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Testimony before the House Appropriations Committee: Fiscal Year 2002 Defense Budget Request
As Delivered by Secretary of Defense Donald H. Rumsfeld, Chairman of the Joint Chiefs of Staff General Hugh Shelton,, Rayburn House Office Building, Washington, DC, Monday, July 16, 2001

REP. LEWIS: If the committee will come to order -- (pause) -- good morning, Mr. Secretary.

     SEC. RUMSFELD: Mr. Chairman, nice to see you.

     REP. LEWIS: Let me begin the meeting by expressing my appreciation for those of you who were so responsive to adjusting your schedule last week. My bride and I had to spend a little time in California on a special family matter that had nothing to do with me, but on the other hand, we want you to know that everything is going fine, and we're happy to be with you.

     Most appreciative of your readjusting today, Mr. Secretary, General Shelton, Dr. Zakheim.

     I wanted to mention, just as an aside, Mr. Secretary, to give you a sense of the committee's concern about our schedule -- I believe you know very well that the committee has been very supportive of the review that you're about. But to put it in some perspective in terms of our challenges, it was one year ago tomorrow that we were filing the conference report for the '01 bill. Generally speaking, it suggested that it's very advisable to have defense matters move well ahead of the pack, if we possibly can, because there are people in the place who do believe that there are other priorities beside defense, no matter what this subcommittee might think.

     So this year, because of a number of circumstances, we're going to be in the midst of that very competitive environment. And so the committee is going to have rather intensive work to do in the months ahead.

     We are appreciative of your scheduling problems, but frankly, this is my first go-round with a new administration that happens to be my administration, where they want to review the way we've been spending dollars -- appropriately so. But in the meantime, it's created some problems and challenges that we will be asking you to help us with as we go forward.

     As the committee comes to order, today the committee is pleased to welcome the Honorable Donald H. Rumsfeld, secretary of Defense, second time around; General Hugh Shelton, chairman of the Joint Chiefs of Staff; and Dr. Dov Zakheim, the comptroller of the Defense Department.

     General Shelton, this may be your last appearance before the committee, and we want you to know that the committee is very proud of the some thirty-eight years of dedicated service you've given to our military forces. And particularly your service over these last years has been just -- to talk about capping off a career, you have made a fantastic contribution to the nation's strength, and we want you to know the committee appreciates that work.

     GEN. SHELTON: Thank you very much, Mr. Chairman.

     REP. LEWIS: Our witnesses are here to testify on the president's amended defense budget request for fiscal year 2002. It's taken more than a usual amount of time, as I suggested, to put this package together, Mr. Secretary, but we can appreciate the challenges you've been facing.

     While the department's budget request for the fiscal year that's ahead of us is $328.9 billion, that is a reflection of 32.6 billion over last year's enacted level. This represents an increase of 7 percent, taking inflation into account, the largest proposed single- year increase for defense since the mid-1980s.

     Mr. Secretary, for a good many years now, members of this committee have been pointing out the need for significant funding increases in support of our national security effort, and there is no question that with this budget you and the president have recognized this as well. And I would ask those who would question the size of this increase to carefully examine where these additional funds would go. Of the $33 billion increase, some three-quarters, or nearly 25 billion, is in direct support of our men and women in uniform for increases in pay and medical care, for housing and installations and for training and operational support. That is the vast majority of the additional funds you're requesting, and it's really by way of taking care of the basics. They put our people first, and for that, Mr. Secretary, I commend you.

     Another area of emphasis in this budget lies in the area of missile defense. I must say that General Kadish had to be doing a dance over the weekend -- (laughter) -- as we began to face a series of tests, as he's described it, but a very, very successful development in terms of the prospect of asking for additional funding for missile defense. In this area, the administration is bringing forward a series of proposals which, in terms of policy, priority and process have already generated debate and no small degree of controversy. This involves not just questions about the ABM Treaty, but also over funding priorities within our defense program and whether and how we can redesign the process for developing and fielding new technologies to meet new threats.

     I hope we are able to engage with you today on these issues involving missile defense, Mr. Secretary, for they are not only important in and of themselves, but they speak to a larger challenge we all must confront; that is, what are the real threats of the future?

     Where should we be putting our priorities, and how best can we move forward once we decide to meet those priorities, for as we all know, the threat of ballistic missiles is just one of many challenges that confront our nation and its allies as we move into the years ahead.

     These are hard questions, and as we consider this budget, Mr. Secretary, many fundamental questions still remain unanswered. This budget does not address changes to war-fighting strategies, the size and composition of future force structures, nor how to transform our forces for the future.

     We realize that these are issues for the Quadrennial Defense Review that will be completed later this year, but they're still vital inputs to the defense appropriations process. And especially where appropriations are concerned, a major question is: Can we afford, and how do we best balance the costs of adequately supporting today's forces, modernizing that force in the near term, and beginning the process of transformation that force for the demands of the 21st century? This is a question the committee must grapple with now, and as we consider the fiscal year 2002 defense budget, we urge you, Mr. Secretary, to work with us closely and make results from the QDR available to the committee as soon as possible.

     You have rightly noted in your written testimony that the United States armed forces are the best trained, best equipped, most powerful military force on the face of the earth. We want you to know that this committee is proud of that force and the exceptional professionalism and dedication of all Defense Department personnel, from the newest recruit, Mr. Secretary, to you and, of course, to General Shelton, who in the months ahead is probably going to have some phenomenal new challenges, and we will miss this fantastic service that has been yours, General.

     So, after my good friend, Jack Murtha, has made his remarks, I'd invite you to summarize your statements and then we'll proceed with questioning.

     REP. JOHN P. MURTHA (D-PA): Thank you, Mr. Chairman.

     Mr. Secretary, he welcomed you three, but one of the most important people here is Arlene Lewis, who is with us today. Seldom do we get the honor of having her, so we welcome Arlene Lewis to this hearing.

     See her back there?

     REP. LEWIS: Thank you. (Chuckles.)

     REP. MURTHA: All right.

     I'm disappointed, Mr. Secretary. We harped, this committee harped with the Clinton administration to either reduce the tempo of operations or increase the budget. We knew that without one or the other we were going to have an inadequate defense budget. We're going through the same drill again where this budget is inadequate, in my estimation.

     I'll say this. Where you put the money, as the chairman said, is exactly the right place. The thing I hear when I'm out in the field is problems with health care, the problems with quality of life, the problems with housing, and you have addressed that issue the best you could with the amount of money you have available. But as the tempo of operations stays the same, without reducing that tempo of operations, we're going down a very treacherous slope, in my estimation, and we're going to have a difficult time keeping the quality of the troops at the highest level with this high technology that we address.

