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[H.A.S.C. No. 108–35]








JULY 20, 2004

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JOEL HEFLEY, Colorado, Chairman
HOWARD ''BUCK'' McKEON, California
WALTER JONES, North Carolina
JIM RYUN, Kansas
ROBIN HAYES, North Carolina
KEN CALVERT, California
TOM COLE, Oklahoma

LANE EVANS, Illinois
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GENE TAYLOR, Mississippi
VIC SNYDER, Arkansas
ROBERT BRADY, Pennsylvania
JOHN LARSON, Connecticut
SUSAN DAVIS, California
RICK LARSEN, Washington

Mary Ellen Fraser, Counsel
Diane Bowman, Staff Assistant



    Tuesday, July 20, 2004 Depot Maintenance—Capacity and Resources for Future Work


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    Tuesday, July 20, 2004

TUESDAY, JULY 20, 2004


    Hefley, Hon. Joel, a Representative from Colorado, Chairman, Readiness Subcommittee

    Ortiz, Hon. Solomon P., a Representative from Texas, Ranking Member, Readiness Subcommittee


    Hugel, Rear Adm. Mark A., Deputy Director, Fleet Readiness Division, Department of the Navy

    Kelly, Lt. Gen. Richard L., Deputy Commandant for Installations and Logistics, United States Marine Corps

    Motsek, Gary, Deputy G3 for Support Operations, United States Army Materiel Command, Department of the Army

    Stevenson, Maj. Gen. Mitchell, Deputy Chief of Staff for Logistics and Operations, United States Army Materiel Command, Department of the Army
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    Wetekam, Lt. Gen. Donald J., Deputy Chief of Staff, Installations and Logistics, Department of the Air Force


[The prepared statements can be viewed in the hard copy.]

Hugel, Mark A.
Kelly, Lt. Gen. Richard L.
Stevenson, Maj. Gen. Mitchell joint with Gary Motsek
Wetekam, Lt. Gen. Donald J.

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

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


House of Representatives,
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Committee on Armed Services,
Readiness Subcommittee,
Washington, DC, Tuesday, July 20, 2004.

    The subcommittee met, pursuant to call, at 1:32 p.m., in room 2118, Rayburn House Office Building, Hon. Joel Hefley (chairman of the subcommittee) presiding.


    Mr. HEFLEY. The committee will come to order. Good afternoon and welcome to the Readiness Subcommittee's oversight hearing on depot maintenance. The subcommittee is gathered today—not many of them, however—but we are gathered here today to learn to what extent each service has an oversight plan to handle the depot maintenance requirements for equipment returning from Iraq and Afghanistan.

    The military services are currently planning the rotation for OPERATION IRAQI FREEDOM (OIF) 3 and OPERATION ENDURING FREEDOM (OEF) 6. This question the subcommittee wants to investigate today is at what pace, and when, equipment that is undergoing high usage rates in austere conditions will return in order to receive the necessary depot maintenance. The subcommittee is concerned that a bow wave of equipment will return, but the services may not have conducted the necessary planning or requested the necessary funding to perform all the of necessary depot work in a timely fashion.

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    The subcommittee touched upon this issue last October in the hearing, ''Resetting and Reconstituting the Forces.'' In that hearing the vice chiefs of all the services testified to the importance of resetting the forces. Today's hearing should present the plan for resetting the forces.

    The Army and Marine Corps have the largest presence in Iraq and Afghanistan, and thus will be facing the most amount of depot maintenance work. I am concerned that both the Army and Marine Corps have a funding shortfall in fiscal 2004 for depot maintenance. I believe the Army's funding shortfall this year is approximately $250 million.

    Lieutenant General Kelly, the Marine Corps witness today, states in his written statement that the Marines won't be able to identify until next month the unfunded depot work that exists. Let me state up front that I would be very interested in that information when it is available.

    I would also like to know from both services the immediate and long term consequences that the shortfall presents. In addition, I am aware of a study being conducted at the Department regarding stresses on the force. I am interested to know to what extent the services have provided data for this report and to make my request now that the report, when finished, be provided to the subcommittee.

    Before I turn to the witnesses for their opening statements, I would like to turn to my partner up here, Solomon Ortiz, for any opening comments he would have.

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    Mr. ORTIZ. Thank you, Mr. Chairman, and thank the panel for being with us today. Mr. Chairman, thank you for calling this hearing. It is a very important subject, and it goes straight to the heart of our military readiness.

    Our depots and arsenals are truly an amazing and vital national resource. Last week, I had the opportunity to visit Rock Island Arsenal in Illinois. As always when I visit such places, I was greatly impressed by the dedication of those fine men and women and I am very interested in what our panel has to say.

    I don't want to take a lot of time this afternoon with my statement, but I do want to share some of my concerns with you. Today, I hope our panel will address their service requirements and what shortfalls they perceive. I want to make sure we are making prudent decisions now and not risking our readiness in the future. Do we understand the requirements? How much of a backlog in equipment is there, and do we have a plan on how to take care of it? Is the level of resourcing sufficient?

    I am mindful that the Army, for instance, has received $245 million less than what it requested; and I think that the Marine Corps is likely to have a significant amount of unfunded depot work in Fiscal Year 2005. I cannot help but believe this might be shortsighted.

    I am not sure we have complete disability on our future requirements for depot maintenance. I think some of these decisions were made with the assumption that the demand for our forces would be tapering off by now, but that is not happening. Troop level and operating tempo remains high. I know that our maintenance personnel are working miracles in theater in various austere conditions, but I predict we will see a significant growth in the maintenance requirements for the future. Do we have any idea what that will be?
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    When we finally see that surge of requirements, I want to be sure we have the capacity to deal with it. We have got to be careful with how we manage our labor force. I know sometimes we hear the argument that we don't want to have more depot employees because this is just a temporary surge, but I don't believe contracting out this requirement is the answer.

    Our depot workforce is aging, and this is the perfect opportunity to bring new apprentices, to bring them now so that we have experienced journeymen we need in the future when much of our current workforce begins to retire in just a few years. If there is a surge, the labor force will right-size itself again through the national career cycles of our retired working people.

