to your comments.


    General FROST. Thanks, Mr. Chairman. Because this is my last day as the Commander of the Army and Air Force Exchange Service, I am especially proud to have the chance one more time to tell to you the AAFES story. I have submitted, like everyone else, a statement, a written statement, which I hope you will accept for inclusion in the record and would like to summarize.

    Mr. MCHUGH. Without objection, so ordered.

    General FROST. Since you seldom, if ever, have the opportunity to observe them, let me begin by telling you about how proud I am of the 49,000 AAFES associates around the world who, under the extraordinary leadership of our Chief Operating Officer, Marilyn Iverson, and a team of world-class executives have once again excelled in 2004.
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    Our 2004 sales were up $417 million. This is 5.5 percent over our sales in 2003. While change to our industry-average increase was only 3.8 percent, AAFES's total revenue of $8.3 billion was up 5.8 percent over 2003. And most importantly, our dividend payment to the services' MWR of $242 million will be 5 percent higher than last year and almost $45 more in constant dollars per capita than 10 years ago.

    Customer satisfaction with AAFES increased one point in the annual American Customer Satisfaction Index. Now, while one point might not seem like a lot to you all, to us it is given the fact that the retail industry average score decreased by two points.

    Likewise, customers gave us the highest rating ever on our own internal customer satisfaction survey, a score of 73. Customers seem to be responding to our renewed focus on service, a priority on price and value and improvements in our infrastructure.

    Deployed troops were not included in either survey, but I believe our customers also recognized the extraordinary commitment of the AAFES team to fulfill our pledge to the troops, ''We go where you go.''

    AAFES continues to provide unprecedented support of our deployed troops with 62 stores throughout the Enduring Freedom, Iraqi Freedom theaters. In Iraq alone, 270 AAFES civilian associates operate 31 stores and oversee a variety of familiar and sometimes unique services. And after a lengthy moratorium on name-brand fast food, we now have 27 name-brand fast food restaurants in Iraq, Subway, Pizza Hut, Burger King and Green Bean Cafe with 25 more on the way, to include a Taco Bell in Iraq by the end of May.
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    Sales of merchandise and food are robust in the combat theaters. As one of my managers told me when I visited last September, it is not about the sales, it is about the smiles.

    The contingency support has not been without its challenges. We have lost millions of dollars of merchandise to insurgent attacks and hijacking. AAFES associates continue to be exposed to many of the same threats our troops endure and we shoulder significant costs to operate in a war zone.

    We were very fortunate that the 2004 defense supplemental reimbursed AAFES over 50 percent of our expenses that were authorized, appropriated funding. Each year since my assignment at AAFES, however, earnings have been impacted as a result of contingency operation and expenses.

    The decrements impact our dividends to MWR, as well as our capital program, and I don't think that is fair to soldiers and airmen. So I am pleased that the 2005 defense supplemental request includes 53 million to reimburse AAFES for its authorized incremental appropriated fund costs.

    Authorized funding or not, the AAFES presence and contingency operations are critical for troop quality of life. One Army specialist in Iraq was interviewed by the Associated Press. What he told the reporter left no doubt in my mind how important AAFES was to quality of life in the theater. He said, ''Sometimes I go to the Post Exchange (PX) even when I don't need anything, because when I do, it is like going to the mall back home.'' and then he added, ''When I go to the PX, I am not in Iraq anymore.'' and I think you will agree that the AAFES mission to sell merchandise is important, but our ability to temporarily transport troops out of a war zone into a familiar comfort zone is the most important thing we will ever do.
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    Today is a special day for me for several reasons. First, the chance to testify before you once again, but today is also the second anniversary of the first AAFES sale in Iraq, 7 April 2003, before Baghdad fell, out of the back of a pickup truck to war-weary troops, an occasion that I will forever celebrate.

    April 7 is also my 31st anniversary in the Army. On this day in 1974, I started WAC officer basic training at Fort McClellan, Alabama, 31 years ago. I was so proud when I recognized I could enjoy the value, service and support of a PX as part of the benefits of being a soldier.

    Like many soldiers whose assignments have taken them around the world, I appreciate that AAFES, with its stores, its services and its fast food has been a familiar anchor wherever the Army has sent me. And so my job as the AAFES commander has been to strengthen that benefit and to ensure its relevance to soldiers, still, 31 years from now.

    I know I can tell my replacement, Major General Bill Essex, that he can count on your support to continue to do the same. And I thank you so much for that support for our soldiers and airmen.

    Mr. MCHUGH. It is hard to express adequately the appreciation for more than three decades of service. And I don't think I can even try other than to say how much we deeply appreciate it. And we wish you all the best again, in the future.

    [The prepared statement of General Frost can be viewed in the hard copy.]
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    Mr. MCHUGH. With that, Rear Admiral Robert Cowley, Commander, Navy Exchange Service Command. Admiral, thank you.


    Admiral COWLEY. Mr. Chairman, Secretary Abell, distinguished members of the Military Personnel Subcommittee, fellow flag and general officers and members of the Senior Executive Service. Today is my first appearance before this subcommittee as Commander of the Navy Exchange Service Command and its 15,000 employees. It is my honor to represent them. Please accept the full version of my testimony for the record.

    Mr. MCHUGH. Without objection.

    Admiral COWLEY. Navy Exchange Service Command understands our role in the lives of our military and their families. It is our mission and our passion.

    Navy Exchange had a record sales year with total sales from direct run operations of 2.18 billion, an increase of 3.3 percent over the prior year. We are pleased to report a 6-year trend in increased same-store sales totaling 35.6 percent growth since 1998. That is an annual growth rate of 5.2 percent. Net profit is projected to be $68 million, which generates $48 million for our shore MWR programs. The ship store program generated another $16 million for a total of 64 million to support Navy MWR float and ashore.

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    Apart from financial results, we measure our performance by how our customers evaluate us in the competitive retail marketplace. Navy has said that savings to our customers is the single most important part of our mission, and our savings percentage has risen this year to 21.2 percent, plus an additional average savings of 6 percent from sales tax avoidance. We are able to provide this savings and still contribute $64 million to Navy's MWR afloat and ashore.

    We also measure our performance by our customer satisfaction index (CSI) each year, and I am pleased to report this year's score is 77. When we compare to two commercial retailers, Wal-Mart at 73 and Target at 75, we are providing the exchange benefit at a world-class level. Both our savings percentages and CSI scores are calculated by surveys of impartial third-party retail intelligence firms, also used by our sister exchanges.

    We are now two years into deployment of our merchandising enterprise resource planning system, Retek. This state-of-the-art merchandising will lower our operating costs, enhance our supply chain and improve our in-stock, on-shelf. We have seen the full potential of Retek modules we tested and deployed and are looking forward to completing this project in 2006.

    Now, this past year, we were challenged with a number of unplanned events, the closure of our store in Puerto Rico and the impact of four hurricanes in Florida, which severely affected stores in Orlando and Pensacola. We met these challenges head on and mitigated their effects.

    I am especially proud that our associates first took time to support essential base readiness requirements for our naval air station in Pensacola and the family station there, and in addition, reopened these exchanges after the storms abated. Our associates labored with very little rest until services were restored to a level where our neighbor families could then begin to rebuild their lives.
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    Aboard our ships, we supported sailors and Marines with the essentials of life and provided shipboard telephones as a much-needed link back home. This year, I am pleased to tell you, we are able to cut the cost in half to $0.50 a minute. We also donated over 21,000 phone cards to support 27 Navy ships deployed in theater. We wish to thank our partner AT&T for their help with these efforts.

    Our Navy lodges continue to provide clean, family-friendly rooms to ease the strain of a duty station move on our families. I wish to recognize our lodge in Bethesda, Maryland, for their special support of 350 Marine families of those injured in Operation Enduring Freedom (OEF) and Operation Iraqi Freedom (OIF). Navy Lodge Bethesda also assisted the Army when facilities in and around Walter Reed Army Hospital exceeded capacity.

    Navy Exchange Service Command (NEXCOM) continues to monitor by programming more than $97 million for 2004 in capital programs. We are committed to providing clean, modern and safe facilities equipped with modern IT systems as an investment for the future.

    Finally, each of the exchanges has invested significant time and resources in the Unified Exchange Task Force. We fully support the efforts of this task force. From my perspective, we are moving toward an integrated solution with potential to make our collective operations more effective while limiting risk to our top-line sales. That is the life blood of a retail company.

    While we have not yet completed the business case, we must ensure it examines applicable business processes, related rules and conversion costs at an appropriate level of detail. The integrated solution must serve the Department and the service as well and improve the exchange benefit into the future.
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    I want to thank the subcommittee for its unwavering support of the military exchanges. We wish to extend our sincere thanks to our industry partners because, without them, we would be nowhere near as successful as we are. We wish to thank our sister exchange services, Commander Navy Installations, and Defense Commissary Agency for their continued partnership.

    With all my associates, I appreciate the opportunity to address you here today. Thank you.

    Mr. MCHUGH. Thank you very much, Admiral.

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

    Mr. MCHUGH. Next, Brigadier General of the United States Marine Corps, Retired, Michael P. Downs.

    General, thank you for being here.


    General DOWNS. Thank you, Mr. Chairman, Congressman Snyder, subcommittee members, for this opportunity to report to you today on quality of life of our Marines and their families and the status of both our Marine Corps exchanges and the MWR program.
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    By any objective standards, Marines and their families have been faced with an extremely high operational and personnel tempo these past three or so years. Approximately two-thirds, 11 of 17, of our installations are part of the deployment base for the Marines deploying to Iraq and Afghanistan, and over 34,000 Marines and reserves have been called to active duty from across the Nation to join the fight against terrorism since October, 2001.

    Understandably, this has stretched our ability to sustain MWR and exchange support for our Marines at home and for those deployed while at the same time seeing to the heightened needs of our families to include those of our fallen Marines and those who have been seriously injured. Our highly competent and capable installation commanders and their staffs are the point of main effort and have done a remarkable job of balancing the dual demands of those deployed and, in some ways, unrelenting demands of those at home, all in the face of flat and declining sales and fixed or increasing operational costs.

    While the profitability of our exchanges in the MWR programs have clearly been impacted, I can report that our integrated organization of exchanges, MWR and overall Marine Corps community services programs were profitable in 2004 and no required program or services were curtailed or diminished. This is a significant accomplishment indeed as at the height of OIF, OEF, nearly 70 percent of Marines, our primary customers, were deployed for warfighting.

    And about 35 percent are deployed today. Our challenge now is to continue to seek ways to respond to what promises to be a sustained higher level of deployment. We are inspired to do so by displays of courage, dedication and spirit so evident in the actions and attitudes of our Marines and the families that support them.
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    Thank you for your continued support, strong support, for the exchange and MWR benefits. Marines and their families are truly appreciative. I look forward to your questions.

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

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

    Mr. MCHUGH. Next, Mr. Patrick Nixon, CEO and Acting Director of the Defense Commissary.


    Mr. NIXON. Thank you, sir.

    Mr. Chairman and distinguished members of the subcommittee, it is indeed a pleasure for me to appear before you today representing the 17,000-plus employees of the Defense Commissary Agency who, day in and day out, go above and beyond to deliver this premier quality-of-life benefit to the military community.

    I have come to the realization, over the course of my career, that in today's military landscape with the forces postured for war, and frequent, extended deployments are the norm, the importance of the commissary benefit to quality of life has never been greater. The ability to buy brand-name American products at significant savings wherever in the world the need for a commissary has been identified constitutes a significant positive motivator on decisions to join and remain in the military, not to mention the peace of mind knowing that one's family can shop for the highest quality products in a safe and familiar environment, as a force multiplier.
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    In today's presentation, I will cover three primary topics. First, I will update on the performance metrics that are in place to measure the efficiency and effectiveness of the commissary benefit. Second, I will provide an outline of future initiatives. And, finally, I will spotlight the issues and challenges ahead.

    In DeCA's role as the administrator of the commissary benefit, we must be ever mindful that there is a balance that must be maintained between the value of the benefit and the cost to the taxpayer. DeCA must operate with the efficiency and effectiveness of our retail counterparts for the commissary benefit to remain viable. Hence, we have a continual process of benchmark, improve and measure.

    In fiscal year 2004, DeCA achieved noteworthy results that I would like to recap.

    While the retail supermarket industry failed to demonstrate any significant sales growth, DeCA achieved sales of 5.2 billion, a 3.9 percent increase representing nearly 200 million in sales growth. This is the largest percent increase in 13 years.

    Of greater importance is the strength of the underlying metrics. Both customer transactions and sales per transaction showed solid growth. Our results for the first quarter of fiscal year 2005 continued this positive trend with a 3.8 percent increase, 50 million of additional sales over 2004.

    While sales are a retail motivator, it is the savings on brand-name American products and their worldwide availability that are at the heart of the commissary benefit. In 1991, when DeCA was formed, savings were reported in the 20 percent range. In fiscal year 2000, the savings were pegged at 27.5 percent. And today, despite increased pressure from discount retailers, DeCA reported a savings of 32.1 percent for the survey conducted in 2004. This savings is not only noteworthy, it has withstood numerous independent audits and reflects direct item comparisons weighted by volume.
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    In the important area of customer satisfaction, DeCA received all-time high grades from both internal and external evaluation surveys. For fiscal year 2004, the customer satisfaction survey delivered a 4.47 rating on a scale of 5.0 versus a targeted result of 4.42. Equally impressive is the result just reported on the fiscal year 2005 survey of 4.55. This is the highest score in the 12-year history of conducting the survey.

    These surveys evaluate 14 important operational elements of each commissary and serve as a benchmark for DeCA performance in critical areas of customer satisfaction as identified by the private sector. DeCA's score increased in all 14 areas measured.

    In the external arena, DeCA received a score of 76 from the American Customer Satisfaction Index compared to an average score of 73 for the supermarket industry. This significant statistical separation demonstrates our continued emphasis on customer service.

    While world-class customer satisfaction is paramount, of equal importance to the taxpayer is a sound business foundation. DeCA achievements are impressive. In fiscal year 2004, DeCA received its third straight clean audit opinion delivered by an independent audit firm. We are one of only six Department of Defense agencies to receive this recognition. In addition, DeCA was recently given the second highest score in the Department of Defense for financial accountability and recognized as the most improved Defense agency in the critical area of internal controls.