     The $20 billion, I agree completely with where you distribute it. The supplemental, we made a suggestion in the supplemental and I think, I hope that Dr. Zakheim will pay attention to it. We put $200 million into the installations of health care so that we can get ahead of the curve. Inflation rate is 3 percent in the installations and 13 percent when we buy the care from outside vendors. They need more nurses, they need more administrators, and so forth, and we tried to make that change, and I hope that you'll look at that and see if we can not even do more next year to provide better and more medical care in the military installations themselves.

     But I can't argue with the amount of money that was distributed to you. I can't argue with any of the priorities that you have set forward, and look forward to hearing your justification for the budget.

     REP. LEWIS: Thank you, Mr. Murtha.

     Mr. Secretary, as I have indicated, your entire statement will be included in the record, but you may proceed as you will and we look forward to an open exchange here. I do understand at the beginning that General Shelton and others have schedule pressures and we're going to try to move forward in an expeditious manner and, in the meantime, General Shelton, we're interested very much in your comments as well.

     Mr. Secretary?

     SEC. RUMSFELD: Thank you, Mr. Chairman.

     (Discussion aside about microphone.)

     REP. LEWIS: This is the Appropriations Committee. We can't really figure the electronics out -- (laughter).

     SEC. RUMSFELD: Apparently that's the mike. Whose is this? (Laughter.)

     REP. LEWIS: It's your public, Mr. Secretary.

     SEC. RUMSFELD: (Laughs.) Mr. Chairman, I thank you, and members of the committee. I appreciate the tight schedule you're on and assure you we will do everything to cooperate with you as we go forward. And certainly the results of the QDR will be available to this committee as they become available.

     Congressman Murtha, with respect to your comment, let me say that we do -- General Shelton has a study underway with respect to the department's engagement approach across the globe, and I am advised that he believes and the chiefs believe that the op tempo issue has been moderated somewhat today relative to, I suppose, a year, year and a half, two years ago.

     I do -- rather than reading my statement, I'd just like to save time for some exchange of views. Let me just make a few comments.

     This committee knows well the numbers and the situation of the armed forces today probably better than almost everyone in Washington. So you understand the shortfalls that the men and women in uniform have been facing in terms of readiness, operation, procurement, health care, maintenance, infrastructure, modernization, housing, intelligence. We do have the best-trained, best-equipped military force on earth, as the chairman indicated, and peace and prosperity and freedom across the world are underpinned by the stability and the security that these men and women provide.

     But there is no question but that years of underfunding and overuse have taken a toll. With the end of the Cold War there was a drawdown, an appropriate peace dividend, but it overshot the mark by a good deal, and as the size of the forces reduced, the men and women in uniform were asked to take on more and more missions. They saluted, they did their best, but at the cost of putting off maintenance, training, procurement and other necessities, and now that bill is staring us in the fact. The cumulative effective of year after year of neglect is catching up.

     The budget numbers the chairman mentioned; it's a sizable increase; some $22.8 billion. That's a significant commitment of the taxpayers' dollars, but we need every cent of it, let there be no doubt. We need the funds for pay and housing and health care and quality of life; we need it for the backlog in maintenance, modernization and transformation and research and development, and this budget certainly helps. But let's be clear, it does not get us well. I know that and you know that. The underinvestment and over- use of the force went in far too long; the gap is too great; the hole we're in is too deep; there is no way to spend our way out of it in one year. Again, you know that and I know that.

     We're proposing this budget in full recognition that just to keep the department going next year on a straight-line basis, with no improvements, just covering costs and inflation, and honest budget numbers, we'd need a budget of $347 billion -- another $18 billion increase. To get well by 2007, that is to meet current requirements in areas like readiness, proper flying time, training, maintenance and so forth, would cost the American taxpayers tens of billions of dollars more, and that's before calculating the additional investment that will be needed for transformation.

     It's an indication of the depth of the hole we're in that the $22.8 billion increase that the president proposes only makes a good dent in the shortfall that the armed forces are facing. So where do we find the money for the rest of the needs? We simply have to match these sizable spending increases with sizable increases in efficiency at DOD. And I've asked the department to come up with reforms and cost savings that we can undertake in the coming months, but we'll need Congress to give us greater freedom to achieve cost savings, so we can assure the taxpayers that we're using their dollars more efficiently, and we can redirect funds to urgent priorities. We simply have got to turn waste into weapons.

     Today we're proposing some immediate and significant savings and efficiencies, but we'll need help from the Congress to allow us to do more.

     Let me make a comment about the B-1 bomber that's been very much in the news. It's a 20-year-old system. It's not stealthy. It's designed for the Cold War. That has been headed towards expensive obsolescence. Last month, the Air Force proposed to modernize the aging B-1 fleet, turn it into a more potent weapon capable of contributing to 21st century security without requiring new money. It proposed cutting the size of the force from 93 to 60, taking the remaining aircraft and concentrating them in two of the largest B-1 bases rather than the five bases where they're scattered today. The Air Force would then take the savings, use them to modernize the remaining aircraft with new precision weapons, self-protection systems, reliability upgrades, so that they can become viable in a future conflict. They are not viable in a conflict today; they're too vulnerable.

     Doing this would add some $1.5 billion of advance combat capability to today's aging B-1 fleet over the next five years without requiring additional dollars. It would make the B-1 force usable so that it could provide America the kind of all-weather, long-range strike capability that will be critical in the 21st century. This is the kind of efficiency we owe the taxpayers.

     Congressional support for the plan would send an important signal to all of the services and give them an incentive to find further cost savings by telling them that such efforts will be rewarded with freed- up funds to improve capabilities. Failure of this proposal would send a damaging signal across the defense establishment that finding ways to save money and increasing efficiency is a waste of time and leads to nothing but hostility to the Air Force.

     That's not the message we need to send, so a lot is riding on the decision, and we need your support and the support of Congress on this effort to respect the taxpayers' dollars.

     Another example, of the Peacekeeper -- I won't go into it. I've mentioned it in my prepared remarks. It's a system that is no longer needed, and the warheads will be needed, and we believe that it is an effective and efficient way to proceed.

     There are other cost savings. I have no desire in the world to enter into a round of base closing. When you get up in the morning, that's not the first thing you want to do. It's just a very difficult thing to do. It makes people unhappy. It causes anguish and angst and concern. But we have to do it. Everyone who talks about says we've got 20 to 25 percent more base structure than we need. We simply cannot be respectful of the taxpayers' dollars and sit there toting, year after year, 20 to 25 percent more base structure than is required to operate this department. So we're going to be coming at you -- as little stomach as I have for it, we will be coming at you on base closings.

     I could go on, but the point is this: I've never seen an organization, public or private, that could not operate at something like 5 percent greater efficiency, but only if it has the freedom to do it. But it's not possible to do that at DOD, because of the restrictions on the department and the way it currently functions.

     So unless the department is given encouragement to turn waste into weapons, we will have to come to you next year asking you to appropriate more of the taxpayers' dollars to still -- meet still more urgent needs, many of which could have been paid for by finding cost savings.

