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[H.A.S.C. No. 106–57]









JUNE 27, 2000

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HERBERT H. BATEMAN, Virginia, Chairman
WALTER B. JONES, Jr., North Carolina
BOB RILEY, Alabama
CURT WELDON, Pennsylvania

JOHN M. SPRATT, Jr., South Carolina
ADAM SMITH, Washington
JAMES H. MALONEY, Connecticut
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MIKE McINTYRE, North Carolina

Peter M. Steffes, Professional Staff Member
Diane W. Bowman, Staff Assistant




    Tuesday, June 27, 2000, Defense Logistics Reengineering Initiatives

    Tuesday, June 27, 2000

TUESDAY, JUNE 27, 2000


    Bateman, Hon. Herbert H., a Representative from Virginia, Chairman, Military Readiness Subcommittee
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    Ortiz, Hon. Solomon P., a Representative from Texas, Ranking Member, Military Readiness Subcommittee


    Gansler, Hon. Jacques S., Under Secretary of Defense, Acuqisition, Technology and Logistics, Department of Defense

    Hansen, Hon. James V., a Representative from Utah

    Hoeper, Hon. Paul J., Assistant Secretary of the Army (Acquisition, Logistics, and Technoogy), Department of the Army

    Orr, Ronald L., Assistant Deputy Chief of Staff, Logistics, Headquarters U.S. Air Force

    Warren, David, Director, Defense Management Issues, National Security and International Affairs Division, U.S. General Accounting Office; accompanied by Julia Denman and John Brosnan, National Security and International Affairs Division, U.S. General Accounting Office

    Whittemore, Ariane L., Assistant Deputy Chief of Naval Operations (Logistics), Department of the Navy

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

Gansler, Hon. Jacques S.

Hoeper, Hon. Paul J.

Orr, Ronald L.

Warren, David

Whittemore, Ariane L.

[There were no Documents submitted for the Record.]

[The Questions and Answers are pending.]
Mr. Bateman
Mr. Jones
Mr. Riley
Mr. Hansen
Mr. Fowler
Mr. Sisisky
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Mr. Rodriguez


House of Representatives,
Committee on Armed Services,
Military Readiness Subcommittee,
Washington, DC, Tuesday, June 27, 2000.

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


    Mr. BATEMAN. At least by my watch and the clock in front of me, it is now 2 p.m.; and I would like to call this subcommittee meeting to order. We are expecting at 2 o'clock a series of votes, which means that we are going to have to excuse ourselves for whatever period of time that takes. In the meantime, I thought I might go through my opening statement, which I am sure you are waiting to hear with bated breath, and after that any comments that Mr. Ortiz may have if it still leaves time for us to get to the first vote.

    With that, this afternoon the Subcommittee on Military Readiness is meeting to obtain a better understanding of current Department of Defense efforts to reengineer logistics functions to improve support for our forces and to achieve savings that are needed for modernization. An effective and efficient logistics program is a critical element in maintaining readiness because nearly one-third of the entire defense budget is used for logistics support activities, which include weapon system maintenance, inventory management, and the distribution and transportation of military goods.
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    Last year, the Department of Defense informed us of their Logistics Strategic Plan, which outlined the Department's approach for logistics reengineering, claiming that by the end of fiscal year 2005, the Department would have highly efficient, integrated logistics processes in place to improve support to combat forces. This new plan proposed that each of the military services would designate 10 pilot logistics programs to test the use of best commercial practices in an effort to reduce costs and improve services. These 30 pilot programs are in addition to the approximately 400 individual initiatives already ongoing throughout the military services and the Department of Defense to improve logistics support. Also last year, the committee asked the General Accounting Office to review all of DOD's logistics and reengineering initiatives focusing on the completeness of DOD's reengineering plans, the potential effect of reengineering efforts on combat forces, and what factors could limit the achievement of all of DOD's stated reengineering goals.

    In responding to our mandate, GAO has reported that they believe DOD has not developed an overarching plan that integrates the individual services' efforts into a single Departmentwide implementation strategy, that it will be difficult to link results and savings to specific reengineering concepts, and that there may not be sufficient funds to adequately test and fully implement the reengineering concepts.

    Other concerns that have been brought to my attention include: What would be the effect of a large number of private contractors providing logistics support on the battlefield; would contractors be able to meet surge demands of future military operations; and what would be the potential effect of outsourcing on the number of positions available to military personnel returning to the United States from overseas assignments or at-sea deployments?
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    I am also interested in learning more about the impact that the use of sole-source, long-term contracts will have on anticipated reengineering savings, and how the Department will manage their reengineering efforts within the confines of existing laws and regulations.

    To help us better understand this issue, we will hear from two panels today. The first will be General Accounting Office personnel who have been deeply involved in this issue for a number of years, and the second will be Department of Defense and military services personnel who are recognized as resident experts in this area.

    Prior to hearing from our witnesses, I will yield to the Ranking Democrat, Mr. Ortiz, for any comments he may choose to make at his discretion now or it can be deferred until after the vote.

    Mr. ORTIZ. I have about a 15-minute statement, Mr. Chairman.

    Mr. BATEMAN. I suspect we should defer it until after the vote then.

    Mr. ORTIZ. We can go vote and then come back.

    Mr. BATEMAN. We will hear his statement when we return. We will be in recess.

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    Mr. BATEMAN. The subcommittee will come to order. I now turn to my friend, the gentleman from Texas and the Ranking Member of the subcommittee, Mr. Ortiz, for his opening statement.


    Mr. ORTIZ. Thank you, Mr. Chairman. I join you in welcoming all of our witnesses here today. Their presence should help us to understand the path or paths that we as a Nation will be traveling in this most important area, providing logistical support to the force. This is not an insignificant task. It is important that we remember that even though the Cold War is over, a fully capable logistical support system that is truly responsive to the user is key to successful accomplishment of the variety of missions we task the military to perform. I look forward to the testimony of our witnesses today regarding the various initiatives that are under consideration. Their testimony should provide us some insights into how the Department is responding to the challenge of providing efficient and effective logistical support today and in the future.

    Mr. Chairman, it is also common knowledge that an acceptable level of readiness cannot be achieved or maintained without an adequate logistical support system. I have frequently expressed my concerns about the Department's ability to provide the type of logistical support needed to ensure that our military is fully capable. I have also heard some of our colleagues express similar concerns about these matters.
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    During preparations for this hearing, I was reminded of the declining readiness indicators in some segments of our military forces. For example, Air Force tactical air mission capable rates continue to decline as a result of a combination of factors, including aging aircraft, engine problems, and unavailability of spare parts and of skilled maintenance personnel. Shortages in readiness spares packages for Air Force Special Operations Command equipment degrade their readiness. While the Marine Corps report that their ground equipment is ready for operation, they are concerned about the long-term capability to sustain that equipment due to the negative effects aging and corrosion have on that equipment. Availability of aviation spares remains a major concern in the Navy. The Army has expressed concerns that high deployment tempo has accelerated wear and tear on the equipment and has increased the required level of maintenance effort which is reflected in increased cost of maintenance, spare parts, consumption and the demand for maintenance technicians. The March civilian personnel hearing this subcommittee held highlighted the Department's apathy in addressing the challenge of attracting and retaining the quantity and quality civilian personnel to meet the Department's technical and management requirements. To me, these are all manifestations of logistical support systems with significant shortcomings. They provide the answer to the question of why it is important to get the logistical support system properly organized.

    While I am convinced of the need and the sense of urgency in working this matter, I do have some reservations about the Department's approach. First, it seems to me that the services and the DOD are working in opposition to each other or at cross purposes. It is my observation that the services are attempting to use the statutory framework provided by the Congress to enable them to move forward and establish depot maintenance policies, national maintenance plans, public-private partnerships and centers of excellence. At the same time, the DOD appears to be focusing its energies on seeking a repeal of existing legislation. I fail to understand DOD's outright opposition to implementing the provisions of Title 10, section 2274, addressing centers of industrial and technical excellence. Additionally, I remain concerned about the heavy reliance on private contractors near or on the battlefield to order and distribute supplies, maintain items, and provide support.
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    Mr. Chairman, I also have specific concerns about the logistical strategies being considered for evaluation by the services and the evaluation methodology. There appears to be no effort at the Department level to integrate the services' individual concepts. I am uncertain if the Department has an understanding of the impact of the various strategies on current readiness. The test plans and the investment strategy appear to be inadequate to support the planned decision deadlines. Furthermore, we need to understand the impact of the various approaches on the availability of assignments and training opportunities for military personnel and on those civilian personnel necessary to sustain the core requirement.

    Logistical support is an important and complex matter. As I said at the civilian personnel hearing in March, this is not a case of mission impossible. And I know it is not something that can be accomplished without considerable effort. But it must be done. We must start with a disciplined and rational assessment of the reengineering strategies and make the resource investments necessary to meet the challenges associated with providing relevant, efficient and effective logistical support, or readiness will get worse.

    Again, Mr. Chairman, I thank you for the time.

    Mr. BATEMAN. Thank you very much, Mr. Ortiz.

    At this point, I would like to identify at least and briefly recognize the people who are participating as witnesses at the hearing today, consisting of two panels. The first panel of witnesses, or the witness, will be Mr. David Warren, Director of Defense Management Issues, National Security and International Affairs Division of the General Accounting Office. Mr. Warren is accompanied by Ms. Julia Denman and Mr. John Brosnan who are also from the National Security and International Affairs Division.
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    The second panel, representing the Department of Defense and the military services, will be the Honorable Jacques S. Gansler, Under Secretary of Defense, Acquisition Technology and Logistics of the Department of Defense; the Honorable Paul J. Hoeper, Assistant Secretary of the Army for Acquisition, Logistics and Technology of the Department of the Army; Ms. Ariane L. Whittemore, Assistant Deputy Chief of Naval Operations for Logistics in the Department of the Navy; and Mr. Ronald L. Orr, Assistant Deputy Chief of Staff, Installations and Logistics, Department of the Air Force.

    I am advised that Mr. Hansen is present and has an opening statement that he would wish to make for the record.


    Mr. HANSEN. Thank you, Mr. Chairman. I appreciate your holding this hearing today. There are many important issues before us and I will be submitting questions for the record.

    I would like to take my brief time here addressing what I see as the fundamental disconnect between OSD policy, represented here by Mr. Gansler, and longstanding legal restrictions as well as what I see as common sense economic decisions.

    As you know, the Air Force is $100 million out of compliance with the 50–50 requirement. Secretary Peters has personally assured us that the Air Force will soon be back in compliance and will not need a waiver in the future. I appreciate the Secretary's leadership on this issue but remain concerned we have seen no movement toward resolving this matter.
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    I am greatly concerned that the Air Force, and indeed all the services, are being forced by OSD acquisition policy to take the short-term view. I would kind of like to hear some response to that one. Gentlemen, get the mikes.

    Last week, Darlene Druyun testified that the Air Force is considering delaying the depot maintenance decision on the F–22 to avoid the program cost cap. Reports suggest that delay will save over $2 billion, as if the contractor would provide these services for free. Delaying this decision until after 2008 clearly violates the core requirement to establish a depot capability within four years of initial operational capability and is another sign of long-term problems with the 50–50. I am looking forward to hearing some response to that. As we probably have said from this committee many times, we are not totally wed to that thing but we would like to—it is the only action we have really got to keep things going. As far as I am concerned, I am very pleased after meeting with the Secretary that he is now concerned that more work should come back to the depots because he has tried to get another flow going the other way. That was as per, what? Not too long ago we met with him and he gave us that indication. I would appreciate hearing from the Under Secretary and others about these concerns that we have.

    Thank you, Mr. Chairman, for allowing me to say a word.

    Mr. BATEMAN. Thank you, Mr. Hansen.

    Now if we may, Mr. Warren, we are pleased to have you back before the committee and look forward to your testimony. Your complete statement as submitted will be made a part of the record and you may proceed as you choose.
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    Mr. WARREN. Thank you.

    Thank you, Mr. Chairman, members of the subcommittee, I am pleased to be here today to discuss this reengineering issue. I am going to focus on three things: planning of the reengineering effort, potential reengineering efforts; the impacts of that on combat forces; and other factors that could limit the reengineering goals, the success of those goals.

    First it is important to note that this is a highly complex task. The Department has taken several actions to move forward to reengineer the logistics process. However, many aspects of the overall effort are not well coordinated and integrated, raising questions about whether the overall goals of improved service and lower costs will be achieved. Key steps that the Department has undertaken include establishing 30 pilot programs to test various reengineering concepts, establishing a new office to coordinate those concepts and help to ensure the implementation of the effort. In addition, they have taken actions to better coordinate the hundreds of initiatives that are underway within the individual military services.

    However, the Department does not have an overarching plan that integrates individual service and OSD efforts into a single Departmentwide implementation strategy. For example, independent of the 30 pilot programs, the Department reports having 400 other major initiatives underway in the services to reengineer logistics. At the same time, they are currently in the process of contracting for the initial development of an overall framework for what the future logistics structure will look like.
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    As a consequence, there are many questions about the potential for duplication among these efforts and how the various efforts will ultimately fit together.