    Today, DeCA operates in a dramatically changing retail environment. While advancements in technology will be the gee-whiz introductions of the future, the two bedrocks of a sound operation are maximizing productive time and controlling average hourly wages. This must be accomplished while navigating the complex rules of the Federal workforce, preparing for the transition to the National Security Personnel System and meeting the challenges of the President's Management Agenda on outsourcing. DeCA is actively engaged in a corporate reengineering strategy that will position the agency to take a leadership role in future Department initiatives and further capitalize on recognized best business practices.
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    As we face the challenges of the present and the future, I am confident and optimistic that DeCA's posture will continue to deliver a premier quality-of-life benefit to the armed services community.

    Mr. Chairman, I would like to thank you and the members of this subcommittee for your staunch support of this important benefit. The leadership of Secretary Abell, the oversight of the Commissary Operating Board and our unwavering support from industry are cornerstones of our success. Day in and day out, it is the dedicated DeCA workforce that makes this benefit what it is. I am proud to lead them during these challenging times.

    Thank you. I look forward to the discourse that follows.

    Mr. MCHUGH. Thank you very much, sir.

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

    Mr. MCHUGH. Brigadier General John A. Macdonald, Commanding General of United States Army Community and Family Support Center.

    General, thank you for being here, sir.


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    General MACDONALD. Mr. Chairman, Congressman Snyder and members of the subcommittee, I am honored to appear before you to discuss the Army's progress in shaping MWR programs to meet the needs of a transforming Army.

    I have submitted my statement for the record and have a few brief comments.

    Mr. MCHUGH. Without objection, it will be entered.

    General MACDONALD. The Army remains dedicated to providing high-quality, predictable MWR and family programs. With a nation at war, MWR is even more critical to soldier and family well-being. Our programs relieve stress, reduce the conflict between duty and parental responsibilities and help maintain contact between deployed soldiers and their families.

    The key objective of MWR is to ensure we are synchronized with the commander's mission priorities and the needs of our soldiers. Since 9/11, we have deployed a total of 34 MWR professionals to support our soldiers in Iraqi Freedom and Enduring Freedom.

    As we focus on our soldiers, one of the best ways to support them is to care for their families. It is not enough to care. Soldiers must trust that we care and have confidence in the systems we have developed to provide that confirming support. Soldiers who know their families are self-aligned with the appropriate support available are better able to concentrate on their missions and more likely to continue their Army careers.

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    One of the primary challenges we face is executing our programs while maintaining financial stewardship and a businesslike approach. We continue to vigorously pursue economies and efficiencies in the management of our programs.

    Over the years, Army MWR financial operating results have been very positive. Fiscal year 2004 results exceeded those of fiscal year 2003 and exceeded our standard. However, we have not returned to the levels of financial performance of fiscal years 2000 and 2001.

    Sir, today our Nation is proudly served by the best trained, best equipped and most technologically sophisticated Army in the history of the world. These volunteer warriors, along with their families, sacrifice much to serve their country, and they deserve the best we can give them.

    Every day, MWR fulfills this important obligation with programs and services delivered around the world. We know our success is not possible without your committed and steadfast support.

    Thank you, Mr. Chairman. I will be happy to answer any questions you may have.

    Mr. MCHUGH. Thank you very much, General. We appreciate.

    [The prepared statement of General Macdonald can be viewed in the hard copy.]
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    Mr. MCHUGH. Rear Admiral Christopher Weaver, Commander, Navy Installations Command.

    Admiral, welcome.


    Admiral WEAVER. Thank you very much, Mr. Chairman, Congressman Snyder and members of the subcommittee, thank you very much for the opportunity to appear today to discuss the Navy's MWR program.

    I have submitted a written statement for the record and I ask that it be accepted.

    Mr. MCHUGH. Without objection.

    Admiral WEAVER. I would like to share some comments with you from the statement now.

    The Navy MWR program is aggressively working to meet our responsibility to the men and women of the Navy by providing reliable, high-quality programs around the world. We are engaged in a number of important initiatives consistent with the Chief of Naval Operations' guidance to become more efficient and effective by implementing modern MWR business processes and systems, adopting business-based standards and output metrics and seeking opportunities to streamline and improve program alignment, all with the goal of generating top-quality MWR programs to our people at the right time, right place, of the right type and for the right cost. Indeed, the Navy is committed to continuously improving our internal organization and delivery processes in a way that maintains quality of service and program offerings at best cost.
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    With a view to maximum value for the resources provided, the Navy has focused its efforts on system outputs, and I am pleased to tell you our customer satisfaction rate reflects success in these efforts. We have directed the vast majority of our efficiencies and savings efforts at overhead functions, rather than program delivery.

    We have not allowed the closing of any facilities that were not actively supported by patrons. In fiscal year 2004, only 21 of over 4,000 facilities and capabilities that we operate were closed, and this was primarily due to low patron usage. In fiscal year 2005, we do not anticipate any closures other than those again dictated by low patronage.

    In my written testimony, I have covered the latest program news in detail, but I would like to elaborate on a few of Navy MWR's most notable recent successes.

    In support of deployed units afloat and ashore, we distributed over 129,500 pieces of recreation and fitness equipment. We upgraded two-thirds of the fleet learning and media resource centers on ships afloat by distributing nearly 2,900 PCs, laptops and printers. And we will have completed the upgrade of the entire fleet in fiscal year 2005 with the purchase of an additional 1,950 of these items.

    Navy child and youth programs cared for over 31,000 children, ages 6 months to 12 years, in 227 facilities and 3,180 on- and off-base licensed child care development homes. Our standard of child care continues to be the highest in the United States.

    In fiscal year 2004, we partnered with Armed Forces Entertainment and the USO on eight separate entertainment tours compared with only three in fiscal year 2003. This cooperation allowed us to provide MWR entertainment events aboard 20 deployed ships and numerous shore locations. Navy-wide, MWR provided 545 shows attended by 140,000 military and family members, and this represents a 40 percent increase from fiscal year 2003 at essentially the same cost.
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    An example of an innovative sailor support program is the new partnership between the Naval District of Washington MWR fitness center and the National Naval Medical Center, Bethesda, Physical Therapy Department. This partnership uses off-hospital facilities to aid in rehabilitating our severely wounded service members in mind, body and spirit.

    As you can see, Navy MWR remains a robust and dynamic program today, and I am proud to be a part of that program. Continued emphasis on applying program innovation, best business practices and employee training will ensure that MWR will remain strong and vital for many years to come. Ultimately, we will remain focused on delivering the best output while driving down the cost of delivery of these services.

    Mr. Chairman, thank you for your time and for this committee's steadfast and ongoing support of these programs. I look forward to addressing your questions.

    Mr. MCHUGH. Thank you.

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

    Mr. MCHUGH. The final presenter today is Mr. Arthur Myers, Director of Air Force Services.


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    Mr. MYERS. Mr. Chairman, Congressman Snyder and members of the Military Personnel Subcommittee, thank you for the opportunity to appear before you today to talk about the status of Air Force MWR programs.

    Our mission is to increase combat capability and improve productivity through programs promoting readiness and quality of life for Air Force people. Our programs, initiatives and outstanding people working around the world form a critical infrastructure to provide deployable support for warfighting commanders, help alleviate the stress that personnel and families have undergone in these critical times and provide a sense of community for the base population and a peace of mind that those left behind are cared for.

    We continue to provide combat support and community service in many ways. In the deployed environment, we provide life-sustaining support, such as hot meals, lodging, fitness, entertainment and recreation opportunities to the troops, bringing them a sense of home the best way we can.

    For those sustaining the home front, we ease the burden of a high operations tempo by expanding our programs even more with extended child care and youth programs, increased community support activities and a professional and compassionate network of care made available for those left behind.

    Helping sustain our Air Force is a tremendous challenge, and we would not be successful without your continued support. We thank you and look forward to working with you to make a direct and lasting impact on quality of life for our military members and our families.

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

    Mr. MCHUGH. Thank you all for being here.

    To my colleagues, I would say, unlike the last few hearings, we are going to at least try to get through without resorting to the 5-minute clock, depending on time constraints. While we won't monitor it with lights, buzzers and bells, we would appreciate your trying to direct your questions as concisely as possible.

    I don't think that at any time when potentially you are asking people to give up their lives for your country that you can do too much for them, whether it is in time of peace or, now, in time of war. But it does seem to me in this environment, with the kinds of deployments that we have that are not just rippling but really quaking through all the services and through all parts of this planet, and the fact that we do have active theaters of combat in Afghanistan and Iraq, we cannot squander any areas that are represented in this hearing and by these individuals today.

    I mentioned in my opening comments about second-destination charges. If there is ever a time, in my view, that these programs are essential—and I think General Frost encapsulated it very well by quoting a military member's, ''When I go in there, I am not in Iraq anymore.'' that really does seize on the essence of what this is all about. And it seems to me that any cut, particularly a cut-down projected to zero in second-destination transportation charges can, for all of the talk of efficiencies and economies, have one net result, and that is greatly diminishing the benefit of this program to our men and women as they are deployed.

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    So let me start with Admiral Cowley, because the Navy has been talking about this, but has not yet effected any reductions. And I don't want to editorialize and get the Admiral at cross-purposes with any of his colleagues or superiors, but I understand that he had some concerns about that.

    How do you view second-destination transportation charge reductions and your ability to achieve your mission?

    Admiral COWLEY. I view them with real concern, sir.

    Now, we have been in communication with our resource sponsor and our logistics agent, and they have reported that they are not contemplating any reduction.

    Mr. MCHUGH. Mike says to pull the mike up. And Mike is right.

    Admiral COWLEY. I would view any reductions there with some real concern. We have been in communication with our resource sponsor and with our logistics champion, and they tell us that they are not contemplating any reductions in second-destination transportation.

    Mr. MCHUGH. Well, that is good. And take the message back, at least from this member's perspective, that I think it is a very wise decision.

    But let me push you into the realm of the theoretical. If you had to find 25 percent savings on that, where would you do that? Would it affect your quality of programs?
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    Admiral COWLEY. I think there would—there are several different aspects of this. We have second-destination transportation that covers what I would call merchandise that is going to the exchange and then we have some NEX depots that we have overseas. And I think we would take a look at becoming effective in both of those areas. We are working with a sponsor right now and also with the logistics folks to see how we can be more effective in both of those lanes so we can work through the stress in that budget right now.

    Mr. MCHUGH. We certainly all encourage effectiveness and efficiencies, but I would suggest without having had the benefit of your direct thoughts that if your superiors have said that they are not going to take money out of that fund, they probably think to do that would have a negative net effect. But that will be my assumption.

    Admiral COWLEY. It would have an impact on operations.

    Mr. MCHUGH. General Frost, as I mentioned in my comments, Dr. Snyder and I wrote about our concerns in this regard and ultimately, as I recall, we got a call from General Christensen over at G–4, and he assured us that the prices would not be increased and other efficiencies would be found to offset that reduction. He cited some of the potentials there.

    But you are looking at STD funding that would be reduced by 50 percent during fiscal year 2006 and zero in 2007. Help me better understand how that isn't going to have a negative effect on programs. It is your last day.

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    General FROST. I am as bothered by it, as you are. And this committee has been wonderful in their support for second-destination transportation and giving us the ability to give U.S.-procured merchandise to our troops overseas at the very same price they would be paying for it at Fort Bragg, Andrews Air Force Base or any other exchange in the United States. It an enormous quality-of-life enhancer. And AAFES is the largest user of the Defense Transportation System in peacetime as a result of the second-destination transportation dollars that we receive.

    The last several years, I believe we have been extraordinary stewards of STD dollars, eliminating tens of millions of dollars by cost avoidance, by stuffing our own containers, by maximizing the cube better than anyone else that uses the Defense Transportation System. However, a cut of 50 percent, there just aren't enough efficiencies left, as we continue to try to get better and better, to make up that amount of money. And we will continue to look for ways to save on STD, but I believe we have gotten just about as good as we can get, given the current requirements.

    If I were going to be the Commander of AAFES, I would still say, I absolutely will not raise prices on soldiers and airmen and their families overseas as a result of that. That would leave us only with a couple of choices. Those would be to reduce the earnings at AAFES, which is going to impact MWR and our capital program, which in the long run also impacts our earnings; or to look for sources overseas from which we can procure U.S. merchandise. And I don't believe that is good for the industry here in the United States.

    So I don't believe cuts in STD are beneficial for anyone involved in military resale and, most of all, for the military community that counts on us for being there in our pledge that ''We go where you go and our prices stay the same.''
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    Mr. MCHUGH. I appreciate your comment about procuring American products, but there is another aspect of that, if I might, and I am basing it on my personal experience.

    Anybody who has been forced to come to these hearings sees these 3-gallon jugs. Well, there is Diet Coke in here, and I admit, I am addicted. You take me to Europe and you give me Coke Light. I can't even choke it down; they sell it as the same stuff, and it ain't the same stuff, and there are differences between American-branded products that are manufactured in Europe and manufactured in America. And Americans grew up with the American stuff.

    General FROST. Mr. Chairman, could I add something to that, as well?

    Mr. MCHUGH. And I love Pepsi Light, by the way.

    General FROST. I agree with you on the Diet Coke, as well.

    But the one thing I have not been able to convince my beloved Army of in regards to second-destination transportation, as they reduce hours, they forget that retail—commercial retailers across this Nation are supplemented with second-destination transportation, because when a soldier or airman or family member orders from a commercial retailer in the States, they are only charged for postage to New York. The rest of the cost for moving merchandise overseas by air is with second-destination transportation dollars provided to the Military Postal Service Agency. And it is patently unfair to support the commercial retail industry of this country and not the Army and Air Force Exchange Service that provides the benefit for MWR as well.
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    Before they look to take hours away, they should be examining other places where that second-destination transportation cost perhaps can be reduced.

    Mr. MCHUGH. Mr. Secretary, I heard your comments and I was encouraged by the fact that you said you expressed your concerns. Hearing what you have heard here today, why don't we stop being concerned and stop it?

    Secretary ABELL. Mr. Chairman, as a Principal Deputy Under Secretary at OSD, I cannot direct a service secretary to do anything.

    Mr. MCHUGH. I am not sure I want to hear what he just said.

    Secretary ABELL. In my position, I cannot direct a service secretary to do anything.

    Mr. MCHUGH. I do appreciate that. I do. But I think with all due respect, it is, at a minimum, your challenge to reflect accurately what you have heard here today and perhaps go back across that beautiful river and inform folks on that side that it was not just a letter signed out of haste that Dr. Snyder—and I trust, and I am confident I am speaking for all my colleagues who signed this, this is bad policy at a terrible time.

    And we are not going to resolve that here today, but I think we made an important point.

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    Let me ask you one quick question, and I want to get to my colleagues. Last year's defense authorization bill created a pilot program on sales, so-called ''impulse items,'' on cameras and such. What is the status of those impulse items?

