```

[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]

                           DEFENSE DEPARTMENT
                           BUDGET INITIATIVES

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, SEPTEMBER 30, 2010

                               __________

                           Serial No. 111-32

                               __________

           Printed for the use of the Committee on the Budget

                       Available on the Internet:
       http://www.gpoaccess.gov/congress/house/budget/index.html

                  U.S. GOVERNMENT PRINTING OFFICE
61-538 PDF                WASHINGTON : 2010
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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ALLYSON Y. SCHWARTZ, Pennsylvania    PAUL RYAN, Wisconsin,
MARCY KAPTUR, Ohio                     Ranking Minority Member
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 SCOTT GARRETT, New Jersey
EARL BLUMENAUER, Oregon              MARIO DIAZ-BALART, Florida
MARION BERRY, Arkansas               MICHAEL K. SIMPSON, Idaho
ALLEN BOYD, Florida                  PATRICK T. McHENRY, North Carolina
JAMES P. McGOVERN, Massachusetts     CONNIE MACK, Florida
NIKI TSONGAS, Massachusetts          JOHN CAMPBELL, California
BOB ETHERIDGE, North Carolina        JIM JORDAN, Ohio
BETTY McCOLLUM, Minnesota            DEVIN NUNES, California
JOHN A. YARMUTH, Kentucky            ROBERT B. ADERHOLT, Alabama
ROBERT E. ANDREWS, New Jersey        CYNTHIA M. LUMMIS, Wyoming
ROSA L. DeLAURO, Connecticut,        STEVE AUSTRIA, Ohio
CHET EDWARDS, Texas                  GREGG HARPER, Mississippi
ROBERT C. ``BOBBY'' SCOTT, Virginia  CHARLES K. DJOU, Hawaii
JAMES R. LANGEVIN, Rhode Island
RICK LARSEN, Washington
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
GERALD E. CONNOLLY, Virginia
KURT SCHRADER, Oregon
DENNIS MOORE, Kansas

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                 Austin Smythe, Minority Staff Director

                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, September 30, 2010...............     1

    Hon. Robert C. ``Bobby'' Scott, a Representative in Congress 
      from the State of Virginia.................................     1
        Submissions for the record:
            Hon. Robert F. McDonnell, Governor, Commonwealth of 
              Virginia, prepared statement of....................     3
            Hal Gehman, Admiral, USN (ret.): ``Journey to 
              Jointness is Not Complete,'' article from the 
              Norfolk, VA, Virginian-Pilot, September 26, 2010...     9
    Hon. Robert J. Wittman, a Representative in Congress from the 
      State of Virginia..........................................    10
        Prepared statement of....................................    11
    Hon. Paul Ryan, Ranking Minority Member, Committee on the 
      Budget, prepared statement of..............................    10
    Todd Harrison, senior fellow, defense budget studies, Center 
      for Strategic Budget Assessments...........................    14
        Prepared statement of....................................    17
    John R. (Bob) Wood, Lieutenant General, USA (ret.), Star 
      Strategies Group...........................................    21
        Prepared statement of....................................    25
    Stan Soloway, president & CEO, Professional Services Council.    28
        Prepared statement of....................................    30
    Jacqueline Simon, public policy director, American Federation 
      of Government Employees, AFL-CIO...........................    36
        Prepared statement of....................................    37

 
                 DEFENSE DEPARTMENT BUDGET INITIATIVES

                              ----------                              

                      THURSDAY, SEPTEMBER 30, 2010

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:05 p.m., in room 
210, Cannon House Office Building, Hon. Robert C. Scott, 
presiding.
    Present: Representatives McCollum, Scott, and Connolly.
    Also Present: Representative Wittman.
    Mr. Scott. I ask unanimous consent that the Representative 
Rob Wittman of Virginia be allowed to sit at the dais to 
receive testimony by witnesses, and that he also be allowed to 
ask questions of the witnesses after all Committee members have 
had a chance to do so. And without objection, so ordered.
    Today's hearing is on the Defense Department's efficiency 
initiatives announced on August 9, 2010. I would like to 
welcome our witnesses. Todd Harrison, Senior Fellow at the 
Center for Strategic and Budgetary Assessments; Retired Army 
Lieutenant General Bob Wood; Mr. Stan Soloway, President and 
CEO of Professional Services Council and Former Deputy Under 
Secretary of Defense for Acquisition Reform; and Ms. Jacqueline 
Simon, the Public Policy Director of the American Federation of 
Government Employees. And I would like to thank Chairman Spratt 
for calling this hearing. He was unavoidably detained and will 
not be with us today.
    Due to our deteriorating fiscal situation many have 
suggested that the rate of growth in the base, or non-war, 
defense budget over the last decade many not be sustainable 
over the long term. In 2001 to 2010 the Defense Department's 
base budget increased an average annual rate of between 6 
percent and 7 percent, from roughly $300 billion in 2001 to 
$535 billion in 2010. Going forward, the President's 2011 
defense budget begins to reflect a more modest level of growth 
as more emphasis is placed on reducing the deficit. It reduces 
the average annual rate of growth in the Department of 
Defense's budget to about 1 percent above inflation over five 
years, a rate many deem to be insufficient to both maintain 
current force levels and recapitalize aging weapons systems.
    In August Secretary Gates announced a Pentagon initiative 
to find overhead savings of $100 billion over five years in 
order reinvest them in higher priority defense programs. He 
maintains that finding these savings is necessary in order for 
the Pentagon to adequately support defense plans within the 
President's budget.
    Although I commend and appreciate the Secretary of 
Defense's desire to weed out wasteful spending and redundant 
bureaucratic functions, I have been alarmed at the lack of 
transparency and basic analysis on how the Secretary arrived at 
these particular conclusions, and specifically on the decision 
to disestablish the U.S. Joint Forces Command in Norfolk, 
Virginia. A decision of this magnitude must go through a 
thoughtful process which the Department appears determined to 
avoid. Since August 9 the Defense Department has failed to 
provide me or any of my colleagues in the Virginia 
Congressional Delegation, or the Governor of Virginia, any 
meaningful analytics to show how the Secretary arrived at his 
decision. There are no numbers to show what savings may be 
achieved, nor any briefing documents to Secretary Gates on how 
he arrived at his decision.
    Furthermore, it is unclear if the Secretary has the 
authority to eliminate such a large command without current 
congressional approval or going through a BRAC process. If the 
BRAC law is not specifically clear in this regard, as the 
Department's legal analysis contends, it is still clear the 
decision is inconsistent with the spirit of the BRAC law. 
Additionally, closing JFCOM was mentioned nowhere in the latest 
quadrennial defense review, and if anything the QDR only 
stressed the importance of the branches of the military working 
together, a key function of the Joint Forces Command.
    Adding insult to injury, the Department's rationale for 
closing JFCOM was been extremely inconsistent since August 9. 
In its prepared statement announcing his decision Secretary 
Gates stated that JFCOM costs at least $240 million to operate 
annually. However, just this week Deputy Secretary of Defense 
William Lynn indicated that JFCOM cost the Department nearly $1 
billion annually to operate. On September 8 the Defense 
Department officials briefed the Virginia delegation staff and 
the only new information received was Comptroller Hale's 
decision was philosophical and that the true savings are still 
being determined.
    Additionally Ms. Christina Fox from the Program Evaluation 
Office stated that the cost savings were not even a significant 
factor in the JFCOM decision. Instead, the Department now says 
its elimination would reduce redundant bureaucratic layers and 
make the Department more agile and efficient. And just this 
week in both meetings at the Pentagon with me, Governor Robert 
McDonnell, and other members of the Virginia Congressional 
Delegation, and before the hearings in the House and Senate 
Armed Services Committees, Deputy Secretary Lynn now submits 
that the decision to disestablish JFCOM was purely a military 
decision and even indicated there was no internal dissent, 
none.
    Even more interesting, General James Cartwright stated this 
week during questions and answers during the House Armed 
Services Committee that when the Department finally looks ``at 
the full range course of action, status quo is an option.'' 
Which leads me to believe that even after the announcement 
closing JFCOM may still be considered an option, or keeping it 
open may be an option.
    So even after seven weeks and no tangible analysis provided 
to Congress, the Department of Defense cannot even get its 
story straight. But if this decision is the right one for our 
military and our national security goals, and if it meets the 
Secretary's efficiency goals, then the Department should be 
eager to explain and justify its decision before Congress, the 
President, and the men and women directly affected, and to 
respond to their invitation to testify today before the Budget 
Committee. And after eleven years of testimony before Congress 
highlighting its critical importance and indoctrinating 
jointness among the military the Department should be prepared 
to explain what functions the Joint Forces Command will need to 
continue.
    Unfortunately, after this week's hearing it now appears 
that the Secretary has made a decision based on who knows what 
and now the Department is scrambling to justify it. So I think 
Congress needs to focus on the documents that were prepared 
before August 9 if we are to understand the real rationale for 
the decision. Anything prepared after August 9 only attempts to 
justify a decision that was already made.
    Although I appreciate the closed door briefing held earlier 
today with Comptroller Hale, I think it is very telling that 
the Department declined to allow him or any other official from 
the Department to testify before the Committee on the Budget on 
the budgetary implications of these efficiencies even seven 
weeks after their announcement. And seven weeks after the 
announcement we still have not been provided any documents with 
numbers on them that support the contention that any money will 
be saved at all.
    At this moment I ask unanimous consent to introduce into 
the record several documents. One, testimony from the Governor 
of the Commonwealth of Virginia Robert McDonnell outlining the 
impact of the proposed decisions on the Commonwealth of 
Virginia; as well as an op-ed by Retired Admiral Hal Gehman, a 
former of the Joint Forces Command, on the reasons why JFCOM is 
still critical and why the mission of jointness is still not 
complete. And without objection, those documents will be placed 
in the record.
    [The testimony of Robert McDonnell follows:]

Prepared Statement of Hon. Robert F. McDonnell, Governor, Commonwealth 
                              of Virginia

    Chairman Spratt, Ranking Member Ryan and other distinguished 
members of the
    Armed Services Committee, on behalf of the Commonwealth of 
Virginia, I thank you for inviting me to offer testimony today in this 
important hearing to consider the Efficiencies Initiative announced by 
the Secretary of Defense on August 9, 2010.
    The Commonwealth of Virginia is proud to be the home of many 
elements of this Country's national defense establishment. The 
Pentagon--the headquarters and virtual epicenter of America's military 
is located in Arlington County, and the Central Intelligence Agency 
Headquarters--the headquarters and virtual epicenter of America's 
civilian foreign intelligence activities responsible for providing 
national security intelligence to senior U.S. policymakers--is located 
in Fairfax County. Virginia has a long and proud history of being a 
close and trusted partner with the United States military and national 
security agencies that goes back to 1608 when Captain John Smith 
recognized the importance of building a fort at Point Comfort in 
Hampton Roads, building Fort Algernourne with the mission of protecting 
the approaches to the colony at Jamestown. As a result of the War of 
1812, Fort Monroe was built to protect the entrance to Hampton Roads 
and the several port cities that had access to its waters.
    As the United States grew its presence of military and national 
security facilities in the Commonwealth, Virginia was embraced as a 
full participating partner in that growth. The Commonwealth and many of 
her local governments located in the Northern Virginia and Hampton 
Roads regions, partnered with the United States to develop and build 
the infrastructure required to support the growth of these facilities. 
This infrastructure included not only roads, curbing and guttering to 
provide access to the expanding facilities of the military and national 
defense establishments, it included building and manning fire 
facilities, rescue and first responder facilities, schools and 
neighborhoods necessary for its maintenance and growth. It was the 
Arlington County Virginia Fire Department that served as the lead 
agency in the response to the attack on the Pentagon on September 11, 
2001. On that fateful day, the Arlington County Fire Department 
employed 279 men and women. As a result of the attack on the Pentagon, 
however, additional career firefighters were hired, bringing the total 
to 305 in 2005. Minimum staffing on the county's engine companies was 
also increased to four firefighters from three in the months after the 
attack. The county trained CERT Teams--Community Emergency Response 
Teams--in cooperation with the federal Department of Homeland Security 
stepped up disaster preparedness programs. These additional components 
of local infrastructure were added as a full partner with the military 
to insure adequate first responder requirements to any future acts of 
terror against the Pentagon.
    Virginia, and her localities and local governments, have been, and 
continue to be, a willing, responsive partner with the United States in 
providing for the general welfare of all of the citizens of the 
Commonwealth, including those citizens who serve our Nation in both the 
military and the national security agencies, as well as their families 
to insure the best possible quality of life for each and every Virginia 
citizen. That high quality of life includes excellent school systems to 
educate the children, the police, fire and rescue resources required to 
protect our citizens and communities, and the facilities used to 
exercise the right to vote on each election day for the leaders of this 
Country and the Commonwealth.
    The Commonwealth has endured economic adversities as a result of 
the several rounds of the Base Realignment and Closure (BRAC). 
Throughout the BRAC process, however, the Commonwealth was, as usual, 
treated as a full participating partner in giving input in the 
decisionmaking process of removing many federal government agencies 
from commercial leased space in both the Northern Virginia and Hampton 
Roads regions. While business owners of the commercial leased space 
have suffered adverse economic impact from the loss of federal 
government agency tenants in buildings that were largely built to 
accommodate past growth and additional requirements of the military and 
national security agencies, the BRAC process does provide the time and 
additional resources required to address those economic adversities.
    The BRAC process in 2005 that removed federal agencies from 
commercial leased properties resulted in those agencies being moved to 
military and national security properties at Fort Belvoir, Quantico 
Marine Operating Base, Fort Eustis, Fort Lee and many other facilities 
within the Commonwealth. Tremendous growth has occurred at these 
federal properties necessitating additional infrastructure--streets and 
roads, curbing, guttering and the like--to accommodate the growth 
generated by the movement of these agencies to the federal properties 
in the Commonwealth. Again, however, the Commonwealth was treated as a 
full partner in the decision making processes such that Virginia could 
address the needs of its citizens.
    On August 9, 2010, that cooperation, openness and partnership 
between the federal government and the Commonwealth was conspicuously 
absent with the announcement by the Secretary of Defense that it was 
his intent to close the U.S. Joint Forces Command (USJFCOM) and reduce 
the use of defense contracts by a total of 30% over the next three (3) 
years. The Secretary of Defense did not provide, and has not provided 
since that time, any material information in support of his decision. 
In fact, the Department of Defense has told staff that the decision was 
``philosophical'' and now they are putting together a plan of action to 
justify and effectuate these decisions. He has directed several flag 
officers at USJFCOM to put together a plan to eliminate USJFCOM and 
provide to him an interim report by the middle of October, and a final 
report in December. Furthermore, he has directed that all personnel who 
participate in the formulation of a plan to support his decision must 
sign a nondisclosure statement--in essence, the Secretary of Defense 
has imposed an embargo on all information that is needed by the 
Commonwealth to evaluate and respond to the August 9th announcement.
    The Commonwealth, after over two hundred (200) plus years of 
partnership with the federal government in the development and growth 
of the military and national defense infrastructure, is not being 
treated as a partner with the federal government. The Commonwealth is 
no longer provided a seat at the table to be a part of the planning 
process for an announced closure of a major employer in the Hampton 
Roads and Northern Virginia regions. The Commonwealth has worked with a 
number of private sector employers that have announced plant closures 
affecting many Virginia citizens to minimize the adverse economic 
consequences of such closures--the most recent example being the 2008 
Ford Motor Company closure of the F-150 truck assembly plant in Norfolk 
that employed 2,433 workers. That plant had a direct payroll of $160 
million, and drew parts from 17 local suppliers that employ about 2,700 
people.
    After several letters requesting a meeting with the Secretary of 
Defense, followed up with repeated personal requests from the Virginia 
Congressional Delegation to members of the White House staff, as well 
as the President of the United States, the Department of Defense has 
responded with an offer to meet with the Governor and the Congressional 
Delegation. The meeting is with the Deputy Secretary of Defense and the 
Vice Chairman of the Joint Chiefs of Staff. The state is still waiting 
for an opportunity to meet with Secretary Gates.
    The focus of the Secretary of Defense with reducing the overhead of 
his department, shrinking the number of military headquarters in the 
department and reducing the size of military headquarters staff is both 
a responsible and commendable goal given the current difficult economic 
and fiscal situation currently being experienced by our nation. It is 
important to achieve savings through reductions in overhead expenses, 
but not the best course for the security of the nation when achieved 
through the reduction of force structure or elimination of successful 
modernization programs--especially when this country is engaged in 
fighting determined and elusive adversaries that have chosen approaches 
to warfare that avoid our military's conventional strengths. As 
Virginia's Governor, I have undertaken a similar goal by appointing a 
Commission on Government Reform and Restructuring which I have 
challenged with putting forth bold and innovative ideas to ensure that 
duplicative, outdated, unnecessary and ineffective services and service 
delivery methods are eliminated, and that state revenues are dedicated 
to the core functions of government. These are good strategies.
    There is, however, a significant difference in the methods chosen 
by me and the Secretary to pursue the goal of achieving efficiencies in 
government operations. The term ``transparency'' generally refers to 
public access to information held by the government, including 
information upon which government relies in making its decisions. I 
have chosen to pursue the goal of eliminating government waste and 
achieving operational efficiencies by means of a transparent process 
involving public hearings of the Reform Commission and receiving input 
and ideas from the public. DoD has chosen to accomplish the goal of 
eliminating government waste and achieving efficiencies without being 
transparent to the public. No Virginia leaders, Congressmen, Senators, 
private contractors or JFCOM leaders appear to have been part of the 
planning or decision making process.
    During the last weeks of July, rumors began to circulate that the 
Defense Business Board, an advisory board of retired economic and 
business leaders, would recommend ways to reduce department costs. One 
such rumored recommendation was to eliminate the Joint Forces Command 
in Norfolk. At his news briefing on August 9th, Secretary Gates 
announced, without any prior notice or warning, that he was 
recommending to the President the closure of the Joint Forces Command.
    As Governor of Virginia, I was asked by the President to serve on 
the Council of Governors, a group of ten governors appointed for the 
purpose of providing State Governors a forum to exchange views, 
information, or advice with the Department of Defense. I was told that 
the appointment was to establish an open and continuous dialogue with 
the Secretary of Defense, and achieve transparency in the exchange of 
ideas. Close cooperation and communication between the federal 
government and the individual states is absolutely vital if the most 
effective use of state and federal resources is to be achieved on 
matters of national defense and homeland security. In support of 
establishing an open and continuous dialogue, I appointed an active 
duty Air Force general officer as a member of the Virginia National 
Guard so that he could command the Joint Task Force responsible for the 
National Boy Scout Jamboree. The appointment of a Title 10 general 
officer as a member of the title 32 Virginia National Guard was the 
first time such an appointment had been made in the history of this 
nation. The recommendation relating to the closure of the Joint Forces 
Command was not taken with a similar spirit of cooperation nor was it 
as a result of open dialogue and transparency in the decision making 
process by the Secretary.
    I have twice asked DoD to provide answers to detailed questions 
pertaining to the reasons for the closure, its impact on national 
security and joint operations, and the implementation plan. Responses 
to date from Pentagon leadership have been wholly inadequate. In my 
letter of September 24, 2010, I inquired into six major areas of 
concern (copy attached) and I still await complete answers to this 
inquiry.
    The U.S. Joint Forces Command (JFCOM), established in 1999 as the 
successor to the U.S. Atlantic Command, is uniquely organized and 
tasked for providing joint forces and developing joint training, joint 
concept development and experimentation, and the joint capabilities 
development needed to adjust to the demands of 21st-century military 
operations. It traces its origins to the shortcomings in joint 
operations revealed during the 1980s and Operation Desert Storm. 
Following the Gulf War, Gen. Colin L. Powell, the chairman of the Joint 
Chiefs of Staff, and others recognized that refining how each branch of 
the armed forces works together to train and deploy for joint 
operations was key to meeting future challenges. He felt that a single, 
U.S.-based unified command should be responsible for training forces 
from all services for joint operations. Today, JFCOM is a forceful 
advocate for ``jointness.'' Retired Navy Admiral Hal Gehman, former 
Commander of the Joint Forces Command, had it right in his widely 
published article this past Sunday (September 26, 2010) when he 
disagreed with Secretary Gate's decision to close JFCOM. He said ``The 
core of work JFCOM does is essential to the future success of the 
United States military and, despite claims to the contrary, is not 
duplicated anywhere else in the department. History has proven this 
work certainly can not be accomplished inside the beltway''.
    The 2005 Base Closure and Realignment process validated JFCOM's 
mission and contributions to joint warfighting. The DoD panel reviewing 
the command recommended that JFCOM purchase its leased spaces to 
support its permanent presence. Congress has responded through the 
authorization and appropriation of funding for military construction 
projects at the command. In 2009, JFCOM opened a 49,000-square-foot 
Joint Deployment Center and Maritime Operations Center shared with the 
Navy's Fleet Forces Command.
    Admiral Michael G. Mullen, the chairman of the Joint Chiefs of 
Staff, spoke to the importance of JFCOM's missions at a 2007 change 
command ceremony. Referring to the command's work to develop ``lessons 
learned'' from ongoing military operations to preserve the experience 
of U.S. service men and women, he said, ``It is vital that we capture 
that for the future health of our armed forces.'' The 2010 Quadrennial 
Defense Review echoed this view, stating, ``Perhaps more than ever 
before, the United States requires joint military forces able to 
function and succeed across a wide geographic and operational spectrum. 
Moreover, military forces must be capable of working effectively with a 
range of civilian and international partners.''
    Recent projections indicate that complete closure of the JFCOM 
function would eliminate more than 10,000 direct and indirect jobs and 
a loss of annual salaries of more than $200 million in Virginia. The 
decision to close Joint Forces Command will also result in the loss of 
numerous contractor jobs in both the Hampton Roads area and the 
Northern Virginia area. The recommendation to the President is a 
significant base realignment and closure action that should be treated 
as such. The transparent process that must be used by the Secretary is 
established by the Base Realignment and Closure (BRAC) legislation that 
was enacted by the Congress to ensure sufficient time and opportunity 
is available for review of such proposals in an open and transparent 
manner. The BRAC process ensures that such critical base infrastructure 
closure and realignment decisions are made only after a complete 
review, without political interference, and within the national 
strategic framework. The Department of Defense has previously used BRAC 
in the Commonwealth to reorganize its base and force structure to more 
efficiently and effectively support United States forces, increase 
operational readiness, and facilitate new ways of doing this nation's 
business.
    The BRAC Commission is an independent body charged with the 
responsibility for reviewing the Secretary's recommendations for 
closures such as this recommendation involving the Joint Forces 
Command. BRAC specifies the selection process for the Commissioners, 
and the President is required to consult with congressional leadership 
on nominations to serve on the Commission. The Commission has the 
authority to change the Department's recommendations if it determines 
that the Secretary deviated substantially from the force structure plan 
and/or selection criteria. The Commission holds meetings to solicit 
public input prior to making its recommendations.