    Further, the decision-making milestones for the development of information that will support the decisions are not in sync with the test plans that will come from the 30 pilot programs. For example, in seven cases, pilot programs, the test plans have not even been developed yet. In another 17 cases, we are told that the test plans are subject to change. And in 21 cases we are told that the results are not likely to be available by the point in time when decisions are to be made about what the future overall logistics framework will look like. However, the reengineering milestones at this point have not been adjusted to reflect those circumstances.

    Additionally, because many of the 30 pilot programs have multiple objectives, it will be difficult to link the results in savings to specific reengineering concepts. For example, many of the pilots were initially designed to reduce support costs and not to develop reengineered logistics processes. Many of these pilots were put in place prior to the initiation of the concept to develop a set of pilots to help to facilitate the reengineering process. Further, the Department has not estimated the total cost of completing the reengineering initiatives or developed supporting budget plans.

    Given these conditions, there is a significant risk that new logistics concepts could be implemented in the future without ensuring that they are more effective and efficient than systems that currently exist today.

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    Regarding the warfighter, it is simply too early to assess whether the impact of the logistics support practices being tested, what that impact will be on the combat forces. However, officials representing the combat forces have identified a number of concerns that need to be considered as part of the process. Quickly, some of these include the effects of having large numbers of private contractors on or near the battlefield, the abilities of contractors to meet surge requirements, the effects of contracting out a number of positions that would ultimately be used or are currently being used as billets for people that are returning from overseas assignments and/or sea duty, and the potential for the loss of operation and maintenance funding flexibility for commanders at unit levels.

    Also, the Department is in the early phases of developing a joint logistics warfighting initiative test. That test will assess the impacts of various logistics reengineering efforts on combat forces in an operational environment. However, again the test is scheduled to take place before the reengineering concepts are to be implemented, thus potentially reducing the value of the results of those tests.

    Last, there are several other factors that if not addressed could also limit the Department's ability to achieve the reengineering goals. These include the impact of long-term sole-source contracts on anticipated savings, and the effects that existing laws and policies would have on the current reengineering plans. As we look at it now, those have not been considered fully within the strategies that are being talked about.

    In summary, we appreciate the complexity and the difficulty of the effort and we agree with the need to move forward to improve the effectiveness and efficiency of the Department's logistics capabilities. To that end, we recommend that the Department develop an overarching plan to integrate the reengineering efforts of all the components, reassess the decision-making schedule for the various initiatives, develop a methodology for evaluating savings, and reevaluate the approach for assessing the use of increased numbers of contractors on or near the battlefield.
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    Mr. Chairman, that summarizes my remarks. We would be happy to answer any questions you might have.

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

    Mr. BATEMAN. Thank you very much, Mr. Warren. We appreciate your testimony today and the statement that you have furnished us and the report that you have submitted. It certainly highlights some concerns that need to be considered very, very carefully as the Department of Defense moves forward with this reengineering.

    One of the things that you mentioned in your report and which is of particular concern and I think is the very foundation of what all of this is about, is a logistical system that gives the best support possible to the combat forces. You mentioned officials in the combat area having expressed concerns about this reengineering. You have focused upon the reasons why they have expressed concerns. I would like for you to spend a little more time on that because we are going to want to ask Dr. Gansler and the military department witnesses to address that a great deal more thoroughly than they did in their comments on your report.

    Mr. WARREN. By way of background, as we talked with the military commands on this issue, one of the issues that did come out, that they did not have a great deal of information on what the new plans actually were going to be; but they did provide us, as we discussed these plans with them, those areas that they thought needed to be built in as part of this assessment. For example, contractors on the battlefield. They were not necessarily opposed to that, but they raised issues about how do we take care of force protection for those individuals; what will our doctrine and tactic strategy be in that regard?
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    Mr. BATEMAN. Let me stop you there. The combat commanders expressed concern about the presence of private contractor personnel on the battlefield and how they would have to develop a plan and a doctrine for protecting them. Does that strike you as something that they should be expected to have to do?

    Mr. WARREN. We did not discuss it in that context. That was an issue—I would say I did have an opportunity to go to Bosnia. They have a contractor support operation there, and that was an issue. They had a number of contractors that were on and off the various camp bases that they had, and their main bases. The general officer that I met with there said, hey, this is really a problem in terms of how do I deal with these people.

    He was in this particular case not rejecting it, but he said that he needed some help so he could do it in such a way that he felt comfortable that he was doing the right thing.

    Mr. BATEMAN. I will be pretty direct on this. I have seen what the contractor base support has done, both in Bosnia and in Kosovo. It is remarkable what they have done. It is very much to the credit of the contractors and how well they have done it. I can't speak to how much it cost us, but they have done it extremely well. I can understand a degree of concern about the military commander and what his responsibilities are in order to protect that coterie of private contractors; but Bosnia, fortunately, Kosovo, fortunately, are not really combat situations in the normal sense. But that is what we have got to address and be concerned about if we are going to extend logistics support all the way from every aspect of equipment, supply, resupply, maintenance in private hands all the way to the battlefield. It gives me very grave concern if that is the direction in which we are prepared to go.
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    Mr. WARREN. And I think that is consistent with the concern that was expressed back to us. They were just not sure how that was going to be done. What they were asking is, if this is going to move forward, that needs to be brought to people's attention and that has to be part of the assessment that will be made before you come up and develop your future framework for the logistics support.

    Mr. BATEMAN. I think my questions and my volunteered comments suggest that I share any concerns that they have expressed. Also, I have a major concern that in the past several years we have seen military units and organizations down the chain of command in many different areas adversely impacted in their budgets by the assumption of savings that would be accomplished, which were never accomplished, and never realistically were going to be accomplished. Yet the particular military activity had its budget whacked on the assumption that the savings would be there.

    What is your view as to whether or not that game is still in play insofar as reengineering of the logistics function?

    Mr. WARREN. I do not believe they are taking—I think it is mixed. I know within the Air Force when they did their lean logistics, and then I think it ultimately progressed to agile logistics, there were a number of reductions that were made in Air Force budgets in anticipation of improved processes that ultimately did not come to fruition. I think as a general concept, as I am understanding the various service initiatives now, they do not want to make budget reductions prior to having proven savings concepts. That is the best I have on that at this point. I think the services would be better on that strategy. I know it has been done in the past and it has been very problematic.
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    Mr. BATEMAN. I understand that, Mr. Warren. I asked the question of you just as a preface for the fact that I think it is one that we want some reassurance from the Department. We want these savings. We want logistics. We know how vital it is. I have read more words on the subject of how important and significant logistics is than I needed to read. But it is also important that it not only be done well, but that it be done not by assumed savings but by reaping the benefits of real savings when they have occurred.

    I would hope to get some reassurances from the Department of Defense witnesses later. I have a number of other questions I would delight in asking you, but in fairness to the committee, I will turn now to Mr. Ortiz for any questions he may have.

    Mr. ORTIZ. Thank you, Mr. Chairman. Mr. Warren, there is no mention or assessment of the impacts of the Army's move to a single stock fund. What is your assessment of the advantages and disadvantages of this move?

    Mr. WARREN. I think a single stock fund is, in fact, a good move. I think it would give them an opportunity for greater visibility over their inventory which is an issue that has been of concern for a long time. In the inventory area, it should reduce also your inventory investment. Overall, I would say it is a positive thing. However, in the context of the specific issue today, as I mentioned, there are some opportunities for duplication and disconnects. At the same time, you have the Army stock fund initiative underway, you also have an initiative within the Defense Logistics Agency, also well intended to reduce inventories; but there is no coordination going on effectively between those two activities. And so that would be an example of one of these initiatives where we think there needs to be better coordination so that ultimately you come out with the most efficient program that serves the warfighter in the best way, and at the same time reduces the inventory to the maximum extent practicable.
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    Mr. ORTIZ. What is your assessment of the impact of the Army's reorganization that places logistics under the Assistant Secretary for Acquisition and Technology? Has that move resulted in the Army taking a total Army approach to decision-making regarding life cycle support of weapons for weapon systems?

    Mr. WARREN. That is an area that we have not looked at in detail, so I really would not have any analytic information to provide you on that. As I understand, there is the potential for us through your committee, the full committee, to look at that in a mandate next year and report back.

    Mr. ORTIZ. You are looking at it as we move along?

    Mr. WARREN. As part of that issue, yes.

    Mr. ORTIZ. I think that is very important. I do have more questions, but later on. I would like to yield to some of the other Members, Mr. Chairman.

    Mr. BATEMAN. Thank you, Mr. Ortiz.

    Mr. Riley.

    Mr. RILEY. Thank you, Mr. Chairman. Mr. Warren, basically just one question. I am somewhat concerned when we talk about taking our private contractors and moving them into a war zone. During your analysis, could you tell me how we could be assured that contractors have the capability of making sure that their private employees go to a war zone?
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    Mr. WARREN. I don't think you can get absolute assurance. I think—the information that we have gathered is that contractors have said they are willing to do that; they have told the military services they are willing to do that. However, that was clearly one of the issues that the combat forces raised to us that they felt needed to be studied in much more detail. So I would say that that part of the process needs to be further looked at.

    Mr. RILEY. I guess my question is, are there penalties for the contractors? Are there any kind of systemic disincentives if they do not fulfill that mission?

    Mr. WARREN. I have not looked at any of the contracts in that kind of detail, Mr. Riley. I would have to get back to you on that.


    Mr. BROSNAN. I think you have the generic types of penalties that you have in a contract. I don't think there is anything special. In other words, if you didn't perform, if you defaulted, if you performed less than satisfactorily but not to that extent, there could be penalties built into the contract, monetary penalties. But we are unaware there is anything different in the sense that would impact that. In other words, you would have the contractual obligation to do that if you didn't fulfill that obligation—.

    Mr. RILEY. I guess the point is, when a depot employee raises his hand and takes an oath, he becomes a part of the military. With a private contractor, the contract itself may guarantee any kind of delivery system that any of us might expect. How do you transfer that down to their employee? Is it possible?
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    Mr. BROSNAN. I don't know if it is possible. I think that what you have would be the normal contractual relationships on those kinds of things. I know exactly what you are saying. I don't think by signing a logistics contract, your employees become obligated to a service member. I don't think you can do that.

    Mr. WARREN. Mr. Riley, notwithstanding that, even if those provisions were in place, what the warfighting community was telling us notwithstanding the contracts, but what if they leave anyway, what do we do? That is the issue they want to examine as this moves forward.

    Mr. RILEY. I look at it from the point that a person working on a factory floor in the United States making $15 an hour all of a sudden has to go into a hot war. He has an option of walking across the street and getting another job or going into that hot war. I don't think there is any question about what his ultimate response will be. As we move forward, and as I looked at your study this time and it said that we are beginning to do more and more of this, I think it just calls into question the whole philosophy of trying to take a private contractor and moving them into a war zone. I just don't think it is impossible.

    Mr. BATEMAN. Would the gentleman yield?

    Mr. RILEY. Yes, sir.

    Mr. BATEMAN. It seems to me that a part of the problem here is that if you formulate a contract, if you put a penalty on the contractor for nonperformance and the performance is to be conducted in a war zone, and he has got employees with whom there is an ongoing labor dispute, the greatest leverage in the world they have is to go on strike, because the employer will be denied whatever—or have to pay whatever penalty. So you almost have something that becomes self-defeating if you put it in the context of the possibilities of labor strife.
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    Mr. BROSNAN. I think all of the problems that you get with contractor performance on any project, you would be transporting that into the battlefield. That is the concern that people have.

    Mr. RILEY. Can you tell me if there are any positive aspects to this policy?

    Mr. WARREN. I think there are positive aspects. The issue that needs to be determined is how far forward do you move this contractor force. I think that is the area that really needs to be studied. I kind of refer to it as where do you do the handshake, where do you do the handoff, and what is the most reasonable spot to do that. Some of the programs that are being tested are very aggressive and moving very forward and the questions that are being raised are will those work? I think that is the key. We need to see where this handshake will best work. That can only be done through testing and looking at the various concepts.

    Mr. RILEY. Explain to me what the positive aspects were. You said there were several.

    Mr. WARREN. In terms, if—and I am making some assumptions. If the contractor support can provide better support, whether it is quicker support, more timely support, better mission capability rates through the new business processes, improved information technology to the forces, then that would be a positive aspect, and those are the types of things they are trying to test. Again it is at what point do you again turn it back over to your military capability and then let them take those supplies and repair parts forward to the forces. So there can be some opportunity through, again, particularly enhanced information technology, new business processes, rapid transportation. There are things out there that could help.
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    Mr. RILEY. Is there any reason that you know, any systemic reason that would not allow the Army to apply those same new business practices to our depot system?

    Mr. WARREN. The short answer is no, but clearly it will require an investment in order to do that. In other words, it is a reengineering and much of this is, again, information technology, new business processes, and each of those—I hesitate to use this, it is a lot like base closures; you are going to have to make some investment to get the ultimate change.

    Mr. RILEY. Thank you, Mr. Chairman.

    Mr. BATEMAN. Thank you, Mr. Riley. Mr. Pickett.

    Mr. PICKETT. Thank you, Mr. Chairman.

    In your review, Mr. Warren, of the progress that has been made on this program, do you feel like the military is having an adequate input to ensure that military needs are going to be met?