     Five percent of the DOD budget is something in excess of $15 billion. We could do a great deal with that saving. We could pay $3 billion needed to annually increase ship procurement from six to nine ships, so we could maintain a steady state, 300-plus ship Navy. We could cover the 1.4 billion needed annually to fund base operation requirements, or we could pay the entire annual cost of procuring the additional aircraft necessary to help meet the steady state requirements for Navy, Air Force, and Army aircraft. These are all important priorities that need to be funded, and I would certainly prefer to come to you next year and tell you that we've found ways to fund certain programs by operating more efficiently.

     Mr. Chairman, we need the support of the committee for the president's budget. We need every dime. We need your support for the proposed increases in pay and housing, the quality of life for our men and women in uniform. We need your support to fund the increased flying hours that are needed. We need your support to reduce the backlog of facilities, maintenance, and repair, and weapon system maintenance and repair for modernization, and for transformational research and development. But we also need your support to give us the freedom to move dollars from waste into more effective capabilities for this country.

     As I said at the outset, after a decade of underfunding and overworking our force, we're in a hole.

     Getting out of it will require significant, sustained investment. I'll feel a lot better about it coming before this committee next year to ask for those funds if I can tell you and the president and the American people that we're treating the taxpayers' monies responsibly; and today we are not.

     Thank you.

     REP. LEWIS: Thank you, Mr. Secretary. We appreciate your candor. I'm glad that there was nothing provocative in your remarks.

     SEC. RUMSFELD: (Laughs.)

     REP. LEWIS: General Shelton, I have not been to India since 1965, but in my youth, I had a chance to spend a good deal of time in that subcontinent shortly after 1947, when it became the world's largest democracy, a country that continues to expand and grow. I was astonished, upon first having the opportunity to have this job, to learn that we'd had almost no significant high-level contact with the military in India.

     It was my understanding that you may be headed in that direction here shortly, presuming our schedules work out. But in the meantime, frankly, I've got to tell you that I'm very pleased with the fact that you are making that effort. I hope to follow sometime later in the year on a return visit myself, so I'd really appreciate your spending some time with me after you have a chance to return from that contact.

     So with that, General Shelton, we are very pleased to hear whatever you might want to present to the committee.

     GEN. SHELTON: Well, thanks, Mr. Chairman. I'll look forward to it and I will get with you as soon as I get back.

     Chairman Lewis and Congressman Murtha and other distinguished members of this committee, it really is an honor to be with you here again today and to report to you on the state of America's armed forces. I'd like to highlight just a few key priorities and concerns from my written statement, which I've submitted for the record, and then we'll move right into your questions.

     First let me thank the Congress, and this committee in particular, for your significant and sustained support of our men and women in uniform. And let me thank you, Chairman Lewis, for your very kind words this morning. Thank you.

     With your help, we've made considerable progress in a lot of areas that directly impact the overall health and welfare of our troops, from the increased pay and allowances to pay table reforms, to TriCare reform and expanded health care coverage, to additional funding to provide adequate housing for our military families, and finally, the budget plus-ups that have enabled us to arrest the decline in readiness for many of our front-line and first-to-fight units.

     But let me also say that we need to sustain this momentum if we are preserve the long-term health and readiness of the force in the years to come. Together as we consider new budgets, new national security strategies, it's important that we also remember that the quality of people in our military is what is extremely important because they, in essence, are the critical enablers for all that we hope to accomplish.

     Since my last testimony before this committee, we have been reminded of the human element of our national security in several profound ways.

     Last October, the USS Cole was savagely attacked by terrorists in the port of Aden and 17 sailors died in that attack. Some have asked why would we put a ship in harm's way in such a dangerous part of the world? Well, that's what we do; we go into harm's way to protect America's interests around the globe. The sailors of the USS Cole were en route to the Gulf to establish our presence and to protect America's vital interests.

     And last December we had two U.S. Army helicopters that crashed during a training exercise in Hawaii. Nine soldiers died in that crash. And some asked, why would the Army put its soldiers into harm's way during a dangerous training mission in the black of night? Well, that's what we do, we train for the most difficult missions that we'll face. We must know that when America's interests are threatened, we'll be ready to go, day or night, because failure is not an option. We minimize the risks to our great men and women in uniform, but we have to train like we anticipate having to fight.

     A few months ago, as we all know, an unarmed EP-3 reconnaissance aircraft flying in the airspace over the China Sea was struck by a Chinese fighter and, of course, for a while we had 24 of our great personnel detained. Some ask why are we conducting surveillance against another nation? My answer to that is, "That's what we do." We are vigilant, we are watchful because we know that our interests and those of our allies in the region may be challenged and we must be ready.

     I'm very proud of the performance of these great men and women and the thousands of others who very proudly wear the uniform of our country. They have been and always will be our decisive edge. Indeed, they're so good at what they do, unless there's an incident or an accident, we rarely take notice of the contributions that they make to national security. They sail our ships, they fly our aircraft, they go on patrols quietly and professionally, and America is safe and enjoying great prosperity in part because of them.

     However, today our people and our forces are experiencing some significant challenges, a number of which I'd like to bring to your attention today.

     To begin with, although our first-to-fight forces are trained and ready to meet any emergent requirement, we find that many other operational units are not as ready. These include our strategic airlift fleet; our intelligence, surveillance and reconnaissance aircraft; our combat service support units; and our training bases, all of which provide critical capabilities to our war-fighting forces. These units are in some cases suffering the consequences of high-op tempo and the diversion of resources to sustain the near-term readiness of the first-to-fight forces.

     In fact, since 1995, DOD has experienced a 133 percent increase in the number of military personnel committed to joint operations. I mean real-world events, not exercises, and we are doing it with 9 percent fewer people. This high operational tempo on segments of the force has placed an increased strain on our people.

     I believe that the fundamental cause of the situation is the imbalance between our national security strategy and the post-1997 QDR force. Fixing this imbalance during -- it's one of the key goals of this year's QDR and one of the top priorities for Secretary Rumsfeld and all the Joint Chiefs, because the challenge will only increase over time, and we owe it to our people to get it right.

     In fact, today we are struggling to reconcile a multitude of competing demands, including near-term readiness imperatives, long- term modernization and recapitalization of some of our aging systems, and infrastructure investments essential to preserve the world's best war-fighting capability.

     And as I've mentioned in previous testimony, we made a conscious decision to cut procurement accounts in the 1990s and to live off the investments of the 1980s. This marked reduction in procurement means that the average age of most of our major weapons systems continues to increase, as highlighted by the secretary. Many of them have experienced or exceeded, rather, their planned service life or are fast approaching it.