    I recognize the integral part the military and national security 
operations and facilities play in the economic vitality of our 
citizens. I intend on being proactive in identifying the appropriate 
strategies to both retain existing military operations and facilities 
that are so very vital to the security of this nation, and to identify 
and attract operations and facilities that should be located within 
Virginia. Therefore, last month I ordered the creation of a Commission 
on Military and National Security Facilities in the Commonwealth. The 
Commission consists of my Secretary of Commerce and Trade and my 
Assistant to the Governor for Commonwealth Preparedness and 
distinguished members of the business community, including the defense 
contracting community, and retired senior military officers.
    I have charged the Commission with the following responsibilities:
     Identify appropriate opportunities for relocating 
additional military commands and missions to the Commonwealth.
     Identify appropriate opportunities for relocating 
additional federal facilities to the Commonwealth.
     Recommend, as appropriate, the best business practices for 
the Commonwealth to retain its existing military installations and 
commands.
     Recommend, as appropriate, the best business practices for 
the Commonwealth to retain its existing non-military federal 
facilities.
     Support and foster collaboration among local and regional 
entities in identifying appropriate opportunities for placement of 
additional federal facilities in the Commonwealth.
     Determine the best and most efficient manner to foster and 
promote business, technology, transportation, education, economic 
development and other efforts to support, attract and retain existing 
military installations and commands in the Commonwealth.
     Determine the best and most efficient manner to foster and 
promote business, technology, transportation, education, economic 
development and other efforts to support and retain existing non-
military federal facilities in the Commonwealth.
     Identify and track all federal government facilities 
located in the Commonwealth and their building plans.
     Determine the best industrial and economic development for 
the localities included in or adjacent to military installations and 
commands in the Commonwealth.
     Determine the best industrial and economic development for 
the localities included in or adjacent to federal facilities in the 
Commonwealth.
     Inform the Governor on a regular basis on all pertinent 
findings and recommendations.
    I have asked Commission members to consider that this great Nation 
is in parlous times and under severe economic and fiscal stress. 
History records that hard times often force the policy makers in this 
Country into making ill considered decisions. It is my intent that the 
efforts of Commission members will result in better planning, more 
transparency in deliberations and recommendations that do not place our 
national security in jeopardy.
    Growing groups of business, senior retired military and political 
leaders are opposed to this decision, and are frustrated with the lack 
of available information to support it. The use of an independent 
commission and public meetings make the process as transparent, open 
and fair as possible. The last BRAC process in 2005 did not recommend 
closure of the Joint Forces Command. Decisions regarding the future of 
the Joint Forces Command and the use of defense contractors located in 
the Commonwealth should be made in the context of the existing 
transparent, open and public process that is represented by BRAC.
    Thank you for your consideration of these important issues, and for 
doing what is best for the military and our nation.
                      attachment, areas of concern
1. Business case analysis of activities to be eliminated
     Numerous documents and statements from DoD have indicated 
that a plan for disestablishment of JFCOM, including a determination of 
the functions that should continue to exist, should be eliminated, or 
should be moved, is being developed over the next several weeks. How 
does DoD justify making a decision to close JFCOM before first carrying 
out such an assessment?
     What studies on cost savings has DoD conducted concerning 
the JFCOM closure and contractor reduction? Please provide details.
     What studies on workload impacts has DoD conducted (e.g., 
what are impacts on JCS of force provider function shift)? Provide 
details.
     Has DoD contacted contractors and civilians to determine 
their intent to move locations if their functions are moved? What 
impact on moving functions, and the service members who receive JFCOM 
training and operations support, could result from the loss of these 
personnel from the workforce?
     What process was used to identify JFCOM for closure and 
what factors were considered in proposing the JFCOM closure? Why was it 
not done within the QDR completed this spring, or as part of a BRAC 
realignment?
     What specific legal authority exists for such strategic 
closures outside of BRAC?
     Jointness and joint interoperability give the U.S. 
military a great strategic advantage. How will such important 
characteristics of the modern military be met if JFCOM closes?
     The modeling and simulation work done at JFCOM is a 
critical low cost test and evaluation function. How can it be done if 
JFCOM closes?
2. Will the process to reduce/elimnate JFCOM and defense contractor 
        support ever become transparent to the public?
     Did OSD review the process and decision made by the OSD 
Headquarters and Support Activities Joint Cross Service Group during 
the 2005 BRAC process that resulted in the recommendation that JFCOM 
continue to exist and should in fact purchase its leased facilities? 
How does DoD reconcile the recommendation to close JFCOM with the 2005 
BRAC recommendation?
     Various personnel at JFCOM have been directed to sign non-
disclosure agreements relating to the review and closure process. Why 
does the Department not take a transparent review and decision-making 
process in this action?
     The Secretary indicated that he authorized the services to 
consider additional closures, and Mr. Hale recently indicated that no 
``more'' closures would be announced until at least February. Is DoD 
currently considering additional base or function closures or 
realignments that would affect Virginia? If so, what are the metrics 
and process being used in that review?
     If the Secretary and the military departments are 
considering additional closures and realignments, does DoD believe that 
another round of the BRAC process is necessary?
3. Impact of infrastructure in place within local communities
     Have specific locations outside of Hampton Roads been 
identified to host any JFCOM mission that will remain intact after the 
proposed disestablishment of JFCOM?
     Has DoD considered moving a new mission to backfill the 
sudden loss of this Command in the Hampton Roads region? For example, 
has DoD considered moving AFRICOM or other functions to the region? 
Which locations are being considered to host AFRICOM?
     What specific JFCOM functions will remain in Suffolk and 
Norfolk? What are the estimated civilian, uniformed, and contract job 
positions at each location? Are these personnel assigned to specific 
billets at each location?
     What is the DoD plan for use of leased space in Suffolk? 
Will the leases be terminated and what are the termination fees?
4. What JFCOM functions are being relocated or left in place?
     If similar functions to JFCOM exist within the Joint 
Chiefs of Staff and other organizations, did DoD consider consolidation 
of those functions to JFCOM, rather than disestablishment? Should 
alternatives, such as expanding or strengthening the JFCOM function, 
have been considered instead of selecting the JFCOM closure option?
     For those activities that DoD determines should continue 
to exist, what process will DoD use to determine whether they should 
remain in place or move elsewhere?
     Was there consideration given to simply reducing the 
number of contractors and eliminating the duplication of missions 
versus eliminating the entire command?
5. Economic impact
     Has DoD calculated the extreme economic costs to Virginia 
of the contractor reduction; and what is the estimate? Where are the 
displaced contractor functions going to be performed?
     Will the JFCOM closure make the region eligible for base 
closure assistance, including OEA grants, from the federal government?
     Will the JFCOM closure result in an increase of personnel 
in the National Capital Region?
6. Reduction in the use of defense contractors
     What costs, and savings, are associated with the use of 
defense contractor personnel at JFCOM? What costs, and savings, are 
associated with the use of defense contractor personnel in the National 
Capital Region? How will DoD decide which defense contractors and 
contracts to cut or eliminate in order to achieve the announced 
reduction?
     What studies has DoD conducted on both the short and long 
term real cost savings by reducing the use of defense contractors? 
Please include any existing examples where reducing the use of defense 
contractors--either by using uniformed personnel or by in-sourcing--has 
actually reduced costs to DoD.
     If the Department is looking for efficiencies, why was the 
decision made to cut the government contracting services sector rather 
than finding efficiencies through the streamlining of administrative 
operations?
     Upon what basis or analysis was the decision made to 
reduce the use of defense contractors by a total of 30% over the next 
three (3) years? Please provide a copy of any analysis conducted by DoD 
that forms the basis of this action.
     What universe of service will the reduction affect? Will 
it be an across the board? If not, which categories of service will be 
targeted?
     Will the reduction in the use of defense contractors be 
spread equally throughout the country or will any such reduction be 
confined to a specific region, such as the National Capital Region of 
Northern Virginia, which appears to be hit extremely hard by this 
decision.

    [The statement of Hal Gehman follows:]

[From the Norfolk, VA, Virginian-Pilot, September 26, 2010, Op-ed page]

                  Journey to Jointness is Not Complete

                     By Admiral Hal Gehman, (Ret.)

    I DISAGREE with Secretary of Defense Robert Gates' message to the 
staff at U.S. Joint Forces Command that jointness in military 
operations has already been achieved and the job is done.
    This is a journey, not a destination. Since efforts to achieve 
better cooperation in U.S. military operations must go on, Gates' 
decision to close JFCOM is abandoning a decades-long effort, initiated 
and supported by multiple secretaries of defense and chairmen of the 
Joint Chiefs of Staff, to ensure the maximum effectiveness of our armed 
forces.
    The natural turnover of military personnel requires a continuous 
joint training program; new systems and equipment require continuous 
oversight to ensure joint interoperability; and new global threats 
require continuous development, testing and implementation of new joint 
doctrine and tactics.
    So, what is jointness, and how important is it? Many military 
operational tasks can be assigned to individual services. For example, 
there is little or no jointness involved in hunting submarines.
    But in a number of operational tasks, joint requirements outweigh 
service requirements. Integrated air defense, control of battlefield 
fires, combat search and rescue, ballistic missile defense and 
logistics are best done in a joint manner. Failure to get this right 
will result in at least ineffective employment of forces and, at worst, 
fratricide.
    A first requirement is to think about, develop, test and advocate 
for joint doctrine, tactics, techniques and procedures. There will be 
no joint procedures and doctrine if there is no organization 
responsible for developing them.
    JFCOM improved and perfected the process using newly developed 
modeling and simulation skills that are unique, saving millions of 
dollars and thousands of man-years of effort. Since joint procedures 
and doctrine underpin all our military operations, now and in the 
future, this work must go on by someone, somewhere.
    The second requirement is to ensure the compatibility and 
interoperability of systems and equipment. Service acquisition 
processes are built to optimize their own purchases. Even in the few 
cases where there are technical requirements that equipment be 
interoperable, the actual acquisition is left to the individual 
services.
    Detailed, independent testing of first-line systems has always been 
needed. Who will do the unbiased testing? Who will determine the 
interoperability standards? Who will advocate the expenditure of extra 
money to make systems not just meet service requirements but meet the 
requirements of the joint battlefield?
    Finally, once doctrine and procedures have been developed and 
approved, and interoperable systems are in the field, the force must be 
trained to operate in a joint environment. The services spend years 
teaching warriors to become proficient in their specialty. Joint 
operations are more complicated.
    When JFCOM was formed in 1999, there was no joint modeling and 
simulation-based war gaming tool. Now joint operations can be perfected 
in simulation, saving millions of dollars without burdening our already 
over-tasked forces.
    While the efforts to enhance jointness have been supported by top 
officials, they have had difficulty attracting a natural constituency. 
Except for some academic students of military affairs, a few members of 
Congress and one or two assistant secretaries, the mission of JFCOM has 
little or no institutional support, and has many detractors because it 
takes away resources and adds requirements.
    The core work JFCOM does is essential to the future success of the 
U.S. military and, despite claims to the contrary, is not duplicated 
anywhere else in the department.
    History has proven this work certainly cannot be accomplished 
inside the Beltway. The jointness journey must go on.
    Retired Navy Adm. Hal Gehman is former commander of U.S. Joint 
Forces Command. He also served as chairman of the 2003 Space Shuttle 
Columbia Accident Investigation Board.

    Mr. Scott. Again, I thank Chairman Spratt for convening 
this afternoon's hearing and look forward to testimony from our 
distinguished panel of witnesses. I now turn to the Acting 
Ranking Member for the Subcommittee, Rob Wittman, for any 
statement he might want to make.
    Mr. Wittman. Thank you, Chairman Scott. And I wanted to say 
good afternoon to our witnesses. Thank you so much for joining 
us today. I want to also thank Chairman Spratt for convening 
this meeting today so we can explore more the decision to 
recommend the closure of Joint Forces Command.
    Mr. Chairman, I would like to first ask unanimous consent 
to submit Ranking Member Ryan's statement for the record and to 
read a few comments for the benefit of the panel in the 
Committee.
    Mr. Scott. Without objection.
    [The prepared statement of Paul Ryan follows:]

    Prepared Statement of Hon. Paul Ryan, Ranking Minority Member, 
                        Committee on the Budget

    Thank you Chairman Spratt for calling this hearing.
    I'd like to welcome our witnesses: Todd Harrison of the Center for 
Strategic and Budgetary Assessments, Stan Soloway of the Professional 
Services Council, Jacqueline Simon of the American Federation of 
Government Employees, and retired Army Lieutenant General Bob Wood, the 
former Deputy Commander of the Joint Forces Command. Thank you for your 
service, sir.
    The Defense Department is our largest discretionary expenditure, 
and has seen robust growth over the last decade. This growth is 
understandable--and in my opinion, justified--by the fact we were 
attacked on September 11th.
    We cannot lose sight that the Defense Department provides one of 
the most critical functions of the federal government--national 
security. The Chairman and I recently had a chance to go to 
Afghanistan, and witnessed firsthand the extraordinary accomplishments 
of our troops in harsh terrain against a fierce enemy. For the tireless 
sacrifice of our country's bravest men and women, Congress must 
continue to make the funding for our troops and their families a top 
priority.
    The Defense budget should not, however, get a pass from a rigorous 
review of its budget. If there is waste, we need to eliminate it. If 
there are efficiencies we need to pursue them.
    I am concerned that some of the growth in the defense budget will 
prove difficult to slow. Tricare and the Defense Health Program--
critical priorities aimed at caring for our nation's heroes--are 
growing at unsustainable rates, as military and civilian pay and fuel 
costs continue to grow faster than inflation. I want to learn more from 
our witnesses on whether they believe the President's budget, which 
provides for average real growth of about 1 percent annually over the 
next five years, is sufficient to fund its current mission.
    As deficits and debt continue their explosive growth--a challenge 
Admiral Mullen describes as our top national security threat, it is 
incumbent on the Department and Congress to address the fundamental 
cost drivers before they overwhelm DOD's budget.
    The Efficiency Initiative announced by Secretary Gates over the 
past several months is a modest start in making it possible for the 
Defense Department to live within this budget.
    Congress needs more details about the rationale and analysis that 
support the specific elements of this Initiative. It's for that reason 
that I am disappointed that the Defense Department declined to provide 
a witness for today's hearing. Those of us who are supporters of a 
strong defense and would like to support the Secretary in his efforts 
to improve the Defense Department's tooth-to-tail ratio are hamstrung 
when we lack the necessary details from DOD.
    Finally, in preparing for this hearing, I was struck by the 
contrast between the calls for reducing defense expenditures in the 
aggregate and the opposition to some of the specific efficiencies 
Secretary Gates is pursing. It appears the Appropriations Committee 
plans to reduce President Obama's defense request by $7-8 billion, 
while others are objecting to the reductions Secretary Gates is trying 
to achieve to bring the DOD budget in-line with the President's 
request.
    These are the sorts of tough choices that Congress will have to 
grapple with while ensuring our men and women in uniform get the 
resources they need.
    Mr. Chairman, thank you for calling today's hearing. I look forward 
to the witnesses' views on the Efficiency Initiative and on the broader 
question of how we can better meet that the Federal government's 
highest priority of providing for the common defense.

    Mr. Whittman. Mr. Chairman, I would like to continue with 
brief opening remarks of my own. And in the midst of these 
serious economic challenges we face I know that we all face 
tough decisions in the coming years. And in many different 
areas of the government in order to reduce our deficit and our 
national debt we will need to really carefully examine the 
choices out there for us as members of Congress. And in fact, 
some of the initiatives made by Secretary Gates to find 
efficiencies within our Defense Department may turn out to be 
reasonable and good from a financial point of view. But until I 
see some sort of analysis on these initiatives I cannot support 
this unilateral, unchecked decision by Secretary Gates.
    And furthermore, I cannot support cuts to the top line of 
the budget of the Defense Department when I have yet to hear of 
similar cuts in other federal agencies. We certainly cannot 
find the solution to our currently budget deficit and national 
debt solely within the discretionary budget within the 
Department of Defense. And I am in favor of a common sense 
approach that uses a rational and objective analysis of our 
national security needs and requirement to determine our 
priorities, which should then drive the budget. Long term 
strategic planning documents like the quadrennial defense 
review, which was published earlier this spring, are perfect 
planning documents that can be used to drive the budget.
    Within this document there are no comments of 
inefficiencies, nor any mention of the need to cut defense 
contracts or eliminate Joint Forces Command, two very specific 
initiatives in the current plan by Secretary Gates. In fact, 
the QDR was criticized by some as actually being budget driven, 
which yields a potential train wreck for our national security, 
which is a quote from the Independent Panel of the QDR as 
requested by the House Armed Services Committee earlier this 
summer. And my common sense approach would have started with an 
objective analysis. And I have been told by the DOD that such 
an analysis exists. Yet after nearly two months have been 
unable to see a single document from that analysis.
    In the absence of that analysis I have started to deduce 
that these initiatives were well-intentioned but sorely 
misguided. And I fear that a potential result for our national 
security will put that at risk, and that's something that I 
will not allow to happen.
    And again, I want to thank Chairman Spratt for allowing me 
to participate today, and Chairman Scott for his graciousness 
in today's hearing, for allowing me to sit here and participate 
and also to stand as the Ranking Member. And I look forward to 
the testimony of our witnesses.
    [The prepared statement of Robert Wittman follows:]

   Prepared Statement of Hon. Robert J. Wittman, a Representative in 
                  Congress From the State of Virginia

    Thank you, Chairman Spratt, and good afternoon to our witnesses. I 
want to thank the Chairman and the committee for having me here today 
on this most important issue.
    Mr. Chairman, I would first like to ask unanimous consent to submit 
Ranking Member Ryan's statement for the record, and to read a few 
comments for the benefit of the panel and the committee:
                             brief summary
    Mr. Chairman, I would like to continue with brief opening remarks 
of my own:
    In the midst of serious economic challenges, I know we will all 
face some tough decisions in the coming years, in many different areas 
of government, in order to reduce our deficit and our national debt. In 
fact, some of the initiatives made by Secretary Gates to find 
efficiencies within our Defense Department may turn out to be 
reasonable and good from a financial point of view. But until I see 
some sort of analysis on these initiatives I cannot support this 
unilateral, unchecked decision by Secretary Gates.
    Furthermore, I cannot support cuts to the top line budget of the 
defense department when I have yet to hear of similar cuts in any other 
federal agency. We certainly cannot find the solution to our current 
budget deficit and national debt solely within the discretionary budget 
within the Department of Defense.
    I am in favor of a common sense approach that uses a rational and 
objective analysis of our national security needs and requirements to 
determine our priorities, which would then drive the budget. Long-term 
strategic planning documents, like the Quadrennial Defense Review, 
which was published earlier this Spring, are perfect planning documents 
that can be used to drive the budget.
    Within this document there were no comments of inefficiencies, nor 
any mention of the need to cut defense contracts or eliminate Joint 
Forces Command, two very specific initiatives in the current plan by 
Secretary Gates. In fact, the QDR was criticized by some as actually 
being budget driven--which yields a potential train wreck for our 
national security which is a quote from an Independent Panel Review of 
the QDR as requested by the House Armed Services Committee earlier this 
summer.
    My common sense approach would have started with an objective 
analysis, and I have been told by DoD that such an analysis exists, yet 
after nearly two months have been unable to see one single document 
from that analysis.
    In the absence of that analysis, I have started to deduce that 
these initiatives were well-intentioned but sorely misguided. I fear 
that a potential result our national security will be put at risk and 
that I something I will NOT allow.
    Again, I thank Chairman Spratt for allowing me to participate in 
today's hearing and I look forward to the testimony of our witnesses.

    Mr. Scott. Thank you. Mr. Connolly?
    Mr. Connolly. Thank you. Thank you so much, Mr. Chairman, 
and welcome to my friend and colleague Mr. Wittman for being 
with us today. And thanks to all the panelists for joining on 
what I think is a very important subject. My concern, of 
course, with this issue is not only about JFCOM but about the 
decision to bring in 10 percent of outside contracts for the 
Pentagon every year for three years. Now, my concern with that 
is the same as what both you, Mr. Chairman, and Mr. Wittman, 
articulated about your concerns with JFCOM. There is no 
analysis to justify that decision. It is a number picked out of 
a hat. It may in fact be correct. It may be too big, it may be 
too little. We do not know. And essentially in the private 
meetings we have had, including the Deputy Secretary of 
Defense, they have conceded as much. They have not to their 
credit tried to defend the indefensible. There is no analysis 
that went into that, it is a goal.
    But it is a goal that has consequences for contractors who 
have currently contracts, and men and women who serve our 
country through that mechanism who have reason to be concerned 
about employment now, lacking clarity. It is not clear that 
there is any sense of priorities about, well, which contracts 
are we talking about? Are we distinguishing between, you know, 
high end combat readiness related contracts and, you know, more 
service contracts that truly could be competed with the public 
sector, and fairly so.
    My own view is that on this kind of issue, insourcing/
outsourcing, it cannot be a matter of theology. It has to be a 
matter of what works. Now, we have gone through the exercise of 
defining that which is inherently governmental. And I think 
frankly the administration listened to labor, to business, to 
the public sector, and actually came up with a definition that 
is quite workable and that I think actually meets the concerns 
by and large of everybody involved. And I was heartened to hear 
in the closed session today with Comptroller Hale that that is 
what they are looking at, and that is good to hear. But it was 
not what we heard several weeks ago when this was just 
arbitrarily put out there.
    I also think we have to dispel the myth that this is 
designed to save money. It is designed, and everyone holding 
their fingers, to actually free up internal resources and 
reallocate them to other higher priority missions, recognizing 
that the growth in external resources will not be there the way 
it has been the last decade. And I applaud that. That shows 
initiative, identifying internal savings to help finance your 
priorities and their growth is, I think, a wise and prudent way 
to go.
    However, my word of caution, there is not a lot of evidence 
yet that this or the JFCOM decision will in fact free up those 
additional resources. If BRAC is at all instructive, it is a 
story of disappointments with respect to those kinds of 
expectations. The savings that we had originally projected in 
BRAC have in fact not materialized. They have been 
significantly eroded because there were ancillary costs and 
other upfront investment costs that greatly exceeded the 
original projections and significantly eroded the consequent 
savings as a result.