    Thank you again, gentlemen, for being with us; very happy to see all of you.

    Thank you, Mr. Chairman.

    Mr. HEFLEY. Thank you, Mr. Ortiz.

    I would like to introduce our panel now. Major General Mitchell Stevenson, who is the Deputy Chief of Staff for Logistics and Operations for the Army Materiel Command. He is accompanied today by Mr. Gary Motsek, Deputy G3 for Support Operations, the U.S. Army Materiel Command. Rear Adm. Mark Hugel, Deputy Director, Fleet Readiness Division for the Department of the Navy; Lieutenant General Donald Wetekam, Deputy Chief of Staff, Installations and Logistics for the Department of the Air Force; and Lieutenant General Richard L. Kelly, Deputy Commandant for Installations and Logistics for the Marine Corps.
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    General Stevenson, we will start with you and work down the line there, I guess.


    General STEVENSON. Chairman Hefley, Congressman Ortiz, other distinguished members of the committee, thanks for the opportunity to appear before you today to share the tremendous work our depots are performing in support of the global war on terrorism. I have submitted a statement for the record, but I would just like to take a moment and mention a few points from that statement.

    First, as you know, the Army's fully engaged around the world in the global war on terrorism; and our equipment in Southwest Asia is operating at three to five times its normal operating tempo—much of it under some very tough conditions. And this is, of course, resulting in a higher than normal demand for depot-level maintenance.

    Your Army depots are performing magnificently. We have already inducted quite a bit of the equipment that required depot-level maintenance from our first rotation that we refer to in the Army as OIF 1. They have risen to the challenge of a significantly increased workload in a very short period of time, not just for the Army but for all the services for whom we do depot maintenance, and not just here in the continental United States but also overseas. We expect this level of activity that we have seen this year in our Army depots to continue in the coming year.
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    I believe the work we have seen this past year in our Army depots demonstrates the value of an organic industrial-based maintenance capability, and this is probably no better seen than in the seven depots and arsenals who rose to the challenge of producing add-on armor plating and kits for the Humvees—an effort that went from concept to production in less than three months, ensuring that our soldiers operating in OIF and OEF got the protection they required for the vehicles that they operate in as fast as it could possibly be done. Already over 8,000 Humvee armor kits have been produced and installed on just our Humvee fleet, and we could not have accomplished this with our organic base.

    Army depots have enjoyed tremendous support from this committee, and on behalf of the Army I would like to thank you for that and hope that you will continue to be able to provide that support. Especially important to us as we head toward the change in fiscal years is timely release of funds so that we continue the mission of supporting our soldiers, sailors, airmen and Marines without skipping a beat as we cross fiscal years. Thank you.

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

    Mr. HEFLEY. Mr. Motsek, do you have a statement you would like to make?

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    Mr. MOTSEK. Certainly. I would simply align myself with my boss' comments; but just to add one comment from Mr. Ortiz's opening statement is that, sir, the surge is here already. We are already surging at our depots, and we will continue for the next several years.

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

    Mr. HEFLEY. Admiral.


    Admiral HUGEL. Chairman Hefley, Congressman Ortiz and distinguished members of the subcommittee, good afternoon. I am extremely pleased to testify before you along with my service counterparts on the impact to depot maintenance workload resulting from the global war on terrorism. Through your generous support, the Navy continues to enjoy a high level of readiness and is able to project significant combat power in support of the global war on terrorism. With your permission, I would like to make a brief opening statement and submit my written testimony for the record.

    As you are well aware, the Navy is a rotational force designed to project combat power throughout the far reaches of the globe. To support this goal, we have adopted a strategy known as the Fleet Response Plan. This plan allows us to deploy 6 carrier strike groups within 1 month followed by 2 additional carrier strike groups within 90 days.
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    In order to meet the goals of the Fleet Response Plan, the maintenance communities, both air side and ship side, have been engaged in deploying several new maintenance initiatives designed to increase our overall effectiveness of the depots while lowering repair costs incurred by the taxpayers.

    I will briefly describe what I believe the heart of the issue is as it relates to the Navy: Sustaining our ability to maintain and deliver ready ships and aircraft to support fleet operations. The four public ship yards and three Navy and Marine Corps aviation depots, coupled with their civilian counterparts, have responded superbly to meeting the increased demands and supporting the global war on terrorism and allowing the Navy to continue to project overwhelming combat power in support of the forces in the field.

    As an example, the Navy's presently demonstrating the ability to react to surge requirements in an exercise called Summer Pulse 2004. Seven carrier strike groups are simultaneously involved in a concrete demonstration of our combat power around the globe.

    To support such operational requirements and enable our sustained employment of the Fleet Response Plan during Fiscal Year 2004, the Navy will execute 79 complex maintenance availabilities at a cost of $3.6 billion on its surface ships and submarines. To date, the Navy has completed 39 of those availabilities, 26 are in progress, and I am confident that the remaining availabilities will be inducted in 2004.

    In conjunction with the ship depot maintenance community, our Navy and Marine Corps aviation depots, along with industry, will repair an impressive 2,949 air frames, engines and associated aircraft components. While determining specific work items to be placed in our depots, the decision to repair versus replace equipment must be made.
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    For ship and submarine equipment, the decision is driven by the cost tradeoff between repairing components to the prescribed technical operating standards versus replacing those components. That decision can be made by shipboard repair technicians if the repair is within their capability or maybe recommended by our fleet technical support personnel or engineering personnel in our depots.

    For aircraft engines and components, the Aircraft Program Offices perform business case analyses to determine repair versus replacement decisions. The results of these business case analyses classify all of the removable parts as either repairable or consumable based on best value. If the item no longer needs to maintain its design capability, the Program Office in conjunction with the fleet reevaluates the item service life. During the process, the item is reevaluated for repair or replacement, insertion of new technology, or modernization. We then choose whichever path provides the best overall value to the Navy.