     Let me provide you with just a few examples. Our front-line air superiority fighter, the F-15, averages 17 years, and it's only three years away from the end of its original designed service life. Our airborne tanker fleet and B-52 bomber force are nearly 40 years old. ISR, our intelligence surveillance and reconnaissance aircraft and electronic warfare aircraft platform, such as the RC-135, Rivet Joint, our EP-3s, our P-3s, and our EA-6Bs, all average between 19 and 38 years of service. And finally, there are numerous helicopter platforms within the department, in all the services, and they have either passed or are fast approaching the end of their original designed service lives. In fact, most of the war-fighting platforms I've just mentioned meet with 25-year rule required by the great state of Virginia to qualify for an antique license plate.

     Our force is not aging gracefully. Today we spend significantly more each year to maintain our aging equipment in repair parts and maintenance down time and in maintenance support. And the operational environment and current pace of operations requires us to keep this equipment ready to go. But to do that, as you know, we've been draining resources from the very same modernization accounts that we should be using to buy replacement systems. If we don't replace these systems soon, either the force structure will shrink further, or we'll have to continue to maintain the same systems, which results -- is resulting in spiraling operations cost and maintenance cost, and also reduced combat capability. In my opinion, these are unacceptable options. The bottom line is, I don't believe that we'll be able to sustain our long-term readiness under these conditions.

     So what do we do? Two things. We must bring into balance our strategy and our force structure, and we must significantly increase our efforts in procurement to modernize and recapitalize the force. The QDR should produce a strategic blueprint and investment profile to help us shape our force and to carry out the new strategy.

     Another related concern is the fact that our vital infrastructure is decaying at an alarming rate. Budget constraints have forced us to make hard choices. We've had to redirect funds from military facilities and infrastructure accounts to support current readiness requirements.

     A quality force deserves quality facilities; therefore, I think it's essential that we provide the resources to reverse the deterioration of our post camps and stations. One way that Congress can directly help is to authorize a process to dispose of excess bases and facilities. According to a 1998 DOD BRAC report, we currently have 23 percent excess base capacity.

     Now, Mr. Chairman, I'd like to focus on what I referred to earlier as the decisive edge, and that's our men and women in uniform. President Bush stated that "A volunteer military has two paths; it can lower its standards to fill its ranks, or it can inspire the best and the brightest to join and stay -- and this starts with better pay, better treatment, and better training," end of quote. The president, I believe, has it exactly right.

     We must continue to close the significant pay gap that still exists between the military and the private sector. This will allow us to attract and retain the best and the brightest to meet our future needs, and we must make continued investments in health care, in housing and other quality-of-life programs that are essential to sustain a quality force.

     One of the most valued recruiting and retention tools that any corporation can offer its potential employees or its current workforce is a comprehensive medical package and, in this regard, DOD is no exception. For that reason, the chiefs and I strongly urge Congress to fully fund the Defense Health Program and all health care costs as a strong signal that we are truly committed to providing quality health care for our troops. I can't think of a better way to renew the bonds of trust between Uncle Sam and our service members and retirees than this commitment to quality health care.

     Additionally, I would ask your support to help ensure that all of our men and women in uniform, single, married and unaccompanied, are provided with adequate housing. Unfortunately, this is not the case today. Currently, almost 62 percent of our family housing units are classified as inadequate. Correcting this situation is essential if we are to improve the quality of life for our service members and their families, and as we have learned over the years, we recruit the service members, but we retain the family.

     Mr. Chairman, if we are able to achieve success in the initiatives that I have listed, I believe we can sustain our quality force and ensure that America's best and brightest continue to answer the call to serve America.

     To sum up, I firmly believe that America has the best military in the world today, but let me also point out that our greatest adversary today, as I have said so many times in the past, is complacency. It's imperative that we take action today to ensure that our men and women in uniform are properly equipped, trained and led, and if we do so, I'm confident that we will prevail in the challenges ahead.

     Again, thank you for the opportunity to appear before this committee, Mr. Chairman, and now we look forward to your questions.

     REP. LEWIS: Thank you, General Shelton.

     Dr. Zakheim?

     MR. ZAKHEIM: I don't have a prepared statement, sir.

     REP. LEWIS: Thank you all very much for being with us this morning. Mr. Secretary, we will follow on with a good deal of discussion regarding what we're doing to attract and retain those fine men and women that General Shelton was referring to. I feel it's kind of my responsibility, though, to join one of the key issues that's a part of your budget at the outset.

     Mr. Secretary, the budget proposes spending $8.3 billion on the full range of ballistic missile defense programs. This is an increase over last year of nearly 60 percent, or $3 billion. This is an increase over last year of nearly 60 percent; in addition to this funding increase, the administration is proposing significant changes in policy as well as the acquisition process as it applies to the potential fielding of national and theater missile defense programs.

     It's clear that this new program is much more aggressive and complex than earlier efforts. For both national and theater missile defense, you are proposing multiple development programs, carried out in parallel with no firm commitment to any one system or approach. In addition, you are seeking a degree of flexibility in managing the development and potential acquisition of these programs, including broad discretion over how appropriated funds are allocated towards different systems. This is unprecedented in recent memory for any defense program.

     Finally, this missile defense program poses many challenging policy questions. These include, first, the need to consider modifying or withdrawing from the ABM Treaty, and second, the relative priority and value of missile defense programs are measured against other pressing demands, such as the department's aging infrastructure equipment, et cetera.

     So with that, Mr. Secretary, what is the threat that justifies making these changes? And we'd be very interested in your commentary regarding the significant increases in funding. Mr. Secretary?

     SEC. RUMSFELD: Yes, sir, Mr. Chairman. The intelligence community is unanimous in recognizing the reality that with the end of the Cold War and the relaxation of tension, we have seen the spread of ballistic missile technologies and technologies relating to weapons of mass destruction in many unusual places across the globe, including countries that -- where people are starving, countries that seem to have very little resources. And as a result, they have identified ballistic missiles, as well as other asymmetric threats, including cruise missiles and terrorism, and prospectively cyberattacks, as the kind of threats and problems that the Unite States will be facing in the decades ahead.

     Certainly the Gulf War persuaded people that competing with Western armies, navies, and air forces wasn't very wise. And as a result, it is an awful lot cheaper and relatively easy for these countries to attempt to and in fact succeed in gaining ballistic missiles and cruise missiles and weapons of mass destruction.

     So the threat is real. It's growing. The numbers of countries with ballistic missiles is increasing every year. The numbers of total ballistic missiles on the face of the Earth are increasing every year. And the destructive power of these weapons is increasing.

     The United States some years ago was the target of a ballistic missile, and a number of Americans were killed and wounded in Saudi Arabia, at Dhahran.

     Now as to the size of the missile defense budget, it is a research and development and testing budget. It is not a deployment budget.

     It is a lot of the taxpayers' money. On the other hand, the Defense Department currently is receiving something less than 3 percent of the gross national product of the United States, and the missile defense budget is, in total, less than 2.5 percent of the defense budget. And the non-theater ballistic missile portion of it is about 1-1/2 percent of the defense budget. So while any numbers of billions of dollars are large in terms of the taxpayers' money, as a percentage, it is a very small fraction of what the Department of Defense is spending.