    So mine is a word of caution. But I believe that there has 
to be analytical rigor. This cannot be a matter of faith and 
theology that one is better than the other, insourcing or 
outsourcing. It is what makes sense. And if doing it inside 
because it is inherently governmental makes sense, great. If on 
the other hand the expertise and the economy are also on the 
outside then it has to be competed in a fair manner. And so I 
would hope, and the reason I mention that, Mr. Chairman, is 
that in listening to the Deputy Secretary he indicated that, 
well, we have grown out of balance. Outside contracting has 
grown to 39 percent, and its historic norm is 26 percent. Well, 
all right. I am certainly open to a fresh look at whether that 
balance makes sense. But to decide a priority, it does not. 
Based on what? Theology? Because I do not like it? That is not 
good enough.
    The same rigorous analysis that you called for, Mr. 
Chairman, and that you called for, Mr. Wittman, with respect to 
JFCOM, must also apply to this decision on contracting. 
Otherwise, the decision is being made for reasons unrelated, 
frankly, to cost savings or any kind of analysis as to whether 
it would work and improve the operation. And sadly, that is the 
testimony we are lacking from the Pentagon. So I am looking 
forward to this private sector panel, but I sure wish we could 
get the Pentagon to testify in open session not only here in 
the Budget Committee but they were also scheduled yesterday at 
the Oversight and Government Reform Committee and declined to 
participate as well.
    Mr. Chairman, I look forward to the testimony and rigorous 
questioning. Thank you.
    Mr. Scott. Thank you very much. Does the gentle lady from 
Minnesota have an opening statement?
    Ms. McCollum. No, Mr. Chairman.
    Mr. Scott. Thank you, we are pleased to have you at the 
hearing. We will now begin with our witnesses and we will begin 
with Mr. Harrison.

  STATEMENTS OF TODD HARRISON, SENIOR FELLOW, DEFENSE BUDGET 
STUDIES, CENTER FOR STRATEGIC BUDGET ASSESSMENTS; JOHN R. (BOB) 
 WOOD, LIEUTENANT GENERAL, USA (RET.), STAR STRATEGIES GROUP; 
    STAN Z. SOLOWAY, PRESIDENT & CEO, PROFESSIONAL SERVICES 
COUNCIL; AND JACQUELINE SIMON, PUBLIC POLICY DIRECTOR, AMERICAN 
          FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO

                   STATEMENT OF TODD HARRISON

    Mr. Harrison. Thank you, and thank you for having me here 
today to testify before the Committee. As fiscal year 2010 
draws to a close and the economy struggles to recover from the 
deepest recession since the Great Depression the federal 
government faces a number of fiscal challenges. The budget 
deficit is projected to exceed $1.4 trillion due in part to 
increased spending on fiscal stimulus programs and a sharp 
reduction in tax revenues due to the recession. But underlying 
the current fiscal situation is a structural deficit that the 
economic downturn only exacerbated. As Congress and the 
administration focus more attention on reducing the deficit all 
areas of the budget, including defense, have come under 
increased scrutiny.
    The defense budget is in many respects a microcosm of the 
rest of the federal budget, and the issues in the defense 
budget, such as the rising costs of pay, pensions, healthcare, 
contracting, infrastructure, and education are issues in other 
parts of the federal budget as well. What I hope to do today in 
my testimony is provide an overview of the trends and issues in 
the defense budget and what DOD is doing, or in some cases not 
doing, to address these issues.
    I want to begin by taking a look at defense spending from a 
historical perspective. The total national defense budget 
request for fiscal year 2011 adjusted for inflation is at the 
highest dollar amount since World War II, and it is higher than 
total defense spending at any point in the Vietnam or Korean 
Wars, even if the costs of the current Wars in Iraq and 
Afghanistan are excluded. Defense spending rises and falls in 
cycles which are primarily driven by external events, such as 
the Wars in Korea and Vietnam and the Cold War arms buildup. 
After each up turn the budget tends to return to a floor and 
that floor is gradually rising over time. These two trends 
suggest that if the current cycle were to follow the same 
pattern, and there are reasons to think it may not, the defense 
budget could experience a significant decline over the coming 
decade. While such cycles are understandable given the ever-
changing threat environment that the nation faces, sharp rises 
and declines in the defense budget complicate long term defense 
planning.
    And just as the top line of the defense budget has varied 
over time the way in which money is allocated within the 
defense budget has also varied. At the previous peak in defense 
spending in fiscal year 1985 the operations and maintenance and 
military personnel accounts together garnered 51 percent of the 
total DOD budget versus 45 percent for acquisition. Compared to 
today, in the fiscal year 2011 budget request 67 percent is 
allocated for operations and maintenance and military personnel 
compared to 30 percent for acquisition.
    The rapid growth in personnel and operational costs is of 
particular concern because the total number of personnel has 
not varied significantly over the past decade and in fact it 
has come down significantly from the 1980's. The 2011 budget 
request for military personnel totals $139 billion and that 
does not include War funding. What is not included in the 
military personnel budget is the defense health program, which 
is funded under operations and maintenance at a total of about 
$30 billion a year. Also not included in the military personnel 
budget is the cost of DOD civilian personnel, which adds 
another $77 billion. In total, DOD spends some $246 billion on 
the uniformed military and DOD civilian personnel. With a 
payroll of 2.3 million direct, full time employees DOD makes up 
51 percent of the federal workforce and employs more Americans 
than Walmart and the United States Postal Service combined. I 
should note that these figures do not include the number or 
cost of support contractors.
    A growing portion of military compensation is consumed by 
non-cash and deferred benefits. Military healthcare is a major 
contributor to this growth due in part to more and more 
military retirees and their dependents electing to use their 
military healthcare benefit. A total of 9.5 million Americans 
are now eligible beneficiaries in the military healthcare 
system. The fee charged to military retirees for enrollment in 
TRICARE, the military health plan, was set in 1995 at $460 a 
year for a family plan and has not increased one dollar since 
then. For comparison, the average annual premium paid by 
private sector workers, and this is the portion paid by the 
workers, is $3,500 a year for a family plan. About 70 percent 
of military retirees have access to private sector insurance. 
But because of this growing differential more and more of them 
are choosing to stay on the military system.
    Another factor in the rising cost of military healthcare is 
the enactment of the TRICARE for Life Program in 2001. This is 
a Medicare supplemental insurance program for military retirees 
over the age of sixty-five who are on Medicare. Accrual 
payments to this trust fund now total $11 billion annually out 
of the DOD budget.
    But personnel related costs are not the only area of the 
budget that has grown over the past decade. The budget for 
acquisitions has also grown by a total of 46 percent since 2001 
adjusting for inflation and not including War funding. A 
notable trend within the acquisition budget is the relatively 
high level of funding allocated for the development of new 
weapons systems. The ratio of procurement to RDT&E has fallen 
from a peak of 3.5 to 1 in the early 1980's to its current 
level of 1.5 to 1 in the fiscal year 2011 base budget. What 
this trend indicates is that DOD continues to spend a greater 
share of its acquisition budget to develop new and 
sophisticated weapons systems but it does not adequately fund 
for the procurement of these systems in quantity. As a result 
DOD's inventory of equipment, the planes, the ships, and the 
ground vehicles that our military depends on, has gotten 
smaller and older over the past decade despite large increases 
in what we spend on acquisitions.
    However, DOD is attempting to reverse this trend. In the 
future year defense program submitted with the 2011 budget it 
projects a rise in procurement and a reduction in RDT&E funding 
over the coming years and this would increase the ratio to 
levels not seen since the early 1990's.
    Classified funding in the DOD budget has also grown at a 
rapid pace. Total classified funding, including both the base 
and the war budgets, is nearly $58 billion in fiscal year 2011. 
Adjusting for inflation, this is a highest level seen since 
CSBA, my organization, began tracking it in 1987. The Air Force 
receives the largest share of DOD's classified acquisition 
funding, nearly 80 percent of the total. The record for 
classified acquisition programs is mixed. There have been 
notable successes, such as the Corona program for 
reconnaissance satellites in the sixties and seventies. But 
some classified programs have had troubled histories, such as 
the National Reconnaissance Office's Future Imagery 
Architecture Program that was to develop the next generation of 
spy satellites. This program was canceled in 2005 due to 
significant cost overruns and technical issues at a reported 
loss of $4 billion to the government.
    However, it should be noted that the mere existence of 
classified programs can create uncertainty in the minds of 
potential adversaries. Such uncertainty complicates their 
planning, and potentially compels them to divert resources to 
hedge against an unknown capability. Classified programs can 
therefore be a part of a cost imposing strategy on potential 
adversaries.
    Funding for the wars in Iraq and Afghanistan is also a 
significant share of the DOD budget, totaling some $159 billion 
in the fiscal year 2011 request. Funding for operations in Iraq 
continues to decline as troop levels there subside, and funding 
for Afghanistan continues to increase as the surge there is 
nearing completion.
    The budget request does not include a projection for war 
costs in future years. Instead it includes allowances of $50 
billion per year for fiscal year 2012 to fiscal year 2015, an 
amount that is likely far below what will actually be needed. 
The future costs of the wars depends on a number of external 
factors that cannot be known in advance, such as operational 
tempo, fuel prices, and the number and composition of forces 
deployed in future years. But our analysis has demonstrated a 
strong correlation between the number of troops deployed and 
the total annual cost. The annual cost per troop since fiscal 
year 2005 has averaged $1.2 million per troop in Afghanistan, 
and $690,000 per troop in Iraq. Given current and projected 
troop levels it is likely the funding for the wars will exceed 
the $50 billion allowance per year for several years to come.
    In conclusion I would note that the trends in the defense 
budget I have outlined here, particularly the growth in 
military personnel costs and the low ratio of procurement to 
RDT&E funding are cause for concern. If these trends are not 
reversed it will not be possible for the Department to maintain 
its current force structure and capabilities without 
significant increases in funding above the current level.
    Secretary Gates has made preserving the force structure a 
top priority. And as part of his efficiency initiatives has 
directed the Department to find savings in other parts of the 
budget that could be directed to force structure and 
acquisitions. However, efficiencies alone are not likely to 
result in the magnitude of savings required. The largest source 
of savings proposed is to reduce spending on support 
contractors by 30 percent over the next three years. According 
to congressional and research service estimates this could 
generate savings of $3.6 billion annually once it is fully 
implemented. For comparison, this is only enough to offset one 
year's worth of growth in military healthcare costs. Smaller 
cuts include the elimination of the Networks and Information 
Integration, NII; J6; the Business Transformation Agency; and 
Joint Forces Command. While these eliminations appear to be 
justified the total savings achieved will depend greatly on how 
these decisions are implemented. If these organizations are 
eliminated without corresponding reductions in the head count 
of military personnel, DOD civilians, and support contractors, 
the savings will be limited.
    The initiatives announced by the Department so far I 
believe are a step in the right direction but they do not 
address some of the fundamental issues that plague the defense 
budget, such as the rising cost of military healthcare. To its 
credit, the Department has made specific, targeted cuts to 
programs and activities it has deemed to be a lower priority. 
This is a sound approach and if applied to the rest of the 
defense budget it is one that will make the military more 
efficient and effective in the long run. The alternative would 
be to simply spread cuts around evenly throughout the 
Department. The risk with spreading the cuts around evenly is 
that it does not prioritize programs and activities and could 
result in a military that looks and operates much like the one 
we have today but is smaller and less capable.
    The challenge for policy makers in such a constrained 
budget environmental is to adequately fund for the support and 
modernization of our national defense capabilities without 
spending one dollar more than is necessary. Rooting out waste, 
inefficiency, and low priority activities within the defense 
budget is a difficult and delicate task. In some cases it will 
mean lost jobs. In other cases it will require taking on vested 
interest, both within the Pentagon and outside the building.
    While the prospect of a flat or declining defense budget 
may seem like a daunting challenge, particularly while the 
nation is still engaged in two ongoing wars and unemployment is 
over 9 percent, it is also an opportunity. This moment provides 
both the fiscal and political imperative to jettison programs 
and activities that are no longer needed, budget artifacts from 
a bygone era, and focus more effectively on the capabilities 
needed to deter, fight, and win wars in the future. Thank you.
    [The prepared statement of Todd Harrison follows:]

  Prepared Statement of Todd Harrison, Senior Fellow, Defense Budget 
            Studies, Center for Strategic Budget Assessments

    As fiscal year 2010 draws to a close and the economy struggles to 
recover from the deepest recession since the Great Depression, the 
federal government faces a number of fiscal challenges. The budget 
deficit is projected to exceed $1.4 trillion due in part to increased 
spending on fiscal stimulus programs and a sharp reduction in tax 
revenues due to the recession. But underlying the current fiscal 
situation is a structural deficit that the economic downturn only 
exacerbated. As Congress and the administration focus more attention on 
reducing the deficit, all areas of the budget, including defense, have 
come under increased scrutiny.
    The Obama Administration's FY 2011 budget request includes a total 
of $712 billion for the Department of Defense (DoD). The base budget 
for the Department includes $549 billion in discretionary funding and 
$4 billion in mandatory funding. An additional $159 billion is 
requested for the wars in Afghanistan and Iraq. The budget also 
requests $19 billion for defense-related atomic energy programs, $8 
billion for defense-related activities in other agencies, and $122 
billion for veterans. Together these expenses total $861 billion, or 22 
percent of the total federal budget.
    The defense budget, in many respects, is a microcosm of the rest of 
the federal budget, and the challenges facing DoD in pay, pensions, 
healthcare, infrastructure, contracting, and education, to name a few, 
are also issues in other areas of the budget. My testimony provides an 
overview of trends and issues in the defense budget and their potential 
impact on future defense spending and capabilities. I begin by 
providing an overview of defense spending from an historical 
perspective and explaining how the share of the defense budget devoted 
to acquisition and operations and support has varied over time. I then 
explore in more detail trends in military personnel costs, acquisition 
costs, classified funding, and war funding. While the issues I identify 
are not new, what makes these issues of more concern now is that in a 
constrained budget environment we no longer have the luxury of simply 
spending our way out of difficult decisions.
    The total national defense budget request for FY 2011, adjusted for 
inflation, is at the highest dollar amount since World War II and is 
higher than total defense spending at any point in the Vietnam or 
Korean Wars, even if the cost of the wars in Iraq and Afghanistan are 
excluded. However, defense spending as a percent of GDP is 4.8 percent 
in the FY 2011 budget request, below the post-World War II average of 
6.5 percent. The apparent discrepancy between defense spending being at 
a peak level in inflation-adjusted dollars but not as percent of GDP is 
due to the different rates of growth in the defense budget and national 
economic output. From the previous peak in defense spending in FY 1985 
to the FY 2011 budget request, defense spending grew by 37 percent in 
real terms compared to 102 percent real growth in GDP over the same 
period. As a result, the total defense budget as a percent of GDP has 
fallen from 7.1 to 4.8 percent over that time period because the 
denominator (GDP) has grown much faster than the numerator (defense 
spending).
    Looking at the defense spending over time, two trends become 
apparent. The first is that defense spending rises and falls in 
irregular cycles, which are primarily driven by external events. In the 
early 1950s, the budget increased sharply for the Korean War. During 
the Vietnam War, defense spending steadily increased for six years 
before it peaked in FY 1968 and then declined for the next seven years. 
The Cold War buildup of the 1980s saw the budget increase for six years 
until it peaked in FY 1985 and declined for the next ten years. The 
current cycle, however, is different in several respects: the budget 
may not have peaked yet, depending on how the war in Afghanistan 
progresses; and the global economic outlook and federal deficit are 
worse than in previous cycles. Moreover, the current buildup in defense 
spending has been a ``hollow'' buildup in many respects because the 
military's end strength has remained nearly constant at 1.5 million in 
the active force, and the equipment inventory has gotten smaller and 
older in many areas.
    The second notable trend is that after each cycle the budget 
returns to a floor, and that floor is gradually rising over time. At 
the end of WWII, defense spending plummeted to less than $100 billion 
in today's dollars. After the Korean War, the defense budget dropped 
again, but only to about $290 billion, this time due, in part, to the 
emergence of a peacetime defense industry. Following the Vietnam War, 
defense spending fell again to about $300 billion. After the end of the 
Cold War buildup, the defense budget never dropped below $350 billion. 
These two trends suggest that if the current cycle were to follow the 
same pattern--and there are reasons to think it may not--the defense 
budget could experience a significant decline over the coming decade. 
While such cycles are understandable given the ever-changing threat 
environment the nation faces, sharp rises and declines in the defense 
budget complicate long-term defense planning.
    Just as the topline of the defense budget has varied over time, the 
way in which money is allocated within the defense budget has also 
varied. In recent years, funding has shifted away from acquisition 
accounts toward operation and maintenance and military personnel 
accounts. At the previous peak in defense spending in FY 1985, the 
operations and maintenance and military personnel accounts garnered 51 
percent of the total DoD budget versus 45 percent for acquisition. In 
the FY 2011 budget request, 67 percent is allocated for operations and 
maintenance and military personnel, compared to 30 percent for 
acquisition--or 62 percent and 34 percent, respectively, if war funding 
is excluded.
    The rapid growth in personnel costs is of particular concern 
because the total number of personnel has not varied significantly over 
the past decade. Since 2001, the military personnel budget has grown by 
a total of 46 percent, adjusting for inflation and not including war 
funding, to $139 billion in the FY 2011 request. What is not included 
in that figure is the Defense Health Program, which is funded under the 
operations and maintenance title of the budget at $30 billion. Also not 
included is the cost of DoD civilian personnel, which adds another $77 
billion. In total, DoD spends some $246 billion on uniformed military 
and DoD civilian personnel--not including the cost of contractors. With 
a payroll of 2.3 million direct employees, DoD makes up 51 percent of 
the federal workforce and employs more Americans than Wal-Mart and the 
U.S. Postal Service combined.
    A notable trend in military personnel funding is the growing 
portion of military compensation that is consumed by noncash and 
deferred benefits. For comparison, in the private sector about 29 
percent of total compensation costs go to non-cash and deferred 
benefits, such as healthcare and pensions. At General Motors, before it 
went into bankruptcy, noncash and deferred compensation made up 45 
percent of total compensation costs. For DoD, the figure is 52 percent. 
Military healthcare is a major contributor to noncash and deferred 
compensation costs for DoD, due in part to more and more military 
retirees and their dependents electing to use their military healthcare 
benefit. A total of 9.5 million Americans are now eligible 
beneficiaries in the military healthcare system, including the active-
duty military, military retirees, and their dependents, at a cost to 
DoD of $50.7 billion in the FY 2011 budget request.
    The fee charged to military retirees for enrollment in TRICARE was 
set in 1995 at $460 for a family plan and has not increased since then. 
For comparison, the average annual premium paid by private-sector 
workers is $3500--not including the share of annual premiums paid by 
their employers. About 70 percent of military retirees have access to 
private-sector insurance, but because of this growing price 
differential more of them are choosing to stay in the military system. 
Another factor in the rising cost of military healthcare is the TRICARE 
for Life program, a Medicare supplemental insurance program for 
military retirees over the age of 65 that was enacted in 2001. Accrual 
payments to this trust fund now total $11 billion annually.
    But personnel-related costs are not the only area of the defense 
budget that has grown over the past decade. The budget for 
acquisitions, including research, development, test, and evaluation 
(RDT&E) and procurement, has also grown by a total of 46 percent since 
FY 2001, adjusting for inflation and not including war funding. A 
notable trend within the acquisition budget is the relatively high 
level of funding allocated to RDT&E for the development of new weapon 
systems. Over time, this has undermined DoD's ability to substantially 
fund for the procurement of new weapon systems and correct the lagging 
pace of procurements from the past two decades. The ratio of 
procurement to RDT&E has fallen from a peak of 3.5 to 1 during the 
early 1980s to its current level of 1.5 to 1 in the base budget request 
for FY 2011. What this trend indicates is that DoD continues to spend a 
greater share of its acquisition budget to develop new and 
sophisticated weapon systems but does not adequately fund the 
procurement of these systems in quantity. However, the future-year 
defense program submitted with the FY 2011 budget request begins to 
reverse this trend. Funding for procurement is projected to rise and 
RDT&E is projected to decline over the coming years. By FY 2015 the 
ratio of procurement to RDT&E in the base budget will reach 2.0 to 1, 
the highest level since FY 1990.
    Classified funding in the DoD budget has also been growing at a 
rapid pace. Total classified funding, including both base and war 
funding, is some $57.8 billion in the FY 2011 request. Adjusting for 
inflation, this is the highest level seen since CSBA began tracking it 
in FY 1987. Classified O&M funding has not been consistently reported 
in previous years, but this year's budget request reveals that it is 
the fastest-growing area within classified funding. Classified O&M 
increases 9.6 percent in real terms in the FY 2011 request over the 
previous year, which follows a similar 11.0 percent real increase in FY 
2010.
    The Air Force receives the largest share of DoD's classified 
acquisition funding--nearly 80 percent of the total. Classified 
programs account for about 43 percent, or $19.1 billion, of the Air 
Force's procurement request and 46 percent, or $12.6 billion, of its 
RDT&E request. The concentration of classified funding in the Air 
Force's budget is the result of two factors. First, the Air Force 
acquisition budget is believed to contribute funds to a number of 
intelligence agencies, including the Central Intelligence Agency (CIA), 
National Security Agency (NSA), and National Reconnaissance Office 
(NRO). Second, the Air Force is responsible for most command, control, 
communications, and intelligence (C3I) functions and related assets 
such as reconnaissance satellites and satellite launch and control 
facilities, which tend to be heavily classified programs.
    The record for classified acquisition programs is mixed. A notable 
success was the Corona program for reconnaissance satellites, which 
produced valuable imagery intelligence from 1960 to 1972. Several 
successful and effective aircraft have also been developed and even 
produced as black programs, including the F-117 stealth fighter, the B-
2 stealth bomber, and the SR-71 reconnaissance plane. Some classified 
programs have had troubled histories, such as the National 
Reconnaissance Office's Future Imagery Architecture program to develop 
the next generation of spy satellites, which was cancelled in 2005 due 
to significant cost overruns and technical issues at a reported $4 
billion loss for the government. However, it should be noted that the 
mere existence of classified programs can create uncertainty in the 
minds of potential adversaries. Such uncertainly complicates their 
planning and, potentially, compels them to divert resources to hedge 
against an unknown capability. Classified programs can therefore be 
part of a cost-imposing strategy on potential adversaries.
    Funding for the wars in Afghanistan and Iraq totals $159.3 billion 
in the FY 2011 request. The budget request continues the trend of 
declining funding for Iraq, as troops levels there subside, and 
increasing funding for Afghanistan. The budget request does not include 
a projection for war costs in future years. Instead, it includes 
``allowances'' of $50 billion per year for FY 2012 to FY 2015, the same 
amount that was used in the FY 2010 budget request as a placeholder for 
future war funding.