    As we move into fiscal 2005, the Navy will increase its surface ship and submarine workload and will execute 105 surface ship and submarine complex availabilities at a cost of about $4 billion. The aviation maintenance community will similarly increase its workload and repair 3,312 air frames, engines and components at a cost of about $2.8 billion.

    In supporting the requirements on the global war on terrorism, the Navy remains compliant with all 50/50 requirements for fiscal 2004; and I am confident we will remain compliant in fiscal 2005. Furthermore, your Navy will continue to be prepared to address any surge requirements in response to national tasking without having to significantly change the workload balance of the public and private sectors.
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    Critical to this ability to provide sustained support is the state of our personnel manning in the depots. I am happy to report to the subcommittee both our ship and aviation maintenance communities have the necessary people to support the remaining requirements in fiscal 2004 and the projected requirements for fiscal 2005. This is made possible through constant monitoring of the aviation and ship depots maintenance workloads. Adjustments to the workforce are made to efficiently address those workload fluctuations. Such adjustments include hiring touch labor and optimizing the national ship maintenance industrial base using the one shipyard initiative.

    During fiscal 2004, the ship depot maintenance community asked for and received $600 million; and the aviation depot maintenance community received $175 million in supplemental funding. This much-appreciated and critical funding was effectively used to offset costs incurred as a result of the global war on terrorism and was not part of our peacetime budget submission.

    In closing, please know how grateful our Navy is for the continued support of this committee. Your efforts have been critical in allowing us to enjoy an unprecedented level of current readiness and offer an impressive outlook for the future as well.

    Again, I wish to thank the committee for offering me the opportunity to appear before you today, and I will be happy to answer your questions.

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

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    Mr. HEFLEY. Thank you, Admiral.



    General WETEKAM. Chairman Hefley, Congressman Ortiz, and distinguished members of the subcommittee, I thank you for this opportunity to present the Air Force position, a status on our depot workload that is returning from the global war on terrorism.

    The Air Force remains committed to maintaining ready, responsive depots with modern facilities and a highly qualified workforce. I believe that that commitment is evidenced in improved performance over the last three years as we and the members of our joint team provide the readiness and support our war fighters require around the globe.

    We are proud of the accomplishments of our depot workforce, and we are appreciative of the staunch support that this committee has provided, and we thank you for that support.

    I offer my written comments for the record and look forward to our discussion on this important topic.

    [The prepared statement of General Wetekam can be viewed in the hard copy.]
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    Mr. HEFLEY. General


    General KELLY. Chairman Hefley, Congressman Ortiz and distinguished members of the committee, I am honored to be before you today representing 215,000 active and reserve Marines. My detailed statement has been submitted for the record.

    The message I bring to you today is your Marine Corps remains fully committed to serving our Nation's security interests by providing forward-deployed expeditionary naval forces. Although we are encountering logistics challenges we have not experienced in years, we are taking deliberate steps to ensure our equipment readiness remains high. Just as we monitor the operational stress on our Marines, we are also keeping a close eye on the operational stress being placed on our equipment.

    Our equipment, new and old, is experiencing higher than projected usage rates under tough combat conditions; but our logistics Marines and civilian Marines worldwide are up to the challenge.

    One initiative being developed by our logisticians is a web-based enterprise management tool we call the Total Life Cycle Management Assessment tool. This tool will greatly assist us in our stress on the equipment study, giving us the data and information that will allow us to make sound, prudent, mission-focused equipment decisions beginning this fall.
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    As we focus on the current fight, we also are creating our logistics future through an intense effort we call logistics modernization. This is the most comprehensive approach we have ever taken to improve Marine Corps logistics end to end with a laser focus at the tactical level. Logistics modernization is deeply rooted in supply chain management education, proven best practices, a sound business case, and changed management.

    The end state will be integrated and interoperable supply maintenance and distribution processes as never seen before. We will use proven, commercial off-the-shelf software built by commercial standards as our logistics backbone. Our performance levels will be equal to or better than those we experience each day in our private lives. The lessons learned and relearned from the Gulf War, Somalia and OPERATION ENDURING FREEDOM and IRAQI FREEDOM are being firmly addressed.

    In closing, you have every reason to be proud of the contributions and sacrifices of the women, men, and families of your Marine Corps and their counterparts in the Navy, Army and Air Force. I thank you for your support, the opportunity to appear before you today and to take your questions.

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

    Mr. HEFLEY. Thank you very much.

    Mr. Ortiz

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    Mr. ORTIZ. Yes. General Stevenson, I have a question. In your statement, you say that the Army's repairing battle-damaged aircraft, not just at the Corpus Christi Army Depot but at some Army troop installations as well. Why isn't this work being done at the depot, and who is performing the maintenance?

    General STEVENSON. Sir, in the case of both crash and battle-damaged aircraft, we categorize the damage into basically two categories: Major crash battle damage and minor. All the major crash battle damage is done at Corpus Christi Army Depot. The minor crash battle damage that doesn't require test fixtures or any of the unique capabilities that you have in a depot that can more easily be done on site at the home installation, we do there, in some cases by providing depot work from Corpus Christi forward to advise the workers that are doing the work there. But all the major work is in fact—and the tough stuff, most of which is not yet completed because it literally takes years to complete, is being done at Corpus Christi.

    Mr. ORTIZ. Are contractors captured in the 50/50 labor rules?

    General STEVENSON. Sir, any contractor that performs depot-level work is captured in the calculation that we do in the case of the 50/50 calculation. I do need to point out, though, that the majority of the aviation maintenance work you see being done on installations is part of a program we call STIR, the Systematic Teardown and Inspection and Repair Program, that we are putting all of our aircraft through that come back from operations from the desert. Most of that work is not depot-level work but is just a tearing down, inspecting and replacing as required. Those workers are not doing depot-level work in most of the cases; and, therefore, we do not calculate that contractor work as part of the 50/50 calculations.
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    Mr. ORTIZ. How do you manage quality control if some of the work is being done outside the depot? We want to be sure that our men and women get the best of the equipment after it has been fixed or even before it has deployed. Who manages quality control?

