A Senate Armed Services Committee interviews a candidate for the position of Secretary of the Navy. Senator Lillian DeHaven (Anne Bancroft) from Texas criticizes the Navy for not being gender-neutral. Behind the curtains, a deal is struck: If women compare favorably with men in a series of test cases, the military will integrate women fully into all branches of the Navy.
The first test is the training course of the (fictional) U.S. Navy Combined Reconnaissance Team (similar to U.S. Navy SEAL BUD/S). Senator DeHaven hand-picks topographical analyst Lieutenant Jordan O'Neil (Demi Moore), because she is physically more feminine than the other candidates.
To make the grade, O'Neil must survive a grueling selection program in which almost 60 percent of all candidates wash out, most in the first week ("hell week"). The enigmatic Command Master Chief John James Urgayle (Viggo Mortensen) runs the brutal training program that involves 20-hour days of tasks designed to wear down recruits' physical and mental strength, including pushing giant ship fenders up beach dunes, working through obstacle courses, and hauling landing rafts.
Given a 30-second time allowance in an obstacle course, O'Neil demands to be held to the same standards as the male trainees. Eight weeks into the program, during SERE training, the Master Chief ties her to a chair with her hands behind her back, grabs hold of her and slams her through the door, then picking her up off the floor he repeatedly dunks her head in ice cold water in front of the other crew members. O'Neil fights back, and is successful in causing him some injury despite her immobilized arms. In so doing, she acquires respect from him, as well as from the other trainees.
Navy leaders, confident that a woman would quickly drop out, become concerned. Civilian media learn of O'Neil's involvement, and she becomes a sensation known as "G.I. Jane." Soon she must contend with trumped up charges that she is a lesbian, and is fraternizing with women. O'Neil is told that she will be given a desk job during the investigation and, if cleared, will need to repeat her training. She decides to "ring out" (ringing a bell three times, signaling her voluntary withdrawal from the program) rather than accept a desk job.
It is later revealed that the photo evidence of O'Neil's alleged fraternization came from Senator DeHaven's office. DeHaven never intended for O'Neil to succeed; she used O'Neil as a bargaining chip to prevent military base closings in her home state (Texas). O'Neil threatens to expose DeHaven, who then has the charges voided and O'Neil restored to the program.
The final phase of training, an operational readiness exercise, is interrupted by an emergency that requires the CRT trainees' support. The situation involves a reconnaissance satellite powered by weapons-grade plutonium that fell into the Libyan desert. A team of U.S. Army Rangers is dispatched to retrieve the plutonium, but their evacuation plan fails, and the trainees are sent to assist the Rangers. The Master Chief's shooting of a Libyan soldier to protect O'Neil leads to a confrontation with a Libyan patrol. During the mission, O'Neil, using her experience as a topographical analyst, realizes when she sees the team's map that the Master Chief is not going to use the route the others believe he will in regrouping with the others. She also displays a definitive ability in leadership and strategy while rescuing the injured Master Chief, whom she and McCool pull out of an explosives-laden "kill zone." With helicopter gunships delivering the final assault to the defenders, the rescue mission on the Libyan coast is a success.
Upon their return, all those who participated in the mission are accepted to the CRT. Urgayle gives O'Neil his Navy Cross and a book of poetry containing a short poem, "Self-pity", by D. H. Lawrence, as acknowledgment of her accomplishment and in gratitude for rescuing him.

Question: How is the Navy going to decide if the Navy should be gender neutral?
Answer: By comparing men and women in a series of test cases.
Alternative answer: test cases