SPEAKERS CONTENTS INSERTS
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26–141
2006
[H.A.S.C. No. 109–21]
HEARING
ON
NATIONAL DEFENSE AUTHORIZATION ACT
FOR FISCAL YEAR 2006
AND
OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS
BEFORE THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
MILITARY PERSONNEL SUBCOMMITTEE HEARING
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ON
MILITARY RESALE AND MORALE, WELFARE AND RECREATION OVERVIEW
HEARING HELD
APRIL 7, 2005
MILITARY PERSONNEL SUBCOMMITTEE
JOHN M. McHUGH, New York, Chairman
JO ANN DAVIS, Virginia
JOHN KLINE, Minnesota
THELMA DRAKE, Virginia
MICHAEL CONAWAY, Texas
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
LORETTA SANCHEZ, California
ROBERT ANDREWS, New Jersey
SUSAN A. DAVIS, California
MARK UDALL, Colorado
CYNTHIA McKINNEY, Georgia
Michael Higgins, Professional Staff Member
Debra Wada, Professional Staff Member
Jennifer Guy, Staff Assistant
C O N T E N T S
CHRONOLOGICAL LIST OF HEARINGS
2005
HEARING:
Thursday, April 7, 2005, Fiscal Year 2006 National Defense Authorization Act—Military Resale and Morale, Welfare and Recreation Overview
APPENDIX:
Thursday, April 7, 2005
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THURSDAY, APRIL 7, 2005
FISCAL YEAR 2006 NATIONAL DEFENSE AUTHORIZATION ACT—MILITARY RESALE AND MORALE, WELFARE AND RECREATION OVERVIEW
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
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
WITNESSES
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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APPENDIX
PREPARED STATEMENTS:
[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.
DOCUMENTS SUBMITTED FOR THE RECORD:
[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)
QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD:
[The Questions and Answers can be viewed in the hard copy.]
Mrs. Drake
Mr. McHugh
FISCAL YEAR 2006 NATIONAL DEFENSE AUTHORIZATION ACT—MILITARY RESALE AND MORALE, WELFARE AND RECREATION OVERVIEW
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.
OPENING STATEMENT OF HON. JOHN M. MCHUGH, A REPRESENTATIVE FROM NEW YORK, CHAIRMAN, MILITARY PERSONNEL SUBCOMMITTEE
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.]
STATEMENT OF HON. VIC SNYDER, A REPRESENTATIVE FROM ARKANSAS, RANKING MEMBER, MILITARY PERSONNEL SUBCOMMITTEE
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.
STATEMENT OF HON. CHARLES S. ABELL, PRINCIPAL DEPUTY UNDER SECRETARY OF DEFENSE, (PERSONNEL & READINESS)
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.
STATEMENT OF MAJ. GEN. KATHRYN G. FROST, COMMANDER, ARMY AND AIR FORCE EXCHANGE SERVICE, U.S. ARMY
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.
STATEMENT OF REAR ADM. ROBERT E. COWLEY III, COMMANDER, NAVY EXCHANGE SERVICE COMMAND
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.
STATEMENT OF MICHAEL P. DOWNS, DIRECTOR, PERSONAL AND FAMILY READINESS DIVISION, MANPOWER AND RESERVE AFFAIRS DEPARTMENT, HEADQUARTERS, U.S. MARINE CORPS
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.
STATEMENT OF PATRICK B. NIXON, ACTING DIRECTOR AND CHIEF EXECUTIVE OFFICER, DEFENSE COMMISSARY AGENCY
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.
STATEMENT OF BRIG. GEN. JOHN A. MACDONALD, COMMANDER, U.S. ARMY COMMUNITY AND FAMILY SUPPORT CENTER
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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.
STATEMENT OF REAR ADM. CHRISTOPHER E. WEAVER, COMMANDER, NAVY INSTALLATIONS COMMAND, U.S. NAVY
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.
STATEMENT OF ARTHUR J. MYERS, DIRECTOR OF SERVICES, U.S. AIR FORCE
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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.
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.
STATEMENT OF SGT. FIRST CLASS PETER CAWLEY, 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. M