     REP. LEWIS: Mr. Secretary, it's my intention to stay very close to the five-minute rule, because of everybody's schedule today. You did not bring yourself to address, however, the question of the ABM Treaty.

     It would appear --

     SEC. RUMSFELD: Oh, my apologies. Yes, indeed.

     The treaty exists. The United States does not make a practice of violating treaties, and we certainly don't intend to here. The president and President Putin have agreed that there will be discussions between our two countries in the weeks and months immediately ahead. The president has announced publicly, unambiguously and repeatedly that he intends to find and establish some sort of a framework beyond the ABM Treaty, which is a 30-year old treaty that prohibits ballistic missile defense. The president intends to have ballistic missile defense to protect the population centers of the United States as well as of our friends and allies and deployed forces.

     The treaty was designed explicitly to prohibit ballistic missile defense. Needless to say, if you want to have ballistic missile defense, you're going to have to find a way to get beyond that treaty. And that is what those discussions are about. That is what the president opened with his counterpart from Russia. I've met with the minister of defense of Russia, Secretary Powell has met with the foreign minister of Russia on these subjects, and we intend to be in close discussion with them in the weeks and months immediately ahead.

     REP. LEWIS: Mr. Secretary, I appreciate very much your response.

     Let me mention to you that I've spent a little time reviewing in some depth the work of the commission that you chaired so ably that dealt with this subject area. I personally feel strongly that you are addressing a subject forthrightly here that's critical to America's interests, and the committee looks forward to working with you in connection with that.

     Mr. Murtha?

     REP. MURTHA: Thank you.

     Mr. Secretary, I'm one of the strongest supporters of missile defense. What I caution you, and I know that you understand, that research is the key to the success of the program. I went over to -- the committee went over to Korea a couple years ago. We rushed THAD to failure. We put so much money in they couldn't spend it, and they rushed the program and it didn't work out A couple years ago, we slowed down the F-22 program because we felt like they were rushing it to failure. The V-22 program, we've had to do the same thing. So I appreciate what you're saying about putting the money in research before we start to deploy the program.

     One of the things you said about general provisions -- which we call general provisions, you call restrictions on the Defense Department. (Laughter.)

     SEC. RUMSFELD: (Laughs.) Where you stand depends on where you sit.

     REP. MURTHA: The vice president, when he was secretary of Defense, called the committee. He said, "We've got to get rid of these general provisions" Staff went over them and I think we eliminated about 65 percent. Well, he called me back. He says, "The lawyers say we have to have them." So I hope we can work closely together because an awful lot of these general provisions are necessary for you to do business.

     SEC. RUMSFELD: Right.

     REP. MURTHA: And so when I talk about general provisions, we're trying to help you, not hurt you.

     One of the other things that we keep failing to mention, tempo of operations, the exercise tempo of operations is as important as anything else we do. These folks come off a -- or come off a deployment, and they come back and then they go on an exercise. The same people do it over and over and over again. And one of the things we have to try is to reduce that exercise tempo of operation at the same time.

     Health care. I appreciate what you're saying about funding health care. I just hope the department doesn't come up with a plan that really is inadequate as far as health care for our retirees. And I know we'ave had some discussions about that in the past.

     I want to mention that when Vice President Cheney was secretary of Defense, he said that the defense budget should never get below 4 percent of the gross domestic product. Well, of course, we're well below 4 percent. And the threat has changed some, but still, we're struggling with the amount of money we have available.

     One other thing I just want to mention is the DD-21. I worry that there's not enough people on that. I've heard General Shelton say that he's trying to reduce the number of people, but when you look at the Cole and the accident we had in the Cole -- the incident we had in the Cole, it wasn't an accident, the terrorist attack, and the fact that if we hadn't had the number of people -- I don't know what the right number is, but I just worry that 95, if 35 of them were killed in an incident, we'd need more people on that ship. So I think you have to look at that when you make the decision about what is going to happen with the 21.

     And I appreciate what General Shelton said about pay, because every place I've gone, General, that's the thing they talk about the most. We did make some changes in redux because of complaints. This committee was in the forefront on pay and always has been. So I appreciate -- I know how painful it is to come and -- not waste your time testifying before the Congress, but I know how many times you testify and how impatient you get testifying before us. But we look forward to working with you on all these very, very delicate issues.

     SEC. RUMSFELD: If I may, Mr. Chairman.

     Congressman Murtha, thank you so much. We'll be delighted to work with you on the general provisions and see if we can't find the right ones that can enable us to have some more flexibility.

     With respect to health care, one of the problems we have is we have made every effort to arrange to see that this budget is going to fully fund that. The problem is there is no experience in the world with anybody doing what we're proposing to do here, so there are not actuarial tables that can help us.

     With respect to the 4 percent of GDP, when I came to Washington it was 10 percent during the Eisenhower and Kennedy period. And then it was about 5 percent when I was secretary of Defense 25 years ago. Four percent made a lot of sense when Dick was -- Vice President Cheney was there. We're dropping below 3 percent. And there's no question but that we have to get ourselves arranged so that we are taking proper care of the force and so that the force is being fashioned to fit the 21st century.

     REP. MURTHA: Mr. Secretary, I just want to add that the direction you're going is absolutely right. The two-front strategy hadn't been in effect for 15 years. We couldn't fight a two-front war unless it was Haiti and a big war. (Laughter.) So you're going in exactly the right direction, and I appreciate the difficulties and decisions you're trying to make.

     SEC. RUMSFELD: Thank you very much, I appreciate that. I wish it were more unanimous! (Laughs.)

     REP. J. LEWIS: You don't have that problem within this committee, Mr. Secretary.

     SEC. RUMSFELD: No, sir!

     REP. J. LEWIS: Mr. Skeen?

     REP. JOE SKEEN (R-NM): Thank you, Mr. Chairman.

     We've got the burner going on this thing so somebody's covering this group of people up here. We've got the line here.

     Mr. Secretary, the KEA SAT will be ready for flight test and experiment next year. Does OSD support conducting the flight experiment?

     SEC. RUMSFELD: I'd have to get back to you for the record on that.

     REP. SKEEN: Well, we're presenting this to you so you won't have anything to do when you're sleeping at night or anything, we've got all this stuff. But thank you.

     SEC. RUMSFELD: Thank you.

     REP. SKEEN: Cruise missile detection. Last month, ABC News and several newspapers reported on the European progress with passive radar to detect stealthy cruise missiles. Would you support having our Army, Air Force, our air defense experts to experiment on the potential for this technology?

     SEC. RUMSFELD: Mr. Congressman, I think I'd rather talk in a closed session on the subject of cruise missiles.