    General STEVENSON. That is exactly why in the rare cases that we do depot-level work on site, we move a Corpus Christi worker forward to ensure that it is done to standard.

    Mr. ORTIZ. How many workers do you have now in Iraq, and I am talking about the civilian workforce that you have, not only Corpus Christi but the entire depot system?

    General STEVENSON. We have, I think at last count, just over 100 depot workers operating in Iraq and Kuwait today. None of those that I can recall are from our Aviation and Missile Command. Most of them are from our Tank Automotive Command doing work on track and wheel vehicles.

    Mr. ORTIZ. And I have just one more question, General Kelly. I see you specifically mentioned that the Marines have hired temporary employees as a way to deal with the surge in requirements. What level of benefits do Marine Corps temporary employees enjoy? And I know that some of them now have been temporary for some time. Maybe you can enlighten me a little bit on that.

    General KELLY. Yes, sir. I think you may be referring to the 170 that we brought on, temporary employees. Our baseline force for both of our depots at Barstow and Albany is about 1,500 civilian Marines. We brought an additional 170 on primarily to do the vehicle hardening work, which is a 24-hour operation, 5 days a week, primarily for that. We brought them on about three months ago, and we will continue to employ them so long as we have hardening requirements from in-theater. Some of those employees are also providing additional work for normal equipment going through the depot as well.
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    Mr. ORTIZ. The reason I asked you this question is that when I visit some of the depots and we talk to temporary employees, they see that they perform an outstanding job, taking care of our men and women up in the front lines in harm's way; but it seems to me that we don't take care of temporary employees because they cannot provide their families health insurance and some of the benefits. Does this discrepancy hurt the morale of the employees?

    General KELLY. Sir, I can say that an important part of United States Marine Corps culture, and this applies both for our uniformed families as well as our civilian ranks, which we are 100 percent committed to in the depots, for not just the temporary employees but the 1,500 baseline employees, it is most important to remain and keep good faith with them consistently over time. And to do this it is best to be able to provide them some level of confidence, for the employees and their families that have moved into Albany, Georgia and Barstow, California, fairly remote areas.

    It is most important to keep faith to provide a work load that will keep them employed so they count on employment. Because there are periods, such as we saw after the Gulf War, where we really needed their help and they stepped up to the plate; and once again we are going to have to be hiring some additional folks, and they will step up to the plate again. But the recruitment process in both of those areas is difficult. It takes, in many cases, relocation of families and individuals.

    So my basic message is keeping good faith with our core capability, and if we bring on additional people, we should try to keep them on for a sustained period of time.
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    Mr. ORTIZ. But we are not providing the health benefits and other benefits for these temporary employees or are we doing it now?

    General KELLY. Sir, I need to get back with you to answer specifically that question. I do not know, but I would like to take that question for the record.

    Mr. ORTIZ. Thank you.

    Thank you, Mr. Chairman.

    Mr. HEFLEY. Thank you.

    Mr. Cole?

    Mr. COLE. Thank you, Mr. Chairman. I just have a couple of quick questions.

    I hope I pronounce this—is it General Wetekam?

    General WETEKAM. Yes, sir, it is Wetekam.

    Mr. COLE. Wetekam. Pronounce that one more time for me.

    General WETEKAM. Wetekam.
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    Mr. COLE. Wetekam. I thought so. Make sure I got it right. Thank you very much for your indulgence.

    Mr. HEFLEY. The confusion started right here with the chairman, there is no question, and I apologize for that. [Laughter.]

    Mr. COLE. Well, I follow my chairman everywhere.

    Mr. Wetekam, if I may, I am particularly interested—Tinker Air Force Base is in my district, and I have a profound interest and appreciation, quite frankly, for what you do. You guys do an incredible job. I know one of the problems that they are concerned with longer term is the aging of their workforce, the civilian workforce, a percentage of it, which is very high, within five or six years of retirement. These are exceptionally skilled workers who provide very high quality service.

    And so I would just like your comments on the quality and the state of your workforce and what you are doing to make sure that you have got a follow-on workforce with comparable ability as these people begin to retire.

    General WETEKAM. Yes, sir. Thank you. The average age right now of our depot workforce, composite depot workforce, I don't have the specific numbers for Tinker, but for all 3 of the air logistics centers is about 46 years. That has actually moderated some in recent years because it was increasing at a significant rate through the 90's; but particularly in the last few years, as we have transferred workloads from Kelly and from Sacramento to Tinker, Warner Robins and Hill, we have seen that moderate some because there has been some new hiring requirements that have come in.
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    The problem, if you will, is still there. It is certainly with us, because a large percentage of those are retirement-eligible in the next five years or so, and we are seeing a number of those retire each year. But with increased hiring over about the last five to seven years, the problem has tended to moderate; and we have really seen the average age tend to flatten out, which is a good thing for us.

    Relative to what we do for each of the air logistics centers, each center, Tinker especially, has a very robust recruiting program and also a training program which grows every year. They have tech training cooperative agreements there in the Oklahoma City area with a number of institutions; and each year that becomes more robust and really helps us to address that problem, the recruiting issue to which you refer.

    Mr. COLE. So you are pretty comfortable that those programs, which I am very familiar with, and they have grown tremendously, are giving you the quality of workers you need to maintain the type of workforce you want?

    General WETEKAM. Yes, sir, we are. There is always some concern, if you will, but we have seen those programs continue to meet our needs. And, of course, we have been expanding those in recent years, but we have been able to continue to meet the needs of the Air Force.

    Mr. COLE. One of the earlier speakers mentioned with respect to equipment, particularly for the Army, that it was being used at a pace of roughly three to five times what had been anticipated pre-Iraqi Freedom. Is there a comparable statistic for air frames and for the Air Force?
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    General WETEKAM. No, sir, not across the entire fleet. There certainly are pockets or different specific weapons systems that are used at a higher rate than we would have predicted, for example, C-130 aircraft. But in actuality, our usage of our equipment has moderated significantly, particularly after the initial months of OPERATION ENDURING FREEDOM and then the initial months of OPERATION IRAQI FREEDOM.