    Secretary ABELL. We are working with the exchanges and the commissary to develop that program, that test. Also, last year's bill directed the formation of the DOD executive resale board, which I will chair.

    Mr. MCHUGH. Is that an official announcement?

    Secretary ABELL. I signed it on March 24, so a week or so ago. And the members of that board will be the three assistant service secretaries and a senior military officer to be selected by the uniformed leadership of each of the services. Ex-officio members will be the resale commanders here at the table with me today and a representative of the general counsel.

    I will convene the first meeting of that group before summer. And one of the things I want that group to help us with is to put the final touches on this test before we roll it out. So it will happen; it will happen this year.

    Mr. MCHUGH. Thank you.

    I stated the question as though under the presumption that everybody in the room understood what I was talking about, and that probably wasn't the proper thing to do. I know General Frost has had some concerns about that, as she should, and was troubled by the potential loss of income in her shop. We tried to put some safeguards in there. I would be more than unfair if I didn't give the General a chance to comment on a pending pilot project and how it is evolving at this point.
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    General FROST. We appreciate the discussion we had last year with regard to that language, and we are fully cooperating with the OSD effort to examine the possibilities that will enhance the commissary shopping experience, because we are partners in resale; but at the same time, ensure that we maintain the level of sales and earnings that really is necessary to sustain MWR support.

    Mr. MCHUGH. I understand.


    Admiral COWLEY. The working group met February, 2005, and I believe they are moving toward a complementary assortment that will protect our equities on both sides here, sir.

    Mr. MCHUGH. Mr. Nixon, do you want to comment?

    Mr. NIXON. We are pleased with the way things are progressing.

    Mr. MCHUGH. Mr. Downs.

    General DOWNS. We think that this DOD resale executive board is the right body to wrestle this issue.

    Mr. MCHUGH. Thank you very much, and I do appreciate that, General.
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    With that, let me please yield to the distinguished ranking member, Dr. Snyder.

    Dr. SNYDER. Thank you, Mr. Chairman. Thank you all for your testimony and for the work that you do. I think it is just so vital and so important.

    Secretary Abell, would you respond to what I said earlier, the question I asked about the UCMJ and the status of that? Congresswoman Sanchez was unable to be with us today but she has been the biggest proponent of looking at the UCMJ, and we were assured that we would have some materials to work on in anticipation of this year's defense bill and time is getting short. We thought we would have that by March 1 and we have not seen anything yet. What is the status of that?

    Secretary ABELL. Sir, the Department's draft has been returned now from OMB with their passback comments and we are meeting right now. I think there is a group meeting literally this very minute to accommodate the passback comments and then the next event is to send it over to you.

    Dr. SNYDER. So when would you anticipate that the committee would receive that?

    Secretary ABELL. Let me go out on a limb and say by the end of next week.

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    Dr. SNYDER. By the end of next week?

    Secretary ABELL. Yes, sir.

    Dr. SNYDER. General Frost, on your written statement on page 11, you make mention of the fact that you had seen a 20.4 percent increase in productivity. Explain that to me how does one get a 20.4 percent increase in productivity.

    General FROST. It is the result of increased sales and reduction of personnel and a lot of hard work on behalf of those that are still remaining working extremely hard. As we moved into Iraq our associates that volunteered in our stores to go were not replaced and others in the stores picked up the slack. But because we saw an increase in sales partly driven by increased sales as a result of operation in Iraqi Freedom, and so forth, and the reduction of the people in the stores back home we saw the increase in productivity. We have about gotten all the blood we can from the turnip and we are looking for other efficiencies.

    Dr. SNYDER. Do you have any comments, and I will direct my comments to you, General Frost, with regard to the upcoming base closure and how that is potentially going to impact on the services in areas that may go through a base closure process?

    General FROST. Well, base closure generally has a significant impact on us because as a result of bases that are closed we have to write off the accelerated, the residual value of the facilities that we have constructed on there and in the past have received very little in return for that.

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    At the same time those that are located on those closed bases moved to different locations where we must enhance the facilities in order to accommodate the increased populations. We are working very carefully with the services and with the Department of Defense to try to identify as best we can where we need to be looking toward enhancing our infrastructure for increasing populations as well as trying not to invest in locations where we might not be able to recruit that investment.

    Nevertheless, we plan to be at bases that are closed until the lights are turned out with AAFESC support and to also make the necessary improvements on those installations with increased population to ensure that we are ready to support them when they arrive. But it is a challenge to our bottom line with regard to the losses as a result of the residual value of the facilities we write off.

    Dr. SNYDER. When the Secretary comes out with his proposed list of based to be closed, at that time do you all start scrambling and coming up with a dollar amount on what you think the result may be or is that when you first start looking at it?

    General FROST. Well, as we have tried to wargame this we have looked at what we have there, but we really will not do the final assessment until we see a list that comes out. But as an example in 1995, in the base closure of 1995 we had to write off $26 million in residual value. This last year we have got our first payment of about 5 million to reimburse us for that and we are hopeful that we will get some in the future. Nevertheless, there is always the delta that we will not receive, and we will have a bill associated with the potential bases available as soon as a list is published.

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    Dr. SNYDER. Admiral Cowley, I wanted to ask you a specific question about your Communication Flow Program so your folks at sea can communicate with their families. Is that technically to the point that everyone is satisfied that they are able to call as often and frequently as folks on land or is it still some technology involved or some limitations on what can or cannot be done?

    Admiral COWLEY. I do not believe we have any technology limitations. Since we have lowered that rate I believe people are taking full advantage of it. Certainly the return costs that I see come in would indicate to me that people are taking maximum advantage of that lower rate afloat.

    Dr. SNYDER. What happens on submarines?

    Admiral COWLEY. Submarines do not communicate once they submerge, sir.

    Dr. SNYDER. Well, they are not afloat. They are under water.

    Admiral COWLEY. They are partially afloat.

    Dr. SNYDER. So there is no——

    Admiral COWLEY. No, sir, that would give away their position, which is contrary to their mission.

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    Dr. SNYDER. Mr. Nixon, would you give me a 30 seconds summary or amplification about your written comments on the Healthy Choices. What is the status of that? Is that something that is ongoing now, the Healthy Choices Program?

    Mr. NIXON. Dr. Snyder, we have coordinated with TRICARE. We set a goal because of our position as the grocer to the military to be the nutritional leader in the supermarket industry, and part of that is partnering with TRICARE to have a joint, the number one and number two benefits to partner and the communications campaign to identify healthy eating habits in the commissary. So you will begin to see signs and placards that identify healthy choice products in the commissary. We will begin to have some more outreach programs where we will go to work with TRICARE to get news about the commissary benefit out into their circles, and also work with the Surgeons General of the services to make sure that we identify healthy lifestyles and truly become the nutritional leader in the supermarket industry.

    Dr. SNYDER. My last question, do you have or are you working on some parameters that you will be able to evaluate how this program is going, if it is worthwhile?

    Mr. NIXON. Absolutely.

    Dr. SNYDER. And you will report that backs to us at some point?

    Mr. NIXON. Yes, sir.

    Mr. MCHUGH. The gentlewoman from Virginia, Mrs. Drake.

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    Mrs. DRAKE. Thank you, Mr. Chairman. Secretary Abell, I have several questions about the exchange consolidation. When you began talking about that you used the term that you personally believe in a full integration of exchanges. Can you tell me what that means?

    Secretary ABELL. When I talk of a fully integrated exchange system I mean the back office functions would be common. I still, as I have testified before this subcommittee many times, expect Marines to walk into a Marine Corps exchange and sailors to walk into a Navy exchange and Army soldiers to walk into a post exchange and airmen to walk into a base exchange. The signs out front look fine, the goods in there are fairly common, as they are already, but from the back wall to the back offices would be a single organization.

    Mrs. DRAKE. Has that always been the intent of this consolidation or was it different than that? How long have we been talking about this consolidation?

    Secretary ABELL. I have been talking about it since 2003 when the Deputy Secretary signed his memo directing us to move forward and I think that was always a vision from that point forward. Exchange consolidation, exchange integration has been discussed in many forms in media for many years and I am sure it means different things to different people, but that is what it has always meant to me and to the effort that we started until we just made this shift toward the shared services model.

    Mrs. DRAKE. Well, you also commented that there has been a lot of resistance——
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    Secretary ABELL. Yes, ma'am.

    Mrs. DRAKE [continuing]. To this change. Which in thinking about this and reading over things last night I began to think about why would we want to do something that in the exchange system the money is used for welfare and recreation so the players that represent those military families in that organization if they are resisting this change—now I have not really heard that from everyone but it is the thought in my mind that why would we be moving something forward that you are getting this type of resistance to? And you are saying two years. I think this has been on the table, what, five years?

    And before you answer that I do want to point out that I did send you a letter in February. I did get a response in mid-March that did not address my questions. I did receive a letter yesterday that still did not answer very specific questions about cost and how much money has been spent to this date to look at this issue and how much money, I would like to know from General Frost or Admiral Cowley, have they had to spend in order to look at this issue. So it sounds to me like there is a tremendous amount of money that has been spent and money that is coming from where—that is another thing that was not addressed from my letter is where does this money actually come from.

    Your response letter to me really implied that there had been a shift in focus and that is why I asked you what your comment was because it says that the UETF has shifted its focus from full integration to shared services.

    Secretary ABELL. Yes, ma'am, and that is what I referred to in my initial statement as well, is that because there has been resistance to full integration in discussions with the exchange system commanders, and in a one-on-one meeting Admiral Cowley talked to me about a shared service model and that this might be a viable alternative and we began to look at it and I agree it may be a viable alternative.
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    Mrs. DRAKE. Can you tell me how much money has been spent and then can General Frost or Admiral Cowley comment on that? How much have they had to spend to get to where we are at this point today and how much has been spent on your end?

    Secretary ABELL. I would rather give that to you for the record because I think what I have spent, if you will, or what my office has spent represents a piece of the pie, not the entire pie and what I hear you asking for is a more comprehensive answer and I am afraid I do not off the top of my head know what that is and I would be exactly wrong.

    Mrs. DRAKE. Well, one of my questions was what have you spent on these consultants that you have hired to look at this issue.

    Secretary ABELL. My recollection is that this task force has spent about $10 million, but that is on many things. It is not just consultants.

    Mrs. DRAKE. And I did ask for that to have a breakdown of the cost and I have not received that either. The only figures I have received are an amount in a total of just under $200,000.

    Secretary ABELL. Okay.

    Mrs. DRAKE. Admiral, can you comment on, do you know what it has cost you to look on this issue of consolidating and to provide the information that has been asked of you?
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    Admiral COWLEY. Yes, ma'am, we have spent just under $900,000. That is about 81 people we have had. Their work hours are equivalent to about six full time equivalents.

    Mrs. DRAKE. General Frost, I would like to thank you for what you said before you answer my question, because I have never heard it expressed so well, the impact the exchanges have on our military members, and I thought that was very well said.

    General FROST. Thank you, ma'am. With regard to our involvement in the integration efforts, AAFESC has spent about $1.2 million again in personnel costs and TDY. That is nonappropriated funds dollars. We do not have appropriated funds for the integration effort.

    Mrs. DRAKE. Mr. Downs, could you comment?

    General DOWNS. Yes, ma'am, the Marine Corps has spent approximately $600,000 in this effort so far.

    Mrs. DRAKE. So does that mean since it's nonappropriated funds it has come from the MWR?

    General FROST. It has come from our earnings and our capital program.

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    Mrs. DRAKE. It has impacted the money?

    General DOWNS. In our case to be fair, in our organizational construct some are nonappropriated fund employees and some are appropriated fund. So are the costs associated with the time and effort spent by those people not on their regular jobs but on this job. So some of our money would in fact end up being reimbursed with the appropriate funds of ours.

    Mrs. DRAKE. I think, Mr. Chairman, what has bothered me is that we are talking about a considerable amount of money over a considerable amount of time, when you are really looking at what is the benefit to the military member and certainly I think, Admiral Cowley, you said it well, we all want to find inefficiencies. I do not think there is one of you sitting here today that wants to spend money that could be in the MWR. But since you are not all jumping up and down and acting like this is the really best thing to do it would make me question what we are doing, why we are doing it and how long we are going to continue in this direction of spending money that is coming directly from your profits.

    Is this the report that you say we are going to have next week when you answered Congressman Snyder?

    Secretary ABELL. No, ma'am, he asked me about legislative proposals on changes to the Uniform Code of Military Justice.

    Mrs. DRAKE. Okay, I was not sure which report because I was focusing in on this one. And are you not, Secretary Abell, the Chair of a governing board that is looking at this issue on the exchange consolidation?
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    Secretary ABELL. Yes, ma'am.

    Mrs. DRAKE. Who are the other members?

    Secretary ABELL. The three service assistant secretaries and the exchange commanders there as well.

    Mrs. DRAKE. So basically the same people that are on the other commission?

    Secretary ABELL. Yes.

    Mrs. DRAKE. Are they meeting now and reviewing this consultant's work?

    Secretary ABELL. They have and will again. We have not met in two months, I believe.

    Mrs. DRAKE. I think I will probably have more questions, but thank you for that.

    Mr. MCHUGH. The gentlewoman yields myself. I thank the distinguished vice chair for her comments. The gentleman from Texas, Mr. Conaway.

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    Mr. CONAWAY. Thank you, Mr. Chairman. I also want to thank the panel for their long service and dedication to an important part of what we do. I have got just two questions, one that each of the exchange leaders could answer and the commissary leader and then one for Mr. Myers. And I will ask the first one and then I will ask Mr. Myers a specific question.

    Each of you talked about your customer service ratings being improving and/or comparable with what you would see in the private sector, 70-plus percentages. By background, in a prior life I ran a retail bank and so good and bad customer service is something I notice. If you think about in their evaluation process I am sure you got comments about how you could do it better. Some of that stuff you agree with, some of it you do not. The stuff you agree with share that with us and talk to us in terms of can you get to the improvements. Are there other things that we need to do? Are there barriers that are keeping you from having better customer service in each of your exchanges?

    Mr. Myers, I am told that under your auspices is the Armed Forces entertainment system, the third year in the row now that you have notified the USO that it is out of money in terms of 50/50 split or the support for USO celebrity travel. Is this something that should be expected each year mid-year for that support to run out like that or can you talk to me what that means?