     REP. SKEEN: That's fine. We can do that. I just wanted you to be aware of it. I have Holloman on my agenda and they're very interested in it.

     Mr. Secretary, the civilian computer networks that are critical to the economy are subject to information warfare. Are the DOD and NSA and our university researchers being coordinated effectively to address this?

     SEC. RUMSFELD: I wish I could say confidently and affirmatively yes, but the reality is that we have a good distance to go on information -- our information capabilities and our networks and the protection of those networks. And there are elements in the department that are reviewing that, and as a matter of fact, I received a briefing on it within the last week -- (to General Shelton) -- didn't we, General? --

     GEN. SHELTON: Yes, sir.

     SEC. RUMSFELD: -- and we have a distance to go.

     REP. SKEEN: Mr. Secretary, tracking mobile targets is the most difficult problem that we have. And the enemy's very long-range anti- aircraft missiles will make our architectures obsolete that use large airplanes.

     When will UAV and space-based counterparts to these aircraft needs be deployed?

     SEC. RUMSFELD: We have, in this budget, in the R&D and the S&T sections, proposed to accelerate some work with respect to UAVs. There is no question but that despite the fact that they're a relatively recent entry into the inventory, UAVs are in enormous demand. And they're what we call the high-demand/low-density assets, and we've got several categories of them that we need to fund considerably better than we have in the recent years.

     GEN. SHELTON: If I might add, though, Congressman Skeen, we also have recognized the importance of being able to detect and track mobile targets, and that has been one of Joint Forces Command's first large experiments that they have ongoing at this time; with some payoff, I might add.

     REP. SKEEN: We appreciate you being at White Sands, there.

     GEN. SHELTON: Thank you, sir.

     REP. SKEEN: Let me just cite this part of it. Mr. Secretary, the F-117 Stealth fighters from Holloman Air Force Base are dependent on tankers to rapidly deploy. How will we meet the greatly increased demands on our tanker fleet to support our new strategy for rapid deployment and long-range strike?

     SEC. RUMSFELD: The tanker question is one that's under review in the QDR at the present -- excuse me for using that jargon -- in the Quadrennial Defense Review which was mandated by Congress -- and we are currently looking at the tanker issue. And there is no question but that it, along with airlift, will have to be addressed as we develop the 2003 budget in this fall.

     REP. SKEEN: (Inaudible.)

     GEN. SHELTON: If I could just add, Congressman Skeen, as you probably noticed on Desert Fox and Allied Force, the operation in Kosovo, the air bridge and the support of the tankers were critical to that throughout both operations, and they did a magnificent job even though, as I indicated, they are old and aging and, as the secretary said, we're having to go back and relook at the program for them. But they perform magnificently on a daily basis, even if they are old aircraft.

     REP. SKEEN: Well, I appreciate the concentration that you've had on it.

     Mr. Chairman, that's --

     REP. LEWIS: Mr. Dicks?

     REP. NORMAN DICKS (D-WA): Thank you. Mr. Secretary and General Shelton, I want to go back to this question about the money. "Jerry McGuire" said, "Show me the money."

     You know, we've had some studies that were done by very prominent people. I think Jack -- (inaudible) -- was on one group that said we -- what was it --

     REP. : And Warner.

     REP. : Yeah. So was I on it.

     REP. : Yeah.

     REP. DICKS: -- we needed $60 billion a year more. And Harold Brown (sp) and Schlesinger called for an increase of $50 billion annually. Now, Mr. Secretary, the other day you had us over, and we appreciated that very much, and you went through and kind of added up what was necessary to really do this budget correctly, and it was significantly more than the $18 billion that we're talking about in the increase in '02 budget. I mean, I think it's important for you to tell the American people in your own personal and professional opinion, you and General Shelton, what you think we need to have in order to deal with not only the very important quality- of-life issues, but transformation and modernization. I mean, what do you think that the number is that would help us deal with the problems that really face the country in terms of transformation and modernization?

     SEC. RUMSFELD: Well, Congressman Dicks, in my prepared statement I discussed some of that, and in my statement before the Armed Services Committee I have laid out a whole series of areas that have been underfunded year after year after year by the United States government.

     REP. DICKS: Right.

     SEC. RUMSFELD: There is no way on the face of the Earth we're going to dig out of the hole we're in, in one year. It will take a series of years. And it is unambiguous that they overshot the peace dividend by a significant margin.

     We are currently recapitalizing infrastructure in the Pentagon at 192 years. The private sector appropriate rate is something like 57 to 67 years' recapitalization. Now you don't get that right fast. It takes some time.

     Our shipbuilding budget is headed down to 130 -- 230 ships. It's currently at 310 or so.

     REP. DICKS: But let's --

     SEC. RUMSFELD: And year after year of not building sufficient ships has put us on a trajectory that is clearly unacceptable for this country.

     REP. DICKS: But you know, here's a great article in the Weekly Standard, "No defense." "Here's some unsolicited advice for two old friends, Donald Rumsfeld and Paul Wolfowitz: resign."

     I mean, in other words, I think you've tried to do your best to go down to the White House and ask for the money that's necessary to get this job done, but you've been turned down. And they have said they will not give you the money.

     As we're told, you asked for like $38 billion, and they give -- and OMB said you'll only get 15 (billion), and you wound up with 18 (billion). And we appreciate the fact that you got the 18 (billion).

     But what I worry about is, if you, as secretary of Defense, and General Shelton know that the country is underfunding the defense budget, then why can't we convince the president and OMB, which seems to be running this government, that we've got to have a significant increase, or we're going to let America's military capability deteriorate? That is unacceptable.

     SEC. RUMSFELD: Mr. Congressman, the country has known we've been underfunding the defense budget year after year after year. This is nothing new. I just arrived. I walk in, walk in the front door, turn around, look under every rock, and every one of them says, "We need 3 billion more. We need 6 billion more here. We need 5 billion more there." You can't do it all in one year. It is not possible.

     REP. DICKS: I understand, but -- okay, I understand that. But would $38 billion have been a more realistic number for '02 than 18 (billion), in terms of the problems that we're facing?

     I'm with you. I agree with what you're trying to tell the country -- that we're significantly underfunding defense.

     Now I've been here for 21 years on this committee. Maybe it's even longer than that. And I'll tell you, I've heard everybody say we're going to do it by -- oh, by improving procurement and doing all that, and I'm with you on that. I agree with you. But I don't think we're going to solve this problem without a significant increase in funding. I think you've said that. I think your statement says that. I mean, you just didn't add it up.

     SEC. RUMSFELD: Mr. Congressman, this is a significant increase. It's the biggest increase since the mid-1980s. It is --

     REP. DICKS: But if it isn't enough to get the job done, Mr. Secretary, what -- we're not fooling each other --

     SEC. RUMSFELD: You can't do it all in one year. It is not physically possible. Second --

     REP. DICKS: But you got to start with a single step that's significant. And the thing that frustrates us here --

     SEC. RUMSFELD: This is a single step.