    We have been operating at a fairly increased OPSTEMPO, if you will, for a number of years, and, in fact, we have about the same number of aircraft deployed right now as we had throughout the decade of the 90's supporting OPERATION SOUTHERN WATCH and NORTHERN WATCH. And so our depots really have been operating at a partial surge, if you will, for a number of years; and we have actually come to size our workload and our capabilities to support that.

    And so while we see certain pockets in specific weapons systems that have some spikes, overall we are not operating our equipment at near the rate that the Army is.

    Mr. COLE. So you are pretty comfortable you have the capacity you need to maintain what you have?

    General WETEKAM. Yes, sir, we are seeing that. We have managed with each succeeding spike to cover that. As I said, there are certain weapons systems where we have to improve our capacity; but we have managed to handle those over the last few years relatively well.

    Mr. COLE. Thank you very much.
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    I have no further questions, Mr. Chairman. Thank you.

    Mr. HEFLEY. Mr. Jones?

    Mr. JONES. Mr. Chairman, thank you very much.

    To Admiral, is it, Hugel?

    Admiral HUGEL. Hugel, Admiral Hugel.

    Mr. JONES. Hugel. I am sorry. I don't get but so many names, Jones and Smith, since mine is Jones. But let me ask you and General Kelly, this issue of carryover, I have the Cherry Point Naval Aircraft Depot (NADEP) in my district and this issue of carryover, I wish you would explain to the committee as well as myself—I know this is an OSD directive, but do you feel that this should be discussed by the Congress? Because what I get back is when our depots are working at this high level of requirement that sometimes this issue of carryover can present some problems for them as it relates to their work.

    Admiral HUGEL. Sir, we pay attention to carryover because carryover represents a potential biwave of work that we are pushing ahead. And so it is important that we ensure that we are not pushing too much of a biwave of workload along from year to year; but carryover in the depots is also a fact of life because some of the equipment that we repair takes longer than a week, a month or even several months to repair.

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    So some of what we see in the way of carryover ends up being work that starts late in one fiscal year and then completes in the following fiscal year. But we need to pay attention to the number just to ensure that we are not pushing too much workload biwave from one fiscal year into the next and creating either a funding problem for ourselves in the following fiscal year or, potentially, a workload problem, workload to workforce mismatch problem.

    It maybe gets more attention than some people would like to give it, but we do use that carryover measure to ensure that we are comfortable, we have our arms around the workload and workforce and funding matches.

    Mr. JONES. General Kelly, can you speak to that issue?

    General KELLY. Yes, sir. For this fiscal year, we are within the ceiling set by OSD for carryover. That is really the budgeted workload plus the supplemental. If we were to get an increase this fiscal year, it would press the limit. I think we would probably have to go in and address it as a policy issue at OSD.

    In peacetime, budgeting and depot maintenance planning, we can certainly work within that; but now I think we are at a point where we are going to have a large biwave of equipment that is going to be coming into our depots. There is going to be a lot of churn throughout the operating forces of figuring out what needs to get in. It won't be a perfect process; and, therefore, I think if we approach that ceiling, we are going to have to address it with OSD.

    Mr. JONES. Thank you.
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    General Kelly, you know, rumors abound any time that a Member of Congress has a depot or a military base, particularly when there is a possible year of BRAC coming in another year or two. But really, my question deals with the situation in Iraq and Afghanistan. Are there any plans to set up a sizable force of workers to go to Iraq from the depot at Cherry Point or any of the depots, NADEPs?

    General KELLY. Yes, sir. I will take the aviation part first. We have a team that went into Iraq about a month ago to assess whether we needed any depot capability in theater, and that team right now is coming up with some courses of action to take a look at what can be done in theater in terms of organizational intermediate maintenance and what really needs to be addressed to the depot level.

    This fall we will have some courses of actions developed for the leadership to make a decision on that, whether we need to put some core capability in theater to deal with depots issues, reduce cycle time and so forth. We don't have any granularity on that right now. In the fall, we will.

    Mr. JONES. Okay.

    General KELLY. On the ground side, our Marine Core Logistics Command has liaison officers with MARCENT and First Marine Expeditionary Force looking at this. At this point, we don't see having to move ground depot maintenance into theater.

    Mr. JONES. Thank you, Mr. Chairman.
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    Mr. HEFLEY. Thank you.

    Ms. Davis? Ms. Davis, you want to hold up because we might have to—can you bear with us while we run and make some votes and come back? All right. The committee stands in recess for a few moments.


    Mr. BISHOP [presiding]. Allow me to call the committee back to order. The chairman is doing business on the floor right now. This will be the one and only time I will ever have to commandeer the entire subcommittee. [Laughter.]

    So no one will butt in front of you in line at the airport, I can promise you, Representative Marshall.

    Ms. Davis is here and she was just about to give a question at the time, so Ms. Davis, the gentle lady from California is recognized.

    Ms. DAVIS OF CALIFORNIA. Thank you. Thank you, Mr. Chairman, and I appreciate the work that you all do. Thank you very much.

    I wanted to talk a little bit about outside contractors and acknowledging the 50/50 split with the private sector. I wondered if you could be more specific. Where is that breaking down today and what are some of the problems that you may see? Where are we with that split?
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    Mr. MOTSEK. I will start first. From the Army's perspective, we are still within the 50/50 break. We started the year with the anticipation of about a 56, 57/43, 44 split. As we run the numbers right now, we are closer to a 53/47 split. So it has narrowed a bit, but we do not believe that either this year or next year we will break the 50/50 rule.

    Ms. DAVIS OF CALIFORNIA. And what about in Iraq alone?

    Mr. MOTSEK. Pardon?

    Ms. DAVIS OF CALIFORNIA. Does that reflect the numbers in Iraq?

    Mr. MOTSEK. Yes, it does.