    Mr. MYERS. Sir, we have not been out of money. When we took over this program back in 1998 the budget was around $2 million. Last year we spent $9 million for entertainment for the troops. We have a yearly plan that comes out for entertainment and it is matched to that budget. What happens several times is USO would come in with a show not on the budget at high cost, so consequently if we took that show we would have to cancel a number of small shows that can make it to a lot of the small units to Iraq and Afghanistan and so forth. So we chose not to do that. In those cases we asked the USO if they would pay for the show and many times they will pay for the show.
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    Always about this time of the year, come to the fourth quarter, we always hold off on shows and so forth until we get the funds. I know the USO gets concerned about this time. We always get the adequate funding to take care of the troops especially deployed in the AOR.

    Mr. CONAWAY. So you work on a yearly budget?

    Mr. MYERS. Yes.

    Mr. CONAWAY. Thank you, sir. Whatever order you guys want to go at in terms of customer service improvements you could do, if you had something else.

    General FROST. I will talk about customer service first because it is a high priority for the Air Force and Army Exchange Service and we never get it as good as we want it to be. There are a variety of factors that impact the perception of the customer on service, of our facilities, how nice they are, how big they are, how convenient they are, the availability of merchandise, making sure that we are in stock all the time so they do not make a trip that they do not need to make if we do not have the merchandise they are looking for. The price. I mean that really does impact service. The associates, how engaging are they, how friendly are they, how knowledgeable are they. And problem resolution. How quickly and how well do we respond to issues as they raise them to us.

    We do not wait until the annual customer satisfaction surveys to assess our customer service. We have a daily customer comment program. We have mystery shoppers and our managers hold town hall meetings or meet the managers to get feedback constantly.
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    I read every day every customer comment that is submitted to the Army and Air Force Exchange Service, and as I read through them I see things that I am embarrassed that we do. We are not as friendly in some places as we should be, our lines are too long or we are out of stock for too long on some items.

    But I also see things like I wish you would publish your sales flier on Thursdays because I play golf on Fridays, and other comments. I stop and I think I cannot imagine writing the CEO of a $8 billion company and saying these things. And then I stop and catch myself and say because they tell us that tells me that they believe that we truly are their store and they are stockholders in this store and have the right to let us know exactly how they feel. And because of that loyalty and that buy-in to the benefit, I do not think we can do enough and go far enough to continue to try to raise the bar on customer service that we provide to them every single day.

    Mr. CONAWAY. But in terms of, the part of my question was there are things in those comments that you agree with and that you disagree with. Publishing on Thursday versus Friday, that would not——

    General FROST. That is probably the far end of the spectrum.

    Mr. CONAWAY. Are there things that you say gee, I agree with the implementation and the people friendliness and all those kinds of things? That is an everyday fight to get that done right. But are there things that you say, gee, that is a great idea, we do not have the money to do it? Is there a legislative barrier to doing that? Is something in that genre of fixing customer service or improving customer service that you would like to do but you cannot?
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    General FROST. Well, sometimes there are. Usually it is not a barrier. It is usually something that we can correct ourselves if we pay appropriate attention to it. There are some things—as an example, the Services Contract Act requires contractors with whom we contract to pay a higher prevailing wage to their employees. Therefore, we are not always able to get the very best contractors on the installation to provide dry cleaning service or barber and beauty or something like that, and therefore our customers will complain about that service. Relief from the Services Contract Act would allow us to perhaps have more competitive providers on the installation.

    But you mentioned one and this committee has really been helpful to us in that regard and I brought it just in case somebody asked. And honestly I have never met the good Congressman so I did not know you were going to ask this question, but it is a customer comment card and this is one of the ones that I read every day. And in here the customer was saying I was unable to buy a projection screen television online and I went to your website to buy it because I was not able to buy it in the Keesler Air Force Base Exchange.

    The armed services exchange regulations precludes the exchanges from selling the projection screen televisions but this committee has been very supportive in the last year in lifting that restriction. Now that rests over in the Senate for a concurrence with lifting those restrictions. But that is the kind of complaint we might get that we cannot do something about.

    Mr. CONAWAY. Okay. I appreciate that. That is the kind of comment I was trying to get.
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    General FROST. I am sorry. I did not mean to take a roundabout way to get there. We take customer service very seriously.

    Mr. CONAWAY. It sounds like it. Thank you. It is my loss that this will be the only meeting that you and I will get to share this format.

    Admiral COWLEY. Yes, sir. I would agree. I think assortment is probably the single biggest area that they're looking for us to improve in, doing more with the space that we have out there. I would echo the General's comments with regard to the large screen TVs. We kind of miss the middle of the market there. We also have a very selected assortment of finished furniture because of restrictions on what we can do with investment for infrastructure. I think assortment is probably the single largest area and we take a lot of pains to try to get as much into the space that we have out there in order to give the customers what they want.

    Mr. NIXON. Sir, we are not selling any large screen TV's in the commissaries yet. Notice I said yet.

    Our customer satisfaction survey, we have actually had it in place almost 13 years now. In fact it was recognized in a national performance review as one of the first efforts on part of the public sector to benchmark customer satisfaction. We have a customer Bill of Rights and an employee Bill of Rights. What we do is the 14 elements, operational elements we measure are also consistent with what is recognized as important by shoppers in the private sector. We use that as a management tool. These 14 elements are rated in each and every commissary and we are able then—we break out commissaries by sales band and look for trends. We can also identify best practices in a store in area of produce or delis or bakeries.
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    It also allows us to focus on areas where we need improvement. In the last survey we had delis and bakeries, which are a service contract areas, and identified we could use some improvements there. We were able to get the contractors together and lay out a performance improvement plan. Satisfaction has gone up. Sales have gone up. So it is a good way to measure your effectiveness.

    General DOWNS. Sir, I think it has all been said. The customer satisfaction index surveys that we take provide very useful tools, installation by installation, store by store and give us every opportunity to develop the kinds of plans and programs and policies that are necessary to meet reasonable requests or points of concern from the customer.

    Mr. CONAWAY. Thank you, Mr. Chairman. I yield.

    Mr. MCHUGH. Thank you very much. For the benefit of those in the room today, our two newest colleagues, we have a number of new members and deeply appreciate them both being here.

    The AAFESC restrictions that General Frost and you exchanged about, by the way, I find it hard to believe that you two Texans did not really collude on that.

    We did that. That is not done by legislation. It is done by this subcommittee writing a letter that is supported by the subcommittee members which Dr. Snyder and I did. Unfortunately the other body, as we say, did not support our initiative. So we are anxious to give them another chance to do it right this year. Hopefully we will.
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    The gentlewoman from California, Mrs. Davis.

    Ms. DAVIS OF CALIFORNIA. Mr. Chairman, thank you all for being here. I appreciate it.

    There are a few issues that I wanted to cover and very briefly I am looking forward to actually hearing from the spouses and military members who are here today. But one of them is just the whole issue of the shortfall on base operation funding and the effect that that is something on MWR, and I know particularly in one of the charts that we have it looks as if the Navy is having a greater impact in that area, the Navy and the Army, rather than the Air Force particularly, because the Navy, the Army and the Marines to the certain extent that funding was pretty flat.

    Can you project a little bit on that? Where do you see that money being taken out of, particularly when it comes to MWR? Where are those shortfalls and speak to that a bit in terms of what the real concerns are?

    Admiral WEAVER. Ma'am, I will take that directed to me. Perhaps the data that you have does not reflect an approximately $50 million additional adjustment upward in this year's, in the 2005 budget, and in 2006 it takes at about that same level, at about $224 million overall, which is consistent with what it was in 2001, 2002 and 2004.

    So my point is that as we have evolved as a new command and we have looked at our business outputs, we have recognized that we were throwing behind the receiver to some degree and we took in execution action to correct that problem. So our focus is on the outputs and not so much—it is obviously, the resources going in are important. But we are seeking to link more closely the resources coming in with the measurable outputs coming out the other end. We believe that we have that now stabilized and we took action again this year to make sure that we did not give ourselves an undue challenge.
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    Ms. DAVIS OF CALIFORNIA. So projecting in the next few years, do you think that is going to be rising?

    Admiral WEAVER. The accurate answer, ma'am, is it is going to be what it needs to be to generate the output we require to support our sailors and their families and the retiree population, and again that is a part of evolving a business model.

    Ms. DAVIS OF CALIFORNIA. Thank you. Could all of you perhaps speak briefly to the child care initiatives and the need particularly for off hour child care and how that is being provided to the military? Are we addressing that issue?

    Admiral WEAVER. Could I start again, ma'am, on that? I am kind of proud of this. We have just finished a pilot of 24–7 child care capability with basically a hotline urgent type of response capability in Norfolk and in Hawaii. This coming year that would be established. We have funded the establishment of that same 24–7 response in San Diego. Again the response was, as you can appreciate, probably overwhelming and we think that is a good step and we have funded it.

    Ms. DAVIS OF CALIFORNIA. There are still problems in San Diego, as you know, with the closure of the child care center there, but we are hoping that you are working on that.

    Admiral WEAVER. Yes, ma'am. We certainly are. We have both a near term and a far term plan to address the issue at North Island, at the CDC there. It involves in the long term with MILCON but in the short term with family child care with some renovations that having been taking place to create some modest additional space at Naval Station San Diego.
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    Ms. DAVIS OF CALIFORNIA. Anyone else want to address that issue, which is certainly a very important one to our service members?

    Mr. MYERS. We have many programs in the Air Force. In the child care center you only by law can take care of a child for 10 hours a day. Consequently people are working more than 10 hours a day. So in the Air Force we started a program called extended care. If you are going to have to work more than 10 hours, we will actually put that child after 10 hours in a family day care home and take care of that child free for you as long as you have to work, and we probably do 24,000 hours a month. It is a big boon to the troops.

    Another program we just initiated also was for a mildly ill child. Both parents are working. The child does not feel well today. Well, you are not going to the child care center. So we have set up family day care homes dedicated to this so if your child is mildly ill we will take care of them in that family day care home. We have also extended our programs to the guard and reserve for their weekends to help subsidize their care.

    We also have another program in the Air Force. If you go to a typical person and ask them where do you want your child to stay in the child care center or in a family day care home they will say the child care center and the main reason is it is cheaper, because in the family day care home those are parents that are certified taking care of the children. They can charge a higher rate. What we do in the Air Force is if there is no room in the child care center and you put your child in a family day care home we will pay the difference in cost. So you pay the same thing as in the child development center and we are really expanding our care.

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    General Jumper, our Chief Master Sergeant, was recently at AOR and he had meetings with the troops on child care and youth, and they got rave reviews. The troops said that we were taking good care of the families.

    Ms. DAVIS OF CALIFORNIA. Perhaps if someone wants to address also whether we are reaching out to the National Guard and activated reserve and providing them the child care that our active troops have.

    General MACDONALD. Ma'am, I can do that. We have started the Operation Military Child Care, which is actually a subsidy for the National Guard and reserve members who need child care as they have deployed. They are not close to an installation so they do not have the opportunity for a child care home or child development centers. So the subsidy program is just kicking off and is being met with great reviews with the National Guard and reserve.

    Ms. DAVIS OF CALIFORNIA. I think part of my concern often is that sometimes parents do not know about some of the services as well and so that means we have to do enough outreach to be sure that they are aware of the services also. If you want to speak to that.

    General MACDONALD. Yes, ma'am. The Military One Source is going great guns with a number of hits both on our website and call-in capability with counseling, that we had heard just that, that it is very hard to find all the resources in all the places. So we have done that with one spot to find it and then that person helps direct the people to the right place.
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    Ms. DAVIS OF CALIFORNIA. Thank you. Mr. Chairman, recently the RAND Corporation put out a book about working around the military, and it particularly address child care but it also addresses the outreach to spouses that might be employed by military contractors. And I do not know if anyone wants to speak to that right now, but I guess I would be asking really what is being done to, I think number one, understand the of course many different careers and hopes, aspirations of our military spouses and how we are making efforts to integrate them within our contracts that we have. Do you want to speak to that?

    General FROST. I would like to talk to that for a minute because AAFESC is a huge employer of military family members. Over 25 percent of our employees are military family members. We are the largest employer of military family members in the Department of Defense. But it is not enough for some of the military family members to simply have a job. They want a career. So we are trying to work a pilot program whereby if we have military family members as managers in our stores, that we will work with them to try to get them another position as a follow-on assignment if their spouse is transferred. It is very difficult to do in a small exchange environment, and so forth, but we have pledged to look at this and try to provide a pilot so we can have continuity of careers for military spouses and at the same time I believe enhance the service that would be provided to friends and neighbors of their own. So it is something that we are very proud of.

    Ms. DAVIS OF CALIFORNIA. Thank you, Mr. Chairman. One more quick question.

    This really comes from the field in Iraq, the issue of free communications and telephone cards for our military. We actually were giving out a number of telephone cards but we were told that there were not enough phones for them to access them at the bases. Is that a problem? Have you heard that? Do we have enough free cards out there for our service members?
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    General FROST. Since I am responsible for the phone centers in Iraq, I have not heard that we do not have enough phone centers there. I think we have 43 phone centers in Iraq. Usually anywhere from 24 to 48 telephones at those locations. The rate now to call home, as you probably know, using the AT&T 550 unit card is 19 cents a minute. We have just given a pack of prepaid calling card to a CODEL that is leaving this afternoon to go to Iraq to hand out to the troops and we would love to do that for every CODEL that goes over.

    At the same time on our website and I believe on the other service exchange websites as well, we have it linked to help our troops call home so that any American can purchase a calling card to be sent to a service member deployed either to a specific person or to be distributed through a charitable organization. To date we have sold $1.9 million worth of those cards.

    Ms. DAVIS OF CALIFORNIA. I appreciate that and I have fun giving them out too. But I was told that, in fact, some people were handing them back saying we cannot use them. The lines were too long. This is at Camp Stryker.

    General FROST. I will check that out because we can always add another phone center if the command will allow us to do that.

    Mr. MCHUGH. Thank you. The gentleman from New Jersey, Mr. Andrews.

    Mr. ANDREWS. Thank you very much. I thank the witnesses for your testimony. I apologize for not being present. I did have a chance to read and review what you had to say though and I appreciate it.
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    Mr. Chairman, thank you for giving these issues the focus they deserve. I know there was some trepidation when the prior MWR panel was dissolved that these issues would not get proper attention and you made a personal commitment that they would and you have honored that commitment, and it is appreciated by Members on both sides.

    Secretary Abell, I wanted to ask about the UETF initiative and I wanted to preface my comments by saying that I am an advocate for consolidation and efficiency in saving taxpayers money. I know each of you is too and we appreciate that. But I want to be very careful as this UETF goes forward that we are not penny wise and pound foolish. I think the real issue here is retention. You know, the front pages are ablaze with news every day about the services making or not making recruiting goals, and that is important stuff. But I think in the long run the real issue is retention, and I think a central determinant or central factor in retention is quality of life for the entire family, and a central factor in quality of life is the value of this exchange benefit.