    Mr. WARREN. I guess at two levels. Clearly the military services are working on some, as I said, some 400 initiatives. There is a very aggressive program within each of the military departments to look at reengineering of their logistics support activities. On the other hand, when we went out to the combat forces, the commands that were going to be the recipient in essence of these new strategies, they did not have much information on that. As we talked also with the Joint Chiefs of Staff, we saw there a greater involvement, and as we moved through our work here over the last six months, that level of involvement has increased; but it was less so, as we saw it, as you got closer to the people that were going to be the actual recipients of the new strategies.
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    Mr. PICKETT. Don't you see that as a danger to the success of what is going on here? If the users are not being adequately consulted about what the end program is going to be?

    Mr. WARREN. Yes, sir, we would agree that that is an important component of putting together the entire program. That is why we have recommended an integrated plan that brings together all of the various elements that will be, in essence, players in this process as a way of moving forward and guiding the program. So yes, we would agree with that.

    Mr. PICKETT. What steps are being taken to remedy this deficiency, if any, at this point?

    Mr. WARREN. The specific things I am aware of, I mentioned the joint warfighting test that will be done, and I believe that is through JCS, with the Deputy Under Secretary of Logistics' cooperation, to take a look at how these new concepts will in fact work and whether or not they are feasible. That is the one I am most aware of. Julia, are you aware of the flow?

    Ms. DENMAN. I guess the first comment is that our concern is that the timing of this is such that you really wouldn't have the concepts implemented in time to feed into the joint logistics warfighter initiative, which the Department has suggested would be their way of testing the warfighter input, because the pilot programs are still in somewhat of a state of flux and they are still implementing these initiatives. At the time of the test, we are concerned that there really wouldn't be anything to test, there really wouldn't be the kind of impact felt that would generate a realistic assessment at that point in time. That is the reason we had suggested a reassessment of the schedule.
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    Mr. PICKETT. And in the meantime, they are going to continue to use the old systems? I guess that is implicit in what you are saying? They can't move to the new one until they are able to prove it out in some way?

    Ms. DENMAN. The question is, what is implementation? Although the 30 pilot programs that were intended to be tested with results that would be evaluated, it really appears that the Department is moving forward to implement the initiatives and they may be outside of the test.

    Mr. PICKETT. They are ahead of the pilot programs, is that what you are saying?

    Ms. DENMAN. It appears that is the case.

    Mr. WARREN. If I could just add, that really is the fundamental point; that we would like to see these pilot programs, the overall framework or ''architecture,'' as the Department refers to, that they are working on, contracting now, and the 400 initiatives that are out there in the service brought together in a more coordinated fashion. Simply, it is pretty much a straight management issue as to how you approach the overall implementation of the concept.

    Mr. PICKETT. Just so I will have a better understanding, would you tell us, just pick out one of the pilot programs, any one that you may be familiar with and tell us what it is, what the logistical implications are. Just very briefly.
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    Ms. DENMAN. The Army's number one is the Apache Prime Vendor. As you all know, the Army a number of years—has been for a number of years attempting to implement Prime Vendor Support (PVS). Basically it is a great deal of contractor involvement in all aspects of logistics for the Apache. They would attempt to modernize the aircraft through modernizing spares and make various improvements to the aircraft at the same time they are providing logistical support. However, as a part of its own evaluation, the Army determined that it might not be cost effective to implement this program. So the Army essentially was sort of at a standstill with regard to implementation of Apache prime vendor support. It is my understanding, then, that the Office of the Secretary of Defense again took forth the initiative to try to implement the Apache PVS initiative. And I believe, although you will have to ask the Department, that it is currently now still being revisited but not having been implemented.

    So my point on this is, this was the Army's number one program, but it is not clear what is to happen to it.

    Mr. WARREN. Mr. Pickett, there are about, I believe, nine of the pilots that are in this prime vendor type operation where simply a contractor will be the integrator through subcontractors for predominantly all the logistics support for a particular weapon system. So it is one-stop shopping for that particular weapon system through a single contractor, and that is the concept of the pilot, to see if that will work better than the existing organic logistics system.

    Mr. PICKETT. Mr. Chairman, I would just observe that what I am seeing and what I am hearing here is that we are adopting a system of logistics that doesn't meet the end user's needs and requirements. So they are going to have to adjust—the end user is going to have to adjust their method of operation to accommodate the logistics system, and that is the tail wagging the dog. I think we should be very, very, very concerned about this. I don't like the sound of it at all. Thank you.
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    Mr. BATEMAN. Thank you, Mr. Pickett. Mr. Hansen will be followed by Mr. Sisisky. He is gone? Now Mr. Sisisky.

    Mr. SISISKY. How long have these test plans been going on?

    Ms. DENMAN. The pilot programs are within the last year, but what is important about this is the pilot programs are really programs that had been identified as pilots for other initiatives, many of them. So the Department had started out about four years ago in its process of changing its logistics system, and you will recall there were a number of studies that came out from the Department that stated its intent to move more toward the private sector to support a logistics supply and maintenance activities. But the particular pilot programs were identified within the last year, about a year ago.

    Mr. SISISKY. Are any of these pilot programs in software or in computers?

    Ms. DENMAN. Cheyenne Mountain Complex is basically computers, yes.

    Mr. SISISKY. What else?

    Mr. WARREN. We would have to provide that.

    Ms. DENMAN. We will be glad to provide it for the record. I believe that is the only one.
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    [The information referred to can be found in the Appendix.]

    Mr. SISISKY. Were there any done by consultants, professional service contracts or things like that?

    Ms. DENMAN. No, sir, I don't believe any of the pilots are. Some of the pilots, particularly if you go to the Navy, they are very different. If you go to the Air Force pilots, most of them are total system performance responsibility-type (TSPR-type) contracts, total contractor logistics support for major systems, or they are older systems that they are upgrading. If you go to the Navy—.

    Mr. SISISKY. The major systems, excuse me, are sole source contracts; is that correct?

    Ms. DENMAN. By and large, yes, sir. Yes, sir, all of them are.

    Mr. SISISKY. For what length of time are these contracts for?

    Ms. DENMAN. They are long-term contracts.

    Mr. SISISKY. The Apache contract, you picked that one.

    Ms. DENMAN. They haven't negotiated a contract. The intent was for a long period of time.
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    Mr. WARREN. They are talking five to ten years in general. That would be the general answer.

    Mr. SISISKY. Five to ten years.

    Ms. DENMAN. The issue, though, is at the end of that time—.

    Mr. SISISKY. What, do you have to wait ten years to see if the projected savings are there? Is that what the test pilot—how are they going to prove the savings? Have they got an accounting system? In your opinion, does the Department of Defense have an accounting system that can prove that the savings are really coming due?

    Mr. WARREN. The savings, as we have said, developing baseline costs for comparison, certainly that is a problem, and that is an issue that—.

    Mr. SISISKY. A problem? That is an understatement.

    Mr. WARREN. A significant problem.

    Mr. SISISKY. This is one of the reasons that the Department never satisfied me that they could really—they could project the savings, that is no problem; they could project the savings, but delivering on the savings was another problem that they had. I am very concerned about the sole-source nature. Of course, I am very concerned about combat forces.
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    Mr. Chairman, I don't know what you were alluding to. You don't really believe that these people can go on strike in the field. And I think it would be interesting to see some of the costs. If you could go back into Desert Storm to see some of the contractor's costs, just the transportation cost over, that, I think, would be an interesting thing that this committee would like to see. There was a real live war there, to a degree. And there were contractors there. And there were airplanes that we rented from the private sector. It would be interesting to see what those costs are. I have never seen that. I think it would be an interesting thing to see.

    Mr. WARREN. I think there was also some recent cost information on the Bosnian situation and that we may have that readily available, Mr. Sisisky.

    Mr. BROSNAN. We are looking at the Bosnian contract now, in fact.

    Mr. BATEMAN. The committee would be very happy in having your analysis of that when your data is in hand and you have been able to evaluate it. And would so request.

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

    Mr. BATEMAN. Thank you, Mr. Sisisky.

    Mr. Chambliss.
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    Mr. CHAMBLISS. Thank you, Mr. Chairman. Mr. Warren, Ms. Denman alluded to a long-term logistics program that DOD is pursuing called TSPR, total system performance responsibility. And I think you are familiar with a letter that I sent to the Air Force back in February of this year which they responded to, very briefly responded to. But I would like for you to tell us for the record what your understanding of the program TSPR means and what you gleaned from the response to my letter of February 11, 2000 with respect to what the Air Force intends to do under that program.

    Mr. WARREN. As we understand the TSPR program, and we have had difficulty getting a clear definition—.

    Mr. CHAMBLISS. That makes several of us that have had difficulty there.

    Mr. WARREN. In general, it is a form clearly of contractor logistics support. The key difference in the TSPR program from other programs that the Air Force is running is that in TSPR, a single contractor is the integrating contractor for all the other logistics support activities that are being provided on a contractor basis for a particular system, as opposed to the government integrating the various contractor support activities. That is my understanding. I am not familiar with the letter. Julia—.

    Ms. DENMAN. I am sorry, sir, I am not familiar with the letter you sent to the Air Force. We have recently issued a report, as a result of the committee's mandate from last year on total systems performance responsibility, where we discussed TSPR contracts and basically said, as Mr. Warren alluded to, it is very similar to contractor logistics support, which is long-term multifunctional contractor support. The difference is that there is often a performance-based metric that is established with the contractor that he is supposed to meet. And as long as he meets that metric, the government's involvement is very small.
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    Mr. CHAMBLISS. If I said I sent the letter, I misstated that. It actually came from the committee. But what I had reference to was your statement in that report in which the Air Force listed some eight systems that they either did have under TSPR or intended to put under TSPR. I believe your comment was that instead of eight, there could have been an additional 75 systems that it appeared were—.

    Mr. WARREN. We thought it took a very narrow definition of contractor support and provided, while they met the legislative requirement and mandate, provided a very narrowly focused look at the level of contractor support that was being conducted in what we call a TSPR-like manner. We believe there could have been at least 75 systems that were discussed in that report that met the general context of that logistics support, yes, sir.

    Mr. CHAMBLISS. Does that not indicate an obvious intention of the Air Force apparently moving in the direction of more and more TSPR-type contracts for new weapon systems?

    Mr. WARREN. Clearly that is the case. I think there is clearly a preference in the Department from—starting from the Office of the Secretary of Defense down through the services to a greater use of contractor support in general. I think that has been a stated policy and practice for at least the last three to four years.

    Mr. CHAMBLISS. Assuming the Air Force has in mind getting the best bang for the buck, which means competition between the public sector and the private sector, is this not, in fact, lessening competition by sole-sourcing more contracts out to the private sector as opposed to giving the public depot systems the opportunity to bid on those systems and getting maybe a cheaper price?
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    Mr. WARREN. It certainly could result in that. However, I think there are safeguards that can be built into performance-based contracts that can help mitigate those types of things. But certainly that is a danger issue that we have discussed before.

    I don't know, John, if you would want to—.

    Mr. BROSNAN. Right. I think one of the aspects of the TSPR program, as we understand, is they are broader than just depot maintenance though, as we could understand them. We had the same problem you all did in figuring it out. But the concept in some of them was to have a contractor perform a portion or usually the majority of the support with a depot performing another portion. And the relationship actually not being overly clear as to work it out, but that is—so I guess conceptually if you do that, then the competition problem isn't as severe, I guess, as it would be if you just pulled that out altogether.

    Mr. BATEMAN. Okay. Thank you.

    Mr. Rodriguez.

    Mr. RODRIGUEZ. No questions.

    Mr. BATEMAN. Then I will call on Mr. Jones for any questions he may have.

    Mr. JONES. Thank you, Mr. Chairman. I only have a couple.
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    First of all, let my say that I am delighted to hear from GAO that you acknowledge that sometimes you have trouble figuring out those contracts because that is very encouraging for a Member like myself, so I am delighted that you make that statement.

    Mr. Warren, let me ask you, I did not see, and I just really went through the report briefly, but any discussion of the Navy's Integrated Maintenance Concept Program; and my reason for asking this question is there is a concern that this initiative may increase the logistic tail by establishing duplicative levels of maintenance around the country. And my question would be to you or your associates, can you provide your assessment of the Navy's concept?

    Ms. DENMAN. We really haven't looked at that in any detail, Mr. Jones.

    Mr. WARREN. We focused more on the overall management structure for the reengineering process and less so on the details of each of the individual pilots.

    Mr. JONES. Have you by any chance, even though I know, as you said, you have not looked into it, but have you had anyone to contact you with some concerns about a duplication around this country if this concept goes forward?

    Mr. WARREN. Not that I am really aware, sir.

    Mr. JONES. Okay. Thank you, Mr. Chairman.
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    Mr. BATEMAN. Thank you, Mr. Jones.

    In view of the hour, I am going to ask the subcommittee if they are willing to proceed on the basis of submitting any further questions to this panel for the record in order that we may have the opportunity to hear the second panel of witnesses. Certainly we have some additional questions, and it is just a function of hearing time that I think necessitates that we give the second panel an opportunity to be heard.

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

    Mr. BATEMAN. We thank you both, all three of you, very much; and your testimony has been very valuable and interesting for the committee.