    The future cost of the wars depends on a number of external factors 
that cannot be known in advance, such as operational tempo, fuel 
prices, and the number and composition of forces deployed in future 
years. While the cost of each conflict depends on many variables, 
previous analysis by CSBA has demonstrated a strong correlation between 
the number of troops deployed and the total annual cost. Based on the 
most current information on troop levels and costs, the annual cost per 
troop since FY 2005 has averaged $1.2 million in Afghanistan and $0.69 
million in Iraq, in constant-year FY 2011 dollars.
    The trends in the defense budget outlined here, particularly growth 
in military personnel costs and the historically low ratio of 
procurement to RDT&E funding, are cause for concern. If these trends 
are not reversed, it will not be possible for the Department to 
maintain its current force structure and capabilities without 
significant increases in funding above the current level. Secretary 
Gates has made preserving the force structure a top priority, and as 
part of his efficiencies initiative has directed the Department to find 
savings in other parts of the budget that could be directed to force 
structure and acquisitions. However, efficiencies alone are not likely 
to result in the magnitude of savings required.
    The largest source of savings proposed is to reduce spending on 
support contractors by 30 percent over the next three years. According 
to Congressional Research Service estimates, this could generate 
savings of $3.6 billion annually once it is fully implemented. Smaller 
cuts include the elimination of Networks and Information Integration 
(NII), J6, Business Transformation Agency (BTA), and Joint Forces 
Command (JFCOM). While these eliminations appear to be justified, the 
total savings achieved will depend greatly on how they are implemented. 
If these organizations are eliminated without corresponding reductions 
in the headcount of military personnel, DoD civilians, and support 
contractors, the savings will be limited. The initiatives announced by 
the Department so far are a step in the right direction, but they do 
not address some of the fundamental issues that plague the defense 
budget, such as the rising cost of military healthcare.
    To its credit, the Department has made specific, targeted cuts to 
programs and activities it has deemed to be a lower priority. This is a 
sound approach, and if applied to the rest of the defense budget it is 
one that will ultimately make the military more efficient and effective 
in the long run. The alternative is to simply spread the cuts around 
evenly throughout the Department. The risk with this approach is that 
it does not prioritize programs and activities within the budget and 
could result in a military that looks and operates much like the one we 
have today, but is smaller and less capable.
    The challenge for policy makers in such a constrained budget 
environment is to adequately fund for the support and modernization of 
our national defense capabilities without spending one dollar more than 
is necessary. Rooting out waste, inefficiency, and low-priority 
activities within the defense budget is a difficult and delicate task. 
In some cases, it will mean lost jobs. In other cases, it will require 
taking on vested interests both within the Pentagon and outside the 
building. While the prospect of a flat or declining defense budget may 
seem like a daunting challenge, particularly while the nation is still 
engaged in two ongoing wars and unemployment is over 9 percent, it 
should also be viewed as an opportunity. It can provide both the fiscal 
and political imperative to jettison programs and activities that are 
no longer needed--budget artifacts from a bygone era--and focus more 
effectively on the capabilities needed to deter, fight, and win wars in 
the future.
        about the center for strategic and budgetary assessments
    The Center for Strategic and Budgetary Assessments (CSBA) is an 
independent, nonpartisan policy research institute established to 
promote innovative thinking and debate about national security strategy 
and investment options. CSBA's goal is to enable policymakers to make 
informed decisions on matters of strategy, security policy and resource 
allocation.
    CSBA provides timely, impartial and insightful analyses to senior 
decision makers in the executive and legislative branches, as well as 
to the media and the broader national security community. CSBA 
encourages thoughtful participation in the development of national 
security strategy and policy, and in the allocation of scarce human and 
capital resources. CSBA's analysis and outreach focus on key questions 
related to existing and emerging threats to US national security. 
Meeting these challenges will require transforming the national 
security establishment, and we are devoted to helping achieve this end.

    Mr. Scott. Thank you. General Wood?

                   STATEMENT OF JOHN R. WOOD

    LTG Wood. Mr. Chairman thank you for inviting me to testify 
before the Budget Committee. It is an honor to be here and to 
be afforded an opportunity to present my views and to answer 
your questions. My comments represent my personal opinion and 
are based on my own experience while on active duty in the 
United States Army. My duty concluded in 2009 after serving 
three years as the Deputy Commander of Joint Forces Command.
    On August 9, 2010 Secretary of Defense Robert Gates 
announced a number of initiatives to promote efficiencies and 
cost savings at the Department of Defense in advance of 
expected reductions in discretionary federal spending. Through 
these initiatives Secretary Gates wants to change the budget 
culture of the Department, promote affordable acquisition, 
become more efficient and eliminate redundancies or needless 
command staff, or functional layers where possible.
    While seeking more than $100 billion over the next several 
years in efficiency savings, the Department will seek some real 
growth in overall spending. More importantly, efficiency and 
cost savings will be invested in greater support to deploy 
troops and greater capabilities for this operating force. This 
shift of expenditures from the tail of supporting functions to 
the tooth of operating forces is a vital focus and a laudable 
objective.
    This notion of finding more capability output within given 
resources, this synergistic result, is crucially important in 
the face of severe resource constraints. Now these ideas of 
efficiency, reduction of organizational layers, elimination of 
redundancy, and achievement of synergy, underlie another 
prominent long term goal of the Department of Defense, the 
efforts to build a truly joint force. But Secretary Gates said 
that we have reached the point where we fully appreciate the 
value of a joint force and in his judgment we no longer need a 
four-star headquarters to advocate for the joint force. For 
that reason he has recommended the elimination of the Unites 
States Joint Forces Command. According to the Department 
elimination of this command will reduce a layer of 
headquarters, and return savings, an amount as yet 
undetermined, to the Department's economies and efficiency 
efforts.
    Now, this recommendation has attracted attention and review 
for good reason. The training of joint operational skills, the 
operation of joint command and control, and the development of 
joint capabilities are by objective and purpose economizing and 
efficient. Few other activities within the Department so 
naturally and closely align with the goals and objectives 
announced by Secretary Gates on August 9. The whole purpose of 
acting as a joint force is to capitalize on the synergy of 
complementary or integrated capabilities unified in action 
under the joint force commander. Why, then, eliminate a command 
like JFCOM that commits itself every day in every mission to 
achieve economical and more efficient joint objectives to 
support the combatant commanders? It is certainly within the 
authority of the Secretary to make such a recommendation, and 
it is certainly a military decision to establish and align 
headquarters to accomplish assigned missions. But it is a 
legitimate question to ask how the alternative solution to 
achieve joint readiness will not stop or reverse progress in 
this area?
    The ability of the U.S. military to act as a joint force 
resulted from difficult lessons learned in past conflicts and 
national missions, whether recovering from the aftermath of 
Desert I, overcoming command and control lessons learned in 
Operation Urgent Fury, or building speed or response required 
for the next Katrina, progress in this joint business has been 
difficult. Today's ability for joint action is a hard won 
strength that sets our military apart from other militaries 
around the world. To act is the key idea. Joint is not a state 
of being, but instead is a state of action. We can be a 
soldier, sailor, airman, or marine, but we act jointly. This 
action is one that involves integration of functions, 
formations, and missions to achieve at a minimum unity of 
purpose, or optimally unity of effort. And typically one 
person, a joint commander, is in charge.
    All in the military and those who support it have worked 
hard to achieve this progress. Along the way we needed to alter 
the culture, build the doctrine, train the forces, and learn to 
integrate joint capabilities. Laws such as Goldwater-Nichols 
were passed to guide this journey. Successive chairmen of the 
Joint Chiefs and Secretaries of Defense gave guidance and 
emphasis on various aspects of joint integration or specific 
joint missions as the military proceeded. And through years of 
combat experience supported by adaptive joint training, we have 
now built a generation in the military who are proficient in 
the employment of joint fires, intelligence, mobility, 
logistics, command and control to combat today's threats.
    Our success to act is evident in the remarkable performance 
of our troops in Iraq, Afghanistan, the Horn of Africa, and 
elsewhere in this global battle against terrorism. This outcome 
is no accident, nor has it been easy to accomplish. Now it is 
not false bravado or overstatement to simply say our historical 
approach to building joint force operational readiness by 
specifying such duties to a combatant commander contributed in 
real ways to our current state of joint war fighting success.
    Since 1947, from early roots in the naval commands of the 
Atlantic Fleet in NATO, until today, unified combatant 
commanders in Norfolk, Virginia have been in charge to build 
and sustain joint force readiness and improve the joint war 
fighting qualifies of the nation's military. Earlier designs of 
unified commands in Norfolk that combine this important task to 
promote joint action with geographic responsibilities, 
geopolitical tasks, or service specific missions, ultimately 
fell short of expectations. The operational, cultural, 
doctrinal, and material barriers to successful joint action 
demanded singular attention.
    Secretary Cohen recognized this and established USJFCOM in 
1999 with a clear mandate, to understand the future 
requirements of the joint force, and build or train the joint 
capabilities needed for success. With the elimination of all 
geographic responsibilities in 2002 JFCOM became even more 
focused on this mission. Just as the integrating functions for 
space, transportation, cyber, missile defense, and special 
operations found homes in today's functional combatant 
commands, joint war fighting became the functional mission for 
JFCOM. The future became its area of responsibility.
    The makeup of JFCOM, its assigned missions, its many 
deployments, and its daily operations all were defined and 
driven by national level guidance, DOD mandate, or JCS 
directive. This activity was not a capricious choice or self-
generated action. At each point in its growth as a command or 
change in its mission, strong rationale was presented by past 
chairmen and Secretaries of Defense as they directed changes to 
achieve better joint synergy, joint operational capability, or 
joint force integration.
    The many talented, military and civilian, who earlier 
served the U.S. Atlantic Command and today serve the U.S. Joint 
Forces Command answered this call to action and made a huge 
contribution to our nation's military readiness and strength. 
And the civilian communities and their leaders broadly 
supported the command's important work along the way. To 
mention just few examples, JFCOM joint training programs are 
perhaps best known. From combatant commander training support 
to expansion of network training capabilities, to federation of 
advanced modeling and simulation, command activities 
contributed repeatedly and materially to the training of all 
joint conventional and special operations headquarters and 
staffs in the wars of the last nine years. Less known are the 
activities of JFCOM's ready forces. These smaller elements have 
repeatedly deployed worldwide to support Joint Commanders 
responding to crisis on behalf of national missions. They stand 
ready tonight to deploy again and immediately provide trained, 
critical operational capabilities such as command and control, 
public affairs, fires integration, personal recovery, and other 
special staff skills. Then there are the activities in JFCOM's 
joint integration directorate, that attend to critical 
coordinating tasks confronting the joint force. Prevention of 
fratricide, elimination of redundant or competing IT systems, 
and promotion of coalition information sharing are just some 
examples of its daily work. The list goes on to include teams 
and subordinate commands under JFCOM that tackle tough 
integration tasks, all delegated down from the chairmen. Such 
as joint fires integration, irregular warfare competence, joint 
personnel recovery proficiency, and coordinated joint unmanned 
aerial system integration. And in the area of joint 
experimentation, JFCOM has kept a focus on future joint war 
fighting and operational needs. Interagency and coalition 
integration, operational planning methods, and integration of 
advanced technologies into joint operations comprise a small 
part of its work.
    The joint force provider mission consumes a major part of 
the command's energy, particularly as transitions continue in 
Iraq and Afghanistan. Intense daily coordination with the 
services with uniquely skilled force managers permit JFCOM to 
develop and offer objective advice and specific force packages 
to answer every changing combatant commander requirements. The 
force management agility to accomplish the surge in Iraq, and 
now in Afghanistan, depended greatly on the quiet professionals 
working diligently in JFCOM.
    Finally, unique elements in the joint world, such as the 
Joint Warfare Analysis Center and the Joint Center for 
Operations Analysis, continue to provide key support to the 
combatant commanders and the Department of Defense. JWAC daily 
advances the art and science of targeting in both the kinetic 
and non-kinetic realm. The Joint Center for Operations Analysis 
has perfected an ability to not just record joint lessons 
learned but analyze and report why operational outcomes happen 
and why it matters to the proficiency of the joint force. Their 
reports and briefings have informed DOD and White House 
leaders.
    The Secretary's clear recognition of the value of joint war 
fighting and his intention to keep many of the functions that 
reside within the Joint Forces Command are not insignificant 
points. He is stating what our military knows: we have and must 
retain our ability to act jointly. He has recommended pursuit 
of this final goal in a different way than through a unified 
command under four-star leadership. It will be the job of the 
nominated new commander, General Odierno, to do the analysis 
and propose a plan to do it. There is no better commander than 
General Odierno to lead this mission, with his wealth of 
experience in current joint operations.
    There is no real way to know what General Odierno will 
recommend in his plan, though. We can say that functions key to 
joint war fighting readiness will continue to exist. We do not 
know how large these activities will be or where they will be 
stationed. Activities such as joint training, joint capability 
integration, and joint doctrine development will likely 
continue. The Secretary has already suggested some functions, 
such as joint force management, could be returned to the Joint 
Staff. Joint experimentation could either be eliminated or 
transferred to the combatant commands. And the guesswork 
continues across the many other smaller activities that 
currently reside under JFCOM.
    But it is important again to assert that we must retain our 
hard won ability to act as a joint force. The merits of any 
plan going forward must be judged not by what we have achieved 
today or in the past, but what we can do tomorrow as a joint 
force against the very threats highlighted by Secretary Gates 
in August. Or stated differently, will we still be able to act 
as a joint force against these future threats with new 
capabilities, evolved doctrine, practiced techniques and 
procedures, and trained and ready leaders?
    Like any other military decision there must be an 
accounting for risk. The risk in this decision to eliminate 
JFCOM is about momentum, to a great extent. The question could 
be asked, do we need the structure and strength of a combatant 
command to sustain the momentum of our progress towards 
enduring joint war fighting proficiency? I firmly believe the 
leadership of the Defense Department understands the risk of 
this decision, to choose a new model to ensure joint war 
fighting proficiency. I also know the troops who have learned 
to fight as a joint team will expect effective joint solutions. 
If we eliminate JFCOM we leave a solution that works, and works 
well.
    Going forward we must not, once again, confront old lessons 
learned in Vietnam, Desert I, Urgent Fury, or Desert Storm 
about inadequate joint training, joint force integration, and 
joint war fighting. It will be important to empower the next 
alternative approach with the authority, the responsibility, 
and the resources to succeed equally well if not better. And if 
it is more economical, more efficient, and more capable as 
evidenced by integrated action, not simply a general 
description, will know the momentum and the essential 
development of the nation's joint force capability continues. 
Thank you.
    [The prepared statement of John R. Wood follows:]

   Prepared Statement of John R. (Bob) Wood, Lieutenant General, USA 
                     (Ret.), Star Strategies Group

    Mr. Chairman, thank you for inviting me to testify before the 
Budget Committee. It is an honor to be here, to be afforded an 
opportunity to present my views, and to answer your questions. My 
comments represent my personal opinion and are based on my own 
experiences while on active duty in the U.S. Army. My duty concluded in 
2009 after serving three years as the Deputy Commander of Joint Forces 
Command.
    On August 9th, 2010, Secretary of Defense Robert Gates announced a 
number of initiatives to promote efficiencies and cost savings in the 
Department of Defense in advance of expected reductions in 
discretionary Federal spending. Through these initiatives, Secretary 
Gates wants to change the budget culture of the department, promote 
affordable acquisition, become more efficient, and eliminate 
redundancies or needless command, staff, or functional layers where 
possible.
    While seeking more than $100B over the next several years in 
efficiency savings, the Department still seeks some real growth in 
overall spending. More importantly, efficiency and cost savings will be 
invested in greater support to deployed troops and greater capabilities 
for this operating force. This shift of expenditures from the ``tail'' 
of supporting functions to the ``tooth'' of operating forces is a vital 
focus and a laudable objective. This notion of finding more capability 
output within given resources, this synergistic result, is crucially 
important in the face of severe resource constraints.
    These ideas of efficiency, reduction of organizational layers, 
elimination of redundancy and achievement of synergy underlie another 
prominent, long term goal of the Department of Defense * * * the 
efforts to build a truly Joint force. But Secretary Gates said that we 
have reached the point where we fully appreciate the value of a Joint 
force and, in his judgment, ``we no longer need a four star 
headquarters'' to advocate for the Joint force. For that reason, he has 
recommended the elimination of United States Joint Force Command. 
According to the Department of Defense, elimination of this command 
will reduce a layer of headquarters and return savings, an amount as 
yet undetermined, to the department's economies and efficiency efforts.
    This recommendation has attracted attention and review for good 
reason. The training of Joint operational skills, exercise of Joint 
command and control, and the development of Joint capabilities are, by 
objective and purpose, economizing and efficient. Few other activities 
within the Department so naturally and closely align with the goals and 
objectives announced by Secretary Gates on August 9. The whole purpose 
of acting as a Joint force is to capitalize on the synergy of 
complimentary or integrated capabilities unified in action under the 
Joint force commander. Why then eliminate a command like JFCOM that 
commits itself every day in every mission to achieve economical and 
more efficient Joint objectives to support the Combatant Commanders? It 
is certainly within the authority of the Secretary to make such a 
recommendation. And, it is certainly a military decision to establish 
and align headquarters to accomplish assigned missions. But, it is a 
legitimate question to ask how the alternative solution to achieve 
Joint readiness will not stop or reverse progress in this area.
    The ability of the US military to act as a Joint force resulted 
from difficult lessons learned in past conflicts and national missions. 
Whether recovering from the aftermath of Desert One, overcoming command 
and control lessons learned in Operation Urgent Fury, or building speed 
of response required for the next Katrina, progress in this Joint 
business has been difficult. Today's ability for Joint action is a hard 
won strength that sets our military apart from other militaries around 
the world. To Act is the key idea. Joint is not a state of being but, 
instead, is a state of action. We can be a Soldier, Sailor, Airman, or 
Marine but we act jointly.
    All in the military and those who support it have worked hard to 
achieve this progress. Along the way, we needed to alter the culture, 
build the doctrine, train the forces, and learn to integrate joint 
capabilities. Laws such as Goldwater-Nichols were passed to guide this 
journey. Successive chairmen of the joint chiefs and Secretaries of 
Defense gave guidance and emphasis on various aspects of Joint 
integration or specific Joint missions as the military proceeded. And, 
through years of combat experience supported by adaptive Joint 
training, we've now built a generation in the military who are 
proficient in employment of Joint fires, intelligence, mobility, 
logistics, and command and control to combat today's threats. Our 
success to act is evident in the remarkable performance of our troops 
in Iraq, Afghanistan, the Horn of Africa and elsewhere in this global 
battle against terrorism. This outcome was no accident nor has it been 
easy to accomplish.
    It is not false bravado or overstatement to simply say our 
historical approach to building Joint force operational readiness by 
specifying such duties to a combatant commander contributed, in real 
ways, to our current state of Joint warfighting success. Since 1947, 
from early roots in the naval commands of the Atlantic Fleet and NATO 
until today, unified combatant commanders in Norfolk, Virginia, have 
been charged to build and sustain Joint force readiness and improve the 
Joint warfighting qualities of the nation's military. Earlier designs 
of unified commands in Norfolk, that combined this important task to 
promote Joint action with geographic responsibilities, geo-political 
tasks, or Service specific missions, ultimately fell short of 
expectations. The operational, cultural, doctrinal, and material 
barriers to successful Joint action demanded singular attention.
    Secretary Cohen recognized this and established USJFCOM in 1999 
with a clear mandate to understand the future requirements of the Joint 
force and build or train the Joint capabilities needed for success. 
With the elimination of all geographic responsibilities in 2002, JFCOM 
became even more focused on this mission. Just as the integrating 
functions for space, transportation, cyber, missile defense, and 
special operations found homes in today's functional Combatant 
Commands, Joint warfighting became the functional mission for JFCOM. 
The future became its Area of Responsibility or AOR.
    The makeup of JFCOM, its assigned missions, its many deployments, 
and its daily operations all were defined and driven by national level 
guidance, DoD mandate, or JCS directive. This activity was not 
capricious choice or self generated action. At each point in its growth 
as a command or change in its mission, strong rationale was presented 
by past Chairmen and Secretaries of Defense as they directed changes to 
achieve better Joint synergy, Joint operational capability, or Joint 
force integration.
    The many talented military and civilians who earlier served the US 
Atlantic Command and today serve the US Joint Forces Command answered 
this call to action and made a huge contribution to our nation's 
military readiness and strength. And, the civilian communities and 
their leaders broadly supported the command's important work along the 
way. To mention just a few examples:
     JFCOM's Joint Training programs are perhaps best known. 
From Combatant Commander training support, to expansion of networked 
training capabilities, to federation of advanced Modeling and 
Simulation, command activities contributed repeatedly and materially to 
the training of all Joint conventional and special operations 
headquarters and staffs in the wars of the last 9 years.
     Lesser known are the activities of JFCOM's ready forces. 
These smaller elements have repeatedly deployed worldwide to support 
Joint commanders responding to crisis on behalf of national missions. 
They stand ready tonight to deploy again and immediately provide 
trained, critical operational capabilities such as command and control, 
public affairs, fires integration, personnel recovery, and other 
special staff skills.
     Then, there are the activities in JFCOM's Joint 
Integration directorate that attend to critical coordinating tasks 
confronting the Joint force. Prevention of fratricide, elimination of 
redundant or competing IT systems, and promotion of coalition 
information sharing are just some examples of its daily work.
     The list goes on to include teams and subordinate commands 
under JFCOM that tackle tough integration tasks delegated to them from 
the Chairman such as joint fires integration, irregular warfare 
competence, Joint personnel recovery proficiency, and coordinated Joint 
UAS operations.
     And, in the area of Joint experimentation, JFCOM has kept 
a focus on future Joint warfighting and operational needs. Interagency 
and coalition integration, operational planning methods, and 
integration of advanced technologies into joint operations comprise a 
small part of its work.
     The Joint Force Provider mission consumes a major part of 
the command's energy, particularly as transitions continue in Iraq and 
Afghanistan. Intense, daily coordination with the Services by uniquely 
skilled force managers permit JFCOM to develop and offer objective 
advice and specific force packages to answer ever-changing Combatant 
Commander requirements. The force management agility to accomplish the 
surge in Iraq and now in Afghanistan depended greatly on the quiet 
professionals working diligently in JFCOM.
     Finally, unique elements in the Joint world such as the 
Joint Warfare Analysis Center and the Joint Center for Operational 
Analysis continue to provide key support to the Combatant Commanders 
and the Department of Defense. JWAC daily advances the art and science 
of targeting in both the kinetic and non-kinetic realm. JCOA has 
perfected an ability to not just record Joint lessons learned but 
analyze and report why operational outcomes happened and why it matters 
to the proficiency of the Joint force. Their reports and briefings have 
informed DoD and White House leaders.