    And I want to be sure that whatever recommendations come out of the UETF process that they place at the top of the list the primacy of protecting the value of that benefit.

    I would like your thoughts on how the UETF process has gone thus far, and I would also like your specific comments on what we might do as a subcommittee to be sure that the principle I just enumerated, which I think is shared by everyone here, is reflected in the final recommendations that come out of that process.

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    Secretary ABELL. Sir, I think it has been said a number of times but I share all of those same views that you just described. The value of the benefit is paramount. The results of any shared services plan will be transparent to the consumer, and the idea will be that that there is a benefit at the end of the day and that because costs will be down dividends will be allowed to go up, and that is the premise of the effort.

    You all will certainly be given the report and then you would have to agree in order for us to proceed and that report will be—we will not send it to you if we do not think it meets that criteria. I am sure it will be examined once you get it.

    Mr. ANDREWS. You are aware of the fact though that lawyers would call it a rebuttable presumption that your report is going to carry a lot of weight, and although it can be overridden I do think it will establish a sort of rebuttable presumption that what it calls for is likely to happen. So we want to be very careful that that report reflects the values that I just talked about.

    The other point I would make is that I think it dovetails something General Frost just said. If one of the ways we are going to effectuate cost reduction is personnel overhead reduction, it needs to be considered. But we also need to consider who some of these employees are, and to the extent that many of them are military family members we are not doing much to help ourselves in the long run if we cut back on a workforce that is married to the men and women who are wearing the uniform in the first place.

    So I would urge you to pay special attention to the issue of the percentage of military spouses who would be adversely affected by any kind of personnel overhead reduction. I think that is very important.
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    The other point I would make to you, Mr. Secretary, also Mr. Myers, and I have to confess my vested self-interest in this, I hope the Ethics Committee does not get wind of this. But I am a former USO performer. It is not self-evident. When I was about ten years old I was a singer in a USO troop that used to go to Ft. Dix and McGuire Air Force Base in Jersey and perform. I wish I could say perform for troops in the Persian Gulf War but it was troops in the Vietnam War era, and I have very fond memories of my personal participation in USO, although I am sure many members of the audience do not have such fond memories.

    I would like to encourage each of you to continue the strong positive partnership you have with the USO, and I think that the USO's value escalates at a time when we have so many people stationed abroad, and I would encourage you to work as you have in the past in any way to continue to make the USO thrive.

    Secretary ABELL. We certainly will.

    Mr. ANDREWS. Thank you, Mr. Chairman.

    Mr. MCHUGH. It will be our little secret. I deeply thank the gentleman for his very gracious comments and his opening statement.

    Two hours, that is a good turn and we appreciate it. And again at the risk of restating the obvious, your programs are so vitally important at all times but particularly at this era in our Nation's very challenging history. So we thank you for your service and we thank you for your dedication. We look forward to working with you in the future with the exception of General Frost, who we look forward hopefully to following with great pride and admiration in our past association and again, General, thank you so much for 3 plus decades of giving service to your Nation and your recent years as the head of AAFESC, for your contributions to our warfighters and their families, and we wish you all the best.
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    I would note, please, to our panel members we will have a number of written questions that we will submit to you and we deeply appreciate those timely written responses to those to help us fill out the record. Again, with our deepest thanks the panel is adjourned. Thank you all.

    Let me begin by thanking our second panel. And our second panel is comprised of two distinct but certainly very equal participants in the Military Resale and MWR system. Let me introduce them in the order in which they are presented here today and then I will call folks out of order to speak if I may.

    Mr. Mike Henties, who is Chairman of the Board of the American Logistics Association. He is not there right now. When he gets here, he will be right there.

    Hi, Mike. Here he is. I said awful nice things about you. You will have to read the record. Thanks for being here today.

    Mr. HENTIES. I apologize.

    Mr. MCHUGH. That is okay. Welcome. Seated next to him is C. Lloyd Johnson, Chairman of the Board of the Armed Forces Marketing Council. Lloyd, good to see you. Also we have four very, very special guests, folks who wear the uniform and family members, spouses of those who wear the uniform, and this is what today is all about. We are honored to be joined by Sergeant First Class Peter Cawley, who is from the Army National Guard. Sergeant, thank you so much for being here. We are honored. Gunnery Sergeant Alan R. Gilly, United States Marine Corps. Good to see you, sir. Mrs. Margaret I. Dougherty, spouse of a military service member. And Mrs. Tammie Bocook, spouse also of a military member.
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    As the latterfour of you have heard, we have deep concerns about this program. We thought it would be very helpful for us today not to grill you, not to put you through the paces but rather just to in your own words, both as service members and those who have married them, to give us your perspective on these very important programs. And while our normal course of recognition would start down with Mike Henties, with their permission and indulgence, I am going to start with Sergeant First Class Peter Cawley of the Army National Guard.


    Sergeant CAWLEY. Mr. Chairman, members of the committee, good afternoon. I am Sergeant First Class Peter Cawley and I am a National Guard soldier currently assigned to the 1109th AVCRAD based in Groton, Connecticut.

    It has been my privilege to serve in the U.S. Military for nearly 22 years. I am a veteran of Operation Desert Storm, Operation Enduring Freedom and Operation Iraqi Freedom.

    Here are my observations regarding MWR programs. There are considerable MWR programs in the United States and Europe. Every major military post I have visited has offered facilities such as gyms, rec centers, PX, commissary, enlisted and officer clubs and more. Smaller posts usually have one or more of these facilities but with scaled down services.

    In particular, the commissary is an excellent benefit to military members. I have heard many soldiers and military retirees comment on the cost savings and the quality of product the commissary provides.
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    In January 2005, my wife and I honeymooned at an armed forces recreation center named the Hale Koa Hotel in Waikiki, Hawaii. It was an outstanding facility with substantial amenities at a very reasonable price. I know other soldiers who vacationed at the Hale Koa and their feedback has been positive as well.

    In February 2003 through February 2004 I deployed in support of Operation Enduring Freedom and Operation Iraqi Freedom. My deployment began at the site of Ft. Drum, New York and from there I shipped off to Kuwait, where I spent my entire employment at a large base with the exception of a couple of days at Iraq.

    MWR programs were in place and well used. There were gym facilities, a small movie theater, two PXs, a Burger King, an ice cream vendor and a coffee shop within a 10-minute walk from my tent. I am a frequent user of the gym and the gyms were adequately stocked with weights, treadmills and stationary bikes. The two gyms operated 24 hours a day. And other than an occasional complaint about the gym being overcrowded, soldier feedback was very positive.

    The PX facilities were well stocked with snacks, toiletries, magazines and some clothing. The availability of these MWR facilities to soldiers and the positive impacts these facilities have on soldiers cannot be overstated. An hour at the gym or a cup of real coffee with a friend provide soldiers with a brief release from the reality of being away from home in often less than hospitable conditions.

    Finally, I would like to comment on celebrity visits. Celebrity visits are great morale boosters for soldiers. I will tell you celebrity visits put smiles on just about every soldier's face. It was a very positive experience for many soldiers.
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    I appreciate your time and consideration on my comments. I would be happy to answer any questions you have.

    Mr. MCHUGH. Thank you very much. Sergeant, when were you married?

    Sergeant CAWLEY. Just before the deployment, sir.

    Mr. MCHUGH. 2005?

    Sergeant CAWLEY. 2004, we put the honeymoon off for a while.

    Mr. MCHUGH. You are still honeymooning. Thank you for your service.

    Next, Gunnery Sergeant Alan Gilly, United States Marine Corps. Gunny, thanks for being here.


    Sergeant GILLY. Thank you, sir. Good afternoon, Chairman McHugh, Congressman Snyder and distinguished guests, members of the Military Personnel Subcommittee. My name is Gunnery Sergeant Alan Gilly. I come before you today to clarify the positive and negative qualities of the commissary and MWR facilities experienced in the daily function of the Marine Corps, our service members and our families.
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    I would like to begin with the personal experience while in Iraq in support of Operation Iraqi Freedom II. As Company Gunnery Sergeant for H&S company I was tasked with the responsibilities for security, coordinating life support at battalion operating base, balancing operational requirements, relations with tenant air wing units and commands in addition to civilian agencies and force protection requirements.

    While stationed at al-Asad Air Base I gathered information for my Marines due to the fact that we were at the opposite end of the air base. I was quite pleased with the effort put forth to allow me to acquire times and operating hours to assure opportunity for the Marines to use the benefit from all services provided.

    There were times at the exchange and the commissary that I was surprised at the high prices required for certain products. However, I was impressed with the variety, availability to us at that time. I believe it is important to remember that the simple things we take for granted here in the States become extremely important reminders of home in a lonely and desolate Iraqi combat zone. Even though MWR had only just begun to set up its services, they were the only essential part of that connection with home.

    Regardless of its necessity in relation to the quality of life, stateside base facilities come under much scrutiny in their purchasing and adaptation to the income of the average military family. Before coming here today, I solicited the opinions of many military families nationwide to observe their concerns in relation to the exchange and MWR facilities. It has not gone unnoticed that the programs provided by MWR are cherished by just about everyone who has had the opportunity to use them. From the recreational opportunities and rental facilities to the classes and sports programs, MWR has achieved its goal of improving the limited time we have to spend with our families. Because of these programs, my family is capable of association with peers wherever we are stationed. Focusing not only on the service members, but also on those left behind, it was extremely important to my family while I was away.
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    MWR tried and succeeded to appreciate the loved ones who were left with nothing to do but wait. Knowing this made it easier for me to concentrate on what I needed to do to get home. The only problem I noticed was the financial burden associated with the exchange. The quality of the merchandise is second to none; however, the common belief is that there is no middle ground in purchasing. What I mean is that high-end product purchasing levels, the average service members and their families, who are quite often on a budget, have very little opportunity to benefit from their discounted items.

    With regard to the commissary, I have found that its benefits are often overlooked due to minor problems that could be alleviated with minimal reorganization. The idea that a military family can walk into the commissary and afford to purchase everything they need to get them to the next payday is a valuable benefit indeed. In this situation, the commissary becomes the means by which a marine can truly provide for his or her family.

    With that said, I must inject the need for quality in the products provided by the commissary. There are very few that I have talked to who have not expressed a concern in this area, from bad produce to outdated dairy. Many feel a sense of not being worthy of the best. I truly think that if the commissary took on the purchasing practices of the larger discount superstores, we would see an end to this type of inequality. By doing this, there would also be the opportunity to eliminate the separation of the commissary and the package store. This would provide one-stop shopping for families and increase the revenue, which in turn would allow the commissary to improve its selection and diversity.

    In closing, I must express my appreciation for the commissary as I feel it is a vital part of my family's military experience. My suggestions are shared only in the best interests of all involved. Because of this, I hope to convey effectively that a common standardization in purchasing held throughout the bases would give a sense of stabilization to military families who live a transient lifestyle.
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    Thank you for this opportunity to appear before you today, and I look forward to your questions.

    Mr. MCHUGH. Thank you very much, Gunnery Sergeant Gilly. I appreciate that.

    [The prepared statement of Sergeant Gilly can be viewed in the hard copy.]

    Mr. MCHUGH. And the people who oversee those kinds of produce and dairy purchases are still in the room, and I know they heard your comments, and we will try to do even better.

    Mrs. Margaret Dougherty, spouse of a military service member. Mrs. Dougherty, thank you so much for being here.


    Ms. DOUGHERTY. Thank you, Mr. Chairman. And thank you, Congressman Snyder, and members of the subcommittee. I wish I was last because I have the least experience with military life. My husband is a Navy reservist who joined post-9/11 in response to 9/11. Previous to that we were just an ordinary civilian family. I worked for a utility; he was an electrical contractor. I am a New Yorker; now I am here, and so it hit us—9/11 affected us, as it did everybody else, but maybe a little more deeply.
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    My husband now, he is right here behind me; he just returned from Iraq. He is in country maybe a month now. He is home here with us in Virginia.

    Mr. MCHUGH. Right where? Forgive me for interrupting.


    Mr. MCHUGH. I would say that applause is shared with our two panelists as well. Thank you. And thank you.

    Ms. Dougherty, please continue.

    Ms. DOUGHERTY. My husband is a Navy Seabee, which is the branch of service he joined, maximizing what he can do for the country. He then subsequently was asked to join the Seabee Engineer Reconnaissance Team, which is now a TMT team, which is a tactical movement team. A tactical movement team is a mobile engineering and security force designed to offer Seabee expertise with Marine tactical capabilities. Consequently, I didn't get to speak to him much because he wasn't actually on base.

    When Ed joined—well, I won't even go there. I have been using the PX and commissary benefits since Ed joined in October of 2001. At the time, the commissary benefits for reserve families were limited to 12—once a month, basically, probably to coincide with their drill weekends. It was subsequently lifted, and that was good for us, although I hadn't been used to using them anyway. We didn't join—or he didn't join the military for the benefits; but I saw the value in it once we started to use them.
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    Once he was deployed, however, as a reservist family we are somewhat disenfranchised. We don't live on base. I, for one, wasn't—we had no point of reference in that many reservist families are—or at least in my experience are at least at some point active duty, and then they become reserve, so they have a way or a knowledge of negotiating through the benefits. We didn't—I did not have that. My only criticism of MWR or something like that would be to reach out to reservist families or find a way to be able to disseminate information better.

    As far as our commissary goes at Fort Belvoir, we have amazing produce, and the prices are markedly different than the Safeway which is right down the road, 30 percent different. I would say 30 percent; after I got asked to testify, I kind of tested that.

    I think it is important to talk about MWR and commissary benefits for reservist families because of that feeling of being disenfranchised. The more I used—after Ed was deployed, I used the base more, and I felt as though I was part of something. I think it is important to not undermine or not appreciate the emotional and psychological value that these benefits provide to the families. It makes us feel like we are part of something, and that while he is away and doing his job and we are left here on our own, that we have kind of an extended family.

    I was able to find a group called Hearts Apart; it is a support group for military families, all branches, ranks, reserve, active duty, who are either separated by deployment or unaccompanied tours. I found the group with some difficulty. I initially looked for it for my children because they were starting to act out a little, and I found that it was better for me, actually. It was a group that was for spouses; they provided child care and a meal. This is not a group that is funded, however. The woman that runs it runs it—she gets comp time, but she runs it on her own time, and she also solicits donations from local churches and other places to get little door prizes, if you want to call door prizes, and the meals.
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    I would strongly recommend that a group like that be extended to most bases, or at least be available to other reserve and active duty families. None of the other women that I—that my husband served with, none of the other spouses, availed themselves of a group like that because it wasn't near them or they didn't know about it.