    If the subcommittee would come to order, it is now a pleasure to hear from and welcome again before the committee Dr. Jacques Gansler, the Under Secretary of Defense for Acquisition Technology and Logistics; Mr. Paul Hoeper, Assistant Secretary of the Army for Acquisition, Logistics and Technology; Ms. Ariane Whittemore, the Assistant Chief of Naval Operations for Logistics; and Ronald L. Orr, Assistant Deputy Chief of Staff.

    Dr. Gansler, we are pleased to have you today; and as always we will take your full statement for the record, and it will be so admitted. You made proceed as you choose.

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    Dr. GANSLER. Thank you, Mr. Chairman, members of the committee. I really do appreciate this opportunity to discuss this very, very important subject of logistics transportation. As you commented, Mr. Chairman, I have submitted a prepared statement for the record. What I thought I would do now is take a few minutes to express some of my concerns about some of the barriers to our logistics reengineering efforts and my hopes that we can somehow work together to accelerate the rate of change and to see still greater results in the near future.

    What I find very frustrating, Mr. Chairman, is that we are dealing here with something that is clearly within the art of the possible. It is not some untried, untested science fiction version of a logistics support system of the future. What we are trying to bring out in the Department of Defense is a logistics system that has basically already been demonstrated in the commercial world. In fact, today, as you know, you can log onto the Internet, click on a commercial resource, choose what you want, place an order, check its availability, purchase it, track its progress from the warehouse to your door, and have greater than 99 percent confidence that it will arrive at the right place at the right time. The result of the advances in information technology in the commercial world has been a new era of high customer satisfaction and vastly improved performance, and all at much lower costs.

    In defense logistics, however, such advances are more apt to move and have been moving much more slowly, largely due to institutional resistance, outdated systems, and numbing bureaucratic delays. Our equipment is aging, and it is aging rapidly. We cannot replace much of that equipment in the near future. We don't have the resources. Consequently our operations and maintenance costs will continue to escalate. This results in reduced readiness, yet at an increasing cost; and unless we can reverse the trend quickly and deliberately, we face what I have described previously to this committee as a death spiral, a situation where reduced readiness requires us to keep removing more and more dollars from equipment modernization and putting it into daily O&M, thus further delaying modernization, causing the aging equipment to be overused, and further reducing readiness, and further increasing operating and maintenance costs. It is a vicious circle.
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    We now have an approximately 1-1/4 million Department of Defense personnel in logistics, we spend around $80 billion a year on logistics support, and in spite of these vast resources, we still fail to do a world-class job in dependability, responsiveness, or costs. However, our vision of a world-class defense logistics system, encouraged by the reality of world-class commercial support systems, sustains us in our determination that we can and we must make our logistics transformation happen.

    Having said all that, what is the strategy for making our vision a reality? First, we must directly attack the problems of large and increasing operating and maintenance costs on our aging legacy systems. To do this, the joint staff, military departments, the Defense Logistics Agency and our transportation commands are pursuing a multitude of initiatives, including the 30 pilot programs that are designed to improve support of our existing weapons system and to provide increased reliability to our aging equipment.

    Second, and in parallel with the initiatives, since we can't wait until later, and parallel with these initiatives designed to improve current operating and maintenance costs, is the urgent need to deploy a responsive, dependable, efficient and effective transformed logistics system. This must begin with a specific strategy. Here we have established a focused logistics strategic plan and a set of actions and metrics to implement it and to measure its performance as we progress.

    Two key elements of our strategy are the implementation of an overall 21st century logistics architecture and, most importantly, a modern logistics information system, one that will provide for our unique defense requirements, and one that is already well in place in the commercial world. My prepared statement discusses these initiatives in considerable detail. This modern information system will improve the speed and the precision of our logistics capabilities through improved situational awareness. Developing such a modern logistics information system is absolutely critical to our success.
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    Last, we must apply all the positive lessons learned from our pilot programs widely and rapidly across all of our systems. Our intent has been to explore a multiple set of strategies in these programs so that the services can tailor product support principles to meet their specific needs on these areas that prove very effective.

    During the past three years, we have achieved some dramatic improvement in our logistics performance. Average logistics response times from requisition to receipt of material has been reduced from 36 days to 14 days. Secondary inventory item levels have been reduced by $11 billion, and in-storage asset visibility has been increased from 50 to 94 percent, but we are not 100 percent. It is achievable by world-class operations today. And why not response times of five days with high confidence in those deliveries, not simply measure the average times? Again, such numbers are achievable and are achieved in the commercial world. Clearly we still have a long way to go.

    The Army—I think it is critically important that the Army Chief of Staff General Shinseki has stated that there cannot be an Army transformation without a logistics transformation. His vision for the transformed Army envisions rapid deployment of a brigade within 96 hours and five divisions within 30 days. Clearly, a logistics system that still requires an average of 14 days response time is incompatible with such rapid mobility concepts.

    Our specific initiatives and our goals, therefore, call for modern information systems such as the Army's logistics modernization concept, total asset visibility, and a system that focuses on the customer need, not on our capabilities. Speed and dependability are what the warfighter requires, from foxhole to factory and back to the foxhole; and we have to meet those needs.
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    Using market forces through competitive sourcing can help us meet those needs with both greater performance and lower costs. In fact, we have been finding savings of more than 30 percent, regardless of whether the winner is the public or the private sector. That is not our drive. It is the savings and the improved performance first. We can expand the use of competitively sourced support for both new and legacy systems, expand our partnering arrangements between the public and the private sector, improve reliability and sustainability through continuous technology refreshment, expand the use of prime vendor and virtual prime vendor support, reengineer our financial processes, improve the integration of our supply chains, and create complementary interoperable information systems, taking advantage again of what is easily available in the commercial world.

    In conclusion, Mr. Chairman, I believe that we can do a world-class job in logistics support. I believe it is our responsibility both to the warfighter and the taxpayer. I mentioned the fact that logistics carries an annual price tag of around $80 billion. Surely there is fertile ground for improved performance and substantial cost savings. Most important, however, is our commitment to the warfighter. The warfighter relies on us for the weapons to fight with, the ammunition for those weapons, and the trucks to carry those weapons and munitions, 100 percent confidence that those systems and their support will be there on time and in good order. The warfighter deserves nothing less, and I believe we can promise nothing less.

    We clearly need the help of this committee in the future as we have in the past if we are going to be successful. Your commitment to the warfighter is nothing less than ours, and we appreciate your support. I look forward to continuing to work with you to make this happen.
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    Thank you very much, Mr. Chairman.

    Mr. BATEMAN. Thank you Dr. Gansler.

    [The prepared statement of Dr. Gansler can be found in the Appendix.]

    Mr. BATEMAN. And now we are pleased to hear from Mr. Hoeper.


    Secretary HOEPER. Before I begin my brief remarks, I would like to recognize you and the other retiring members of this committee, Congressman Pickett, Congresswoman Fowler and Congressman Talent, for your strong support for our men and women in uniform and your dedicated service to our Nation. On behalf of Army leadership and America's soldiers, I wish the best always. Thank you for your guidance, and your leadership will be missed.

    Mr. BATEMAN. As I should have said, all the witnesses' statements will be made a part of the record, and each of you in turn may proceed as you choose.

    Secretary HOEPER. Thank you very much.

    Thank you for this opportunity to discuss the Army's efforts to improve efficiency and effectiveness of its logistics processes systems and infrastructure. I appreciate the work and findings of the GAO. All of this information helps us to work harder and smarter for our soldiers.
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    I will talk briefly about the Army's significant progress. My written statement, of course, has more details; and I appreciate the fact that this will be made part of the record.

    Mr. Chairman, we are transforming America's Army into a force that is more strategically responsive and dominant across the entire spectrum of operations. Our strategy will result in an objective force that is more responsive, deployable, agile, versatile, lethal, survivable and sustainable than the present force. The Army's strategy for maintaining our aging equipment is recapitalization. Let me define this carefully. Recapitalization is the maintenance and systemic upgrade of current fielded systems to ensure operational effectiveness and a zero-time, zero-mile system to, one, extend the service life; two, reduce operating and support costs; three, improve system reliability, maintainability, safety and efficiency; and four, enhance capability.

    Recapitalization may include preplanned product improvements, extended service programs and major modification. Recapitalization should go far towards reversing the death spiral that Dr. Gansler has identified. Sustainment is a vital element of any military operation. We recognize that. Since unifying acquisition and logistics in my office, I have added establishment as a formal evaluation criterion. Army policy, in fact, holds us accountable for cost, schedule, performance and sustainment. We succeed as a team, not as an acquisition community or a logistics community. We are one team, and we are proving it.

    We have an entirely new management approach on our Guardrail/Common Sense program where the Army's Communication and Electronics Command and our program Executive Office for Intelligence, Electronic Warfare and Sensors have joined forces as equal partners to jointly sustain Guardrail. When I visit Ft. Monmouth in early July, those same communities will sign another agreement on fire support command and control, formerly the Advanced Field Artillery Tactical Data System.
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    This team work is not merely Army-wide, it includes industry. On the Abrams tank we have a partnership with Anniston Army Depot and General Dynamics. The engine replacement on the Abrams tank has been extended and renamed the Abrams-Crusader Common Engine Program. On the Army's Heavy Expanded Mobility Tactical Truck, or HEMTT, we have a partnership between the Red River Army Depot and the Oshkosh Truck Corporation.

    As we transform the force, we aim for easily maintainable equipment made with more durable materials that share repair part commonality. We aim for fuel efficiency as well as built-in diagnostic sensors that anticipate failures and initiate reply or replacement activities before failures occur. As we create efficiencies, we will apply those savings and/or cost avoidances right back into our modernization program, especially to help cover some of the significant shortfalls in our recapitalization program. To maintain warfighting readiness we must recapitalize the legacy force as the Army transformation goes forward.

    In closing, let me thank you again for your strong support for America's Army.

    Mr. BATEMAN. Thank you, Mr. Hoeper.

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

    Mr. BATEMAN. Now we are pleased to hear from Ms. Whittemore, speaking for the Navy.

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    Ms. WHITTEMORE. Good afternoon, Mr. Chairman and distinguished members of the committee. I am pleased to be in front of you today to discuss the Navy's logistics transformation initiatives. Since my statement has been made a part of the record, I will just give you a couple of brief overview remarks.

    The effort that the Navy is undertaking to reengineer logistics processes and infrastructure is captured in our high yield strategy. This strategy is comprehensive, broad-based and accelerating in pace. A key component of our strategy known as one-touch support applies best business process reengineering and exploits Web-based technology to achieve a fiscal year 2005 end state that focuses on best-value suppliers, integrated systems and technology, customer-centered metrics and tailored customer support.

    The strong desire to reengineer logistics processes and infrastructure is based on the recognition that logistics support strategies are critical to determine operational success and affordability. Also, our ability to drive down operating costs allows us to redirect funds to modernize and recapitalize warfighting capabilities. This requires a partnership between the logistics and acquisition communities. In the Navy, this partnership is the cornerstone of our strategy to execute the new DOD acquisition goal to integrate acquisition logistics to ensure a superior product support process.

    The Navy strategy aims at improving logistics performance and effectiveness in addition to reducing total ownership cost. One initiative we are pursuing to achieve this goal is to design in-product support during the early stages of acquisition. This strategy allows us to address both optimal logistics performance and cost-effectiveness.
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    Also, the Navy is increasingly relying on the private sector for logistics support where it makes sense to do so. For example, the Navy and industry are partnering to provide enhanced logistics support to the EA–6B Prowler aircraft. Contractor field teams have partnered with the organic maintenance activities to achieve a zero bare firewall status by almost doubling the quarterly throughput of J52 engines at one of our intermediate maintenance facilities. This has significantly enhanced the operational availability of the EA–6B, allowing it to better perform its mission.

    Third, the Navy is putting a greater emphasis on ensuring that logistics support plans are developed and funded early in the acquisition process. Our goal is that all logistics support and training will be available when the item is fielded in the fleet.

    As test beds for these concepts, our pilot programs are operating across the spectrum of this overarching strategy. Concepts being tested include partnership with industry, prime vendor and virtual prime vendor support, performance-based logistics, and application of best commercial practices.

    Finally, the Navy has recently created a council of our most senior officials from the areas of budgeting, acquisition, warfare requirements and logistics. This Cost Reduction and Effectiveness Improvement Council each year rates and ranks the best investment opportunities across all Naval activities to make sure that we are investing our money most wisely. As a result, investment decisions are being made from a corporatewide perspective, the process optimizing investment decisions across the Department vice focusing solely on what is best for the individual system or program.
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    The Navy will be successful if we achieve three outcomes. First, defense systems are cost-effective to maintain throughout their life cycles; second, robust and competitive organic and industrial support infrastructures are maintained; third, but most important, success means that we continue to satisfy warfighting readiness through an efficient, timely and dynamic logistics support infrastructure.

    This is our high-yield strategy for transforming logistics processes and infrastructure. While pilot programs are a component, fleet support remain our focus. As has always been the case, the quality and timeliness of logistics is a key element of successful Naval operations.

    Mr. Chairman, members of the committee, this concludes my remarks. Thank you for your interest in Navy logistics.

    Mr. BATEMAN. Thank you very much, Ms. Whittemore.

    [The prepared statement of Ms. Whittemore can be found in the Appendix.]