    Ms. DAVIS OF CALIFORNIA. How much of the overall work that is done by private contractors cannot really be done by the depots? Are there some functions that you can't—where does that break down?

    General STEVENSON. I will take a shot at it. I think the answer is very little. Probably the largest reason we augment our depot workforce with contractors is because of time where we have to meet a specific—I will give you an example with the case of the 3rd Infantry Division who will be redeploying to Iraq in January. We have a very finite period of time in which to get their equipment through what we call reset, a deliberate maintenance process; and in order to meet that timeline and timelines of other units like it, we have to quickly augment a force to get the work done. But it is not a problem not having organic skilled workforce; we have got that.
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    Ms. DAVIS OF CALIFORNIA. Prior to the war, it is my understanding that depots have decreased their workload while their costs have actually increased. Is that the case today?

    General STEVENSON. I think that it is true that since OEF, OPERATING ENDURING FREEDOM, we have, in all cases, increased the number of workers in our depots, and there has been a decrease—it depends on the point at which you measure from.

    Ms. DAVIS OF CALIFORNIA. I guess the question is are the contractors more cost efficient for the depots?

    General STEVENSON. And, again, it depends on how you measure it. Our depot rates today, the way we compute them, have to include the cost of overhead; in our case we use cost of materials as part of the labor rate. And so depending if you made an apples to apples comparison, you might conclude that contractors are cheaper, but that is not necessarily the case.

    Ms. DAVIS OF CALIFORNIA. What direction do you all see this going then? Do you see actually more work going to private contractors, especially in theater like this, or do you see that we are less likely to go that direction?

    General STEVENSON. The depot-level work, I would tell you, and then I will give my colleagues a chance to take a shot at this—the depot-level work, I don't see there being a large outsourcing. First of all, we are prohibited by law from doing that. Second, we have a requirement to maintain a core capability in our depots; and, in fact, that requirement is probably going to increase. So, no, I don't think there will be a wholesale contracting out because of some presumption that it is cheaper.
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    Admiral HUGEL. In the case of the Navy, we have been at about 54 percent in the public sector, 46 percent in the private sector for a couple of years; and our projections into the future are in that ballpark. I would agree with General Stevenson in terms of comparing private sector costs and efficiencies to public sector. It is difficult to compare apples to apples because of the cost accounting in either place. I would tell you that we see where the private sector is more efficient and places where the public sector is more efficient, and that is often based on the kind of work that we ask each to do; it is not always the same.

    The capability inside the public sector is commensurate with the capability in the private sector. Some of that is protected by the core law. We have to maintain that capability in the public sector, and we do. And I think, as I said, we project into the future that the balance between public and private sector workload is expected to be about where we are right now.

    General WETEKAM. In the case of the Air Force, ma'am, it is a very similar situation. We are about 55/45. We don't anticipate that changing much in the foreseeable future, a percentage or two either way, slight variations. And, again, it is a mix of workload relative to public and private sector, but our public sector depots are doing very well and are very competitive.

    Ms. DAVIS OF CALIFORNIA. One of the concerns that I have—I am sorry, did you want to respond to that?

    General KELLY. Yes, ma'am. I think there is a healthy tension that goes on between three factors, effectiveness, efficiency and best value, for the depots. We really believe that our depots today are sized about right for our current and future requirements. The war will have some temporary hires, perhaps some permanent hires to do the additional work and some contract work; but we believe what we have in place today meets the needs of our corps, and right now our split is about 68/23, 23 being on the contracted out percentage. The one thing that we have done over the last year is work very closely between the depots and our acquisition community to buy individual pieces of equipment to ensure that for an individual piece of equipment, it is treated in the context of the greater good of the institution so we don't have individual managers going out and totally outsourcing all support and then having an impact in the out-years. So we are looking at it from an enterprise level for the first time, but we are really committed to having corps capability.
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    Ms. DAVIS OF CALIFORNIA. Could you——

    Mr. BISHOP. Thank you. I am sorry, I have to interrupt. The gentle lady's time has expired. Let's go through the committee and we will come back.


    Mr. BISHOP. Representative Rogers, the gentleman from Alabama?

    Mr. ROGERS. This will be for General Stevenson and Mr. Motsek. We have heard about how the equipment in Iraq has been experiencing wear and tear that is over and above what would normally be expected and budgeted for. Could you speak to how this deterioration compares to what we experienced in OPERATION DESERT STORM?

    General STEVENSON. I think at this point, given only a little over a year in operations in Iraq, we are not seeing a significant difference. Of course, as you know, in the Army Materiel Command (AMC), in the depots, we are only seeing the depot-level maintenance; there are level echelons of maintenance that are going on below the AMC and below the depot.

    Of course, an extended stay in Southwest Asia, with the same vehicles operating in the same condition, will probably yield a different result; but thus far we have seen about what we saw last time.

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    Mr. ROGERS. So you feel like it has been budgeted for, anticipated.

    General STEVENSON. As Congressman Ortiz indicated earlier, we did not get exactly what we asked for in the 2004 supplemental in terms of depot maintenance, but some fortuitous things have happened over the course of the year such that it has turned out to not be a problem for us this year. And, specifically, what I am talking about is the fact that we held some forces in Iraq longer than what we had anticipated we would. They are coming out now, specifically talking about the 1st Armor Division, the 2nd Light Cavalry Regiment, and thus their work will actually be pushed into 2005; and so long as we are funded in 2005 for that work, we should be okay.

    Mr. MOSTEK. The other piece is is that when we tried to cost out the cost of repair at any level, we use the experience of the last Gulf War to add in a factor which we call 3D, or delayed desert damage. So the cost that we are putting on a platform of repair is higher than what you would have seen in a normal peacetime repair. So we have tried to take that, and we are gaining more experience every year as we go through the budget cycle to see how accurate we were in our estimations.

    Mr. ROGERS. As you all know, Anniston Army Depot is in my Congressional district and dear to my heart. One of the things that we are particularly proud of is the depot there has been on the cutting edge of establishing public-private partnerships and growing them and has great examples with General Dynamics and United Defense.