    I think that, in short, the benefits lend a sense of inclusiveness. That, I think, is very important to the families. And I hope, and I am happy to hear, that all of you are so concerned. I was heartened to hear General Frost's comments, because she does value, as you do, the emotional value of all of these benefits. So I appreciate your letting us speak.

    Mr. MCHUGH. We appreciate your being here. Thank you so much for your perspective.

    Mrs. Tammy Bocook, spouse of a military service member. Nice to see you.


    Ms. BOCOOK. Thank you.

    Mr. Chairman and members of the subcommittee—I am losing my voice, so you will have to excuse me here. I am Tammie Bocook, and I am a spouse of a senior master sergeant, Ray Bocook. We have been in the Air Force for the past 19 years, and I have dedicated my life's work to helping families of Air Force members. I am part of the Key Spouse Program at Robbins Air Force Base, Georgia, where I serve as an adviser to the Commander on issues affecting our families.
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    In 2003, I was selected as the Air Force Joan Orr Spouse of the Year, and I am routinely asked to speak at special events representing our families Air Force-wide. I was asked to give testimony on the importance of the Morale Welfare and Recreation program and explain the value of the commissary and base exchange.

    I would like to start by saying these programs make a positive impact for families to help bases be self-sufficient. To start, the MW program is vital to have as a resource for several reasons. Families are highly mobile and are restricted to the amount of household goods that they can maintain. Weight restrictions limit the shipment of personal items, and therefore our families must use caution when making our purchases. Outdoor recreation supplies us—help us make up for these limitations by maintaining and providing rental equipment to include campers, boating, camping gear, hiking gear, kayaks, chairs, tables, and coolers and picnic items, and et cetera. These items are nice and handy and really provide our families with the opportunity to find some rest and relaxation and some together time. My 7-year-old son Micah has a campout Friday, April 15th, and we plan to sign out equipment for this weekend.

    Military families live with long separations because of extended deployments, and many children are accustomed to additional stress, heartbreak, and disappointments while their parents are away. MWR is an excellent program that reduces the stress and helps families cope with the challenges associated with our military. Our bowling center is reasonably priced and fun for the family; the movie theater is a big hit with families and especially our young airmen. The skills development center allows our airmen to use the woodworking equipment and provides classes to learn new skills. The auto hobby shop enables the airmen to repair their vehicles with assistance of a certified mechanic, learning valuable skills and saving substantial amounts of auto maintenance. Many people enjoy the golf course and find it a great outlet for stress. The base swimming pools provide children with a fun place to go in the summer, and the fitness center is critical to the overall health of our troops and their families.
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    The commissary is very vital to our spouses, and we cannot manage without the services they provide to our families. We move around the world, and one thing that we trust more than anything else is the reliability and the affordability of our commissaries; are self-sufficient and donate funds to our military organizations.

    We currently spend over $500 a month to feed a family of six. Without the commissary, we would be forced to procure food elsewhere and would experience a 30 percent increase in our grocery bill. My husband is an E–8 with almost 20 years in the service, and currently receives a monthly food stipend of $267.18. The commissary enables us to feed our family more affordably. Most families I know consider the commissary as an integral part of their lives and part of their compensation package.

    The PX provides families with quality products and a convenient place to purchase our household items. Whether the local community has a Super Wal-Mart or not, the PX is a place for the highly mobile military families. Many dependents find employment opportunities at the PX; many base workers visit the PX food court daily for lunchtime variety.

    If we lose any part of this MWR, the commissary, the PX, our families will definitely lose the quality of life that has made our sacrifices more bearable. This would put hardship and future stresses on our members because they would be worried about their loved ones left behind as they deploy.

    I would like to thank the subcommittee for considering my comments, and I am honored to serve as an Air Force spouse, and I am honored to address this committee. And God bless.
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    Mr. MCHUGH. The honor is ours, let me assure you. And thank you and Senior Master Sergeant Bocook for your joint service to your Nation.

    Next, Mr. Mike Henties, chairman of the board of the American Logistics Association.


    Mr. HENTIES. Thank you. Mr. Chairman, and members of the subcommittee, the American Logistics Association is most grateful to you and your continued strong leadership in preserving and improving the commissary, exchange, MWR benefits for service members, military retirees, and their families. I ask that my written statement be accepted into the record in its entirety.

    Mr. MCHUGH. Without objection.

    Mr. HENTIES. It is an honor for me to be here today, and I must add it is an honor to be on the panel with active military members and their spouses. Thank you for that arrangement.

    As chairman of the board of the American Logistics Association, representing over 400 of America's leading manufacturers, over 100 brokers and distributors, and more than 2,000 individual members who are actively engaged in providing goods and services to the military resale and MWR activities, I want to reaffirm ALA's strong commitment to maintaining the commissary and exchange benefit as an integral part of the total nonpay compensation package for service members and their families. Our association actively supports and promotes programs that enhance the quality of life for military service members, retirees, and their families.
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    Today, I want to address four issues: ASER restrictions, exchange consolidation, SDT, and BRAC. So we will be clear on where ALA stands on these issues, I will give you our position before I explain each one with brief remarks.

    We support lifting all ASER restrictions in the exchanges. We do not support consolidation of the exchanges. We support continued second destination transportation funding, and we support preserving quality of life benefits at BRAC installations.

    First, ASER restrictions. Exchanges are a key component of the quality of life for our uniformed service members. We believe shoppers should have a choice without restrictions of merchandise sold in the exchanges. Our military members want and deserve access to products to meet their family needs without restrictions. Many of these military patrons are young families utilizing credit for the first time, and, therefore, high interest rates can easily get them into financial difficulty. Mr. Chairman, ALA strongly supports lifting all ASER restrictions on exchange stock assortment.

    Exchange consolidation. Exchange consolidation is an issue of significant concern to our members. ALA does not support this initiative unless a solid business-based analysis is completed that clearly demonstrates the change will not degrade the current benefit to the patron or the MWR dividend. Any merger may have a damaging impact on small businesses as the number of contractual opportunities will diminish, effectively limiting competition and subsequently reducing the benefit.

    Recently the Unified Exchange Task Force has been developing several shared services models designed to reduce overhead costs. The philosophy for this approach is that by reducing backroom costs, the exchanges will have greater margins from which to offer their customers better pricing. ALA believes the objective is admirable; however, we continue to view the proposals with cautious interest until additional information becomes available. For example, implementation costs and transition costs are important components in the shared services decision, and that information is not yet available. We will continue to monitor this proposal until a specific business case is made and the exchanges resolve all the issues regarding the management and the control of this approach.
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    Third, second destination transportation. ALA supports continued SDT funding for goods shipped for resale by the Army and Air Force Exchange Service to overseas locations. We appreciate the often compelling need of the Army to identify additional funding for wartime operations, and we understand that there is a need to verify and enhance efficiency of SDT. However, this particular proposal to eliminate SDT funding for AAFES with little regard for the quality-of-life impact it would have on overseas military families is imprudent and unwise. Of the many accounts within the budget of the Army, there are very few that have such a direct effect on the quality of life of service members, their families, and the communities in which they live.

    Finally, BRAC. ALA urges Members of Congress to protect the interests of all beneficiaries impacted by the base closures and realignments including active duty, guard, reserve, retirees, and their families. Mr. Chairman, we support preserving quality-of-life benefits such as commissaries, exchanges, MWR/Services, child care, medical facilities, certain family services for the military community that remains at the BRAC installations.

    In recognition of DOD's new focus on the National Guard and reserve force mission and recent congressional approval of unlimited commissary shopping privileges for the guard and reserve retirees and their families, ALA believes the criteria for preserving commissaries and other quality-of-life programs at BRAC installations should involve all beneficiaries. Eliminating commissaries and exchanges and other family services at BRAC installations is, in our opinion, unwise and sends the wrong message. We urge Congress not to let this happen.

    Thank you, Mr. Chairman and members of the subcommittee, for providing industry the opportunity to present its views on these critically important topics. Moreover, thank you for your stewardship of these important benefits that are essential to our military families' quality of life. I would be happy to answer any questions. Thank you.
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    Mr. MCHUGH. Thank you very much, sir.

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

    Mr. MCHUGH. Our final presenter, Mr. C. Lloyd Johnson, chairman of the board, Armed Forces Marketing Council.

    Lloyd, thank you for being here, sir.


    Mr. JOHNSON. Good afternoon to you, Mr. Chairman, Congressman Snyder, and other members of the Subcommittee on Military Personnel. What you will hear now is an abbreviated version of a written testimony that was submitted for the record.

    My name is Lloyd Johnson, chairman of the Armed Forces Marketing Council, known as the AFMC. The Council was incorporated in 1969 as a nonprofit business league. It is now composed of seven leading firms in our industry that provide sales and merchandising services to over 400 manufacturers, both large and small, who supply consumer products to military resale activities around the world. Our member firms are all small businesses that together employ over 2,800 people and support another 3,000 or more independent contractors. Many of these, by the way, are spouses or dependents of military members. A list of firms serving on the Council is found on Exhibit 1. A list of manufacturers we represent and provide services to is in Exhibit 2.
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    The mission of the Armed Forces Marketing Council includes encouraging congressional and Pentagon support and funding for the military resale systems in consideration of the important role they play in quality of life for U.S. Active Duty personnel, National Guard, reservists, retirees, and their families. Those same resale systems are also customers for the goods sold by the 400 manufacturers we provide services to.

    Mr. Chairman, the AFMC wishes to emphasize once again the critical importance of the resale system's role in recruitment, retention, and readiness. This is especially true when you consider that the United States relies on a volunteer force that is only modestly compensated and operates in extremely dangerous locations around the world in the war on terrorism. For the past three years in particular, they have often worked under intensely stressful conditions, resulting in some 12,000 injuries and nearly 1,500 deaths. Clearly the case for continuing the resale benefit and many other vital benefits is compelling. In fact, any effort to diminish them seems indefensible.

    Mr. Chairman, regarding commissary specifically, these are turbulent times for the military establishment, and future deployments, redeployments, and troop realignments will keep that operations tempo and turbulence at a high level. The 1.1 billion subsidy for commissaries is money well spent. In fact, that subsidy is a great investment since it allows authorized patrons to save over $2.2 billion when they purchase their groceries on base.

    Also, as regards commissaries, let me address the ongoing government effort to contract out parts of the commissary workforce under the A–76 directive. The AFMC believes that DeCA's current efforts to reengineer their business processes and the impending conversion of its workforce to the National Security Personnel System, also known as the NSPS, will not only drive up efficiency and productivity, but will require intense focus to implement. And, of course, they must maintain all-important customer service levels at the same time and face challenges soon to be presented by BRAC and other forced relocations of military personnel.
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    With all of this going on, the A–76 process requires DeCA to conduct in-depth studies on contracting out its workforce. This drains time and scarce budget funds and seriously detracts from employee morale on a project that we believe won't work well anyway. That is to say if the A–76 process results in various contractors winning awards for separate sections of the commissary workforce not already contracted out, running commissaries will become unmanageable and will put DeCA in the unenviable position of being the only supermarket chain in America that tries to operate a retail business with a workforce dominated by nonemployees. Therefore, the AFMC respectfully requests that Congress direct the Department of Defense to provide DeCA with temporary relief from the requirement to conduct competitive outsourcing of individual store employees until at least 2010 when there is at least a chance that current and expected future turbulence in the market will subside. In the meantime, DeCA is not broken; it is efficient, productive, and effective, and ongoing internal reengineering will make it more so.

    Concerning the latest CBO proposal to consolidate all resale activities into one entity, the AFMC has numerous objections and concerns that in the interest of time I will just ask you to refer to pages 6 and 7 in our written testimony. In the interest of that time, I would like to move on to the next subject. This concerns further relief from merchandise restrictions imposed on the military exchanges by the Armed Services exchange regulations.

    As you know, while the House of Representatives opted last year to remove projection TVs, the Senate did not agree. Hopefully what I am about to say here may give us a little more ammunition together to convince the other side of the Hill of the wisdom of lifting these restrictions.

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    Our point is that exchanges cannot offer patrons the latest technology in projection TVs and, more importantly, the opportunity to buy the most affordable large-screen TVs on the market. This point is clearly illustrated in Exhibit 3 in our testimony, our written testimony. All of this is occurring at a time when in-home entertainment devices are in very high demand, especially by people that are in the age bracket of most military families. Consequently, military patrons are forced to go outside the exchange system where they pay higher prices by as much as 6 to 19 percent, higher credit costs by as much as 7 to 20 percent, and sales taxes. On relatively high-ticket purchases, these percentages end up costing military consumers a huge amount of dollars.

    The AFMC also believes that the current cost price limitation of $3,500 for TVs which may be acceptable today should be abolished to allow the exchanges to quickly react if new technologies in this rapidly changing consumer electronics category bring high-demand new products to the market that we cannot predict at this time.

    As regards furniture, the current restrictions prohibit exchanges from selling any one piece of furniture costing over $900, and from initiating any capital construction for building or renovating facilities for the purpose of offering anything other than what is now a very limited selection on most bases. Documented customer satisfaction surveys show that furniture is a category that most patrons want to see improved in most exchanges. Having access to a reasonable selection of furniture is a lot like projection TVs: Military patrons are currently forced to shop outside the gate where prices and credit rates are higher, and sales taxes are imposed on normal household goods that are relatively high-ticket purchases even at exchange prices. And while savings to military patrons is the primary concern, it is also true that the increased sales by exchanges on these important categories would provide millions of dollars in additional dividends to support on-base MWR activities, thereby reducing reliance on appropriated funds.
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    While it is true that expanding these categories for exchanges would take a small amount of sales away from commercial retailers, the overall impact would be minimal versus the resulting benefit to military patrons, especially during a time when military members are making extraordinary sacrifices for their country and when the Pentagon is not meeting its recruitment and retention goals. Also, so-called mom and pop stores would not be seriously affected, as some believe, because these type of retailers now play an insignificant and fast-declining role in the TV and furniture categories. Additionally, military sales in exchanges are historically only one to two percent of retail sales of the national chains for entire categories, and in this case the AFMC is merely suggesting that these two categories be expanded only a limited amount beyond whatever already exists.

    On the subject of shared military exchange services, I believe everything has been said on behalf of industry already, so I won't repeat that in the interest of time here.