    Mr. BATEMAN. Now Mr. Orr speaking for the Air Force.


    Mr. ORR. Mr. Chairman and members of the committee, it is a great pleasure to be here today to discuss the Air Force's logistics reengineering efforts. I have submitted my prepared statements for the record and will take just about 60 seconds to simply supplement what has been said by my cohorts and address a few of the issues that have been brought up earlier in our discussion.
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    Our Air Force strategy with our products support pilots is twofold. All of the pilots have a degree of freedom to explore initiatives customized to their individual programs. However, there were certain boundaries. These boundaries include operating within current laws and supporting key Air Force priorities, such as respecting the need to retain core capability, particularly both base and depot maintenance capability. As an example, none of our pilots utilize contractors for maintenance in the battlefield as part of this process.

    To ensure all Air Force stationholders are involved up front, we have implemented a new strategic decision process to ensure that senior Air Force leadership, including our operating major commands, are involved early and often in the development of these product support strategies. We have great confidence in our pilots, but we realize that it will take time to accurately assess their success. We have not assigned any savings targets or bogies for these programs. Our Air Force focus has been on improving readiness and support to the warfighter. We believe that improved effectiveness will ultimately translate into improved efficiency, which will then lead to reduced cost. We want to wait and see the results first.

    At this point I would be happy to answer any questions. Thank you.

    Mr. BATEMAN. Thank you, Mr. Orr.

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

    Mr. BATEMAN. Let me comment I am delighted at your unequivocal statement that you are going to receive the savings before you begin to spend them or to assume it is there to be spent. I hope we will receive similar assurances throughout the Department of Defense, because I don't believe that has been the recent history insofar as past operations.
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    Dr. Gansler, I hear this phraseology about best business practices and so forth. I hear it most often in a context that seems to make it inconsistent with a governmental institution or facility conducting itself and keeping with the best business practices that well-run businesses in the private sector do. I hope that that is really not the case; and it is not the assumption that only by going to or resorting to the private sector can you achieve a good management, good business, good efficiency, cost-effective operation.

    Dr. GANSLER. Mr. Chairman, I totally agree with you. There is no question that we are trying, in fact, very hard to achieve the same best business practices within the government as outside of the government. Of course, one of the best ways to incentivize that is through the competitive forces public and private, both cases, but there are other ways we can do it as well.

    Mr. BATEMAN. Well, I would hope that there would be, because I can't envision a logistics world in which through the forces of public/private competition we arrive at a phenomenon where most of the logistics support is provided by private contractors who are sole-source contractors; and what kind of contract can you write that will protect the taxpayers when you are down to the fact that everyone in the government who can do it has gone away, and all you are left with is a sole source, non-sole-source performer who has no one who competes against them; and you are stuck with a contract that either you give them what they ask for, or at a minimum is going to be some sort of a cost-plus-a-fee arrangement that will escalate as they require you to escalate it; and I am not particularly comfortable with that scenario.

    Dr. GANSLER. I am not either. First let me begin by saying that giving work to the government on a sole-source basis is also a sole-source; and so we are comparing how to eliminate sole source and create market forces so that we can, in fact, do exactly what you want to do, which is to continue to have a form of competition.
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    It is not our intent to have the organic capability go to zero, nor is it our intent to have it go to 100 percent guaranteed. I mean, the whole idea of this is to figure out ways to create market forces so that we can take advantage of the forces of competition. The idea when it does go to the private sector—and many of these cases, these have been mixed, as was pointed out by the other services, where we have a mixture of public and private, trying to take advantage of the best of both—what we tried to do is to create an environment in which we still have an alternative after the first contract.

    Now, these contracts are being awarded on a performance basis. The idea here is to encourage the winning contractor not only to give us in most cases a fixed-price contract, but also to have it performance-based so it is an incentive for them to improve the reliability and performance as they go along. In all these cases we have options on the longer term, not just a fixed contract for very many years in most cases.

    So what we try to do is to ask the services to try to make sure that there is an alternative. In most of these cases, in fact almost all of them, there is an alternative contractor who would be happy to bid on the next round of these after a few years of the current contract. If the current contractor is doing a good job and improving performance and lowering the cost, we are happy and you are happy, the taxpayer gets what they want, and the warfighter gets what they want. On the other hand, if either performance goes down or costs go up, then we don't exercise the option on the outyear contracts; and we recompete it. If there is not any government person left doing that kind of work, we compete among just private; but most cases there will still be public sector, and they can come back with their most efficient organization and compete.

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    So the whole idea is to try to figure out how to gain the forces of the market applied to better performance at lower cost. I would emphasize that we are trying to very hard to make these performance-based competitions and performance-based contracts.

    Mr. BATEMAN. Dr. Gansler, what you just said is very reassuring, at least to this member; and I appreciate the manner and the terms on which you have responded.

    That leaves on the table, though, the fact that, in law, we have this 50–50 performance requirement between the public depots and private industry.

    We also have the A–76 bulletin that sends—establishes ground rules for public-private competition. Now, a part of the A–76 ground rules is that if the work is inherently necessary to warfighting and maintaining our military capability, then it is strictly and totally governmental and not subject to being put through the A–76 process.

    I believe that is sound policy. It does not mean to me that you can't insist upon best management practices within that governmental agency. But I think it is very, very important that that aspect of the A–76 process be safeguarded; and I don't believe—and there are some specific instances where I believe it is virtually being ignored. That bothers me a great deal. So I need to know whether or not the Department of Defense is seeking to further the A–76 process even in instances where it is clearly a matter that is critical to our warfighting capability and whether or not it has any desire or is seeking to change the 50–50 proposition.

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    Dr. GANSLER. We certainly abide by the law, so we will start with that assumption. And, in fact, we are making big efforts right now to try to adjust to the 50–50, even if in some cases it is causing impact on readiness and cost.

    In terms of the intent of satisfying the A–76 requirements, we clearly are against doing that. We have gone through a very extensive effort and we have now got some in-house, some contracted studies looking at trying to define what are those functions which are inherently governmental functions that are essential to be done organically in trying to better understand the meaning of that term.

    And, clearly, there are some functions which absolutely have to be done. Warfighting is an example that is inherently governmental, no question about that. There are other functions that are now being done—in fact, I would argue everything that is being done for the Department of Defense in one way or another relates to warfighting. That is the business that we are in.

    The definition of those things that need to be done organically versus those things had need to be done, as far as I am concerned, every dollar that we spend of our 300 billion needs to be done or we shouldn't be spending it for warfighting, because that is the whole business that we are in. The definition of which of those functions then need to be done organically is where the difference of opinion may come up in some cases.

    Mr. BATEMAN. Well, it is not something that lends itself to a precise definition. But my experience is we have been wrestling with coming up with a reasonably satisfactory definition for more than six years, and to this point I am not aware that such a definition exists.
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    I don't mean to extend this, monopolize the committee's time, but, for instance, there is, I am told, about to begin or has already begun an A–76 process at a Naval weapons station. Now if you take it as a premise that we have Naval combatants in order to be able to use and fire ordnance, it occurs to this Member that those people who store it, service it, maintain it, and load it onto the ships of the Navy are doing something that is inherently necessary as a part of the mission of the United States Navy. I would not see that as anywhere within the ambit of being subject to an A–76 study. Do with them as you should to make them efficient. Study the heck out of them—whatever. But an A–76 study? However the study comes out, unless you are prepared to contract out vital inherent warfighting capabilities, you are wasting money doing it as an A–76 study. Do it the way it needs to be done to improve the efficiency of the organization. If there is any basis for finding that it is not—.

    Dr. GANSLER. I am not familiar with that case, Mr. Chairman. I will certainly look into it.

    I can point out that those weapons that are also essential for warfighting were all built by the private sector. So the dividing line when you get down to when someone pushes the button and the war conflict is very clear, that is the warfighting requirement that has to be done by uniformed military personnel. When you get back into who builds them and then who piles them up in a warehouse, there I think it becomes a little vaguer.

    Mr. BATEMAN. In fairness to the rest of the subcommittee, I am going to suspend and look to Mr. Ortiz for any questions he may have.

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    Mr. ORTIZ. Thank you, Mr. Chairman.

    Dr. Gansler, I am concerned that the Defense Department is rushing to outsource logistics support without adequately considering the risks it is taking regarding surge capability. The GAO report states that the Department's vision for the future includes a logistics system that places greater reliance on the private sector. I am concerned that the Department may be moving to a logistics system in which the services are held hostage to the private sector, particularly in regard to work loads the private sector cannot do or is unwilling to do.

    Last year, when the defective transmission gear threatened the CH–47 and the Apache helicopters flight safety, the Army looked to the private sector to replace and inspect the defective parts. However, the Army found no private sector firm that was capable of completing work within the Army's established time because there were no Apaches available. They were all grounded. The potential contractors had too much commercial work that they were obligated to complete before they could address the Army's safety issue.

    Corpus Christi depot was the only available repair source able to meet the Army's time frame. In fact, Corpus Christi completed the work on the Apache helicopter before the private firm stated that they could begin. They said, ''we might be able to begin some time in April and finish about February or March of the year 2001.'' The Army depot was able to do the work, they were able to shuffle their schedule, and they were able to make the Army happy by being able to do all the necessary repairs to the helicopter.

    Now, I believe this is an example of verification of why the committee feels so strongly that it is important for the Department to maintain a strong, robust, organic capability to meet these surge requirements. I am very concerned that the Department has not given adequate consideration to worrying what effect these logistics reengineering initiatives might have on the Department's ability to meet surge requirements during military operations. I share GAO's concern that the Department may be implementing reengineering concepts before they have been adequately tested.
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    I don't know how many cases like this are out there that we don't know about; but I am aware of, because this happens to be in my district, no one in the private sector could come and do the work. Why? Because they had other contracts.

    Do you know of any other, you know, problems like this?

    Dr. GANSLER. Let me comment on that.

    First, let me point out that during my tenure I have tried hard not to use the word outsource. I have consciously used the word competitive source. Now, I genuinely believe that what we are really trying to do and, in fact, what we have found is through the competitive process we have gotten enormous improvements and effectiveness and lower cost within the public sector as well. So that is the reason I want to emphasize that. I have really tried to do that.

    In terms of surge, I should emphasize that the general data seem to appear as though the limits for surge are essentially the same in the public and the private sector, by and large; and I will come to your specific case in a minute. But the things that limit surge are labor, first, the ability to shift people from one job to another when you have to surge; and, second, and dominantly, it is the availability of parts at the second and third tier so that you can surge the systems because you have the parts available.

    In both cases, the public and private sector are faced with these same constraints, the labor force. The public sector doesn't want to keep a pile of people around anymore than the private sector does. So you shift people from one job to another, and you try to have on hand sufficient spare parts so you can at least surge. And then when you run out of them, as we did, for example, in the Patriot system in the Persian Gulf, once we ran out of those parts there is nothing you can do about it until you get more parts.
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    The fact that the industry didn't respond to your need at that time I find interesting and is probably worth looking into. As you know, for many years we have had the ratings system that—the DX rating in this case would I think apply to your Apache example in which we can just simply tell the contractor you shall do this particular work and stop doing the work that you are now doing. And, apparently, that wasn't exercised in that case. But I don't know enough about it.

    Now, it is very clear that when you have an organization set up and doing the work, they can surge much more rapidly. I would guess that was the case in the depot. They have been doing the Apache work, they could surge on it much more quickly than a contractor. Even if they said, I am going to start tomorrow, they wouldn't have the setup, they wouldn't have the tools, they wouldn't have the spare parts and so forth. So whoever is doing the work clearly has an advantage in being able to surge.

    I suspect that was the case in your Apache case. If someone had been doing the Apache work, then they would have had the same constraints, namely labor and parts, which you actually had in the depots.

    Mr. ORTIZ. Most of the work on the Apache has not been the government, it has been the private sector. But, in this case, it wasn't that they didn't have the parts. In this case, it was that they had other contracts to do. Now, what happens when we encounter another problem? It could be the tanks. It could be something else. What would you do?

    Dr. GANSLER. I would exercise the priority rating system and tell them what they are to do.
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    Mr. ORTIZ. They tried. You can talk to the Army Chief of Staff. This is why we are so concerned.

    Dr. GANSLER. It is a valid concern.

    Mr. ORTIZ. Because of what we have seen happen before. And, you know, as a private—if I was in a private company, I am looking as well—and I am not trying to demean them—I am looking at profits while these other people are looking at being able to provide the best equipment so that we can go fight a war. Not that the private sector doesn't do that, but they have to look at profits. And that is part of the game.

    Dr. GANSLER. But they are also very dependent on the Department of Defense. You know, they look at profits in the short term and profits in the longer term. With our major defense contractors, we have a great deal of leverage.

    Mr. SISISKY. But you lose every court case.

    Mr. ORTIZ. In this case, they did not respond.

    I would like to allow somebody else to also ask questions.

    Mr. BATEMAN. Thank you, Mr. Ortiz.

    The Chair will recognize Mr. Riley for any questions he may have.
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    Mr. RILEY. Thank you, Mr. Chairman.

    Dr. Gansler, I would like to go back to—you heard the conversation we had a moment ago about taking private contractors, putting them on a battlefield. I have got just a very deep-rooted problem with that. And I would like to—I don't know, I have been sitting here thinking about this vision of back during Korea when you had thousands and thousands of Chinese flowing across the battlefield. I cannot imagine getting a private contractor to go over there and help sustain that force. How do you deal with something like that?