    The Secretary's clear recognition of the value of Joint warfighting 
and his intention to keep many of the functions that reside within the 
Joint Forces Command are not insignificant points. He is stating what 
our military knows * * * we have and must retain our ability to act 
Jointly. He has recommended pursuit of this vital goal in a different 
way than through a Unified command under four-star leadership. It will 
be the job of the nominated new commander, General Odierno, to do the 
analysis and propose a plan to do it. There is no better commander than 
General Odierno to lead this mission, with his wealth of experience in 
current Joint operations.
    There is no real way to know what General Odierno will recommend in 
his plan. We can say that functions key to Joint warfighting readiness 
will continue to exist. We don't know how large these activities will 
be or where they will be stationed. Activities such as Joint training, 
joint capability integration, and joint doctrine development will 
likely continue. The Secretary has already suggested some functions 
such as Joint Force management could be returned to the Joint Staff. 
Joint experimentation could either be eliminated or transferred to the 
Combatant Commands. And, the guesswork continues across the many other 
smaller activities that currently reside under JFCOM.
    But, it's important again to assert that we must retain our hard 
won ability to act as a Joint force. The merits of any plan going 
forward must be judged not by what we've achieved today or in the past, 
but what we can do tomorrow as a Joint force against the very threats 
highlighted by Secretary Gates in August. Or, stated differently, will 
we still be able to act as a Joint force against these future threats, 
with new capabilities, evolved doctrine, practiced tactics, techniques, 
and procedures, and trained and ready leaders?
    Like any other military decision, there must be an accounting for 
risk. The risk in this decision to eliminate JFCOM is about momentum, 
to a great extent. The question could be asked, ``Do we need the 
structure and strength of a Combatant Command to sustain the momentum 
of our progress toward enduring Joint warfighting proficiency?''
    I firmly believe the leadership of the Department of Defense 
understands the risk of this decision to choose a new model to insure 
Joint warfighting proficiency. I also know the troops who've learned to 
fight as a Joint team will expect effective Joint solutions. If we 
eliminate JFCOM, we leave a solution that works and works well. Going 
forward, we must not, once again, confront old lessons learned in 
Vietnam, Desert One, Urgent Fury, or Desert Storm about inadequate 
Joint training, Joint force integration, and Joint warfighting. It will 
be important to empower the next alternative approach with the 
authority, the responsibility, and the resources to succeed equally 
well if not better. And, if it is more economical, more efficient, and 
more capable as evidenced by action, not simply in description, we'll 
know the momentum in the essential development of the nation's Joint 
force capability continues.
    Thank you.

    Mr. Scott. Thank you. Mr. Soloway?

                  STATEMENT OF STAN Z. SOLOWAY

    Mr. Soloway. Thank you Mr. Chairman and members of the 
Committee. I appreciate the opportunity to appear here today 
and share the views of the nearly 350 members of the 
Professional Services Council on the different and important 
efficiency and insourcing initiatives underway in the Defense 
Department. PSC is the largest organization of government 
services contractors in the nation with a membership that 
includes companies of all sizes performing services of all 
kinds across the government, very prominently including the 
Defense Department.
    Let me start by saying that I am not here today to 
challenge the intent or focus of Secretary Gates' initiatives. 
The Secretary has set in motion a series of efforts that are 
most necessary and timely. The fiscal pressures faced by the 
government as a whole, and DOD in particular, coupled with the 
clear workforce challenges that have existed for some time, 
mandate that the Department move aggressively to both optimize 
its resources and balance its workforce. As such, our approach 
to each of these initiatives, which I will address individually 
in a moment, has been to seek a collaborative dialogue aimed at 
enabling success.
    As many have already pointed out this afternoon, in 
addition to being important initiatives they must be conducted 
in a manner that meets basic principles of analytical rigor, 
transparency, and collaboration. Unfortunately to varying 
degrees and in different ways none have fully met these basic 
tests.
    There are actually three separate but interconnected and 
interdependent initiatives underway today. The Secretary's 
efficiency initiative, through which he has established an 
ambitious but achievable goal of some $100 billion in savings 
over the next three years. Under Secretary Carter's acquisition 
improvement initiative, which is designed to ensure the 
Department gets best value in its acquisition process. And the 
Secretary's insourcing initiative, which was designed to help 
DOD address shortfalls in critical workforce skills.
    Under Secretary Carter's acquisition improvement initiative 
is very much a work in progress. And while many questions have 
arisen relative to some of the goals he has established, the 
process of defining the details associated with execution are 
just now underway. The Department has pledged to work with a 
number of different groups, including industry, in developing 
those details and we welcome that opportunity. As such, for the 
purposes of this hearing I will focus more on the Secretary's 
efficiency initiative and the trend to insource.
    With regard to the Secretary's efforts to find $100 billion 
in savings, our principal questions revolve around the 
analytics underpinning several of the specific actions. We take 
no position on organizational questions, such as the closure of 
JFCOM, BTA, or NII, but do agree with everyone that it would be 
helpful if the Department were to share more of the data that 
led to the specific decisions. I might add in addition to the 
comments, Mr. Chairman, that you made earlier this afternoon, 
in his comments on closing JFCOM the Secretary also made a 
major point of the fact that JFCOM is very ``contractor 
heavy,'' whatever that may mean. But that in and of itself does 
not seem to me to be a reason to close a command. Who is 
performing the work is of far less significance than the 
nature, relevance, and quality of the work being performed. The 
core issue should be mission focused, not who focused.
    Similarly the Secretary has mandated a 10 percent per year 
reduction in contract support services for the next three 
years. This begs much the same question: what is magical about 
reducing contract services? Clearly if the work involved is 
inherently governmental that is one thing. But beyond that I 
think it is fair to ask why that directive was not targeted 
more holistically, to include the full range of departmental 
activities without regard to who is performing the work, a 
strategic mission focused approach.
    The record surrounding DOD's insourcing initiative is far 
more troubling. In simple terms, the Secretary set out in April 
of 2009 to address the Department's workforce issues by adding 
35,000 new positions, many of them in acquisition. Half of 
those positions were to come through insourcing currently 
contracted work, the other half through new hires. We strongly 
supported this initiative, even though many of our member 
companies would likely be affected. We all recognize the 
importance of ensuring DOD has the right skills in place to 
plan, manage, and oversee its missions. And to be fair, some 
progress has been made amongst the acquisition work force. But 
overall, the initiative has devolved into a quota-driven 
exercise tied to arbitrary budget assumptions that have little 
or no analytical data to support them. More than half of the 
positions identified for insourcing involve routine support 
services and will thus do nothing to help address the workforce 
issues the Secretary identified.
    In my written statement I have detailed some of what we 
have seen, and the lack of analysis and transparency that has 
underpinned those decisions. I would be happy to discuss it in 
more detail during the question period.
    As a result of this highly undisciplined process, 
insourcing is taking place that will actually increase cost to 
the taxpayer without addressing the Department's workforce 
needs. Moreover, the Department has been entirely unwilling to 
share any of the analyses that are being done to support either 
individual insourcing decisions or the overall budgetary 
assumptions. In addition, no consideration is being given to 
the broader economic impacts associated with insourcing, 
particularly with regard to local and regional economies and 
the associated loss of tax and other revenues.
    Clearly, the government should not be a jobs program for 
the private sector, nor for the public sector for that matter. 
And where work must be done by federal employees the economic 
and cost impacts are what they are and must be accepted. But 
where options exist for performance those impacts should very 
much be a part of the analytical equation. When small 
businesses shutter their doors as a result of an undisciplined 
insourcing we should ask where the analyses are to support such 
effects. Likewise, when local tax revenues or investment bases 
are reduced as a result of this process we should ask how the 
trade offs and the analytics to support that have been 
structured and meet the best needs of the government and the 
taxpayer. And when insourcing decisions result in the 
government assuming vastly greater deferred liabilities than 
immediate savings it has projected, we should ensure that the 
analytics broadly support such decisions.
    Unfortunately, today that is not occurring. And as this 
process has unfolded the Department and the military services 
have refused to share publicly, or with the directly affected 
companies or unions, the analyses underpinning their decisions. 
Frankly, the unwillingness to do so is inexplicable and 
directly counter to the increased transparency Congress and the 
administration have been advocating.
    Mr. Chairman, as I said Secretary Gates and Under Secretary 
Carter have embarked on important and ambitious initiatives 
that we support and want to succeed as designed. Our hope as 
these processes unfold the degree of openness and dialogue will 
dramatically increase so that together we can ensure that 
success. Thank you very much.
    [The prepared statement of Stan Soloway follows:]

          Prepared Statement of Stan Soloway, President & CEO,
                     Professional Services Council

    Mr. Chairman and members of the committee, thank you for the 
opportunity to appear before you today. My name is Stan Soloway and I 
am the President and CEO of the Professional Services Council, the 
nation's largest association of government services contractors.
    The Department of Defense has embarked on several important and 
ambitious initiatives to reduce its overhead costs, eliminate 
unnecessary work, and properly balance its workforce. I appreciate the 
opportunity to share our views on those initiatives. As these 
initiatives unfold, it is in everyone's interests to ensure that they 
do so in a transparent, evidence-based, mission-focused manner. 
Moreover, those attributes should exist in advance of any decision or 
action, not as a post-hoc rationalization.
    Let me make clear that we fully recognize the imperatives the 
Secretary of Defense has identified and support his commitment to 
ensuring that the department optimizes its resources and appropriately 
aligns its workforce needs. There is no question that there are savings 
to be had and that, in this time of exceptional fiscal pressures, every 
effort needs to be made to identify and capitalize on those 
opportunities. Moreover, as we have made clear repeatedly to the 
department, the members and staff of the Professional Services Council 
stand ready to work closely with the department in the development and 
implementation of strategies that will enable the department to meet 
its goals. We already have had some of those discussions but many more 
are needed. Conversely, the Secretary's ambitious objectives will not 
likely be met if the department attempts to operate in a vacuum, solely 
through directives, or on the basis of arbitrary goals.
    The department has set in motion three independent but 
interconnected objectives. These include the Secretary's insourcing 
initiative, which was launched in early 2009; the department-wide 
efficiency initiative he announced earlier this year and elaborated on 
in his August 9 statement; and Undersecretary Carter's acquisition 
improvement initiative which was initially announced on June 28 and 
more fully unveiled on September 14. Since the acquisition initiatives 
remain a work in progress, particularly with regards to improvements in 
what Dr. Carter called ``tradecraft'' in services acquisition, I will 
focus most, but not all, of my remarks on the other two initiatives. In 
all cases much work remains to be done to ensure they truly meet the 
tests of transparency, rigorous analysis, and collaboration.
            the acquisition initiatives: a work in progress
    We commend Undersecretary Carter for undertaking an acquisition 
improvement initiative and we look forward to engaging in substantive 
dialogue with the department as the details of the initiative unfold. 
Our goal is to engage with the department to identify ways to ensure 
the objectives of the initiatives are met. For now, let me make just a 
few brief comments on the initiatives as they currently stand.
    First, with regard to competition, Dr. Carter made clear his 
concern that competition for services is not what he would like it to 
be. In so doing, he mentioned that some 28 percent of awards that were 
solicited broadly and were intended to be awarded competitively, 
attracted only one bid. His stated goal is to lower that percentage. 
While we would not disagree with him on the importance of competition 
and of maximizing the number of offers that the department receives, 
there are strong explanations for industry's lack of response to some 
solicitations that should be disclosed and discussed.
    Improvements in performance work statements, genuine openness to 
innovation, and more are all key ingredients to enhancing competition 
and attracting more bidders. But we should also recognize that 
competition is not simply defined by the number of bidders. Every 
contractor performing on a services contract knows that his or her 
competitors are watching them constantly, and prepared to pounce on 
opportunities that emerge through recompetition for the work. At the 
same time, those competitors are simply not going to bid if they 
perceive that the incumbent is performing well and the contract appears 
to be competitively priced. Nonetheless, the very fact that they are 
prepared to bid when an incumbent stumbles or a new innovation opens a 
door, creates a kind of implied competition that must also be 
considered and appreciated.
    Second, it is important to recognize that the issues of competition 
and the market dynamics of the services sector are entirely different 
from the hardware or weapons system sectors and thus demand very 
different actions. As Dr. Carter noted, the department does not yet 
have an adequate taxonomy for defining services and developing the 
right kinds of acquisition strategies for each relevant case. We 
believe that a common taxonomy must be developed and in place before 
specific policy or strategy decisions are made.
    Finally, Dr. Carter appropriately discussed the need to drive more 
innovation. We agree, and we look forward to engaging with him and his 
team to affect acquisition practices that genuinely enable innovation. 
But let's be clear, while the statutory and regulatory authority 
clearly exists to enable the department to make the value-based 
decisions that are essential to attracting and rewarding innovation, 
the current environment is overtly hostile toward what is known as 
``best value'' acquisitions. I believe it is fair to say that every one 
of our member companies is deeply concerned that the government has, 
over the last four or more years, regressed in its acquisition 
practices to the point where virtually every award decision is made on 
the basis of the lowest price--even if that is NOT what the request for 
proposal states. To some extent, this is a result of the ongoing fiscal 
pressures facing the department. To another extent, it is the direct 
result of the influence of elements of the oversight community that 
almost invariably criticize, sometimes very harshly, acquisition 
professionals who make value-based judgments and do not award to the 
lowest bidder. This dynamic serves no one's best interests and must be 
reversed, at a minimum through specific policy guidance.
                   insourcing: a good idea gone awry
    In April 2009, Secretary Gates announced an initiative to rebuild 
the department's critical workforce skills, particularly, but not 
solely, within the acquisition workforce. The Secretary expressed 
concern that a combination of factors, including workforce demographics 
and a broken hiring and personnel system, had created an over-reliance 
on contractors. At that time, the Secretary outlined a strategy to 
increase the department's organic workforce with those critical skills 
by approximately 35,000 people. He said that roughly half of the 
increase would result from insourcing and the other half would 
represent new hires. As part of the implementation of the Secretary's 
action, the DoD Comptroller issued a classified ``Resource Management 
Decision 802'' (RMD 802) that provided budgetary guidance to the 
military departments and defense agencies. That RMD has never been made 
public.
    There is no question that the department simply does not have 
adequate internal capability or skills to design, award, or manage 
contracts for its many and diverse missions. As such, PSC was 
supportive of the Secretary's plan. Although a number of companies 
recognized that some of their work could be affected, the consensus 
among our member companies then was that the Secretary's actions were 
on the right track. Unfortunately, the implementation of his plan has 
not accurately reflected either his stated intention or addressed the 
department's most pressing needs.
    First, the Secretary's numeric personnel targets were allocated 
across the military departments and other defense agencies, which, in 
turn created individual quotas for each component. Indeed, widely 
distributed Air Force Materiel Command (AFMC) documents confirm this 
fact. Those documents state that AFMC's ``share'' of the Secretary's 
directive is roughly 3,500 positions.'' Similar statements were made by 
components of the Army and Navy.
    Second, the AFMC documents clarified that, through Resource 
Management Decision 802, the department was assuming a 40 percent 
savings for every position insourced. If this extraordinary declaration 
was based on any analysis, it has never been publicly released, despite 
repeated requests from industry and, members of Congress. But the AFMC 
documents are enlightening on the question of how such savings could 
possibly be achieved. It says and I quote: ``The objective is to 
replace contract costs with personnel costs.''
    In other words, the department was comparing fully burdened 
operational contract costs--which include salaries, benefits, 
equipment, hardware procured under a contract, other overhead and, of 
course, profit--with just the salaries and immediate benefits of a 
federal employee. No consideration was apparently given to any of the 
expense categories for contract performance that also apply to 
government performance, nor was consideration apparently given to 
unique government costs, principally post-employment costs such as 
retirement benefits and long-term health care.
    In January 2010, the department finally issued ``guidance'' in the 
form of a Directive Type Memorandum, or DTM, to provide a methodology 
that would enable a more accurate assessment of the relative costs of 
contract performance versus in-house federal performance. However, as 
we outlined in an extensive analysis we provided to the department,\1\ 
the DTM provides neither a workable methodology nor a comprehensive 
listing of all of the identifiable costs that must be considered in any 
objective process.
---------------------------------------------------------------------------
    \1\ See the PSC June 16, 2010 letter to The Honorable Christine 
Fox, director of Cost Assessment and Program Evaluation, available at 
http://www.pscouncil.org/AM/Template.cfm?Section=Policy--
Issues&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=5562.
---------------------------------------------------------------------------
    Other analyses have also concluded that the DTM contains a number 
of inexplicable contradictions. For example, in assessing the relative 
costs of performing work using uniform military or civil servants, the 
DTM requires that all post retirement and other benefits costs for each 
be considered. But in comparing the costs of civil service performance 
versus contractor performance, the DTM specifically prohibits the 
consideration of any costs that would not be incurred by DoD. What 
might those costs be? By far the biggest category would be the post 
retirement costs associated with the civil service since they become 
the responsibility of the Office of Personnel Management. Moreover, it 
is notable that the DTM was not issued until some nine months AFTER the 
Secretary issued his insourcing directive and six or more months after 
RMD 802 declared the savings that would be achieved. This led to 
funding decisions that were embedded in the budget before the cost 
comparison process, weak as it may be, was even developed. Obviously, 
the order of events should logically have been reversed.
     analyses not made available to affected parties or the public
    Regrettably, while the department has acknowledged our analysis and 
concerns, it has not responded to any of the specific issues we raised. 
The same occurred in 2009 when Congressman Jeff Miller wrote the Air 
Force requesting information about the insourcing of routine base 
support services--primarily because those actions resulted in a small 
business with nearly twenty years of service to DoD literally going out 
of business. In its response to Congressman Miller, the Air Force did 
not share any of the analytics underpinning that insourcing decision.
    With the combination of established numerical headcount quotas and 
specific dollars savings assumptions, along with the lack of a 
workable, analytically rigorous process for assessing relative costs, 
the department's insourcing process has been marked more by efforts to 
meet those targets and survive presumptive budget cuts than by 
strategic workforce efforts focused on the kinds of skills the 
department needs most and that the Secretary set out to address. By the 
department's own estimates, at least half of the positions identified 
to date for insourcing fall outside of the kinds of critical skills the 
Secretary was targeting in his original directive. That means that the 
department has based at least half of the insourcing decisions reached 
to date on incomplete and highly questionable cost analyses and thus is 
insourcing contracted positions performing entirely routine work rather 
than obtaining the critical skills that were identified by the 
Secretary in 2009.
                         a lack of transparency
    In addition to the apparently arbitrary and undisciplined manner in 
which DoD insourcing has progressed, we are deeply concerned about the 
continued refusal of the department's components to publicly share the 
analyses that have led to individual decisions. In virtually every case 
I am aware of, DoD activities have not even been willing to share the 
bottom line conclusions they reached in their analyses, let alone the 
analyses themselves. This is consistent with the AFMC guidance 
referenced earlier that states that the analytical tools are only 
available at the major command level. But it is highly inconsistent 
with the government's otherwise broad commitment to transparency and, 
indeed, to decades of tradition in contracting, where contract prices 
are announced at the time of contract award. Moreover, because the 
analyses do not involve competing proposals, there is no objective 
reason they cannot be shared with the affected incumbent contractors.
    This has left the affected parties, including companies and their 
workforces, with only the option of filing Freedom of Information Act 
requests. For example, the International Association of Machinists and 
Aerospace Workers have filed numerous such requests. After the first of 
those requests was responded to in a relatively timely manner, they 
have been entirely unsuccessful with each of their subsequent requests. 
This simply does not need to be. Indeed, if there was more transparency 
in the process, the need for costly and time consuming FoIA requests 
would largely disappear.
            air force documents reveal analytical weaknesses
    However, the one FOIA request on which the IAM was successful was 
highly informative and may reflect one of the reasons there has been 
such resistance to responding to additional requests.
    In this case, the Air Force decided to insource a contract with an 
estimated five year value of approximately $225 million. The documents 
obtained as a result of the FOIA request show that the Air Force 
expects to save only $450,000 over the life of the contract, equal to 
0.02 percent. This clearly contradicts the long-held consensus that a 
minimum savings of about 10 percent should be required for any 
insourcing OR outsourcing decision, just to cover the inevitable costs 
associated with the workforce churn that will take place. What is even 
more telling about this Air Force analysis are the details behind it.
    For instance, the Air Force assigned to the contract cost elements 
that were never executed; had just one of those elements been 
eliminated as they should have been, the result of the analysis would 
have been a net cost INCREASE resulting from the insourcing. In 
addition, the Air Force clearly did not include a wide range of 
training, personnel development and support costs that are covered 
under the contract and which will accrue similarly to the government.
    Even more telling however, are two other aspects of the analysis. 
First, the Air Force is planning to perform the work with approximately 
15 percent fewer personnel than the contract calls for. In light of the 
fact that the Air Force's own, highly questionable analysis shows that 
the savings from the insourcing will be negligible, one can fairly and 
clearly conclude that the cost per person associated with performing 
the work in house will be significantly higher than under the 
contract--and that's before adding in the many cost elements ignored by 
the analysis. If, in fact, the work can be performed with fewer people, 
imagine the savings that would be possible if the Air Force and the 
contractor worked together to identify workforce efficiencies.
    Finally, the Air Force analysis did not include any assessment of 
post-retirement costs associated with the federal workforce. A simple 
calculation shows clearly that just post-retirement health insurance 
premiums will result in the government assuming tens of millions of 
dollars in deferred liabilities against a purported savings of less 
than a half million dollars.
    This example is one of the very few where data is available. But it 
is instructive and reflective of the broader departmental approach, as 
illustrated in the AFMC documents. And it is clear from this example 
that the only real explanation for continuing with this particular 
insourcing action is to meet pre-determined quotas--even if, as in this 
case, the real short and long term costs to the government will 
actually be higher.
    This is not a new finding. More than a decade ago, when the Army 
moved so heavily into contractor logistics support, it did so because 
it recognized that it is cost prohibitive for a permanent civil service 
to perform work that is variable in both nature and scope. Similarly, 
following the early phases of the Iraq war, the Navy realized that far 
too many of its sailors were engaged in out-of-theater support work at 
a cost the Navy could no longer afford. Since so much of that work was 
variable in scope and amount, the Navy also chose, in some but not all 
cases, to hire private contractors rather than incur the permanent and 
long-term costs of civil service employees.
    This is not to in any way demean the value or importance of the 
civil service. Rather, it is merely to reinforce the importance of 
conducting, on a case-by-case basis and in a manner consistent with the 
missions involved, meaningful and complete cost comparisons.
the secretary of defense acknowledges that insourcing savings have not 
                              materialized
    In light of the issues and concerns outlined above, it is not 
surprising that the Secretary of Defense on August 9 acknowledged that 
insourcing has not resulted in the desired savings. As a result, with 
the appropriate exception of some critical acquisition skills, he 
announced a significant de-emphasis on insourcing as part of his 
efficiency initiative. However, the Secretary's changed strategy 
applies only to the Office of the Secretary of Defense, the combatant 
commands and the defense agencies. It has no direct effect on 
insourcing activities within the military departments, which appear to 
be continuing apace, despite the clear and compelling evidence that 
real savings are illusory.