    Regarding base closures under the BRAC process, the AFMC believes that every effort should be made to retain resale facilities at any closed base where there is a sizeable population of reserve, National Guard, and retired service members. Given the current reliance on reserves and National Guard for active duty assignments and on retirees who can be called back into active duty, we believe the U.S. Government owes them access to resale facilities as part of their nonpaid compensation.

    Regarding the second destination transportation funds, the AFMC supports everything that has been said here today to continue the funding. And I might add that, among other good arguments, lower funding would force a lot of procurement from foreign sources. And I think we should remember that U.S. companies are paying the taxes to support our war effort and support our troops, and they deserve to get the business rather than foreign sources.
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    In summary, Mr. Chairman, in view of its impact on quality of life which contributes directly to recruitment, retention, and readiness, the resale system is clearly a core function of DOD. The modest cost of providing it is truly worthwhile when measured against its value.

    Thank you, Mr. Chairman, and members of the Military Personnel Subcommittee. I appreciate the opportunity to appear before you today, and I will be glad to receive your questions.

    Mr. MCHUGH. Thank you very much.

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

    Mr. MCHUGH. And thank you all.

    Mrs. Dougherty, I am going to go back to you. You commented about how you had just a short time of experience with these programs, and you were worried that perhaps that wouldn't give you the kind of expert insight that we are looking for. Actually, your insights are very important based on the mere fact that today in Iraq about 43 percent of the military on the ground is made up of guard and reserves or folks who are there for the first time and going through what you went through for the first time with their spouses back home; and we want to work real hard to make sure that, A, the programs are running as well as they possibly can, and, B, that you know about them and you can access them. Because, as you noted, in your family support group, if something exists, that is great, but if you don't know about it, it doesn't do you a lot of good.
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    I was struck by your comments as to your lack of knowledge as to what was there and what you could access and such. In theory, when a spouse deploys, that spouse and the deploying member of the marriage is supposed to get information and support groups and such. You don't recall receiving any kind of help in that regard? Or it just wasn't sufficient to kind of guide you through the program?

    Ms. DOUGHERTY. I am not really comfortable criticizing anything.

    Mr. MCHUGH. No, no. It is an observation. We will do the criticizing for you.

    Ms. DOUGHERTY. We are very happy to have done this and to have served, and it makes us all very proud.

    Mr. MCHUGH. Let me rephrase it. I understand. You raise a good point, because the way I put it, I sound like an attorney, and I dropped out of law school after ten days. What might have happened that would have made you feel more comfortable and more confident in accessing those services and understanding them? Let me put it that way.

    Ms. DOUGHERTY. Well, when with my husband was activated, there was—there were no family meetings, for instance, called to share information. In fact, most notably was the financial impact. Since he had really no time in the military, and military is based on grade and time in service, he is a petty officer second class, they are not highly paid. So the consideration—I was trying to find out information about exactly what was the bottom line, what was he going to be paid, what was—with the housing allowances and all the things that I couldn't figure out on the Internet. There was not one person who could answer that question. Not one. And coming from the private sector, and a person who is in human resources and labor relations, it was unbelievable to me that nobody could answer that question.
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    We did creative things like refinance the house. When Edmund joined, we discussed the possibility or probability of having to sell our house and rent while he was deployed, knowing that we would have a severe financial impact. So trying to—although he was given his warning order on June 2nd, which is my birthday, so that is why I remember it, and then——

    Mr. MCHUGH. That was a good day.

    Ms. DOUGHERTY. Well, he had told me the next day. But he was away, and I got the e-mail, so I actually knew. So—and, consequently, anyway, we refinanced and did an interest only loan, and I do shop exclusively at the commissary. We were able to do things that didn't make us sell the house, for instance. However, I happen to be fortunate because of the CERT team that he is on, there were seven wives, and one of them was very proactive, and they had been prior active service, so they had a—she knew how to negotiate her way around. I was very fortunate to be part of that group, and she was able to share information with me. When I went to the Hearts Apart group, there were 20-some-odd women around the table, and the woman to my left happened to be a woman whose husband was in my husband's battalion and had not been contacted by anyone. This is 5 months into his deployment. And I was sorry that took me 5 months to find this group. I consequently put her in touch with the battalion ombudsman, and she did contact her and then was in the loop, so to speak.

    But it was—the one thing that could have alleviated all of that was to not ask the families to attend a meeting, but require them to attend a meeting that would outline and explain all of these things. Now, just—not just salary, but all the other benefits that we were entitled to, because I didn't know what we were entitled to. And, quite frankly, as a reservist, I didn't feel like I had the right, because there was a stratification of benefits when he originally joined. Insofar as the commissary, I just assumed there was a stratification through and through. I wasn't comfortable going and asking as a reservist.
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    Mr. MCHUGH. We are working real hard to try to get through that, but you have hit on the core of the biggest challenge we face, and I don't think most of us who have not gone through this can understand the overwhelming fright really that hits a family that has no idea what tomorrow is going to bring, and you are contemplating having to sell your house. It is incredible. To what? To serve this Nation in the cause of freedom. It is amazing.

    Let me ask you and Mrs. Bocook, fair to say that—we tend to view these things as kind of fun, recreation; well, isn't that nice, go out and play on the jungle gym, or something. But when you are talking about the core program like the commissary and exchanges, as I believe I heard you say—and I appreciate Mrs. Bocook's both personal experience and your liaison work and reaching out to other families, what you hear. These make it possible for you to afford to live. Is that an overstatement?

    Ms. DOUGHERTY. No, that is not an overstatement.

    Ms. BOCOOK. No. I mean, we have been in 19 years. And I can tell you that probably the first 12 years, if we would have had to go off base, there probably wouldn't have been food in our house most of the days during the week. It was already hard enough to stretch what little bit we did have much less, you know, put anything else on there. I mean, I could tell you, for the first year that we were married, fruit was a luxury on the 15th because we couldn't afford it on the 1st, Even if it was like a little bowl of fruit. So everything was budgeted out. If you took that from us—and we are fruit lovers today still, I believe, for that reason.

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    But you have got to take in consideration, every time we move we have a lot of changes, just not uprooting our family and going. Our insurance rate changes, our mortgage rate changes. I mean, putting something on your window costs you money to—you know, we get a little bit of money to offset that cost, but you use that eating out and entertaining your kids during the move. And, I mean, when you take it all into consideration, it does not even out. Not in our family it doesn't anyway, and we don't live what I would call high class at all. I mean, we are normal people.

    Mr. MCHUGH. You give that impression.

    Mrs. Dougherty, do you want to add anything to that?

    Ms. DOUGHERTY. I would like to say, outside of the commissary and PX, I bring my children to the pool on base, and it costs me a dollar and change. I mean, these are things I can do without having to join the rec center or something, which would cost me more money. But one of my fondest memories was going to Constitution Hall for a Christmas concert with my sons. And the holidays were hard. And they recognized the families and the reservists and active duty men serving. And my oldest son said, Mommy, that's Daddy. And of course I wept, and that was horrible. But it was one of those moments that I wouldn't have gone to the concert had I not gotten the tickets at MWR. And it was important to start to—it is hard emotionally to even get motivated to get out of the house and do anything. I was so pleased that I had the tickets, they were free. I brought them there; it was festive, and then they felt that they recognized their father. It was—you know, they were speaking to them. And that was important for them, just as they understood then it is not—their sacrifice also was being recognized. It is important.
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    Mr. MCHUGH. Well, the families, the children, the spouses sacrifice every bit—in a little bit different way, but every bit as importantly. Thank you for that.

    Let me just quickly go to our two folks in uniform who visited theaters. You may have heard General Frost say that when a particular soldier went into the exchange, he wasn't in Iraq anymore. Obviously there is a morale lift by knowing you can go get real Pepsi or real Coke, not Coke Lite or whatever they are making, or Pepsi Stadt in Europe. I don't know. Or, if you are from Texas, you have got to have Dr. Pepper. That helps you. But what about just that emotional outlet? Is that important to the troops? Can you add to what our two spouses had to say?

    Sergeant GILLY. I would, sir. I got the opportunity, like I say, because I was a company gunny for headquarters and support for the battalion. I got to see the marines use the exchange off al Assad Air Base quite a bit. The marines come back in for a 12-hour patrol not knowing what is going to happen to them while they are out there. Being able to stop at the exchange was a separation, is a separation, between their job and a break to go in and get a soda.

    Like I said, a lot of people take for granted what we have here in the United States compared to what we had when we were in theater in Iraq. And the services that MWR provided for the marines over there definitely gave them that separation and did lift their morale tremendously.

    Mr. MCHUGH. Thank you.
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    Sergeant First Class.

    Sergeant CAWLEY. Yes, sir. Every once in a while we would just walk through the PX and escape the theater for a while. It was great to do.

    I totally agree with you, American-made products delivered overseas are the way to go. So whenever that can happen, that is a good benefit.

    I would like to back up to the family members. Specifically for the lower-ranking soldiers, the PX and commissary benefit is essential for people to live, to have a decent quality of life. It is important to remember in terms of retention, if you take care of somebody when they are at the early stages of their career, they are more likely to stay around for 20 or more.

    Mr. MCHUGH. And that is a real critical aspect right now, and recruiting and retention is under such stress.

    Well, listen, I appreciate all of your comments. I am going to yield to the distinguished Ranking Member Dr. Snyder.

    Dr. SNYDER. Thank you, Mr. Chairman.

    And picking up, Mrs. Dougherty, on the Chairman's line of, I guess, more or less question than comment, but I remember a few weeks ago we had a man from Arkansas here, Chief Warrant Officer Keaton, who had inhaled some fumes when he was going out, when they were under attack, and they would go and look at the crater and try to analyze what the trajectory was. And, anyway, he inhaled some fumes while he was there and had some heart problems and was transferred back medically. And his comment was a variable to what you were talking about: That he had been in the military, been in the guard for 20-plus years, and so there was no bureaucracy that he hadn't learned how to maneuver through in that 20 years. But he became like a mother hen for these 18- and 19-year-olds who had been wounded and had hardly been in the military at all, and yet they were literally changing locations every few days or a week or two from Baghdad to Landstuhl to Walter Reed, and then getting plans to go to VA or whatever it was. And he said they just needed a lot of help, and he didn't think that we appreciated how much difficulty these new folks had in navigating through a system.
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    And you are a year or two older than 18 or 19, but the issue of being new, I think, is a variant of that. We have a responsibility for folks who are just coming in, and don't assume that somebody who has been out and working and raising a family somehow knows how to maneuver through the military bureaucracy. It is not that easy. So I appreciate your comment.

    I just had one specific question. Gunny, your comment about the produce. Mr. Nixon, do you want to respond to the issue of not great produce?

    Mrs. DRAKE [presiding]. Please take a chair and use a mike for us, Mr. Nixon.

    Dr. SNYDER. This is the produce man here.

    Mr. NIXON. We certainly take the gunny's comments quite seriously. Let me give you a little background on how we do the produce business. And what we are doing, in fact, we are testing a new process of produce.

    From an historic perspective, we have always used kind of an executive agent to procure our produce, and that was the Defense Personnel Support Center, which is now the Defense Supply Center, Philadelphia. And we have recently looked at how the produce business model is operated and found that there is probably a better way to do produce. And we have engaged in a test in—in fact, in the Tidewater area, where we have engaged small business and actually turned the business of procuring our produce from the standpoint of quality control and field buys over to the private sector, and this is a little bit different.
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    Six weeks into the test, we have some remarkable results. We found out that the savings, which ran in about the 35 percent range, have gone up to 47 percent. Tonnage has increased 27 percent. The savings has gone up about 10 percent. And it has been easier to procure, easier to manage, and easier to pay bills. So that is very positive. So we are looking at rolling that out.

    But, you know, there is no reason why you should not get quality produce day in and day out at every commissary in the world. And I will be talking to the gunny and hope he has some specifics that, if there are isolated instances——

    Dr. SNYDER. He specifically mentioned milk also. That is probably a different issue than the produce.

    Mr. NIXON. Milk is procured. We have——

    Dr. SNYDER. That should be a management issue at the facility.

    Mr. NIXON. Absolutely.

    Dr. SNYDER. If it is out of date, you chuck it.

    Mr. NIXON. There should be nothing systemic. In fact, we have food service, food inspectors who inspect all of our products that arrive at the back door to make sure—our contracts require them to have a certain amount of shelf life when they arrive, and they are not to be sold after an expiration date. And that exists everywhere in the world. So these—I am assuming these are isolated instances, nothing systemic. Our customer satisfaction surveys don't show that there is a systemic problem. But any indication of dissatisfaction is taken very seriously, and we will move out to correct it.
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    But produce in particular is—we think there is a better way to do it, and the tests have proved successful. We look at rolling that out throughout the country in discussions with the Defense Supply Center.

    Dr. SNYDER. Could I just make up a date and say September 1st of this year, could you provide the committee with a written report of where you are at on this produce plan?

    Mr. NIXON. Absolutely.

    Dr. SNYDER. Thank you.

    Thank you all for being here. Appreciate you.

    Mrs. DRAKE. The gentlewoman from California.

    Ms. DAVIS OF CALIFORNIA. Thank you. Thank you, Madam Chairman.

    And I want to thank you all for being here. I think this is the first hearing that I have been at that spouses have testified, and I think that is very important. So thank you. I really appreciate it.

    And I just wondered, first, Mrs. Bocook, could you talk a little bit about your role just as the Key Spouse volunteer? I think what I am asking, what I am looking for, because we have some limited time about that, what in your role would be helpful that you feel you are somehow stymied in or not able to deliver to the families that you work with? Is there something that be available to you?
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    Ms. BOCOOK. I think we have all the resources that we can use. It is getting the word out to the spouses what the Air Force or other branches have to offer, because we have the reserves at our base now, and actually I have a few reserves that are being taken care of by me because they don't have a Key Spouse in their unit.

    The biggest thing that I could see that would help is I put a package together for our spouses now and—first I will back up. When they come to the base, I have their name, and I contact them: I know you are new here. What do you need? Is there anything we can do? They get a card from me, they get one from the—a letter from the commander. They get a letter from me also letting them know if they need anything, they can contact me, they can contact the first shirt, and they can contact the commander. So, I mean, sometimes it is just to find a dentist, you know, little things.

    Then they are in the base, and we try to find a way to meet them, you know, to get them in on the base. And then about two weeks after they are in, I kind of give them a call back and ask them if they know about our family support center, do they have any special-need children that might need some attention, anything, you know; you know, somebody might want the fitness center, let them know the hours of the fitness center.