    Dr. GANSLER. Let me start by repeating what Mr. Orr said, namely, in general, this is—he mentioned for the Air Force, but none of the 30 pilot programs assume contractors on the battlefield. That is not the direction that we are really focusing on. That doesn't say that some cases—and as the battlefield becomes, frankly, much broader—as you remember in the Persian Gulf it became back at the bases, and it is likely to do that in future cases, the battlefield is somewhat less defined.

    But what we are really talking about here is primarily focused on back behind the battlefield, and the issue of the contractor on the battlefield is one that the Joint Staff have recently addressed—in fact, published a document in April of 2000 where they did some experiments, the Focused Logistics War Game of 1999, and then followed that up with a new directive that they published, 4.0, which—chapter 5 is specifically where it is in; and they tried to address what should be the policy in that area.

    What we have done in the Office of Secretary of Defense is say, this really is—I think the concern that you are raising is one that the military ought to address. And so—.
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    Mr. RILEY. I don't think so. I think this is something that you have to address.

    Dr. GANSLER. As far as I am concerned, if the military set up the rules—and I think what they will do is to set up rules that they are comfortable with, as contrasting to our telling them you must have contractors on the battlefield. We are not doing that. We are saying to them that what we are focusing on is back in the whole logistics chain and that up in the very front you decide whether you need somebody up there or not.

    Some cases—you mentioned Korea—I was just over in Korea recently and saw contractor maintenance being done, not up on the front line, of course, but back in the maintenance facility with contract.

    Mr. RILEY. Believe it or not, there is a little difference between now and the 1950s.

    But you are telling me in the Army's Apache prime vendor problem there will not be any of the private contractors on the battlefield, is that what you are telling me? If not, who is going to do it? Because no one else is going to be trained in these programs.

    Dr. GANSLER. That is not so. We will actually—first of all, the Apache program, as with most of these other pilots, have government people involved with it as well. These are partnership programs. Second, we will have people on the flight lines and up in the front in the battlefield who are trained in maintenance.
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    But the main focus of this whole chain from right up in the front line all the way back to the factory, the vast majority of that, will be contractor. Contractors aren't going to be flying the planes, and the contractor—those being shot at up in the front line will probably not be contractors. This is a choice that I think the Army is going to have to make. I don't think they will have contractors up there.

    Mr. RILEY. I don't think the Army has got to make that. I think the OSD has got to make that. I think you have already made the determination.

    Basically, what you are doing is reversing 70 years of what I think has been a successful military policy. You have done it, basically, in the last four or five years. I think it is a failed policy. I think it is absolutely ridiculous that we are going to something—sole sourcing. Sole sourcing only works if you—you said a moment ago if you give a contract to a depot or if you give a contract to a private contractor, they are both sole sourcing. Do you not recognize the difference between the two?

    Dr. GANSLER. Is that a question? Sure. My assumption was I want to give it competitively to one or the other. I am distinguishing between a competitive contract to one or the other—

    Mr. RILEY. No, you are not.

    Dr. GANSLER.—or sole source to one or the other.

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    Mr. RILEY. A sole source to the government entity that controls costs, that controls labor, that controls all of your overhead is completely different from a sole source that goes to a private contractor that is in business to make a profit. If you don't recognize that, then we have a real, fundamental problem here in the way the Army proceeds in the next few years.

    Dr. GANSLER. In the competitive evaluations that we have done, private versus public, or even some cases where—recently, there was one at Wright Field, the Air Force ran it. There was no private sector bid. The public sector bid on the most efficient organization, and it was 50 percent less than the current cost. I would argue there is some inefficiency in that sole source contract to the government. That is what we want to take advantage of thorough competition.

    Mr. RILEY. Mr. Chairman, one more question, if I can. I hate to do this.

    In the last three years I have come to believe now that there is absolutely no doubt that a public depot—we have the capabilities to be as efficient as anyone. What we can't be is efficient as long as we have the parts requisition system that we have, as long as our hands are tied behind our back.

    You sole sourced out one part on an M–1 tank we haven't been able to get for a year. So what our depot has to do is go out and rob it off of another tank and put it on this. And then you expect us to compete.

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    If you want these depos to be effective, if you want them to be cost efficient, if you want them to compete with private industry, what you have to do is restructure their ability to compete; and that is what you are not doing.

    Dr. GANSLER. That is exactly what we are attempting to do in trying to set up the whole chain from the customer all the way back to the factory. We are trying to change that. And, in fact, that is exactly the objective. It is to help make the depots more efficient by doing the whole chain. We will actually encourage the depots to become more efficient through the competitive sources when they win them. We will encourage the process through restructuring of the process to do exactly what you are asking for.

    Mr. BATEMAN. I think we understand the point that you are trying to make, and I think it is widely agreeable to members of the committee. But, in fairness, I will turn to Mr. Picket.

    Mr. PICKETT. Thank you, Mr. Chairman.

    Secretary Gansler, I think we all applaud what you are trying to do. And I look at these words: ''optimize support to the warfighter, meet mobilization/ deployment requirements of the national defense strategy; implement customer wait time as the logistic metric; achieve comprehensive joint total asset visibility;'' or to ''modernize logistics information systems'' and so on; and I think most of us realize that if you are able to get that done that there should be an improvement in the system.

    But the question I started out with with the previous panel had to do with are we going to supply the end users requirements? In a private environment, if you don't make your schedule and you don't perform the way your boss likes you to perform, you may get a chewing out, you may get a reprimand, you may get fired, but you don't get killed, you don't get permanently injured, typically. And that is the big difference in my mind, is we have to do things right for the people that are going to be using the equipment.
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    I am very disturbed when I hear that the people who are going to be using your system are not being consulted about how the system is going to meet their requirements, and somebody at a higher level is assuming that the shoe is going to fit. I think that is a big mistake. If it is true, then it is a big mistake that may be made.

    The other thing that I think that you are going to be confronted with is what Mr. Riley was alluding to, is the cumbersomeness of government contracting. It is not going to allow you to be swift and agile, because it bogs everybody down that has to contend with it.

    Another thing in this process that frustrates me all the time is how, in a bureaucratic environment, cost shifting takes place. One guy says, well, I am going to do this, but it is going to raise the cost of people on both sides. And he says, to hell with that, it is going to lower the cost. How do you plan to deal with that sort of environment?

    I would like, if you would, to maybe take one of our pilot programs that you are familiar with and just tell the committee how you visualize the program unfolding and what it is going to tell you ain't how you will be able to learn from that to better serve the needs of the warfighter.

    Dr. GANSLER. Let me start with what I think is the really critical question that you raise first, which is the service to the warfighter. They are involved. In fact, the interesting thing to me is the strong involvement of both the Joint Staff and the military people that have been driving this program and the experiments that we are doing.

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    The Marines have done an incredible job. In fact, I rarely see a civilian show up at the meetings that doesn't tell me about the transformation that the Marines are going through. These are the military users who are the ones demanding much faster response, much more dependable response. They are, frankly, not interested in the cost. They are really interested in trying to get hours measured as the response, rather than months measured as the response. And they want to know when they order a part that they will get it, not that it has a 2-year possible tail with an average of 36 days. They want to know that they will get it in five days or whatever they have been promised.

    So we are really trying to focus on the customer, which is the warfighter. And this is the case for all of the services, that that is the direction these initiatives are going.

    By the way, someone asked an earlier question, are we taking the cost savings? As Mr. Orr said, not in the Air Force. Not in any of the services. What we are saying is, when we realize these costs, we will take them. The objective here is to better serve the warfighter. Then, by the way, we would save some money. Because we really need the faster response for the mobility in the Army, for example, and all the services.

    Now, one of the big things that will help—and your procurement example is very valid—one of the big things that will help is electronic commerce and the whole information system. Because we are going to be able to speed up the whole time period for the orders, to the receipts, to the tracking of the systems and knowing where they are at any given time and even redirecting them if necessary. Electronic commerce can change that whole process, including the procurement process. That will take some changes in the system, no question about it. That is what we are really trying to do. It is not just going to pay for it, which we are trying to do right now. It is going to integrated process that is an electronic commerce system. We are increasingly using that, and it is all web based. So it will be fast and dependable, and everyone will have it out there.
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    As far as the pilots go, I think it is very important to recognize that these are, in a sense, experiments. We started out by doing a wide variety of different ones. We said we will ask each service to do so some of them and let them pick which ones they want.

    The only criteria we had is that they be high-dollar value ones in an area where we can get some impact. So they are not finished, in a sense, with basically those two criteria. They have to be important things, because we want to see if we can have an impact.

    We said to the services, you pick the type of thing you want to try to do, whether it be an integrated logistics system, whether it be a new information system, whether it be a reliability improvement, which a lot of them are geared towards, whether it be competitive sourcing of some portions of it. They are doing different things in each case.

    The idea is to try and see which ones are the ones that really have a payoff, first in terms of performance and then, second, in terms of cost. The other was tracking the metrics for them. They are having periodic meetings—they have quarterly reports to meet. They have periodic meetings among themselves for data exchange. And the ideas that look like they are fruitful, they grab ahold of and start to use in the service. They may transfer from one to another.

    Mr. BATEMAN. Thank you, Mr. Pickett.

    Mr. Chambliss.

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    Mr. CHAMBLISS. Dr. Gansler, once again I think we are—I have had a difficult time trying to understand, really, based on what you said in your opening statement, about why you feel so strongly that there is only one way to go or the best way to go certainly is going the route of private contracting. I am having trouble wrestling with that.

    You talk about the fact that you want to achieve 100 percent efficiency in some area because that is what they do in the private sector. You talk about cutting down the number of days because that is what they do in the private sector, but yet I don't know any single private sector company that tells its employees when they walk in the door every single day, guys, you all better get ready because by the time you leave here this afternoon, we may be at war. I mean, that just doesn't happen.

    Yet in the public depot system, that happens every single day. There is a distinct difference, and you are never going to be able to have the same psychological influence in the private sector; you are never going to be able to have the same practical influence in the private sector. And until we have some general understanding throughout DOD of that, then I think we are going to have a continuing problem in this public-versus-private and why we don't understand each other.

    I think another reason that we are having a problem in comprehending this is that—and I really do believe as I look back on it now—that going on eight years, this administration has simply conducted one experiment after another. Here we are today, we have talked about TSPR, we have got theater storage area (TSA), we have got core plus, we have got A–76 and any number of other programs that are out there. They keep coming up, seems like another acronym appears every year of something else that we are experimenting with.
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    When the folks that audit you at GAO can't understand any one of these programs in order to be able to make a definitive report to Congress, then something is wrong.

    I want to go back to your original written statement which says that the Department's efforts to reengineer logistics processes are driven by operational requirements that demand greater speed and precision in logistics delivery than we have historically experienced. You said that the Department achieved dramatic improvements in our logistics performance over the last three years, including the reduction in logistics response time by over 50 percent; from 36 days in 1997 to 14 days in 2000.

    It is my understanding that this dramatic improvement may actually be smoke and mirrors and a misrepresentation of what the real facts are. For example, it is my understanding that in 1999, the database on which logistics response times numbers are calculated was expanded to include a significant volume of requisitions for commercial-type food and medical supplies. If these changes had not occurred, the improvement would have been much less dramatic. More specifically, if you only looked at the requisitions for weapons parts, the category of items being measured in 1997, the 2000 logistics response time would not have been 28—excuse me, would have been 28 and not 13 as your statement suggested.

    Now, I believe this is just what GAO was talking about when they said that your current engineering plan does not include a process that will accurately reflect the savings or value from the changes that you are proposing to institute. How then, Dr. Gansler, would you expect the Congress to buy into what you are doing when there doesn't appear to be any evidence that this will save money or achieve the improvements in performance which you are claiming?
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    Dr. GANSLER. Let me start with saying that I think your concern about continuous change is one that I don't have a good answer to, because that is the way the world is today. Typical information system technology, as you know, changes every 18 months. The military equipment that we are going to be fighting with is going through a dramatic transformation. The Army is going through their transformation, the Air Force and the Navy are going through theirs. The Marines are making a dramatic change. This is a period of dramatic change.

    I think that the only way we are going to make it through this period of change is with a significant number of what you called experiments, trying different things that might make a significant difference and picking the ones that really are successful.

    As far as the statistics go, I am frankly much more interested in the uncertainty in the spread in those numbers than I am in the averages. What I keep hearing is that we can reduce, and as you properly point out, that we can reduce the averages by picking the ones that go fast. The real problem is we are waiting for an aircraft part and it might take two years; and that is one part, not the average, that we have got to figure out a way to make sure everyone comes within a 5-day period rather than the average being on five days and you have got a lot of food and clothing, very rapidly, and the aircraft part takes two years to come.

    We are really focusing on trying to satisfy the readiness need of the customer as opposed to simply contrasting averages, and saying on average we're doing okay but our readiness is going down. That is the part that really discourages us.

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    As far as do we have any evidence that we can in fact make significant improvements, I think there we have to look at what the success has been in the commercial world. When you and I put something into FedEx, we know that in 24 hours, with 99.99 percent probability, it will get there, where we sent it, on time. And they can tell you at any given instant exactly where it is by going onto the Web and give you an exact location.