                        economic impacts ignored
    Finally, with regard to the current insourcing initiative, no 
consideration is being given to either the loss of imputed corporate 
tax and other revenues to local or state governments or the impacts 
associated with reducing well-paying, private-sector jobs at a time 
when such jobs are what the economy needs more than anything. While the 
government should not be a jobs program for either civil servants or 
contractor employees, it is reasonable to ask the critical question of 
how insourcing, in the cases where it involves routine commercial 
activities that do not need to be performed by federal employees, 
serves the nation's broader economic interests or the interests of the 
local economies that are affected.
    Some would argue that this is a false premise and that, in fact, 
insourcing simply changes the identity of the employer and that 
employees keep their jobs. However that is simply not the case. Some 
work actually does change locations. Moreover, as noted explicitly in 
the AFMC guidance, incumbent contractor employees are not in any way 
assured of a continuation of their jobs, their salaries, or their 
employment status. Indeed, with the exception of the limited benefits 
associated with direct hire authority that has been granted for 
acquisition positions only, incumbent contractor employees face the 
very same gauntlet of employment processes and procedures as any other 
new government hire.
    In addition, insourcing actions have a very real effect on local 
governments and economies associated with reduced private sector 
revenues. Real estate taxes and development, local corporate use and 
sales taxes and other critically important sources of local revenue are 
eliminated when work is insourced. If the work involved is inherently 
governmental or so critical that it must be performed by a government 
employee, then we agree that it is a price that needs to be paid. But 
when it is not, such impacts cannot be ignored, particularly in the 
current difficult economic environment.
                 toward an accurate comparative process
    Given the track record thus far, and the extreme paucity of 
information being shared, we would propose that, for each insourcing 
action involving OTHER than inherently governmental functions or work 
that is otherwise deemed so critical that it must be performed by 
federal employees, the department be required to conduct an analysis of 
the total lifecycle costs borne now or in the future by the American 
taxpayer associated with performing the work in house. This analysis 
should also include an assessment, made on the basis of reasonable 
market research, of the potential benefits that might accrue through a 
new competitive award process or through contract adjustments 
negotiated with the incumbent contractor. Finally, there should be an 
analysis of the impact of an insourcing decision on small businesses 
prior to finalizing the decision. After all, as the President has said, 
small business is the engine of innovation and is critical to our 
economic recovery. As such, it seems counter-intuitive to take work 
away from small businesses unless doing so results in meaningful and 
measurable benefits for the American taxpayer.
  secretary gates' efficiency initiative: some answers, some questions
    On August 9, Secretary Gates announced a new initiative to find 
$100 billion in defense budget savings over the next several fiscal 
years. Among the components of this initiative are a freeze on new 
hires within the Office of the Secretary, the defense agencies and 
combatant commands; reductions in the number of senior flag and general 
officers; proposed reductions in the general bureaucracy; and a 10 
percent reduction in contract support services each year for the next 
three years.
    We support efforts to achieve the Secretary's desired results. The 
department has no choice but to reduce its overhead costs and eliminate 
unnecessary spending if it is to meet its mission needs. While we take 
no position on his specific decisions to close Joint Forces Command 
(JFCOM), the Business Transformation Agency (BTA), or the Network 
Information and Integration (NII) office, questions about the strategic 
analyses underpinning these decisions, much like many of the insourcing 
decisions discussed earlier. Regardless of whether those are decisions 
that are the discretion of the department or whether there are 
additional statutory procedures that must be followed, all stakeholders 
should be privy to the factors considered and the justification to 
shutter commands and programs.
    In his August 9 statement, the Secretary echoed the words of the 
Defense Business Board when, in explaining his decision to close JFCOM, 
he talked specifically about how the command was ``contractor heavy.'' 
Whether closing JFCOM is the right action or not, we find that 
justification wanting. In our view, WHO is doing the work has nothing 
to do with whether the work being done remains important and valuable 
to the mission. It is the mission need and not the badge of the worker 
that should drive such a decision. In that vein, it would be very 
helpful to understand more about the analytical underpinnings of this 
decision, particularly given the effect the JFCOM closure will have on 
the economy of the Tidewater region in Virginia. The same rigor should 
underpin the decision to close BTA and NII.
    The same concerns apply to the Secretary's direction that contract 
support services be reduced by 10 percent each year for the next three 
years. There are already conflicting reports as to what contracted 
services are included in this directive. Is it all service contracting? 
Is it specific subcategories? How was the 10 percent goal determined?
    Most importantly, what is magical about contracted support 
services? Why target only contractor-performed work rather than the 
totality of the work being done by the department? Why does the 
directive not seek a more holistic approach to all work being performed 
by DoD in an effort to find areas of redundancy or changed needs, 
regardless of who is performing that work?
    In short, our principal concern with the 10 percent per year target 
is its arbitrary nature and its failure to look comprehensively and 
strategically within each defense activity at all of the work being 
performed by the total force of uniform military, civil servants and 
contractors.
    Finally, as these reductions are executed, questions remain as to 
whether the execution strategies will be developed through a 
collaborative process in which the contractors and the department work 
together to find ways to reduce the overall costs of performance or 
will be implemented through prescriptive direction. Again, the best 
hope for effective implementation is the kind of communication and 
collaboration that marks the best in customer/supplier relationships. 
Unfortunately, in today's environment, our public-sector partners too 
often feel that they are under increasing pressure to reduce, not 
enhance, their communications with industry. This violates common sense 
and the most fundamental premises of good business relationships. In 
fact, the problem became so severe that Deputy Secretary of Defense 
William Lynn issued a memorandum in June reminding the department's 
workforce of the essential importance of constant and open 
communication with their private-sector partners.\2\ Unfortunately, the 
pressure remains. And there is thus an abject need to not only remind 
the workforce of the importance of communication, but to insist that 
they engage in it.
---------------------------------------------------------------------------
    \2\ ``Policy for Communication with Industry'' memorandum from 
Deputy Secretary of Defense William Lynn, attached.
---------------------------------------------------------------------------
                               conclusion
    Mr. Chairman, our goal today is not to question the objectives 
Secretary Gates has set forth through any of these initiatives. What he 
is seeking to do is the right thing to do and he deserves our strong 
support. At the same time, to the degree actions taken in the field run 
contrary either to his guidance or to the best chances of successfully 
implementing his initiatives, it is important for us to speak out. We 
have reached out to the department on many occasions with some limited 
success. And we look forward to more detailed and ongoing dialogue. The 
decisions being made today and in the months ahead will have enormous 
repercussions for the department, the taxpayer and the thousands of 
high performing companies supporting our national security mission. As 
such, those decisions must be analytically rigorous and the process 
behind them must be open and transparent to the degree our national 
security interests allow. Without such analyses or transparency, the 
likelihood of falling well short of the Secretary's important goals is 
increased many times over.
    Thank you again for your time and the opportunity to provide this 
information and our perspective. I would be happy to answer any 
questions you might have.

    Mr. Scott. Thank you. Ms. Simon?

                 STATEMENT OF JACQUELINE SIMON

    Ms. Simon. Mr. Chairman and members of the Committee, I 
want to thank you for the opportunity to present the views of 
federal employees on DOD's efficiency initiative. The more than 
200,000 civilian DOD employees represented by AFGE support 
efforts to increase the efficiency of the Department's 
operations that are consistent with its mission. We realize 
that the Department's initiative involves many different tasks 
and we are here today to talk about three in particular: the 
freeze on civilian positions, the restrictions on insourcing, 
and the cuts in contractor spending.
    During the previous two administrations the civilian 
workforce experienced efficiency initiatives and in these cases 
efficiency turned out to be code for massive and indiscriminate 
privatization that increased costs to taxpayers and caused the 
outsourcing of many important and sensitive functions that 
should always be performed by civilian employees. So AFGE 
members understandably have questions about the Department's 
most recent efficiency initiative, which include a three-year 
freeze on the size of the civilian workforce and a severe 
restriction in the effort underway to rebalance the federal 
workforce so as to reduce reliance on contractors. Both efforts 
appear to be contrary to laws that, number one, forbid the 
management of the civilian workforce by arbitrary constraints, 
and number two require DOD to use civilian employees, or at 
least give special consideration to using civilian employees, 
to perform various functions.
    Technically the Department's initiatives apply to the 
Office of the Secretary of Defense, the combatant commands, and 
the defense agencies, but not to the military departments which 
employ the bulk of the civilian workforce and which conduct the 
vast majority of insourcing efforts. However, because of the 
Department's sometimes copycat corporate culture, there are 
some in the military departments who are using the efficiency 
initiatives to advance proposals to arbitrarily reduce the 
civilian workforce and to discourage meritorious insourcing 
efforts.
    Our AFGE members who work in acquisition have also 
questioned how the Department can implement cuts in service 
contractor costs, especially given the Department's apparent 
inability to either implement the contractor inventory 
requirements or integrate the results into the budget process.
    Ultimately, AFGE members are very concerned that for the 
third administration in a row the civilian workforce will bear 
a significantly disproportionate share of the sacrifices 
necessary to achieve efficiencies. As history shows, DOD has 
repeatedly frozen and shrunk its civilian workforce, resulting 
in wasteful, wholesale privatization, as well as widespread 
losses of critical in-house capacities. At the same time DOD 
has been consistently unable to manage its contractors, let 
alone reduce their costs. Understandably, our members fear that 
the well-intentioned initiative announced by Secretary Gates 
last month will not turn out any differently.
    The case for insourcing functions that are inherently 
governmental, functions that are closely associated with 
inherently governmental work, and considering insourcing for 
government work that was outsourced without competition, or 
that is being poorly performed by contractors, starts with the 
obligation to enforce current law. In part in reaction to the 
over-reliance on contractors and the excesses of outsourcing, 
Congress has enacted laws that require that inherently 
governmental functions be performed by civilian employees; that 
closely associated with inherently governmental functions be 
performed by civilian federal employees to the maximum extent 
practicable; and per the inventory law DOD is required to 
correct any unauthorized personal services contracts through 
elimination, modification, or insourcing. DOD must also give 
special consideration to insourcing functions that are closely 
associated to inherently governmental work, contracted out 
without competition, and contracted out but poorly performed 
either in terms of cost or quality. Finally, DOD is required by 
law to consider shifting work between its civilian contractor 
and military workforces depending on which one is least costly 
in a way that is consistent with military requirements. So how 
can insourcing that is required to be undertaken, or at least 
be given special consideration, or even mere consideration, 
actually occur if the civilian workforce is frozen for three 
years?
    The Army's contractor inventory provides us with some keen 
insights. Of the 95,000 contractor jobs that were reviewed by 
the beginning of 2010 more than 2,000 were inherently 
governmental, another 41,000 were closely associated with 
inherently governmental, and another 1,500 were performed 
pursuant to unauthorized personal service contracts. This 
assessment does not include critical jobs performed by 
contractors that might need to be insourced and it also does 
not include the contractor jobs that should be insourced 
because the contracts involved were entered into without 
competition or are being poorly performed, again either for 
cost or quality reasons.
    There is nothing unique about the Army's excessive reliance 
on contractors, unfortunately. What is unique is the extent to 
which the Army has documented the problem through its 
conscientious compliance with the fiscal year 2008 contractor 
inventory requirement. If the Army's inventory is typical of 
the Department, how will DOD rebalance its overall workforce if 
a three-year freeze has been imposed on its civilian workforce?
    This concludes my statement and I will be happy to answer 
any questions members of the Committee may have.
    [The prepared statement of Jacqueline Simon follows:]

    Prepared Statement of Jacqueline Simon, Public Policy Director,
          American Federation of Government Employees, AFL-CIO

    Thank you, Chairman Spratt, Ranking Member Ryan, and members of the 
House Budget Committee for this opportunity to present the views of 
federal employees at today's hearing on the Department of Defense's 
(DoD) efficiency initiative. The more than 200,000 civilian employees 
represented by AFGE support efforts to increase the efficiency of the 
department's operation that are consistent with its mission.
    During the previous two Administrations, the civilian workforce 
experienced earlier efficiency initiatives--which turned out to be code 
for a massive and indiscriminate privatization that increased costs to 
taxpayers and caused the outsourcing of many important and sensitive 
functions that should always be performed by civilian employees.
    AFGE members understandably have questions about the department's 
most recent efficiency initiative, which includes a three-year freeze 
on the size of the civilian workforce and a severe restriction on the 
vital effort underway to rebalance the federal workforce so as to 
reduce reliance on contractors. Both efforts appear to be contrary to 
laws that forbid the management of the civilian workforce by arbitrary 
constraints and require the department to use civilian employees or at 
least give special consideration to using civilian employees to perform 
various functions.
    Technically, the department's initiative applies to the Office of 
the Secretary of Defense, the Combatant Commands, and the Defense 
Agencies--but not to the military departments which employ the bulk of 
the civilian workforce and which conduct the vast majority of 
insourcing efforts. However, because of the department's sometimes 
copycat corporate culture, there are some in the military departments 
who are using the efficiency initiative to advance proposals to 
arbitrarily reduce the civilian workforce and to discourage meritorious 
insourcing efforts.
    AFGE members who work in acquisition are also skeptical of how the 
department can implement cuts in service contractor costs, especially 
given its inability to implement the contractor inventory requirement 
(and then integrate the results into the budget process) and the 
apparent counterproductive obsession on achieving reductions in just 
two particular categories of service contracting costs, object classes 
25.1 and 25.2.i
    Ultimately, AFGE members are very concerned that, for the third 
Administration in a row, the civilian workforce will bear a 
significantly disproportionate share of the sacrifices necessary to 
achieve efficiency. As history shows, DoD has repeatedly frozen and 
shrunk its civilian workforce, resulting in wasteful wholesale 
privatization as well as widespread losses of critical in-house 
capacities. At the same time, DoD has consistently been unable to 
manage its contractors, let alone reduce their costs. Understandably, 
our members fear that the well-intentioned initiative announced by 
Secretary Gates last month will not turn out any differently.
             1. three-year freeze on the civilian workforce
    Historically, civilian personnel freezes have led to increased 
contracting out. Work still needs to be performed; if civilian 
employees can't be used because of the freeze, then contracts must be 
undertaken instead. Indeed, in the absence of any consideration of in-
house performance, contracting in such circumstances often leads to 
increased costs and contractor performance of functions that are too 
important or sensitive to outsource.
    Congress, on a bipartisan basis, has always striven to prevent DoD 
from imposing artificial constraints on its workforce. 10 U.S.C. 129 
requires the department to manage its civilian workforce solely on the 
basis of workload and funding. Under the law, DoD is forbidden to 
impose any constraint or limitation in terms of man years, end 
strength, full-time equivalent positions, or maximum number of 
employees. Moreover, the military department secretaries must certify 
annually that their workforces are not managed by such constraints or 
limitations. A streamlined version of this law is also included in 
every Defense Appropriations Bill. No workload analysis was prepared by 
the department prior to the Secretary's announcement that would justify 
a three-year freeze on the civilian workforce--and risk even more 
outsourcing that increases costs to taxpayers and further undermines 
performance.
                  2. a severe reduction in insourcing
    Secretary Gates said last August that the department was not 
``seeing the savings we had hoped from insourcing''. Consequently, 
contractors would not be replaced with federal employees except in 
extraordinary circumstances; rather, the positions held by contractors 
would simply be eliminated. Naturally, contractors chose to interpret 
this remark to mean that insourcing had failed.
    However, DoD officials continue to point out that civilian 
employees are generally cheaper than contractors. In July, Secretary 
Gates told The Washington Post that ``federal workers cost the 
government 25 percent less than contractors''.ii During a Senate Armed 
Services Committee hearing earlier this week, Deputy Secretary of 
Defense William Lynn disputed the notion that contractors were cheaper 
than federal employees: ``As a general statement, I don't think that's 
accurate, no''.iii And DoD has clarified the record since the August 9 
announcement, calling the effort ``highly successful''iv, ``a 
statutorily required workforce-shaping tool/process to appropriately 
align work between private and public sectors * * * that can generate 
savings or efficiencies'' as well as ensure in-house performance of 
thousands of inherently governmental and closely associated with 
inherently governmental functions.v
a. What happens to the contractor work?
    Obviously, greater savings are possible by eliminating contractor 
positions, rather than by replacing contractors with civilian 
employees. And if the work performed by contractors need no longer be 
performed or can be performed without adding in-house staff, then there 
is no reason to insource. However, it is difficult to believe that 
service contract dollars can be reduced by almost one-third--Secretary 
Gates called for 10% cuts during each of the next three years--without 
having an impact on mission, without it being necessary to hire at 
least some additional in-house staff to perform work that still needs 
to be done--unless the indiscriminate privatization perpetrated during 
the previous two administrations was far more wastefully ruinous than 
even its worst critics had believed.
    AFGE members in the Defense Agencies, who have been doing more and 
more with less and less for several years, are understandably concerned 
what a combination of real reductions in contractors and a freeze on 
the civilian workforce will mean for their ability to perform their 
missions.
b. How can DoD measure the savings from insourcing?
    Most insourcing efforts are less than one year old. It is difficult 
to understand how any reliable assessments could be made about 
insourcing in such a short time. It is our understanding that DoD 
cannot say how much was saved from insourcing efforts. Rather, DoD has 
looked at two contract object classes, 25.1 (Advisory and Assistance 
Services) and 25.2 (Other Services), before insourcing efforts began 
and then again more recently, and determined that contract costs 
continued to grow. However, DoD is not capable of distinguishing 
insourcing savings from the usual explosive growth in contract spending 
in those two object classes.
    Moreover, it is not clear why DoD is focusing on those two object 
classes. [Object classes include, among others, 25.3 (Goods & Services 
from Government Accounts), 25.4 (Operations and Maintenance-
Facilities), 25.5 (Research & Development), 25.6 (Medical Support), and 
25.7 (Operations & Maintenance-Equipment).] Insourcing in DoD is not 
limited to just object classes 25.1 and 25.2. Moreover, contracts are 
often entered into the wrong object classes or are entered into more 
than one object class.
c. How will DoD undertake insourcing (or at least consider undertaking) 
        as required by law?
    Inherently governmental functions must be performed by civilian 
employees.
    Closely associated with inherently governmental functions, per the 
FY08 National Defense Authorization Act inventory law (Section 807), 
must be performed by federal employees ``to the maximum extent 
practicable''.
    Also per the inventory law, DoD must correct any unauthorized 
personal services contracts, through elimination, modification, or 
insourcing.
    Per the FY08 National Defense Authorization Act insourcing law 
(Section 324), DoD must give ``special consideration'' to insourcing 
functions that are ``closely associated'', contracted out without 
competition, and contracted out but poorly performed.
    Finally, 10 U.S.C. 129a requires DoD to consider shifting work 
between its civilian, contractor, and military workforces, depending on 
which one is least costly if that is consistent with military 
requirements.
    How can insourcing that's required to be undertaken or at least be 
given ``special consideration'' or even mere consideration actually 
occur if the civilian workforce is frozen for three years?
    The Army's contractor inventory provides us with some keen 
insights. Of the 95,000 contractor jobs that were reviewed by the 
beginning of 2010, more than 2,000 were inherently governmental, 
another 41,000 were ``closely associated'', and another 1,500 were 
performed pursuant to unauthorized personal services contracts.vi This 
assessment does not include ``critical'' jobs performed by contractors 
that might need to be insourced. And, obviously, it does not include 
the contractor jobs that should be insourced because the contracts 
involved were entered into without competition or the contracts are 
poorly performed. There is nothing unique about the Army's excessive 
reliance on contractors. What's unique is the extent to which the Army 
has documented the problem through its conscientious compliance with 
the FY08 contractor inventory requirement. If the Army's inventory is 
typical of the department, how will DoD rebalance its overall workforce 
if a three-year freeze has been imposed on its civilian workforce?
           3. cutting service contractor dollars by one-third
    If further progress had been made on the contractor inventory 
required by the FY08 NDAA, DoD could comprehensively review its 
contracts in order to reliably determine, specifically, where 
efficiencies could be realized--instead of using broad and arbitrary 
cuts. Unfortunately, contractors, realizing that greater visibility 
inevitably leads to increased accountability, have resisted the 
inventory and foiled DoD's attempts to comply with the law.
    However, even these broad and arbitrary cuts are unlikely to be 
realized because of the excessive focus on a pair of contract object 
classes. Whether or not this initiative is successful will apparently 
be determined by comparing costs for 25.1 and 25.2, before and after. 
As noted earlier, there is no rigor as to how contracts are entered 
into object classes. By entering relevant contracts into different 
object classes, it would be easy to make it appear as if service 
contract spending in 25.1 and 25.2 is decreasing even if, overall, 
service contract spending is actually increasing. (Indeed, some 
contracts are regularly entered into more than one object class.) Given 
the limitations in accounting for contracts, why not include the other 
contract object classes?
    Moreover, why not implement Section 803 of the FY10 NDAA 
(originally enacted as Section 806 in the FY08 NDAA) which would give 
the department greater visibility and thus greater accountability over 
its service contract costs?vii As the report language noted, this 
provision would require DoD to include in its ``annual budget 
submission the total amounts for the procurement of services and the 
number of full-time equivalents requested by each component, 
installation, and activity * * * The information in the budget 
submission, together with the detail provided in the annual 
inventories, should provide the information needed for improved 
oversight by both the Department and Congress for the procurement of 
contractor services''. Absent implementation of Section 803, how can 
DoD ensure that those contracts eliminated or reduced in scope are not 
subsequently revived or restored? And how can DoD ensure that other 
contracts are not subsequently undertaken to replace or supplement 
those contracts that were earlier eliminated or reduced?
    AFGE's DoD members thank the House Budget Committee for this 
opportunity to discuss our views on DoD's efficiency initiative. We 
look forward to answering your questions.
                            insourcing brief
    In response to concerns:
    1. that the department's contractor workforce had grown from 
732,000 in FY01 to 1,320,000 in FY06 (the last year for which this 
information was reported to Congress)viii, while, according to budget 
documents, the numbers of active duty military personnel increased by 
2% and 7%, respectively, from FY2000 to FY2010;
    2. that DoD's service contractor costs had increased by more than 
100% during the Bush Administrationix; and
    3. that the Government Accountability Office had reported 
widespread outsourcing of functions by the department that reasonable 
people believe should be performed by civilian employees (e.g., 
developing budgets, preparing regulations, overseeing contractors)x,
    The FY08 National Defense Authorization Act included two historic 
reforms:
    1. a requirement that DoD inventory all of its service contracts in 
order to identify contracts that are being poorly performed or include 
functions too important or sensitive to outsource and then essentially 
integrate that information into the budget process; and
    2. a requirement that DoD establish a policy by which it could at 
least consider insourcing functions that are poorly performed, were 
contracted out without competition (because they might cost more than 
they should), or include functions too important or sensitive to be 
performed by contractors.