     REP. DICKS: -- and I'm a good Democrat, but when I heard Mr. Cheney say, properly, during the campaign, that we needed to do more on defense, that help was on the way, I thought we were going to see something significant, like when Ronald Reagan was elected president, Ronald Reagan increased the defense budget. And we did it significantly, and it addressed the problems.

     And in 1991, when this -- when Cheney and Powell had to go to the war, we had a military capability that was sufficient to get the job done.

     Now, what we're seeing here today is we're allowing the deterioration of America's military capability, because we're not doing transformation right, we're not doing modernization right. And I say this with all due respect. I hope that you would be successful in your dealings with the administration, but apparently that isn't happening. And I think we have to be honest.

     General Shelton, what do you think?

     SEC. RUMSFELD: Wait a second. You're not going to lay that on me and not let me answer, are you? (Laughter.)

     REP. DICKS: Oh, of course not.

     SEC. RUMSFELD: Look. This budget does not continue the deterioration. This budget reverses the deterioration that's been going on for year after year after year. It is a significant step forward.

     REP. DICKS: But not in transformation and not in modernization, Mr. Secretary. You say it in your -- you go through every category and say what we're short of. We didn't get it! We didn't get the help we needed we needed in transformation. We didn't get the help we needed in modernization.

     SEC. RUMSFELD: When you say let's be honest, that testimony you received from me is as honest as anyone can be. I have laid it right out there.

     REP. DICKS: Exactly. And that's why I'm saying, if you've laid it out, why doesn't the White House get it?

     SEC. RUMSFELD: Well, they do, and they gave us the biggest increase in 16 years, and a 7 percent increase, and walking away the largest increase of any department or agency. And we are completing our quadrennial -- congressionally mandated Quadrennial Defense Review. The conclusions out of that will have additional recommendations for transformation. There are transformation aspects in this budget. And when we come out with that, as the chairman indicated, it will be arriving at a tine when we're developing that '03 budget. And you will see a number of things.

     Frankly, I don't want to fix all the infrastructure in the defense establishment, because as I said, we've got 20 to 25 percent more infrastructure than we need. It would make no sense to go out there and try and fix all of it.

     REP. DICKS: General Shelton?

     GEN. SHELTON: Congressman Dicks, first of all let me say that I think that today our armed forces, which help define America as a global power and help protect our national interests around the globe, I think are one of the greatest investments that Americans have. Three cents on the dollar. That's what we're paying for everything in DOD. When you put it in terms of $320 billion, it sounds like a lot. It's still three cents on the dollar in this economy that we have today, at the lowest point of any time since before World War II.

     We have some very significant challenges that the secretary and I have addressed and as I talked about today, with aging force structure, with aging infrastructure, deteriorating infrastructure. We all know that we're not going to be able to make significant inroads into fixing the modernization and the transformation and the infrastructure at three cents on the dollar. Exactly how much it's going to take, I think, we've all seen the CBO, Congressional Budget reports reports. We've seen the independent studies that have been looked at, that range from $50 (billion) to $100 billion. I'm not sure what the right number is, but I do know that it's going to take significantly more as we look out over the next five to 10 years to be able to fix that infrastructure that we know is deteriorating and to be able to transform the force.

     When we come out of the QDR, and by September, we should be able to -- then we know what the strategy's going to be for the next four years, we know what the requirements are going to be, based on the force structure that will be taken to support that, and we know right now that some of our systems -- I talked about ISR and our tanker force, et cetera -- are going to need to be recapitalized. And so how we recapitalize the force, how we fix the infrastructure is part of what we need to come out of the QDR with, and I'm confident that we will. And that should paint a much clearer picture for us. But it's going to be more than three cents on the dollar.

     REP. DICKS: Would the chairman indulge me just for one comment, and then I --

     REP. : (Off mike) -- get back to you.

     REP. DICKS: I understand that.

     My comment is this. I think that we need to have a bipartisan effort from the Congress to help support you-all in making this case to the White House. And I just hope that we can do that. I have supported the defense budget throughout my entire career, and I think we need to work together on this.

     REP. LEWIS: Mr. Secretary, let me mention that we try to control the time within a five-minute rule here, and we've done very well today. And those colleagues who are beginning to get anxious, if we'll just settle down.

     Let me mention that the administration does propose defense budgets. Over recent years, this committee has been in the business, after receiving proposals, of advancing a more sizable number.

     In view of the timing I mentioned earlier of this year's bill, it may not be possible to move in a fashion that this committee would hold as ideal.

     But let me mention, not always are we in agreement. In the past, when we looked at UAVs, for example, the Department of Defense was not supportive of that idea as an asset of value. The Congress saw otherwise. In the past, JSTARS was an item that the military was not particularly interested in; now considers it to be one of the most important assets in our force. Indeed, the work of committees like our policy committees, as well as this one, sometimes find ourselves in disagreement, but eventually we dispose in a fashion that we believe helps strengthen in the entire force.

     In the last budget, we put in $150 million for a thing called "cyberwar" -- information warfare. I am pleased to see that the president's budget includes approximately a half a billion dollars, $500 million, going further in that direction, helping us find out what the questions are. That's a very helpful step in the right direction.

     You will find over time, Mr. Secretary, this committee is trying to help, not do otherwise.

     Mr. Bonilla?

     REP. HENRY BONILLA (R-TX): Thank you, Chairman.

     Mr. Secretary, I know you've been in and out of this city for over 30 years now, and I've got to tell you that I have not had the privilege of getting to know you well, but by all accounts you're the right person for this job; you've got that tough, thick skin that we need to have in place at the Pentagon. (Laughter.)

     SEC. RUMSFELD: (Laughs.)

     REP. BONILLA: And you need that because I know you're trying to do the right thing, and you're having to listen to a lot of whining and complaining from members of the House and members of the Senate and people at the Pentagon, and there's even some -- apparently some disagreement at the White House. But we need this tough, firm stance that you're taking and to walk right through the fire and do what you have to do. And I, for one, think that you stick around and do this for many years to come because we need to see -- have you see it through.

     This is also -- what we're talking about here today -- the most important thing that we can deal with on Capitol Hill. And I'm surprised there are empty chairs in this room today. I can't imagine what the media, for example, may be wondering about that's more important in this town today than what we're talking about here today.

     But the deterioration of our armed forces over the last few years, we've reviewed this over and over again. I agree with my friend, Jack Murtha, about the over-deployments over the last few years. We've talked about this many times with hearings. And some of our troops we visited with first-hand who on occasion even seen a tear in their eye because they want to be -- they want to sign up again, they want to re-up, but the family sometimes make it too hard on them because they come back from being deployed, they're off on another training exercise, they're deployed again, and their personal lives are torn apart. The healthcare facilities, the recruitment, the retention, the maintenance -- I mean, you name it, it is something that I'm just sorry that the American people are not more focused on this.