    So what I do is I put all that in a package in almost like a phonebook of all your resources. If your car needs to be fixed, call so and so. If your—gosh, you know, if you need painting classes, the skills development center. Believe it or not, our spouses don't even know sometimes what each facility offers. They might not know everything that the skills development center has to offer, you know.
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    Ms. DAVIS OF CALIFORNIA. And do you do this with your own resources, and do you have resources available to you to help, if a family is in need, something happens, they just need some resources right away?

    And I ask this partly because the ombudspeople have shared with me, both the Marines and the Navy ombudspeople, that there is a lack of kind of immediate funds. And I think the commander has appropriated funds, but I don't know whether this is something that has come to your attention that they have talked about.

    And, Madam Chairman, I think this is an issue that is out there, and it may or may not be relevant. Is that something that rings true for you?

    Ms. BOCOOK. True. I mean, we don't need a lot of money, but sometimes, you know, we do. Knowing your resources is one of the biggest things you have got to know right away. And, for me, Air Force Aid, we are very blessed with that. At Robbins we are blessed that our first shirts do fund-raisers. And so if I need money for one of our spouses, I will go to our shirt and say, I need money. You know, what is it for? We can give them $50. But that is usually about our limit on that. I keep a notebook probably about this big that has all the resources I can use off base. It tells me about the Angel Food Ministry, and we advertise that a lot for the younger airmen especially. But it might be who pays electric bills, it might be who will help you with child care. Any resource that I can find, we gather and put together, and we share it at our Key Spouse meetings with other spouses. So we try to combine our resources a little bit. But postage money would be great.

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    Ms. DAVIS OF CALIFORNIA. I think we have no appreciation and underestimate the role that you all play. It is so critical. And I think, Mrs. Dougherty, you spoke about that. And I think one of the difficulties is that the guard and reserve did not have access to those support services. They are starting to connect a little bit now, but it is—we are two years into this, and that was a real problem. And I think that a lot of our casework I know came from people in that situation. And so I just want to commend you for doing that, because as a volunteer I know it takes actually money out of your pocket.

    Ms. BOCOOK. Oh, yeah, it does.

    Ms. DAVIS OF CALIFORNIA. And is just an important role. You are trained to do that; you have probably taken advantage of that. And so it is terribly important, and I think whatever we can do to applaud and to help resource where necessary our volunteers who play that role, it is incredible, it is very important for us to do that.

    I don't know, Mrs. Dougherty, did you have anything more to add to that in terms of connecting with that kind of a wonderful volunteer?

    Ms. DOUGHERTY. I was fortunate to have had a very active ombudsman who was a member of this CERT team my husband was a member of, and she was very proactive. So, fortunately—but I was fortunate. I know I have met other people that weren't as fortunate. But you have to search for it. I know my way around the Internet; I have been working for 20-some-odd years. So for the younger people, I find there is a—I find that they are angry as opposed to a little—because they don't feel like they have control, and they are not old—a little bit more experienced where they will know that it is there if they search it out.
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    So it is critical, I think, to have people that volunteer, but they have to be—but it is a special person that does that and somebody who really believes in the cause, because not every spouse feels that way. I think most of us do, but not everybody.

    Ms. DAVIS OF CALIFORNIA. Thank you.

    Sergeant First Class Cawley, did you have a sense that there was a support system out there for your new spouse?

    Sergeant CAWLEY. Yes, ma'am. My unit, while we were deployed, held monthly family support meetings for information distribution. If somebody was in a jam and needed their house painted, it could be arranged through that. So we were—we ran it within our own at the unit level. The guard is somewhat disjointed from the active duty as far as centralized services, so that is a hurdle we have to overcome at mobilization time.

    Ms. DAVIS OF CALIFORNIA. Thank you. Thank you all very much. Thank you.

    Mr. MCHUGH [presiding]. I thank the gentlelady. As I understand it, the distinguished vice chair passed on her own when she took the chair, so I would be happy to yield to her.

    Mrs. DRAKE. Thank you, Mr. Chairman.

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    First of all, I would like to start by thanking everyone for being here. It certainly is the first time I have seen spouses in a hearing.

    Mr. Henties and Mr. Johnson, I would like to thank you for your commitment to our commissaries and our exchanges, to your concern about them. I appreciate that you both brought up your concern about exchange consolidation. I think you heard me say it is something that, even though it is new to me as a new member of this committee, that it is something that just doesn't feel right. So I appreciate that you are really watching that very, very closely. And I appreciate the effort you make to get our name-brand products into these commissaries overseas and into our exchanges, because we heard that very clearly from you, Sergeant First Class, that that really made a difference to go in. And I know when I have traveled overseas, it does feel strange to go in the store and they don't have anything that we have.

    I would like to thank both of you, Gunnery Sergeant Gilly, as well as Sergeant First Class Cawley, for your service for our country and for what you have done for us. And to our two spouses, that was a very, very moving testimony to hear about your personal experiences and the sacrifices that you have made to be military families.

    And I think, Mrs. Dougherty, you must have found your ombudsman way after your husband was deployed because of not even knowing how much money you were going to earn and making the commitment to us as a Nation that you would refinance or sell your home. I think that is a true American to be willing to do that, and I would like to thank you for that. And you might have thought you didn't have anything to offer, but the things that you have said have been very, very touching and make us realize we need to do a better job. And we have heard that in other committee meetings that, from the actual military member, that they didn't feel they were as connected. And so to hear it from you was pretty powerful as well.
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    And thank you, Mrs. Bocook, for what you have done to make other members, other families, know what is going on and feel a part of it. I would like to ask you, as Key Spouse, when someone comes to the base that you are at, and those people that you would work with, you get reservists as well as active duty members, you get them both?

    Ms. BOCOOK. Um-hum.

    Mrs. DRAKE. So had she come to your base and been part of yours, right away she would have had those services. And would you have been able to direct her somewhere so she would have known what her income would have been?

    Ms. BOCOOK. Oh, yeah. Easily.

    Mrs. DRAKE. You would have done that very easily.

    Ms. BOCOOK. Just like that. All the services that are offered to us are offered to them on our base except for the Air Force Aid. Everything else is open to them.

    Mrs. DRAKE. And one question I do have from the whole conversation today for the four of you who are exchange and commissary users. Is it apparent to you that there are certain items you just can't buy there, and has that been a frustration to you?

    Sergeant CAWLEY. Not for me, ma'am.
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    Ms. DOUGHERTY. Not for me, either.

    Mrs. DRAKE. How about Gunnery Sergeant? Have you noticed that?

    Sergeant GILLY. I haven't really noticed. The biggest concern that my wife and I were talking about, ma'am, was no standardization of the commissaries throughout the bases. You can go to one base, and the commissary might be different at the Air Force base than what it can be at the Marine Corps base. And that kind of gave us the sense that the stability of going from one base knowing that I can get this item at this, I can't get it at this commissary.

    Mrs. DRAKE. That is what you meant; they don't carry the same products?

    Sergeant GILLY. Some of them do, some of them don't. And that can be generalized because of the area that I was currently stationed at.

    Mrs. DRAKE. Mrs. Bocook, have you been frustrated by that?

    Ms. BOCOOK. A little bit. It is a stock issue, because like recently I was looking for a PDA, and the tag is there, but the stock is not there.

    Mrs. DRAKE. So it is out of stock?

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    Ms. BOCOOK. So you continue to go back and continue, and it is still not there.

    Mrs. DRAKE. Was that commissary or exchange?

    Ms. BOCOOK. Our exchange.

    Mrs. DRAKE. That is your exchange?

    Ms. BOCOOK. Um-hum.

    Mrs. DRAKE. I don't know, Mr. Henties or Mr. Johnson. Mr. Johnson, would you like to comment on that?

    Mr. JOHNSON. I think the main difference one commissary to another, and the folks that work for DeCA can probably expand on this, but the main difference is the size of stores. There is no question that a smaller store will have less assortment of merchandise than a larger store just partly by square footage available. Mostly that is the reason. Other than that, if you went to a class one store, for example—and there are basically five classes of stores in DeCA. If you went to a class one store on one base and a class one store in another base, you would find large similarities, almost complete similarity, other than the configuration of the store might be a little different. But the stock assortment should be 95 percent or better the same.

    Would that be fair, Pat?
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    So it may be that the gunny sergeant has perhaps looked at different bases—different sized bases. And, also, the other variant you might find is in some locally procured items, such as dairy produce, some DSD items, that might be different in one part of the country than another.

    But nationally available items are centrally decided upon by DeCA headquarters at Fort Lee, and there is a standardization that goes throughout the system from Japan to Turkey and points in between other than size of stores drives the difference.

    Mrs. DRAKE. Thank you for that. And I would just like to add that I have visited the Navy Exchange in our area since I have been elected, and it has been many, many years since I have been in one, and I was absolutely stunned at how beautiful it was, how well laid out, the selection. The prices were great. I visited the Navy Lodge at Little Creek and that was absolutely incredible, as well as one of the recreation facilities over at the Naval base.

    So I really was impressed and I think there has been a lot of changes in the last 20 or 30 years to those services. So thank you. Thank you for coming.

    Mr. MCHUGH. Thank the gentlelady. Gentleman from New Jersey, Mr. Andrews.

    Mr. ANDREWS. Thank you. I would like to thank each of the witnesses for their participation today, and most especially, Sergeant First Class Cawley and Gunnery Sergeant Gilly. Thank you for your service. And Mrs. Dougherty and Mrs. Bocook, thank you for your service because it is the entire family that serves, and I thought you each added something very important to the testimony today. Mrs. Dougherty, I think when we talk in substantive analytical terms about the value of this benefit, your story about the holiday concert was better than anything we could ever say.
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    I just thought it was very moving and very heartfelt and it just really drove home the point of the value of this benefit. We appreciate it very, very much. I wanted to ask both Mrs. Johnson and Mr. Henties, I notice that a shared point in your testimony is that with respect to the UETF process, that you both, I think correctly, insist that a business case analysis that supports shared service implementation be laid out. I am an amateur, but I understand that to mean that it has to make sense from a practical economic point of view to share services. It can't just look good on an organizational table. And I wonder if either of you or both of you could spell out for the committee the kinds of elements you think should go into that business case analysis so we could be guided by your thoughts.

    And to the rest of the panel, the reason that I ask this question is that I truly believe that if in the name of consolidation and efficiency we do this carelessly, that the quality of the benefit that you have spoken about so eloquently today could be jeopardized. So I am concerned for that reason.

    Mr. HENTIES. Thank you, Mr. Congressman. As I said in my statement, we are concerned in particular in two areas, the implementation cost and the transition cost are of concern to us and we want to be sure that when the plan is put together that those two areas are addressed, and that we see the real activity based costing models that go along with, just not, you know, just not a theoretical cost model, but a real measurement of the activities that are involved in the transition and the activities that are involved in the actual implementation of it, and that we haven't seen yet.

    Mr. ANDREWS. I appreciate that. Thank you.
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    Mr. Johnson.

    Mr. JOHNSON. I believe that the UETF is working hard to try and come up with some, not only the criteria, but how to construct an organization of shared services to meet the criteria. But one of the things that is terribly important is that there be measurable gains, if we consolidate, there be measurable gains for the patrons through better merchandise selection and availability, lower prices, and that there be increased contributions to MWR. If the model can come up with a way of providing those things, it is pretty hard for anybody to say it shouldn't happen. The question is, can that model be developed at an acceptable—like Mike said a moment ago, at an acceptable development cost, you know, conversion cost. And if all of those things can be done, why would anybody be against it? But it is a daunting task to come up with all of those things.

    Mr. ANDREWS. I was on sabbatical from the subcommittee to go to the Homeland Security committee the last two years, and probably because of my absence, not despite of it, I think the committee did a great service in moving this discussion from where it was in 2003 to where it is today. I think the consolidation discussions in 2003 were the wrong way to go. And because of the work of this committee we are now talking about rational versus irrational ways of making the existing system work better is what I hear us talking about, which I think is very welcome. And I would say, Mr. Johnson, that your point about benefit really reflects what the secretary said in the first panel, that if, in fact, we can produce a better dividend that increases the quality of the benefit for the families that is great. But I want to be sure that we don't produce that benefit at the expense of employees who are, themselves, military families and others that are not military families, because I think the reason the systems work as well as it does is the quality of the men and women who work in it, and I just think it is very important.
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    You can't put a price tag on that all the time. But the quality of their service and the dedication to their job is what makes this possible. So I know that you share our view that we want to validate that point. Thank you, Mr. Chairman.

    Mr. MCHUGH. I thank the gentleman. Ms. Dougherty, let me ask you a question about that concert you went to. Did Mr. Andrews sing at that?

    Ms. DOUGHERTY. No.

    Mr. ANDREWS. No. She liked it.

    Mr. MCHUGH. This is a well kept secret. We have got to try to find out what else he is up to. Okay. Well that's good. And I appreciate the gentleman's comments about the process of consolidation. And you both had a chance to expand upon that, Mr. Henties and Mr. Johnson, so I won't go back there. Let me just say, and I think, Lloyd, you had mentioned it directly in your testimony. Mike, I am not sure, forgive me, I am not sure if you did or not. But the A–76 process that is going on in DeCA is troubling to me personally, and we are going to add that to one of the written questions we submit. It seems to me, at a minimum, at a minimum, it makes far more sense to let DeCA kind of reengineer its workforce as it is going about it, and at least forestalling the A–76 process till you get through that, rather than try and do both at the same time.

    I don't think it is the way to improve efficiencies. I don't think it is to put such pressure on a workforce that is already under great pressure because of the times we are in and is doing such a great job. So I just—if you wanted to add to that, that is fine, but otherwise I just wanted to kind of throw that out there.
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    Mr. JOHNSON. You are right on. We support that as well.

    Mr. MCHUGH. Thank you all again very much. And to our spouses, God bless you for your service. And you really did add a true human touch to this. And it is critically important we don't forget folks like yourselves, the spouses and families that remain behind. And we focus a lot of on folks in theater, such as these two gentlemen here, two heroes, and we should. But there is another aspect of this that is equally critical, and we deeply appreciate it. And to the industry partners, and I have said this many times. I have never witnessed an organization or a group of individuals that make their living in providing goods and services in this case to the military equivalent of department stores and grocery stores that feel such a part of a team and are a critical component of the team that provides defense to our Nation, and I appreciate all that you do. And a lot of the sacrifices, a lot of contributions that underwrite these programs that are so important go unsung and untold about, but I am aware of a lot of them and they come because you folks so believe in what you are doing, and we all deeply appreciate that.

    So with our deepest thanks to all of you, and gentlemen for your service, we express that appreciation. And with that, the subcommittee will stand adjourned.

    [Whereupon, at 4:14 p.m., the subcommittee was adjourned.]