    In response to these requirements, DoD began, slowly, to compile 
its inventory of service contractors. In 2001, the department announced 
that it would insource more than 40,000 contractor jobs over five 
years.xi Despite the obvious necessity and modesty of DoD's insourcing 
effort, reaction from contractors has been rather disproportionate. 
This excerpt from a May 27, 2010, letter to the Professional Services 
Council from the Under Secretary of Defense for Personnel and Readiness 
is one of the department's many earnest attempts to placate 
contractors: ``While the Department's insourcing plans impact less than 
1% of currently contracted services, the net growth in contracted 
services last year was more than $5 billion.''
    DoD did itself no favors by embracing insourcing as a five-year 
panacea for its chronic budget shortfalls. The Congress intended for 
insourcing to be an on-going effort to rebalance the department's 
workforce--bringing back in-house functions which are too important or 
sensitive to outsource as well as commercial functions which might be 
performed more efficiently by civilian employees. As implemented, 
however, insourcing became a five-year budget drill with inordinate 
savings assumptions.
    Fortunately, the House Armed Services Committee (HASC) and the 
House Defense Appropriations Subcommittee, have continued to provide 
necessary guidance to the department. In the FY10 National Defense 
Authorization Act, the HASC included a bipartisan provision that would 
prohibit DoD from using quotas or targets to promote insourcing. Quotas 
and targets were used openly and extensively by the previous 
Administration to promote outsourcing, which contractors 
enthusiastically supported. Fortunately, the Congress, on a bipartisan 
basis, outlawed the use of outsourcing quotas and targets. AFGE opposed 
the use of outsourcing quotas and targets and worked with the HASC on 
the provision (Section 325) in the House FY11 National Defense 
Authorization Act that would ban insourcing quotas and targets.
    There are other instances in which contractors have been 
inconsistent. Contractors regularly recruited senior federal officials 
to work as contractor executives. Now, when agencies make job offers to 
rank-and-file contractor employees as part of the overall workforce 
rebalancing effort, contractors call that ``poaching'' and insist that 
the practice be forbidden.
    Contractors, without complaint, took tens of thousands of federal 
employee jobs during the previous two Administrations, without ever 
having to compete for our work. Now, they complain at the detailed 
costing methodology used for insourcing.xii
    Because of sole-sourcing, contractors infrequently compete with one 
another for work, and agencies have always been able to terminate 
contracts for convenience with few restrictions and to not renew 
contracts without any restrictions. Now, however, contractors want to 
impose unprecedented restrictions on the ability of agencies to 
insource.
    Contractors used to brag about their flexibility. Now, they insist 
on retaining contracts merely because they've held the contracts for 
several years.
    When federal employees lost their jobs because the competition 
process was flawed or wasn't even used, or when they were veterans in 
work-therapy or even disabled, contractors said, ``It's business''. 
Now, when contractors are losing their contracts, it has suddenly 
become personal.
    Contractors have alleged various ``insourcing crimes''. However, 
their allegations regularly turn out to be unfounded--the contract 
doesn't exist, the contract was cancelled rather than insourced, the 
contract included closely associated with inherently governmental 
functions, the department's analysis reliably concluded that the work 
performed under the contract was actually better performed in-house. 
There will, of course, be mistakes. However, such mistakes are no more 
grounds to shut down the promising but fledgling insourcing initiative 
than the seemingly endless waste, fraud, and abuse that is endemic to 
outsourcing is a justification for stopping all outsourcing. Indeed, if 
outsourcing had been held to the same standards that contractors would 
like to apply to insourcing, outsourcing would have been suspended no 
later than close of business on the first day of the Republic. 
Fortunately, the Congressional architects of insourcing have striven to 
make insourcing thoughtful, transparent, and apolitical--a stark 
contrast to the way the two previous administrations conducted 
outsourcing.
                                endnotes
    \i\ E.g., Army Guidance on Implementing Army Efficiency Initiatives 
(September 2, 2010). See Task #2: ``ASA (FM&C) will develop a 10% 
reduction in contracts executed in object class 25.1 and 25.2 for 
consideration for approval by the Secretary of the Army''.
    \ii\ The Washington Post, ``National Security Inc.'' (July 20, 
2010).
    \iii\ Congressional Quarterly, Transcript of September 28, 2010, 
Hearing of Senate Armed Services Committee.
    \iv\ Federal Times, ``Can Gates get it done? His role key to 
success of cuts, experts say'' (August 16, 2010).
    \v\ Government Executive, ``Defense insourcing to continue at 
military services'' (September 7, 2010).
    \vi\ Department of the Army, Submission to the House Defense 
Appropriations Subcommittee (January 28, 2010).
    \vii\ DoD agrees that the integration of the inventory into the 
budget process is necessary to actually implement cuts in contractor 
costs and admits regret at not having complied earlier with the law. 
Nevertheless, DoD is still unprepared to commit to compliance. Here is 
an excerpt from the Congressional Quarterly transcript for the 
September 28, 2010, hearing of the Senate Armed Services Committee 
hearing with the relevant discussion between Chairman Carl Levin (D-MI) 
and Deputy Secretary of Defense William Lynn:
    LEVIN:
    * * * In the past, we've found that proposed cuts to contract 
services are nearly impossible to enforce because expenditures for 
service contracting are invisible in the department's budget.
    For this reason, Section 806 of the National Defense Authorization 
Act for Fiscal Year 2008 required that budget justification documents 
clearly and separately identify the amounts requested in each budget 
account for procurement of services. The department has not yet 
complied with that requirement.
    Will you--well, when are you going to comply with that requirement, 
Secretary Lynn?
    LYNN:
    Well, part of--part of the effort I mentioned would be to comply 
with that requirement. And I would--would add I think your implication 
is right.
    We are regretting that the department hadn't complied earlier. It 
would make the task that we're undertaking easier if we had better 
data, and we're endeavoring to--to develop that.
    LEVIN:
    So when will the department comply with that statutory requirement? 
Are you going to comply for the 2012 budget request?
    LYNN:
    We are trying. I can't commit at that point--at this point that we 
will have all the data to be able to do it, but we're going to do our 
very best.
    LEVIN:
    Well, it's a couple years now overdue, so that's not satisfactory. 
And I'm just wondering if you can give us a better handle on that, if 
necessary month by month.
    I mean, I don't want to burden you with unnecessary requirements, 
but this is something in law, and it is essential that there be 
compliance on this.
    So would you let us know by the end of October--let's just try 
report number one, whether or not the budget for 2012 will be complying 
with that requirement? Let us know by the end of October?
    LYNN:
    Yes. Yes, I'll do that, Mr. Chairman.
    LEVIN:
    And if not, why not.
    \viii\ DoD Reports: Performance of Commercial Activities (2001 and 
2006 submissions).
    \ix\ Please see Attachment 1.
    \x\ E.g., Government Accountability Office, DEFENSE ACQUISITIONS: 
Further Actions Needed to Address Weaknesses in DoD's Management of 
Professional and Management Support Contracts (GAO-10-39).
    \xi\ Contractors insist that this attempt to reduce reliance on 
contractors to pre-Bush Administration levels is arbitrary and wrong. 
They're right, of course. DoD should have tried to reduce its reliance 
on contractors to pre-Clinton Administration levels.
    \xii\ Recent contractor correspondence insists that DoD ``is not 
considering the broad scope of other costs, borne by the taxpayer, and 
which are ineffably associated with the federal employee infrastructure 
(overhead, lifetime benefits, personnel support and systems, pay 
support, and systems, management/oversight, training, etc.).'' 
Professional Services Council Letter to Secretary of Defense Robert 
Gates of May 3, 2010. AFGE understandably approaches contractor claims 
of inadequate in-house overhead with a great deal of skepticism. It is 
not an exaggeration to say that many contractors would like to charge 
every in-house workforce involved in a sourcing decision with a 
fraction of the cost of running Air Force One. The DoD IG has pointed 
out that a significant amount of the overhead contractors have tried to 
attribute to federal employees in OMB Circular A-76 privatization 
studies is unjustified. DoD should be prepared to defend the costing 
methodology generally as well as its use in specific situations. 
However, let the record show that, contrary to contractor assertions, 
DoD's costing methodology does indeed take into account ``Recruitment, 
Advertising, Etc.'', ``Training'', ``Unfunded Civilian Retirement'', 
``Postretirement Health Benefit'', and ``Post Retirement Life 
Insurance''. Directive-Type Memorandum (DTM) 09-007, ``Estimating and 
Comparing the Full Costs of Civilian and Military Manpower and Contract 
Support'', page 20.

    Mr. Scott. Thank you very much. I want to thank all of our 
witnesses for their testimony, and now we will have a few 
questions for the panel. General Wood can you explain the 
significance of not mentioning the closure of JFCOM in the QDR?
    LTG Wood. I think the QDR, which looks broadly at strategic 
requirements and then the resourcing and programs that back it, 
probably does not make its way down to the specifics of a 
command. It looks primarily at functions and priorities. And 
perhaps I would simply suggest that it was not in the scope of 
the work or the terms of reference of the particular study to 
take it to that level of detail.
    Mr. Scott. But they mentioned in the QDR the significance 
of jointness.
    LTG Wood. Oh, without question. And I think that jointness 
is a recognized strength of the Department, it is a recognized 
strength of our military. And perhaps assumptions were made 
about, you know, the continuity in progress that we had made, 
and would continue to make, in that area.
    Mr. Scott. If such progress has been made, we heard 
yesterday a suggestion that the decision to disestablish JFCOM 
was unanimous, that there were no countervailing arguments. Is 
that credible?
    LTG Wood. As not part of that analysis it is hard to say. 
But I would suggest that it was likely a course of action, and 
all courses of action that are considered in this sort of 
analysis have pros and cons. So whether it was a statement of 
disapproval, or it was a summation of negative points versus 
positive points, I would imagine that there was a pro and con 
described with regard to the decision. So I do think likely 
they were measuring costs and benefits as they made this 
decision.
    Mr. Scott. If you were to ask the individuals services what 
they thought of it, what would their individuals reaction be to 
the idea of being able to keep all their funds to themselves 
and not have to share it with jointness?
    LTG Wood. I think my answer would be hypothetical. I cannot 
really describe what each position of the services would be.
    Mr. Scott. Well I mean, how could you, if the explanation 
was that everyone they talked to supported the closure, could 
you explain how that could be?
    LTG Wood. I can offer only a personal opinion.
    Mr. Scott. Okay.
    LTG Wood. I think we have a natural tension, a constructive 
tension in fact, between what services are required to 
accomplish under their Title 10 responsibilities. And quite 
frankly, the responsibilities directed to the Department 
through Goldwater-Nichols to the combatant commanders. So there 
is a natural tension between what the services provide as 
trained and ready forces, and I would say a constructive 
tension, to what the combatant commanders require on a routine 
basis. So that tension simply causes people to come down in 
different positions as it relates to either a zero sum outcome 
of providing service or capabilities to the joint force, or 
those who think it is a synergistic outcome, where it is 
multiplicative in outcome as opposed to additive. And so it 
just really depends on where you sit, where you stand in that 
area.
    I think there is a broad in general, and I certainly agree 
with the Department's point, that the appreciation of what 
joint can provide for our forces and the jointness of our 
forces has proceeded to a point today where it has daily 
validated itself in the combat, in the operations that we see. 
That is today. Tomorrow is another day, and the threat 
continues to change. And it is important, as I mentioned in my 
remarks, that we take a look at integrated action as opposed to 
the idea of simply claiming we are joint.
    Mr. Scott. Is there a natural inclination to revert to, to 
avoid jointness by the various services that would recommend 
that there be some countervailing force towards jointness?
    LTG Wood. Again, they have interests that are described in 
Title 10, trained and ready forces. But all of them are deeply 
and seriously and sincerely obligated to provide the best of 
available capabilities to joint commanders. It is a natural 
start of analysis in all of these decisions as to what are the 
impacts on the specific service to execute or provide 
capabilities as they do and do willingly. In many, many cases 
there is no problem and no tension. But there is a constructive 
tension overall that, in JFCOM's case, we constantly helped and 
worked and tried to integrate solutions that were beneficial to 
the whole, in this case specifically to the combatant 
commanders.
    Stovepiping does occur. But we are well past that point, I 
think, of days past. But it is perhaps a natural line of drift, 
that drifts back to an idea of service-specific solutions.
    Mr. Scott. And that is, the countervailing force in that 
natural reversion is JFCOM, is that right?
    LTG Wood. I think it has played a very constructive role in 
that regard.
    Mr. Scott. The suggestion has been made that a four-star 
command is no longer necessary. What would be the problem with 
reducing the number of stars in the commander?
    LTG Wood. Well I think it has to do a lot with, importantly 
there will be a commander and I think that point has been 
recognized and articulated by the Department. It will take 
someone who is in charge, who can provide focus and unity of 
effort to this important mission. So first of all it would be a 
commander. I leave it to the Department to determine the level 
and grade of that commander. But I would suggest that a four-
star commander does have the ability to sit in council with 
other combatant commanders and understand their requirements, 
articulate the solutions, and frankly engage in the dialogue. 
It was, it is helpful to speak at that level and on that level 
with your peers. But the Department has made the decision, and 
I happen to think they will arrive at a correct assessment and 
analysis, where someone is in charge and charged with the 
authority, responsibility to accomplish the mission assigned.
    Mr. Scott. What relationship does JFCOM have with the 
international forces that are located in the same area?
    LTG Wood. A very close relationship with Allied Command 
Transformation, the NATO Command. Up until I believe October, 
frankly September, the Joint Forces Commander was also the 
Commander of Allied Command Transformation. So there was a 
natural synergy between the NATO and NATO nations, and what we 
accomplished, and what they could benefit from. It is a 
constructive daily dialogue between the international presence 
at Allied Command Transformation and Joint Forces Command. 
Frankly a function of geography and common interest.
    Beyond Allied Command Transformation there are a number of 
nations who have a direct liaison relationship with Joint 
Forces Command. I believe we have nineteen nations with a 
bilateral memorandum of understanding, actually work with JFCOM 
with its integration, its training, and experimentation 
functions. And twenty-eight representatives on the ground with 
JFCOM from allied nations. There are additionally another 
fourteen nations who are pursuing a formal relationship. So it 
is a constant mix of multinational relationships that are 
growing, and have grown for a while, with Joint Forces Command 
as they recognize the importance of unifying action with our 
joint forces.
    Mr. Scott. And what would be the implications of 
disestablishing JFCOM to all of those relationships?
    LTG Wood. I think those relationships would be continued 
but with a different arrangement as determined and described 
probably by General Odierno. I think the relationships are 
important enough, and multinational relationships in particular 
for our coalition operations are so critical, that that will 
likely be an aspect of whatever solution they arrive with.
    Mr. Scott. Mr. Wittman?
    Mr. Wittman. Thank you, Mr. Chairman. Again, I would like 
to thank the panel members for joining us today. General Wood, 
I would like to focus some more of the discussion concerning 
strategic planning within our military. You know, recently the 
House Armed Services Committee received the quadrennial defense 
review. And there was a review of that by an independent panel 
that looked at that because there was some concern that our 
strategic planning should be driven by analysis of the 
strategic needs of this nation, not necessarily from a 
budgetary standpoint. And as you know the analysis by the 
independent panel was somewhat critical of that, in looking at 
whether it truly was a strategic needs document or whether it 
was indeed a budget-driven document. And their words, not mine, 
was that the QDR was a train wreck. So they had some issues 
about whether or not it was really driven by strategy.
    What we are hearing with the decisions being made under 
these efficiency initiatives is that they are indeed military 
decisions, that they are not being driven by budget 
considerations. Which sort of is counterintuitive when you term 
an exercise an efficiency initiative, it would lead you to 
believe that it is indeed driven by budgets. And when we ask 
those questions they say no, no consideration was given to 
business models or anything such as that in the decision, that 
it was all driven by military decision making. And my question 
to you, in looking at how this decision has come about, and of 
course there is not much information about how the decision 
came about. But I am going to ask for your assessment as to 
whether this truly is a military decision? Or does it appear as 
though this is a decision driven solely based on budgets?
    LTG Wood. It is certainly an understood responsibility and 
authority within the military that the structuring of your 
commands is inherently a military task. So I believe they are 
starting from that line of logic, which says how you organize 
your forces, how you determine the chain of command and the 
command of control, is in fact inherently a military decision. 
So I believe that is where they are starting in terms of that 
explanation.
    It is cast in terms of an efficiency, in the case of Joint 
Forces Command, where it produces certain economies caused by 
de-layering. And when the idea of savings and economies is 
presented, even premised on a military decision, I think it is 
a natural question to ask, ``What analysis has been done that 
shows what savings are in hand, or could potentially be in 
hand?'' And so I think they start at the right place. But in 
the context of an efficiencies program where the idea is to 
promote economies and provide savings, ultimately they are 
going to have to then describe those savings in real terms, and 
in real dollars, and likely real jobs.
    Mr. Wittman. Sure. Let me ask this, then. In your 
experience, can you remember a situation where there was a 
determination that a recommendation would be made on a major 
issue like closing a command, and then after that saying, well, 
we will then do the analysis of the economic impact. We will 
then afterwards do the analysis of the strategic implications 
of this. In other words, what does this mean to how we continue 
the concept of jointness? And then after the fact we will 
figure out how we implement that. Do you recall, in your 
experience do you recall a process that occurs like this with a 
decision or a recommendation being made up front? And then 
seemingly the analysis, and seemingly being that we can't get 
any documentation prior to August 9 about how that analysis 
might have been performed. And then subsequent to that saying, 
well, we are going to be doing much of that analysis. Do you 
recall a decision there being made in that manner? Especially a 
decision of this magnitude?
    LTG Wood. Well, that is a fair question. If you change the 
word ``recommendation'' to ``objective.'' And they said, in 
fact we have an objective of de-layering headquarters, and in 
order to do that we are going to take a look at Joint Forces 
Command as an example and assess and evaluate what savings 
could occur. It does remind me a bit of what we did in reducing 
forces in Europe, where we had objectives with regard to the 
de-layering of headquarters under NATO. And those were stated 
as objectives, and the analysis determined ultimately which 
were the wise decisions, and which were the economical 
decisions, and which in fact were the tough decisions that we 
just had to make regardless. So perhaps that is as close as I 
can get to it.
    Mr. Wittman. Sure. But it seems in this situation that it 
is actually a level higher than objectives. I could understand 
if the objective was to look at efficiencies within JFCOM, 
those kinds of things. But to actually start with the 
recommendation of the disestablishment of JFCOM, and then move 
on from there and say, well, now we will figure out the details 
about how that happens, does seem to be a little bit different.
    Let me ask you this. The assertions that we have been given 
and what little bit of information we can get concerning the 
conversations, the analysis, or lack thereof in this decision 
making, is that jointness has become so ingrained in the 
service branches that JFCOM no longer has a purpose. And my 
question would be to you, do you believe from your observation 
and knowledge of the current status of all of our service 
branches, do you believe that the mission of jointness is 
complete?
    LTG Wood. If specifically you are asking me, and I think 
you are, if the mission of jointness is complete, it is not. I 
would suggest that after seven and a half, eight years of 
combat, in a joint setting of CENTCOM and areas surrounding 
that, that we have learned, and our force almost a half 
generation now with multiple deployments, have learned the 
value of jointness and understand its execution very typically 
at the tactical level. At the operational level or the 
strategic level there remain lessons yet to be learned. And I 
would also suggest that one very obviously good way to build 
that expertise and ingrain that knowledge could be combat. 
There are likely less costly and less serious ways for that to 
occur. And the continuity of growth in the area of joint, this 
inflection point we are at in terms of missions as they are 
either transferring or transitioning, it is about the right 
time to draw some very necessary conclusions and 
institutionalize those conclusions so that we grow the next 
generation with equal knowledge and appreciation focused now on 
threats that are in the future by threats that are present.
    So jointness will continue to be an important aspect of the 
training of the force. It will be an important element of the 
culture. And the work continues. And I do believe that the 
Department acknowledged and stated the same. They have chosen a 
different approach as to how to draw those lessons and 
institutionalize them in the force, in this case by the 
elimination of JFCOM.
    Mr. Wittman. Well, let me ask this then. Looking at it from 
that context, in that the mission of jointness not being 
complete, but that many aspects of it are indeed 
operationalized both at the tactical level and somewhat at the 
strategic level. But still looking at how do you continue to 
make sure that is put into place as objectives, as missions 
change? Do you believe then that the role of JFCOM under those 
conditions is complete? And that those roles could be assumed, 
as one of the suggestions is, by operations under the Joint 
Staff?
    LTG Wood. My personal opinion is that staff 
responsibilities are dramatically different than command 
responsibilities. And to take functions and assign them to 
staff elements, as opposed to beneath a commander, dramatically 
alter the outcome. And as such, I think the point was made 
yesterday in particular by General Cartwright, where it does 
take a single commander, charged with the responsibility to 
produce and execute and provide solutions, in this case joint 
solutions, is something that will likely be one of the elements 
of whatever course of action they choose. It does take a 
commander.
    Mr. Wittman. And one last question before I yield. Is 
looking within that context of this whole realm of decision 
making, and looking at what we have been told. And that is that 
there were over thirty ``meetings,'' and I use meetings in 
quotes, there in the Pentagon in discussing this particular 
recommendation of the disestablishment of JFCOM. In your 
experience can you envision that with thirty meetings that 
there would not be a situation where there were notes, or 
proceedings, or any kind of written capturing of those meetings 
that would be available to provide to Congress or to others 
that may ask about that particular documentation about the 
whole effort of analysis there in the Pentagon, to get to the 
point where the Secretary has made that recommendation? And 
again, we were told of those thirty-plus meetings that had 
happened. I just want to get your thought about whether that is 
indeed a realistic scenario.
    LTG Wood. I certainly believe that there are notes or 
briefings that were part of the analysis. I can imagine it only 
simply as a review of the entire program. This was a very major 
initiative that was announced, and I could just imagine that 
there were a number of meetings that dealt with not just JFCOM 
but a whole range of issues that were announced by the 
Secretary. So to answer your question directly, I would believe 
that there would be something that represented briefings or 
notes from those sessions.
    Mr. Wittman. Thank you, Mr. Chairman, I yield back.
    Mr. Scott. Thank you. Mr. Connolly?