    What I would like to know is for 2005, in general, and for reset in particular, could you speak to how you see these public-private partnerships playing out at Anniston Army Depot as far as their growth and development and at other depots around the country?
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    General STEVENSON. I don't have specifics and can't talk to future plans of the individual depots, but we are pleased with what we are seeing across Army depots with public-private partnerships. The ones at Anniston, as you indicate, are working out well. They offer us an opportunity to ensure that we make the maximum use of the facilities that we own, take advantage where we can of gaining a closer working relationship, particularly in the way of engineering support from the original equipment manufacturers that work with us, but also to ensure that we make maximum use of the facilities that we have.

    At any given time, there may be some facilities that are underutilized; and this allows us to get them utilized to keep our rates down and make us an attractive option for repair from whatever our customers may be, whether they be in the active or the Guard or elsewhere.

    Mr. ROGERS. Do you feel like there is a significant amount of that depot infrastructure that is being underutilized?

    General STEVENSON. Certainly not at Anniston. Anniston is a busy place these days, and as you probably know better than I, we have added considerably to the size of the workforce there over the past year, and we don't see that workload changing in the next year, for sure. Beyond that I would just be speculating, but we anticipate the size of the work, the amount of the work is going to be about the same, maybe a little bit higher.

    Mr. ROGERS. What plans does AMC have for the carryover in 2004–2005 actual workload, to include reset, to ensure that our depots and arsenals remain at peak efficiency in getting equipment turned around as quickly as possible?
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    General STEVENSON. We will have carryover this year. This is something we spend a lot of attention on, but we will stay within the policies that have been established for it. We will not see any break in the level of effort as we cross fiscal years. There will be work, hopefully at the same pace, subject to continuing to fund the requirements that we have, that you see right now.

    Mr. ROGERS. Thank you.

    Mr. BISHOP. Thank you. Just for the committee's sake, I am told that we will be done here by 3:30 regardless or something terrible happens. So if we can make sure we keep on that time frame, be as brief as you can on the answers and responses. I would like to get a question in here sometime too. Otherwise we may be looking at written questions for the panel if that is all right.

    Mr. Marshall, you are next.

    Mr. MARSHALL. Thank you, Mr. Bishop. This is addressed to all of you gentlemen but I have to phrase the question in terms that I am familiar with and they are principally Air Force terms having to do with Robins Air Force Base.

    And, General Wetekam, I want to congratulate you, sir. I think this is your first hearing now that you have gotten your three stars; am I correct about that?

    General WETEKAM. Yes, sir, you are. Thank you very much.
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    Mr. MARSHALL. Glad to have you here. I think right place at the right time. You certainly did a great job at Warner Robins Air Base for all of us.

    What I am worried about is the trend that we have seen in recent years of manufacturers entering into contracts to maintain for a certain period of time the items, platforms that we are buying. The C–17, take that as an example. The Air Force entered into acquisition of C–17. In the agreement, the manufacturer retained maintenance responsibilities, and it was only in the last couple years, last year or so, that Secretary Roche, working with the Depot Caucus, came up with the idea that there should be this partnering.

    And General Wetekam in his written remarks described this as, ''We began a significant push to require weapons systems managers,'' the acquisition team, ''to begin establishing partnerships, product support and depot maintenance programs early in the acquisition cycle and to plan and program investment dollars required for capacity and capability.'' And so we sort of missed the boat on the C–17; and we are trying to go back and catch up to it, get on it, and we have had some success there.

    Now we are talking about, where the Air Force is concerned anyway, acquiring 767 platforms for tankers; and we are going to do so by lease. And my question, I guess, has to do with, where the Air Force is concerned, what is the process in the acquisition phase for these leased tankers that guarantees that we are not setting ourselves up with the same sort of problem that we have with the C–17 where depots are concerned? The manufacturer, in this instance the lessor, is going to retain, I think that is probably going to be contemplated, maintenance responsibilities for a certain period of time. And are we in this acquisition process taking into account our long-term core capacity capability needs, maintaining our depots and the fundamental capacity of the depots?
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    Now, I don't know whether or not the same kinds of issues—that wouldn't surprise me at all if the same kinds of issues—don't come up with the Navy since your things are huge, but I don't know whether those kinds of things come up with the other services.

    And I guess I would like a description of the process we are going through right now to assure that in the acquisition process we are actually doing what you say in this sentence, General Wetekam, not only with outright purchases but if we get into this lease business, with leases as well.

    General WETEKAM. Yes, sir. There is a fundamental difference between policy today and policy at the time that we initially procured the C–17. And at that time, we really had no directive within the Air Force to look at 50/50's, as you mentioned, to look at maintaining our organic repair capabilities and what new weapons systems would mean to that.

    Since that time, we have added to Air Force acquisition policy just that type of directive, which now requires program managers during the acquisition phase of a program to look at 50/50 requirements, consider the impact of where the repair will be done and what type of mix we will use, and also not just 50/50 but also relative to keeping our depots modern, keeping our depots involved with new weapons systems and new technologies. And that has become part of Air Force acquisition policy.

    Relative to the tankers, it is very difficult at this point to surmise what that might look like and what type of sustainment strategy we might look at for some type of aircraft, be that leased or be that a straight buy. Clearly, if it is a commercial derivative aircraft that we use, then we might very well seek to leverage off commercial capabilities that are already out in the marketplace rather than investing heavily to bring up a capability within one of our logistics centers. Or we might seek to do, as we have done in the C–17, and that is to leverage the strengths of both and build an effective partnership.
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    Mr. MARSHALL. What worries me is that in the acquisition process you increase your costs, your up-front costs, by taking into account this subsequent future need, and there is always this temptation, in light of budget realities, to try and keep the acquisition costs as low as possible, get the platform in place and then worry about it later. And it sounds like we may be doing that with the 767 platform if your response is, ''Well, it is kind of hard to tell at this point what we are going to do with regard to that issue.''