    There is no reason why we can't get that kind of performance on our systems. Caterpillar does it, Wal-Mart does it, GE does it, Boeing does it on their commercial parts. We should be able to have that same kind of a system. I am confident that we can move to that system, and I am not sure that we will have to wait for the metrics to prove that that system is a lot better than the one we have now, because they are all doing that with fewer dollars; but most importantly, they are doing it with high confidence and much faster, which is what our military requires today. I am willing to spend the same amount of money if I could cut the response time and increase the dependability.

    Mr. CHAMBLISS. The only thing I would comment on is that, Dr. Gansler, in World War II we were flying, what, P–41s or whatever they were, and today we are flying F–15s. There have been changes from day one, since the military was implemented in 1776; and we have always had a system that worked. But we have never seen these kinds of changes and this kind of state of flux that nobody can get their arms around it. I think there may be something inherent in the way we are trying to think through the process and trying to complicate it too much.

    Mr. BATEMAN. Thank you, Mr. Chambliss. Now the very patient gentleman from Virginia Mr. Sisisky.
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    Mr. SISISKY. You must be frustrated. I have known you since you came into government service, and I know that you are trying, and I know you must wonder what in the world has happened on the other side of the table. Run it like a business. I remember telling the Secretary of Defense, when he told me that that's how they are going to do it, I said, how are you going to do it with 535 Members as a board of directors? That is one of your real problems.

    But the other problem, because it has changed where you are, you don't have this upheaval in corporations that you have in the Department of Defense. I didn't idly talk about proving that you can save money. I remember 18 years ago I sat on the fifth floor—you may have heard this story—the fifth floor of the Cannon Building, and there were three of us who were freshmen Congressman. A guy by the name of Boucher, Charles Boucher; he said he had a 15-year term and couldn't be fired for anything other than malfeasance in office, and that he was going to get the Department of Defense accounting system straight. He retired three years ago and it is still not straight. That is one of the problems that we have.

    I did operate a business on ontime delivery. I had to, unless I would have tripled my warehouse space and things like that. But let me tell you, if it didn't make it on time, it cost me money, but it cost one of four suppliers business, and that is the difference. Therein lies the difference. You don't have four suppliers that can—by and large. I am talking about in proprietary items that we have. So I know how important that is. I know how you want to do it, but it is very difficult to do.

    But there are things that we can do that are not being done, in my opinion, and correct me if I am wrong. You talked about modern information systems. What is the Global Command Support System? Is that an information system? We are spending $1-1/2 billion in this year's budget and the services are going their own way. It is easy to get them together. You said you meet every month, every quarter. Have you met with Mr. Hoeper on the global connect, because they have got a different one than the Navy has got and they are not talking. They are not talking to each other. That is pretty simple in getting the thing right. No big upheaval.
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    It is as bad as on the floor of the House of Representatives. For the last three weeks, the two sides, Republicans haven't been talking to each other. You can't make a deal unless you talk to each other. This is something that is so simple to do. And my information may be incorrect, but I would just like to know how many times you meet together and are you going to have different systems? We have spent an absolute—God, we could retire our debt with what we just spend on computers in the Department of Defense now. We started the computer system, really. But what we have spent—and still do not have the information that we should have.

    I know there are some other things I wanted to tell you, but I have forgotten. So if you would just answer that, maybe I will come back to them.

    Dr. GANSLER. As a comment on that one, Congressman, when the Department of Defense started out trying to address this modern information system a number of years ago, they tried to take an approach which said everybody would use the same one and that would solve the problem. The requirements became so overwhelming; the systems kept crashing by the requirements. So what we have done instead is to focus on the interoperability of these systems. With modern information systems, as long as you can share the databases and have interoperability, that is sufficient.

    Mr. SISISKY. You are still not talking to each other; am I correct in that?

    Dr. GANSLER. We are trying to get them to talk to each other. The objective is for them to talk to each other.
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    Mr. SISISKY. Before the light goes on, I knew there was something else I wanted to talk about. You told Mr. Pickett that it wasn't from the top down in getting these programs that you did discuss; and then at the end you said here are 30 things, now each service pick 10. We heard something this morning that was the most refreshing thing we have ever heard, Mr. Bateman and I; we were in there together. It is the same thing that we heard about five weeks ago, from operating admirals, those who are in the field doing fleets. And, God, what he said this morning would scare the life out of you, for our young people to be on this sophisticated equipment and have an optempo like it is. That is who you need to talk to. When we go out in the field, that is who we talk to. We don't talk to the chiefs of staff. They have to talk to them. But I am telling you, if you had just said this is mandated, that is what you are going to do; they are used to taking orders. But you may get a different feel, going out in the field with these guys that really operate. That is what I wanted to bring up.

    Dr. GANSLER. We recognize that. That is why we have actually tried to put such a strong emphasis on the role of the logistics people and the CINCs and the Joint Staff. It is the Joint Staff that is sort of representing the CINCs that we have been having a lot of interfacing with—I personally have as well as the services and my logistics operation; because that is, as you properly point out, the real payoff. It is serving the CINCs and—they are actually designing the experiments and even putting up some of their own money in these logistics experiments, which is encouraging.

    Mr. SISISKY. Who is putting up their own money?

    Dr. GANSLER. The Joint Staff and the CINCs.
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    Mr. SISISKY. They are actually putting their own money?

    Dr. GANSLER. Most of their resources are in people and they are putting the people in experiments.

    Mr. SISISKY. No wonder we can't sink ships if they are doing that.

    Dr. GANSLER. The Joint Staff has some small amounts of money to spend which is very precious to them. Yet they think that logistics is so critical that they are willing to spend some of their money to focus some of these very limited experiments, that they have very few dollars for experiments. They think this is an important area to focus their experiments and frankly we do, too. This is where the real payoff is going to come for the transformation. It is going to come in the field. People are seeing I can get a part without worrying about it. I don't have to order it three times just to make sure I get one. I will actually get it in time.

    Mr. SISISKY. Boeing still has to manufacture that part. I don't think—in fact, we tried it on shipboard parts where a guy was manufacturing parts; but the law was so strict and had a number of corporations on that, even when they sent it to laboratories to be tested. I think you have to use original parts; am I correct? So they have to manufacture that part and if they have got a thing that is like that, something that costs them $3 to make, you may be paying $600. That is how we get into that cycle. You can get it and it is the same thing.
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    I tell people all the time, I say why can't the Post Office Department be like Federal Express? Stop and think what you are paying in Federal Express to send that package, versus what you are paying at the post office. You can get Express Mail at the post office delivered, and a heck of a lot cheaper, than you can Federal Express. And they are very efficient, and there is nothing wrong in using Federal Express to take parts overseas. I have nothing against that, but there is a difference.

    Mr. BATEMAN. Thank you, Mr. Sisisky. Mr. Secretary, if you have any comment you feel like you want to make at this time, I will give you an opportunity to do it.

    Dr. GANSLER. Mr. Chairman, the only one I would make in summary is exactly the one that Mr. Hoeper made in introduction. First, to thank those of you who are retiring from the committee for really great service to the Nation, but also to comment on the fact that this committee working with us I think can achieve a great deal. And I think there is an enormous importance to what we are trying to achieve collectively, I really do. I think this can make a difference in the next generation of warfighting.

    Mr. BATEMAN. Mr. Secretary, we have some more Members who have not had an opportunity to ask questions of this panel and I want to give them the opportunity to do that and will not intervene, but for a moment. Please be assured, there are no differences between you and the people at the table and DOD about the importance and necessity of improving the logistics functions. None of us are divided on that. We have some levels of discomfort as to how you are going to get there and are all the macro policy decisions in keeping with our sense of the practical realities.
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    Believe me, this Member and I am sure all Members stand ready to work with you toward an objective of providing the best logistics training that can be provided to the people who do the warfighting and who conduct the missions.

    With that, and the order in which they appeared, I am obligated to call on Mr. Rodriguez.

    Mr. RODRIGUEZ. Thank you, Mr. Chairman. Let me, I guess, Mr. Gansler, thank you for being here. I know—I just want to ask you a question, then ask you to think about it, and then turn to Mr. Orr from the Air Force. You made a comment and I want you to give it some thought; but you indicated in between questions that in terms of the impact on the 50–50, that it does have an impact on readiness and cost. I want you to see if you can be specific on some of those and how that impacts on readiness and cost.

    Mr. Orr, I was reading your comments that were made. You indicated on your written documentation that in terms of the flow days, that you wanted to reduce by 50 percent. I understood that that is just for the private sector and not the public sector.

    Mr. ORR. We are actually working, although this pilot is addressing the public as part of the contract that we awarded. When we competed the workload, the contractor—which is obligated, and has set up a performance contract that reduces flow days over a number of years, down from about 300 down to 115, I believe it is.

    Mr. RODRIGUEZ. That is where you claim to raise over $600 million, from that?
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    Mr. ORR. Part of the savings comes through other efficiencies other than just flow days. The key also with that is we are working with him to look at where we do modifications to take some of them and put them at different locations, so that when we do a program depot maintenance we can quickly do it on a KC–135.

    Mr. RODRIGUEZ. Do you do the same with the depots?

    Mr. ORR. We are negotiating the same with Oklahoma City and the—.

    Mr. RODRIGUEZ. That $600 million is a reflection of savings on the private sector, not the public sector?

    Mr. ORR. The 600 million that I believe you are referring to—and I may have to take that for the record—is for the whole depot competition coming out of Sacramento. Separately, of course, we have an organic depot at Oklahoma City Air Logistics Center. Many of their flow days were already less than the contractor who is starting out. Some of this is start-up and the contractor, over the years as he learns, reduces the flow days. But we also have a major flow-day reduction within Oklahoma City Air Logistics Center.

    Mr. RODRIGUEZ. Can I ask in terms of how you are going to be able to hold them accountable—I know more or less in terms of the private sector—but the public sector, on the flow days?

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    Mr. ORR. In the public sector, what we have negotiated—.

    Mr. RODRIGUEZ. I gather you haven't done it. Now you are working on it with them?

    Mr. ORR. We have done it on some of ours. I can't answer whether we have done it on the 135 yet. What we are doing in the public sector, and General Babbitt and General Lyles have set this up with an Air Force Material Command (AFMC), is establishing service level agreements, specific negotiations, similar to the performance requirements that we are setting in our contracts, what improvements will be made over the years, what kind of performance can be expected out of the organic depot. This is to bring in those same commercial-type practices that we talked about that we have in industry into the depots.

    Dr. GANSLER. You will recall when Secretary Peters testified, he said that the reason that the Air Force broke the 50–50 was twofold. One was because of the unanticipated demands from Kosovo and, second, because of the unanticipated delays and impacts associated with the two bases that were closed and moving the workload to other bases. And the combination of those two were the explanation.

    He also went on to say that he felt that having closed those bases and redistributed the work was a big advantage to the Air Force, and he talked about over $2.5 billion worth of savings. But there was clearly an impact on readiness and cost as a result of that transition period, more, in fact, than had been anticipated.

    Now, when you look at the current situation which is that, as a result, they now are under the 50 percent in the public sector, that means they will have to put some work from the private sector into the public sector. That is what they are working on trying to do in order to satisfy the law. In doing that, they will take some work that is now smoothly working in the private sector, interrupt it, and send it to the public sector. In the same way that when there was a close-down of one base moving to another, there are bound to be impacts on readiness first, and second on cost, before that transition is completed.
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    Mr. RODRIGUEZ. Do we have any assessment in terms of the actual cost? We do a lot of studies, but do we have an actual assessment in terms of the cost or problems that are created by the 50–50 ratio?

    Dr. GANSLER. The example I just gave you is trying to get back to the 50–50, we are going to have to actually close down some operation in the private sector associated with inefficiency in shutdown, to pay for the close-down, then move it to the public sector and have start-up costs. And during that transition we will also have readiness impacts.

    What the Air Force is trying to do, and that is the right thing to do, is to try to minimize both of those. There are things that they can move back in order to satisfy the commitment in the law. They will actually have to find places where they can bring the work and suffer the readiness and cost impacts.

    Mr. RODRIGUEZ. Similar to the same argument that is given by the depot side, that if you want to be able to do it, then you are not going to be able to pull it off because you don't have the base. And the same problem is occurring now with the private sector. The private sector can pull it off and not the public sector. So the same argument applies on the other side.

    Dr. GANSLER. What you want to do in any transition is to do it well enough in advance so you can plan it well and so you can have a smooth transition. In this case, this was unplanned; and so the impact will be greater in trying to find work to move from private to the public rapidly in order to satisfy the law. So there will be a bigger impact than there would be if it were planned out.
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    Mr. BATEMAN. With that, I now turn to the very patient Mr. Jones of North Carolina, who will then be followed, as our hopefully windup questioner, by the lady from Florida, Mrs. Fowler.

    Mr. JONES. Mr. Chairman, thank you very much. Dr. Gansler, let me ask you, you have been in your position, I believe, three years now. Roughly three. How would you evaluate the attitude of the employees at the public depot under your leadership? Would you say that in the last three years that they have felt more confident about their future, or are there still those that are concerned about whether they have a future working at these public depots?