    Mr. Connolly. Thank you, Mr. Chairman. I thank you all for 
your testimony. Mr. Harrison, in your testimony I believe you 
made reference to I think a CRS study that showed that bringing 
it in would lead to fairly significant cost savings, although 
relative to need not all that big. What was the methodology 
used to make such an assertion? I have not seen any such 
analysis?
    Mr. Harrison. I cannot recall the exact methodology they 
used. I believe what they did is looked at estimates of what 
Joint Forces Command costs today. That is a little difficult to 
do because each of the individual services provides personnel 
and resources to the Joint Forces Command. And so you have to 
go in and try to dig out of their personnel budgets and other 
budgets exactly what proportion is going into JFCOM.
    Mr. Connolly. I am not only referring to JFCOM.
    Mr. Harrison. In terms of the other savings initiatives, 
the largest one that I mentioned in terms of reducing the 
support contractors, it took an estimate of what we spend today 
on support contractors and then took a cut of that, and that 
came out to $3.6 billion annually.
    Mr. Connolly. But the functions would still have to be 
undertaken.
    Mr. Harrison. Well I think that, and the report points this 
out, that that is the difficult question. Is would we actually 
realize that much in savings?
    Mr. Connolly. Or any?
    Mr. Harrison. Or any. Now, the way that Secretary Gates 
announced it was, you know, he had previously said he had a 
goal of insourcing, and moving these jobs in house. And it was 
based on a head count, basically, a percentage of the workforce 
that was made up of support contractors. He wanted to bring 
that down to a different target. He said in his August 
announcement that he was not satisfied with progress doing it 
in that way so he decided to just cut the budget by a certain 
amount.
    So cutting the budget, you know, if that is your method 
then you can certainly achieve that. But what are the 
consequences? What is left undone? And there are certain risks 
associated with that. I would say that this is not really an 
ideal approach at all about how to go about doing it. First I 
think you would want to step back and say, okay, well who are 
the contractors? What are they doing? And how many are there? 
And DOD does not right now have a comprehensive answer across 
the Department to those questions. Once you have done that then 
you can go in and say, okay, on an individual basis what are 
they doing? Is that something that should be done by a 
government person? Is it more cost effective or is it 
inherently a government function? So then that is something 
that you would want to insource. You may look at it and find 
that some contractors are doing things that we want to have 
done by contractors. In that case, you leave them, let them do 
their job. And in some cases you may find that contractors are 
doing things that simply do not need to be done and then you 
can eliminate them.
    That requires a lot of work, though, and I do not think the 
Department is there at this point. I do not think they can do 
that.
    Mr. Connolly. Right. Well, and again, as both of my 
colleagues have indicated, this is now my third session this 
week on this topic. Not once has the Pentagon even pretended 
that it did the analytics Mr. Soloway referred to to justify 
this decision. They are actually going to do it after the fact. 
And that is a little bit like a corporation saying, you know, 
we have decided to eliminate a whole division of the company, 
the marketing division. And as an act of faith we are going to 
assume it will yield net reductions in cost and it will not 
appreciably affect our sales, not having a marketing division. 
And by the way, we expect the board to approve this decision, 
and we will provide them data on how well it worked after they 
approve it. So this is all, you know.
    No company on the planet would allow management to make 
such a decision. That is exactly what we are doing here. And it 
may make sense, but no proof has been provided to Congress, or 
to the public, or anybody else. And the reluctance of the 
Pentagon to appear at public hearings, with the one exception 
here in the House which was yesterday at the Armed Services 
Committee, I think gives some evidence of that fact.
    And the reason I asked about the methodology is, you know, 
we sometimes are a little too fast and loose with what is 
cheaper and what is not. And I have seen examples of both, you 
know? And what we have to make sure is that if we are going to 
be looking at personnel costs they are fully loaded. The 
government requires the private sector when it bids on a 
contract to have fully loaded costs, otherwise you are low 
balling it, and you may have an unfair competitive advantage 
over the competition, and it does not really give us an 
accurate picture of what the real costs are. Well, if we are 
going to be looking at this kind of question of insourcing/
outsourcing, they have to be fully loaded costs. And 
unfortunately I just, I have not seen any methodology used in 
this decision and it is a fairly sweeping decision. This is not 
a marginal savings decision, presumably.
    Ms. Simon, thank you for your testimony. You talked about 
inherently governmental, and I was just wondering if you want 
to share a few examples of what you think clearly fall under 
that rubric that ought to be brought back into the Pentagon.
    Ms. Simon. Well there are a number of positions that have 
been identified as inherently governmental having to do with 
the preparation of budgets, the writing approval of regulations 
that implement laws passed by Congress, and some contract 
oversight work.
    But if I may, with regard to insourcing, the procedures 
that the Defense Department is required by law to adhere to 
when it considers insourcing, there are rather rigorous 
analytics involved. It is really quite different from the 
outsourcing agenda that was pursued in the last two 
administrations. In fact, the Department is required annually 
to report to Congress the number of positions that have been 
insourced, the rationale in each case for the insourcing. And 
for example, they have to be able to show that it was either 
inherently governmental work, closely associated with 
inherently governmental work, or a cost comparison was 
conducted. You know, it could have been an illegal personal 
service contract. Or a cost comparison was conducted that 
demonstrated that it was less costly to perform the work in 
house.
    And I also would be more than happy to provide you with 
materials we have from the Department of Defense that do 
demonstrate that the cost comparison process DOD is using when 
it considers insourcing does not have any kind of quotas, and 
has what you refer to as fully loaded costs. For example, it 
includes the lifetime cost for health insurance benefits 
provided to federal employees in retirement and retirement 
costs. They really are completely fully loaded costs. So I 
would be happy to provide you with those materials that we are 
in possession of.
    Mr. Connolly. I would be glad to get them.
    Ms. Simon. So, yeah.
    Mr. Connolly. Let me just say to you, though, Ms. Simon, I 
am sure you are aware of the fact though, and you just heard my 
two colleagues complain about the fact, correctly so, the 
Pentagon heretofore has not provided any analysis, any 
documentation to justify this decision. Now if that data you 
refer to is so readily available, why would they not have done 
that analysis to show compellingly, of course we are going to 
go this route because look at the savings it generates. And 
they have not. And they admit they did not do it.
    Ms. Simon. Well, my answer was with respect to insourcing.
    Mr. Connolly. Sure.
    Ms. Simon. You know, of course----
    Mr. Connolly. Well, but I am referring to insourcing on 
the, I'm sorry, on the contractual piece here.
    Ms. Simon. One of the things that we are most fearful of is 
if contracts are cut by 30 percent over three years and none of 
those positions are insourced. Of course they will save money 
if they simply eliminate those contracts and do not replace any 
of the employees doing that work with civilian federal 
employees. There is probably some of that work that can be 
absorbed by the current workforce, but certainly not all of it.
    Mr. Connolly. Right.
    Ms. Simon. And, you know, with the freeze on civilian 
employees, you know, we know what has happened historically 
when there are personnel ceilings and freezes on federal 
employees. It essentially eventually leads to outsourcing, and 
outsourcing often without competition. And of course 
outsourcing of inherently governmental work and work closely 
associated with inherently governmental work.
    Mr. Connolly. Yes. And to underscore your point, what 
concerns many of us is the magnitude of this. Ten percent a 
year times three years is billions of billions of dollars and 
could affect tens of thousands of jobs. And I take your point. 
If they just, well, it depends on how they dispose of that, 
what happens to those functions and so forth, and whether it 
puts an additional burden on the existing workforce that may be 
already overstretched. And again, no plan has been provided to 
the public or to this Congress on how you would implement such 
a cut. And 10 percent is not trivial. It is very serious and 
very large. So I take your point.
    Ms. Simon. Thank you.
    Mr. Connolly. Mr. Soloway, did you want to comment on that?
    Mr. Soloway. Yes, I think that we are confusing a few 
different issues here. Maybe just to provide a little bit of 
factual context. First of all, the Secretary's insourcing 
initiative, his 10 percent cut, and the broader efficiency 
initiative, none of what he has announced or done is 
inconsistent with statute that has been established by 
Congress. The Secretary's guidance most recently about not 
automatically providing one for one switches in insourcing jobs 
has nothing to do with whether the Department continues to 
still have to give consideration to whether, when, and how to 
insource certain kinds of positions. The Deputy Secretary of 
Defense guidance from May, 2009 is still in effect, which is 
merely a reflection of statute, almost a direct word for word 
reflection of statute.
    What the Secretary did last month is acknowledge that they 
are not achieving the savings expected from insourcing. 
Contrary to what some have suggested, in fact the data shows 
that it is just not there in many cases. That is not to say it 
is never there, it is to say that it is not there on a broad 
basis that one can just assume across the budgetary line. So 
the Secretary said they are no longer going to simply offer new 
positions on a one for one switch for positions, contracted 
positions, that are eliminated, with the exception of the 
acquisition community where there will be, where positions are 
inherently governmental as Ms. Simon said, they will be one for 
one created within the Department because that is such a 
critical workforce.
    With regard to the closely associated with inherently 
governmental functions that is covered in the statute and 
covered in the Deputy Secretary of Defense guidance I think it 
is important to recognize what the Obama administration has 
said about closely associated with inherently governmental 
activities. They have made it explicitly clear that those 
positions may be contracted if it is more cost effective, if 
the agency involved has adequate financial management and other 
controls in place to adequately manage and supervise and 
oversee its contractors, there is absolutely no reason why one 
could not actually continue to contract or increasingly 
contract for those positions. The issue is a matter of 
workforce balancing at OMB and its guidance that you referenced 
earlier actually makes very clear that it is that balance it is 
not a uniform closely associated with inherently governmental 
functions must come from in house.
    The third point I would make is with regard to analyses and 
cost, and let me share an actual case rather than--let me back 
up one step, sir. The Department initially announced that they 
were going to assume a 40 percent savings per position 
insourced. That was contained in resource management decision 
802 which remains a classified document, has never been 
released, nor have the analytics underpinning it ever been 
released. That was followed by a directive type memorandum, a 
DTM, that was issued last January which purported to be a 
comprehensive methodology for comparing costs. It is neither 
comprehensive nor is it a methodology and it explicitly, 
although it is the ruling document, it explicitly excludes any 
costs that are not the responsibility of the Department of 
Defense. And by definition that would include many post-
retirement and administrative and benefits costs that become 
the responsibility of the Office of Personnel Management.
    Third, it is instructive to look at specific cases for 
which data is available. And one I will just mention very 
briefly involved an Air Force insourcing of a contract valued 
at about $225 million with 400-plus people performing the work 
at seven locations across the country. The Air Force decided to 
insource that contract on the basis of an analysis that it 
would not share. As a result, the union involved submitted a 
Freedom of Information Act request to see the data, to see the 
analysis underpinning this decision, because many of its 
workers would lose their jobs. They were not coming into the 
government, they would not necessarily be eligible, and so 
forth.
    The data received from the Air Force through that FOIA 
request showed that on a $225 million contract the Air Force 
net savings was expected to be $450,000, .02 percent. Now one 
of the, Ms. Simon and I have often disagreed on many issues and 
I think there are two things we can agree on. Number one, 
arbitrary FTE ceilings are no smarter than arbitrary contract 
cuts. And number two, some reasonable savings for outsourcing 
or for insourcing better be shown just to cover the costs and 
chaos created by the churn of transition.
    What is even more constructive about this particular case 
is that according to Air Force documents that have been widely 
released, the details of which are in my testimony, the Air 
Force is only looking, as you said, at totally burdened 
contract costs versus internal personnel costs. There is a 
whole set of operation costs not being considered. In this 
particular case the Air Force is also proposing to do the work 
with 15 percent fewer people when they bring it in house. By 
their own estimate, since there is effectively no savings, the 
per person cost of performing the work in house is actually 
substantially higher than were they continuing to perform it 
through contract. Imagine what would be possible if they 
actually worked with the contractor to bring the contract 
requirements down to the level they believe the work would be 
performed and there you would have actual real savings. And 
finally, as I said, they specifically did not include post-
retirement costs, and merely health insurance premiums for a 
workforce of 350 people would create costs that are in the 
millions. That in and of itself is not a reason not to insource 
the work if it was inherently governmental or so sensitive and 
critical as has to be performed by a federal employee. But in 
this case no one is even attempting to make that argument. It 
has been purely made as a ``we are going to save money,'' and 
the answer is they are not.
    Mr. Connolly. And final point, and just briefly, I assume 
there is actually a third area where you agree, I think, with 
Ms. Simon. Which would be the example she gave of inherently 
governmental work?
    Mr. Soloway. We have always taken the position that 
inherently governmental work, no one is going to argue that it 
should continue to be outsourced. And to the extent a small 
number of positions that Army has found are inherently 
governmental that were inappropriately outsourced, they should 
be brought back in house. Where we depart significantly, where 
I think our position at PSC is more aligned with the 
administration view as OMB guidance has articulated over the 
last several months, is in this area of closely associated, if 
you will, with inherently governmental, those significant 
skills. We fully agree with OMB that the government has to have 
residual core capabilities that may not be by definition 
inherently governmental, but are nonetheless necessary to 
adequately and efficiently manage and oversee its missions.
    Beyond that, there is a choice to be made. And those 
choices must focus on cost, availability of skills, life cycle 
costs, not just to the individual department but to the 
taxpayer totally, and competition for talent in the marketplace 
and so forth. Those are the kinds of considerations that are 
not currently being conducted at DOD in this particular 
mission.
    Mr. Connolly. Thank you, Mr. Chairman.
    Mr. Scott. Thank you. I understand Mr. Wittman has an 
additional question or two?
    Mr. Wittman. Yes, and I want to direct those to Mr. 
Harrison. I just want to get you to refine a little bit of your 
previous testimony. In your written testimony you state that in 
relation to the elimination of JFCOM you say that while these 
eliminations appear to be justified the total savings achieved 
will depend greatly on how they are implemented. Let me ask 
this. If the focus is really on the implementation, and that is 
critical to the validity of the decision of eliminating JFCOM, 
do you believe then that the process that has been pursued now 
by the Pentagon, and that is making the decision up front and 
then doing a post-analysis of that decision, do you believe 
that that is the proper sequence to really look at the utility 
of the decision itself to disestablish JFCOM?
    Mr. Harrison. Well, I guess I would start by saying that, 
you know, the implementation of how the elimination of JFCOM 
comes about, the big savings when you eliminate an organization 
like that are really going to be in a reduction in head count, 
both military, civilian, and contractor employees, and the 
elimination of facilities, so that you no longer have to 
maintain them. So those are the big areas I would look for in 
terms of cost savings. And of course, the Department has not 
yet decided how they will do that.
    It is very likely that the military and the DOD civilians 
will just, those jobs will just be transferred elsewhere. So 
you will not save any money on reducing those items. The 
contractors, some of those would presumably go away if 
functions go away and you no longer need them. As functions get 
transferred to other areas within DOD, particularly within the 
Joint Staff, then those contractor jobs might just shift as 
well. So for that reason I think it is really hard to know up 
front how much money you will save, if you will save any money.
    You know, it was pitched as part of DOD's efficiency 
initiative. And you could certainly make the argument that you 
could achieve some efficiencies by doing this. I do not think 
that they know yet how much they will save by doing this, if 
they will save anything at all. And they will not know until 
they have decided on an implementation plan. Now, should they 
have waited to make the decision until they had an 
implementation plan? Well, perhaps. But given the urgency that 
Secretary Gates has put on this initiative I do not think they 
simply have the time to do that.
    Mr. Wittman. Again, I will go back to get you to give me 
your estimation of the process. And I think you got a little 
bit there, but I want to get you to further define that, 
looking at truly if there are going to be cost savings. And let 
us take a step back, too, and look at, looking at a strategic 
analysis. And that is, one of the overarching issues here, too, 
is strategically is this the right thing to do in maintaining 
jointness? So we look at that both strategically and from a 
business model cost efficiency standpoint. Is this process, and 
that is doing analysis of implementation, doing analysis of the 
strategic implications after this recommendation has been made, 
do you believe that that is the best way for this decision to 
have taken place?
    Mr. Harrison. I would say in an ideal world before you 
announce a decision like this you would want to be able to take 
the time to go through and figure out the best course of 
implementing such a change, cost that out, determine what the 
savings are, and then do your balance, your cost benefit 
balance. I think, and this is just my own, you know, personal 
opinion of the way the decision came about, was looking at some 
overall metrics for Joint Forces Command. And if you look at 
these they do cause, they are cause for concern.
    If you compare the total number of employees in JFCOM, 
which according to the Defense Business Board their analysis is 
over 6,000 including DOD and contractor personnel. When you 
compare that to some of the other combatant commands it does 
raise a few eyebrows. In particular, if you look at CENTCOM 
they have less than 4,000 total employees. And we all know what 
CENTCOM does, they are fighting two major wars for the United 
States right now, and other DOD activities that are going on in 
their area of responsibility. And it does bring up the 
question, then, well, is whatever JFCOM is doing, is it 50 
percent more important than what CENTCOM is doing? I think most 
people would agree, well, probably not. So why do they have 50 
percent more people dedicated to those tasks?
    Now, that is just a very high level analysis that would 
just tell you, well, this is worth investigating more. I think 
when they start to dig in deeper, when General Odierno gets 
there and starts coming up with an implementation plan then we 
will be able to see more of what they plan to do and how they 
plan to implement this recommendation.
    Mr. Wittman. One last question, Mr. Chairman. I want to 
lead, then, to this question. In your experience in looking at 
decisions within the Pentagon, within the Department of 
Defense, do you recall a decision of this magnitude that is 
taking place like this? And that is with a post-decision 
analysis on the implementation, on the strategic impacts, and 
really on the economic implications or efficiency implications 
of a decision?
    Mr. Harrison. Off the top of my head I could not name a 
comparable decision. That does not mean it does not exist. But 
off the top of my head I do not have one.
    Mr. Wittman. Thank you, Mr. Chairman.
    Mr. Scott. Mr. Connolly, do you have any additional 
questions?
    Mr. Connolly. No, sir.
    Mr. Scott. Thank you. Mr. Harrison, just following up on 
that, is it possible to cut costs without eliminating the whole 
command?
    Mr. Harrison. Certainly it would be. You would still, it 
would still impact jobs because to really achieve any 
significant cost savings you would have to cut the number of 
personnel somehow, and so, you know, that would still have an 
impact on the local community and economy. But you could 
certainly downsize JFCOM and reduce costs.
    Mr. Scott. And one of the things you talked about, the 
costs, if you eliminate the command and move the functions 
somewhere else, are there costs associated with that?
    Mr. Harrison. Absolutely. There would be one-time upfront 
costs, you know, from just the movement of people and 
resources. But then there are the ongoing costs of the 
personnel wherever you have them. And you also have to 
consider, and I have not looked at this to know if this is 
significant, but the different costs of labor given different 
geographical areas. And so if you are moving them you could 
actually increase or decrease your costs just because of the 
costs of labor in the different markets.
    Mr. Scott. So if you closed JFCOM and moved all the 
functions somewhere else you might end up spending more money, 
and not saving anything at all?
    Mr. Harrison. Especially if you continue all of the 
functions at the current level that they are today. If you 
really want to save money, as I said before, you cut head 
count. And when you cut head count you are cutting the amount 
of work that you are doing. And so that is really the way that 
you are going to generate savings. And if they do not do that 
there really will not be savings.
    Mr. Scott. And you could reduce functions without 
eliminating the command.
    Mr. Harrison. You could.
    Mr. Scott. General Wood, could you give us an idea of what 
kind of functions would be eliminated and not continued at 
JFCOM?
    LTG Wood. Well, I guess the, they have already described 
the force management function not to be eliminated but moved, 
likely to the Joint Staff. I think important to understand is 
the functions at JFCOM have been assigned either by Office of 
Secretary of Defense, by the Joint Staff, or collaboratively by 
services through JROC action. So we would essentially make a 
proposal that the function of fires integration, for instance, 
which is one of the elements of the command, or joint personnel 
recovery, or the lessons learned in operations analysis 
activity, can be now shifted to a location where it will not 
lose its essential aspects. You would make a recommendation in 
the Joint Staff, or the JROC, or the Chairman would approve it. 
So that is what General Odierno is going to do. I really do not 
want to presuppose functions that can be eliminated until that 
type of analysis has been completed.
    Let me say one other thing. As a command, if it stayed in 
place, if it did not go away, it would be subject to the 30 
percent directive in terms of reduction of inservice contracts. 
That is, in this case if you looked at it, that is about 900 
people. 900 people less of a JFCOM of whatever date in the 
future you look at will without question be likely more 
efficient, more focused on priorities, and it might even be 
therapeutic. It does not say the command goes away. It simply 
abides by the directives the Secretary has described. It 
remains with a commander in charge of Joint and jointness. It 
is now efficient in terms of decisions made by the commander. 
And then he will make an idea about likely which functions will 
go away.
    I would imagine that functions will realign inside the 
command and remain in place. Functions will reduce in terms of 
size and likely remain in place or be renamed. And then you 
will end up with a smaller element to accomplish what has been 
directed, typically by the Department. So I do not want to 
presuppose----
    Mr. Scott. Well it seemed to me when this thing started the 
criticism of JFCOM said it had too many generals and too many 
contractors and therefore they said you needed to eliminate the 
command. It seemed to me another response could have been to 
reduce the number of generals and reduce the number of 
contractors, and keep everything else in place. If you 
dismantle it altogether and then reassemble some but not all 
you end up with what Mr. Harrison has suggested, you may end up 
by the time the dust settles spending as much or more where 
everybody lands than where you started off. You lost all the 
synergy that you have with the international force and all of 
the good parts of JFCOM. And it seems to me that if you are 
going to eliminate the functions, you can eliminate the 
function. You do not have to eliminate the command.
    LTG Wood. Yes.
    Mr. Scott. And so one of the questions we had was, and we 
cannot know because we have not seen the analysis, we have not 
seen the arguments pro and con, we have not seen any document 
with any numbers on it. And so we are just unable to make any 
assessment. But there seem to be many other credible options 
other than just eliminating the command and regrouping 
somewhere else.
    LTG Wood. General Odierno will be charged with that task, 
will look function by function, and the size of that function 
and where it needs to be positioned. And likely maintain the 
focus of a commander over whatever result he comes up with.
    Mr. Scott. Well if you have a commander, does that not 
suggest a command?
    LTG Wood. It does.
    Mr. Scott. Thank you. I ask unanimous consent that members 
who did not have the opportunity to ask questions of witnesses 
be given seven days to submit questions for the record and to 
submit opening statements for the record. Mr. Wittman, do you 
have further comment?
    Mr. Wittman. No.
    Mr. Scott. I want to thank all of our witnesses for being 
with us today. This has been extremely helpful. And we have a 
lot of work to do and information to get. Without more, the 
Committee now stands adjourned.
    [Whereupon, at 3:34 p.m., the Committee was adjourned.]

                                  
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