    General WETEKAM. Yes, sir, I guess that is my response in the sense that we are not really talking about an established program at this juncture anyway, so we are not even sure what type of platform the follow-on tanker might be, so it is really very difficult to give you an answer to that part of it.

    Mr. BISHOP. Thank you very much.

    General Wetekam, I am always interested in the opinion of somebody who has a master's from the University of Utah. That stands out positively. [Laughter.]

    I realize that transformation is the buzz word, if I could ask a couple of questions right now, within DOD; and my impression is that the Air Force depot structure has been transforming for several years. I just wondered for the record and the panel's consideration if you could just mention a couple of steps the Air Force has taken to ensure the taxpayers are getting the most bang for their buck and maybe additional processes or best practice reforms that the Air Force is looking to further increase what is already a very impressive efficiency rating at the three ALCs.
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    General WETEKAM. Thank you, sir; happy to address that. We are very proud of what we are doing within our air logistics centers to transform our capabilities. The initiatives have kind of come and gone over many years, but about three years ago, I think, we settled on a set of initiatives that is really serving us well now, and we have maintained that focus.

    In the industrial operations area, we have elected to center our process improvement strategy on lean process improvement. Essentially, it is an outgrowth of what some people call the Toyota production system; and all three of the air logistics centers are using that as the centerpiece of their process improvement methodology. It is paying great dividends; we have success stories at all three of the ALCs that we love to tell, because they really are—they are not projected savings, they are not projected improvements, they are improvements that are on the books today.

    And then in the other area is our supply management, and we have a series of purchasing and supply chain management initiatives. It is a long list, but it is a very integrated list that is providing us better supply support. And, again, we see that statistically in terms of what we are seeing in our supply support to our air logistics centers and supply support to the field. Now, some of that, clearly, is the outgrowth of improved funding in that area. Certainly, that has been the bulk of it, but we have really improved our supply processes in terms of cycle time, acquisition, support and so on there; and there are more to come.

    So I would say those two are the biggest initiatives that we have going on relative to depot processes and continuing to transform our air logistics centers.
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    Mr. BISHOP. Thank you, General. I have a couple of other questions, but in deference to the gentleman from Texas, let me see if I can put these in writing and submit them to you instead.

    Mr. Rodriguez?

    Mr. RODRIGUEZ. Thank you very much. We had heard some testimony in October of last year regarding the inspections on aircraft returning back from overseas and their condition; and it was unclear to what extent the depots and the costs were going to be required. I wonder if we have gotten a better feel for that now in terms of what is needed, in terms of upgrading of our aircraft, especially of both the Afghan situation as well as the Iraq war and the toll that it has taken.

    My understanding is there was some money that was also allocated from the supplemental, and I was wondering if there were some additional requirements that were going to be needed in that area?

    General WETEKAM. Sir, I will start that. From the Air Force perspective, we do not anticipate any additional funding requirements in fiscal year 2004 for depot maintenance. We believe that we are covered there. We currently are sizing our unfunded for fiscal year 2005. We estimate that at about $242 million in our depot line. Now, that is a moving target. It is obviously subject to other outside influences, but that is the way——

    Mr. RODRIGUEZ. Is the work going to be able to get handled with the present situation that we find ourselves with?
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    General WETEKAM. Yes, sir. We have the capacity at the air logistics centers to handle that level of work, and we are handling it pretty well. Some of that was the fact that we have been operating really at an increased OPSTEMPO for several years within the Air Force, because we were operating OPERATION SOUTHERN WATCH and NORTHERN WATCH. And so this is almost a steady-state operation for us.

    And then another factor, of course, is the process improvements I just spoke of. That has really improved our capacity with a given size workforce and different given size facilities and so on. So we are getting more work done with the same number of people and the same facilities that we had in years past.

    Mr. RODRIGUEZ. And I just want to hear briefly from the rest in terms of where we are at and see if we need to beef up in that area.

    Admiral HUGEL. For the Navy and Marine Corps team, we are seeing about a 15 percent increase in the amount of maintenance that needs to be done on our rotary wing aircraft coming back from the war. We have seen about a 17.5 percent increase in engine wear for our airplane engines that are serving in the desert environment compared to those that do not. But we are in a position, people-wise and money-wise in our depots to deal with both of those issues and other issues with our aircraft coming back from the war.

    General WETEKAM. General Stevenson referred briefly to the STIR Program earlier, and that is our program to try to take into effect the delayed desert damage, the increased corrosion, and increased requirements. It is interesting to link that, though, with a question Mr. Ortiz asked earlier, which was about quality control. If I take an aircraft through the STIR Program, and we are adequately funded right now for that program, that engine comes off, that engine goes back to Corpus Christi; and that engine is torn down there. So that is how we maintain the quality control of the subcomponents, because virtually all of them process through the depot.
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    It then links into the initiatives we are taking, because on that same engine line, we have a partnership with Boeing that helps kick the parts to us so that we are able to get a throughput on that line so that 2 years ago we were producing roughly 600 engines a year; we are producing 1,400 engines a year out of that same line and are prepared to go to 1,800, as necessary, next year, next fiscal year.

    So we have gone through the process and it is the synergy of all these things that we are talking about, trying to get the biggest bang for the buck, that we have been able to pull it off. But we did a reasonably decent job in anticipating the extra damage on a lot of our aircraft that are going back. We are putting on a desert kit, which consists of additional filters and the like, to help minimize some of the damage in the future. And I don't think we have had any substantial surprises as we tear down these aircraft. But, again, we are in the first year of the process, and as we go along, we will learn more.

    Mr. BISHOP. Thank you very much. Obviously, members of the panel have the ability of presenting some written questions to the staff who may be presenting those to you at a future date.

    On behalf of Chairman Hefley, who is presenting an amendment over on the floor, and Ranking Member Ortiz, may I thank you, gentlemen, for being here and for your input and your answers and your accessibility, and I apologize for the 30-minute vacation you had in the middle of this meeting for other business going on.

    With that, I declare the subcommittee in adjournment.
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    [Whereupon, at 3:28 p.m., the subcommittee was adjourned.]