    Dr. GANSLER. I guess—the first thing that comes to my mind, frankly, is in Congressman Chambliss's area. For the last three years now, I have been going down to Warner-Robins, visiting them about once a year, and talking with the workers there. I found in this last visit that I had a much greater excitement and satisfaction, interestingly, because they won the competitions. They have instituted a cost visibility program so that they have more of a regular management perspective now. They have metrics that they are using to measure themselves against world-class operations, and it is a very positive environment.

    Now, I suspect that that may not be the case universally. That happens to be one where I actually made a conscious effort to go, because of the C–5 award. I wanted to monitor that as it was evolving and try to make sure that we realized the savings that had been planned. There was a good working relationship between them and their subcontractor that I think gets 60 percent of the work in the private sector. That is working out well. They are bringing in private-sector companies to come work at Warner-Robins which seems to be also working out well. As I say, I honestly sensed a very positive environment there.
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    Mr. JONES. I believe that the employees, as long as they believe that they are being treated fairly—that is, an apple for an apple, anytime you are in the bid process for business, then I think they will be satisfied that they are being treated fairly. It is when they feel that, for whatever reason, that they are put at a disadvantage in this process, that they really are concerned about their future.

    I must say, very quickly, because I want to get to Ms. Wittemore in just a second, that I will never forget as long as I live my first year up here that I was in the caucus, the depot caucus. We had General Krulak, the Commandant of the Marine Corps, and in the Armed Services Committee he made the statement that there would be no way that the Marine Corps could be the 911 force of this Nation unless they could count on the public depot, which happened to be the Naval Aviation Depot (NADEP), to give them the support that they needed to be the warfighting machine.

    So I hope we don't ever forget that. Those of us, whether we stay here in Congress or those of us in any new Administration, there has to be this partnership and it has to work. There is no way that it cannot work in this country, have the military force that it needs to defend the freedom of this country.

    Ms. Wittemore, I would like to ask you, because I asked Mr. Warren about the IMC program, I think he said that they hadn't had a chance to review it. Would you please give me and the committee, as short as you can, give me an explanation of what the IMC program is and what your goals are?

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    Ms. WITTEMORE. Congressman, I am sorry, I am not familiar with the term IMC. I believe it might be a Marine Corps concept. In the Navy—.

    Mr. JONES. I had a Navy integrated management concept program.

    Ms. WITTEMORE. In the Navy we are pursuing a regionalization concept for our Naval shipyards where we are looking where it makes sense to regionalize maintenance in the ship area between the intermediate level and the depot level. We are doing that at Pearl Harbor thus far. We call that regional maintenance. I believe IMC may be a similar concept with the Marine Corps, but I would have to have more specifics.

    Mr. JONES. Let me go to Dr. Gansler. I think I am correct when I say it is the Navy's integrated maintenance program. Is that correct?

    Dr. GANSLER. We don't recognize it either.

    Mr. BATEMAN. This sounds like a very good question to be submitted for the record, so they can offer a written response.

    Dr. GANSLER. We will be glad to do that.

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

    Mr. JONES. I guess since I will be getting a written response, I will then yield back my time, Mr. Chairman.
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    Mr. BATEMAN. If you would like to take the remainder of your time, I would be happy for you to do so.

    Mr. JONES. I guess another thing I would like to say is there are many people throughout this country that know about this program and, of course, if you have got 400 pilot programs, what is 401; who is to know, or to say?

    Dr. GANSLER. It is probably the name, too. In terms of the description, we probably are all familiar with it and don't recognize it. One of the things I have learned in the three years I have been here, they keep making up new names for these things and then giving them initials to make it worse.

    Mr. JONES. That is a good way to hide things that you want to pursue. I'm not talking about you, but others. With that, Mr. Chairman, if you will let me submit, and if I can get a complete explanation, then I will yield back my time.

    Mr. BATEMAN. I would recommend that we do make that a formal question for the record so that there won't be any possibility of confusion as to what program you are referring to and what the status of that program may be.

    Mrs. Fowler.

    Mrs. FOWLER. Thank you, Mr. Chairman. Thank you, Dr. Gansler. I am sorry I was late; I had another meeting to attend, but I have reviewed your statement and that of the GAO. I missed their panel earlier.
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    I just have a couple of questions here. I know, Dr. Gansler, you say that you are really supportive of competitive sourcing, whether it be private/private, private/public, whatever; but competitive sourcing is the key, and I agree. Yet I understand of these 30 pilot programs, only maybe five really involve competitive sourcing.

    I was interested in what do the budget plans for DOD, what do they call for in terms of investment and technical data? What is the budget plan for investment in tooling and infrastructure? How are we going to support competition if DOD doesn't have the technical data? And how are you going to when it is private/private, have one private company share their technical data with another private company when they are in competition with each other? I am not quite sure how you are going to do it.

    And as we referred to earlier, I know there is a provision of law that you all would just as soon ignore, but it is called 10 USC 2464. There have been some creative ways of getting around that, but it does say that within four years of initial operational capability (IOC), that DOD has to have core capability in these new systems. That is the law. How are you going to have it unless you are putting in the investment that needs to be put in? That is why I want to know what your budget plans have called for for this investment; because you are not doing it, you are not getting that technical data in the beginning. You are saying four years out from there, five years out, there will be the money to do that. The old law will be long gone and somebody is going to have to be dealing with the fact they don't have the dollars nor do they have it.

    My second deals with surge capability, which really relates to what Mr. Jones was saying about General Krulak. I was there that day, too. In these 30 pilot programs, is the Department doing any test within these to determine what the surge capability under them would be, because it is critically important for our warfighting capability to have surge capability. That is why the depots have been so important, because usually they work one shift, or they can go to two shifts, three shifts if need be. They have that flexibility to do it, whereas a lot of your private contractors, in their environment, they are not only doing our contracts, the government ones, but they are also doing other work, so they have less flexibility. I would be interested in what type of provisions to determine surge capability have been built into those 30 pilot programs.
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    Dr. GANSLER. Let me take those three questions—I think there are three—in order.

    The first one was relative to the pilots. You are correct in that all of them are not looking at competitive sourcing. In fact, they are looking at a variety of different techniques, some of which do not even involve the depot. One of them, for example, the Navy program, is actually just looking at trying to get more common helicopters out of the programs, figuring they can have a dramatic impact on logistics cost by just trying to look at it from the viewpoint of common equipment. So they are taking a wide variety of different approaches.

    Now, in terms of the specific question of getting the data, to the extent that we can and where it is applicable, we are trying hard to use sort of a functional description rather than a design requirement, because one of the things we are trying to do—and some of these pilots are effectively doing it—is to upgrade the equipment by using replacement parts that are much better, as a subsystem that is a much higher reliability item, that you replace the old system. In fact, the Army refers to this as sort of an upgrading system through sparing. That, I think, makes a lot of sense. But then you require your system not to have the drawings but, rather, to have the form, fit, and function interface specifications that are compatible.

    That is the way the commercial world is moving as well as, you know, with open architectures and things like that. We are trying to go that way. Sometimes we will need the drawings because sometimes we are going to be forced to have a duplication of the item. But in most of these, where we are trying to compete them, we are trying to give them more flexibility because the big payoff will come if they can improve the reliability of the systems while lowering the cost, not just lowering the cost of the system.
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    The second question in terms of the 4-year law that you have to bring systems in in four years, my understanding of it is that weapons systems are not defined as core. Core is defined as skills, equipment, and facilities. Explicitly, when the Congress enacted the current language on core, the conference committee agreed that it was not necessary that all work for systems required for the war plan be performed in public facilities. Rather, it is the capacity, the capability to perform the work. It is the capability that you have to have.

    Mrs. FOWLER. And you can't have that if you don't have the data.

    Dr. GANSLER. I understand. The fact that you don't have, you don't pay for the data initially, partly is a function of whether you plan at the end of that fourth year to bring the item into the depot. In other words, if you are not planning—the F–117, for example, is being, as you know, done by the contractor, not by the depot. It would be kind of expensive, if not foolish, for us to—unless we were later going to transition it and at that point get the data—to pay for the data up front, primarily because the data keeps changing so fast, essentially, with the rapid change in technology. Every 18 months, you have got a new electronic system. To freeze the data is extremely expensive because you just constantly are upgrading it.

    The third question that you had which was surge, we did talk about that earlier. The constraints, as you properly point out, are labor and also parts. Those are the two principal constraints. What we have found is that industry or the public sector both have the same constraints. In other words, that industry will have to surge in terms of labor shifts as the depot is doing. The depot doesn't have a lot of people sitting around just waiting for a war. Obviously they have the people that they have to shift onto the work or go to multishifts. Those are the two options you can use. Industry does the same thing. They normally don't run most of their systems at three shifts.
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    Mrs. FOWLER. My question is, are you looking at this in any of your 30 pilot programs? That is my question.

    Dr. GANSLER. Yes. We are looking at surge.

    Mrs. FOWLER. Are you going to get evaluations on surge capability from these pilot promise programs?

    Dr. GANSLER. Surge is one of the principal requirements, because you don't want to trap yourself, particularly in the case of the military. In fact, that is the reason we can't go to just-in-time deliveries, too. We have to have some residuals. We can't do our parts on the basis of just in time, because we need some in the stockpile; because when we go to war, we don't want to make sure we just got it that hour, that we have some sitting ready.

    There is a different environment here. We will have to have some stock on hand, much more for the surge capability.

    Mrs. FOWLER. That is included in your review of these. Mr. Chairman, if I could just ask him to submit for the record, since he wasn't able to be specific, I would like for the record, from both DOD and each of the departments, what are their specific budget plans in terms of investment, technical data, tooling and infrastructure. Because if you don't have them, we are in bad shape.

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    I think we as a committee need to know what are those budget plans, how are you laying them out, and has it all been put out? Five years from now, we are going to end up with a real problem because you are going to end up with sole sourcing, not competitive sourcing. Thank you.

    Mr. BATEMAN. Thank you, Mrs. Fowler.

    Let me say to Dr. Gansler and the other witnesses, we would very much appreciate your furnishing that information for the record.

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

    Mr. BATEMAN. While I am on that subject, and I will address this in a more formal way probably with the Secretary of Defense, but it has been brought to my attention that after the February 29 hearing of this subcommittee, several questions for the record were submitted to the Department of Defense, to the military services, to respond to. We have had a response from only one of the services: to their credit, the Marine Corps. The others have not. When we have had staff call to ascertain where are the responses and why haven't we received them, the answer is something to the effect of, we just got the questions from OSD, or we haven't gotten the questions.

    I would like for somebody to be doing some scrutiny on the promptness, because this was a February 29 hearing and the date that we requested to be met was April 24. It is now June 26. We do—I don't sit there and inventory and have a laundry list of the responses, but we do need responses to these questions and would hope that you would help me convey the message throughout the Department and the services that we really do want the information.
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    Dr. GANSLER. I will do that, Mr. Chairman.

    Mr. BATEMAN. Thank you, Doctor. One other observation I want to make is that in light of Mrs. Fowler's questioning about the database and is it going to be available, I would like for someone to be giving some thought, if they haven't already, to whether or not when we do a contract with the manufacturer of a weapon system or some particular thing of military significance, we don't have a clause in that contract, which is a part of the consideration, moving from the United States Government and the taxpayers to that firm, that gives to the United States the right to have that data available to governmental sources whenever it is determined, in the best judgment of the government, that it is needed.

    Certainly you can't make them give you data, but you can enter into contracts under which you are entitled to data. I think someone needs to be looking at the way we are doing our contracting. That is too much for me.

    Mr. Chambliss had a further statement or question he wanted to ask.

    Mr. CHAMBLISS. Mr. Chairman, I would just say in light of what you just said, that was the primary concern that we had with the flexibility sustainment contract on the C–17; and we have gotten the assurance that that tech data is going to be maintained by the Air Force. You are right, it ought to be in every contract.

    I just want to say, Dr. Gansler, that we tend certainly to be your critic up here. I think that is our job, just as you have to critique the employees under you, and in the end we want to make sure that the warfighter and the taxpayer come out to the best advantage in this.
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    But I want to say that when you do something right, we ought to tell you that, too. And I have long been an advocate of this partnering arrangement that we have been talking about for years. While I think you all were pretty slow in moving to that, we are getting there now. I have had two personal experiences at Robins with partnering on the C–17. While I have still got problems with flexible sustainment, I do like what we are doing there with respect to the Air Force doing what it does best and the private sector, presumably, I think is doing the same thing.

    The other thing, on the Lantern program, we have been slow getting there, but we have gotten those legal problems worked out. I think that is working well, and the warfighter and the taxpayer are certainly going to win there. I think the future of the private depot system and the public depot system depends on expansion of that partnering idea. I think things are moving in the right direction there and we are doing good things.

    Thank you, Mr. Chairman.

    Mr. BATEMAN. Thank you, Mr. Chambliss.

    Does anyone else have a comment or questions that they feel compelled to make as opposed to submitting further questions for the record? If everyone is satisfied?

    Dr. Gansler, all the witnesses, we appreciate your being here. Sorry to have taken this much of your time. You have been very helpful and we appreciate it.

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    [Whereupon, at 5:10 p.m, the subcommittee was adjourned.]


June 27, 2000
[The Appendix is pending.]