     We're the fattest and happiest we've ever been in this nation and people are more concerned about, you know, their cell phone contracts and whether the videos are there to check out at night, and that's wonderful. We have a very, very prosperous country. But there's not any attention or understanding of the threats that continue to exist out there or the hardships that our military and personnel are facing all over the world.

     So again, just from one lonely voice here, I thank you for being here and doing what you're doing.

     And I want to just touch briefly on a couple of areas in health care because as you know, I live in a city that proudly calls itself "Military City USA" -- San Antonio, Texas. We've got Wilford Hall, we've got BAMSI, and we have -- we're now going to have four installations as of this last weekend with Kelly closing.

     But, for example, General Carlton has talked to us about a problem with medical specialists.

     As -- one figure he gave us, for example, was 50 percent reduction in radiologists, due to competition with the private sector. And I'm just wondering, is this something that -- also, I know you're dealing with a very large picture at the Pentagon, but is this a -- this is a huge concern, and I'm wondering if this is a growing problem and what we can do to curb this loss and if there are methods in place already that you're looking at to try to address this problem that's causing our active-duty to wait too long, to not be able to receive proper health care. Our veterans, our retirees, and so forth are just going through a tremendous amount of agony, and is this something that you're looking at?

     SEC. RUMSFELD: Well, thank you very much, Mr. Congressman, for your generous words. It something we're looking at. We have a recently confirmed undersecretary for Personnel and Readiness that is in charge of the health care area, and he is worrying those issues through.

     One of the things that we did try to do in terms of attracting and retaining people is to retain some flexibility in key grades, where people were leaving in higher numbers and where we needed them most, with respect to the recent pay raise.

     The amount of money going into the health care area is enormous and growing substantially every year. The actual delivery of the services falls short, in my view, and we need to work very hard at it, and I thank you for calling it to everyone's attention.

     REP. BONILLA: Last year, General Shelton was present as well, and we worked very well with Secretary Cohen. And I read a letter from an active-duty officer in the Air Force who had described in great detail some of the terrible conditions that existed in terms of just preventive care in dental offices and so forth. And it was extremely troubling.

     I know that in the supplemental there's an increase of $1.6 billion, just to make sure -- no, that's just for basics. It's not for anything new. And I'm wondering if -- do you anticipate that the $5.6 billion increase that we're looking at in defense health care programs in next year's budget is one that you think will be adequate, or will you have to come back again in another supplemental?

     SEC. RUMSFELD: We have tried to fashion the budget in a way that we would not have to ask for a supplemental. The president is unenthusiastic about the pattern of each year sending up a budget that is short in certain areas, with the expectation that he'll come back later and ask for a supplemental.

     The honest truth is that it is a wild guess -- those health care numbers. We simply do not know, and I do not believe we can know how it will actually play out in practice.

     What we have done is, there have been debates as to what the level ought to be, and we have tended to take the higher number. Dov, you may want to comment on this.

     (Off-mike cross talk.)

     MR. ZAKHEIM: That's right. There are basically two ways you could normally look at how you would project costs. One is, if you had a series of data points, and you just projected outward -- we don't have that. The increases that we've put in for '02 -- that is to say, the 15 percent for pharmaceutical and 12 percent overall -- are based on actual results. And we simply have said, "Look, we don't know if it will be lower than that, but we are being exceedingly conservative."

     I would also add that there's $800 million specifically for medical treatment facilities, for the military treatment facilities, in the '02 budget as well, sir.

     REP. BONILLA: Thank you. Am I out of time, Chairman?

     REP. LEWIS: You're out of time. Thank you.

     REP. BONILLA: Thank you. And don't let the you-know-whats get you down, Mr. Secretary.

     SEC. RUMSFELD: (Laughs.) Thank you.

     REP. LEWIS: Mr. Visclosky?

     REP. PETER VISCLOSKY (D-IN): Thank you, Mr. Chairman.

     Mr. Secretary, thank you very much. And you had mentioned in your conversation with Mr. Dicks shipbuilding, and you go on at some length in your written testimony about shipbuilding. At this point in time, you have a projection that we should have a Navy with about 310 ships. We're on target to be at 230. But you mentioned that the QDR for '02 may somewhat change those requirements. Any date yet as to when we will know what that new estimate is, and any range that you could give us now as to what that new estimate would be?

     SEC. RUMSFELD: On --

     REP. VISCLOSKY: On shipbuilding.

     SEC. RUMSFELD: Yes, indeed. I'm trying to think when -- the QDR is addressing it, but Pete Aldridge and the secretary of the Navy and the Department of Navy as well as Dr. Zakheim are all engaged in aspects of the shipbuilding issue. And it is going to be coming out of the review process, and I would think that in the September-October period, we would undoubtedly have numbers. And they've got to be --

     REP. VISCLOSKY: I'm sorry, what date was that, Mr. Secretary?

     SEC. RUMSFELD: In the September-October period we will certainly have numbers as part of the 2003 budget bill which takes place in the fall. They will certainly be higher than the trajectory we're currently on, but we're just going down to 230 ships. Whether there will be more or less than the 310 or 300, where we currently are, I'm just not in a position to say yet, but we are working hard on the subject.

     REP. VISCLOSKY: Is part of the problem here money, which has been alluded to a number of times today, or is it also some problems within the Navy, is it technology, is it redesign as opposed to just having less ships that their performance is enhanced?

     SEC. RUMSFELD: Let me have Dr. Zakheim, who is working on the study -- part of it is that ships have to have one- or two-year preparation prior to arriving at the point where you actually numerically include them in a year's budget. And we only build a carrier, for example, every five or six years, and so there's lots of years without them. In one case, there is a design problem, and we're well behind -- the contractors and the Navy are well behind.

     REP. VISCLOSKY: That's the LPD.

     SEC. RUMSFELD: So --

     MR. ZAKHEIM: That's right. The LPD-17, as you mentioned, Congressman, is two years behind schedule right now. That's the lead ship. There are three follow-on ships, and they're also behind schedule. So that one was deferred in terms of its '02 procurement.

     We also put in --

     REP. VISCLOSKY: And you have some significant cost overruns on that, as well.

     MR. ZAKHEIM: There are some difficulties there. They are being worked on, as I understand it.

     REP. VISCLOSKY: You mentioned difficulties; I mentioned significant cost overruns. Where are we closer?

     MR. ZAKHEIM: We have -- the reason I say that is we've put in money as part of the secretary's attempt to realistically fund -- pass shortfalls. We've put quite a bit of money in to close up the shipbuilding accounts, in particular, where there were shortfalls. So it's not clear to me that when we look outward beyond '02, we will have that difficulty. And that's why I said what I said. You're right on the facts, but we're putting money in to deal with them.

     One other ship class. There's an auxiliary cargo shop called a TAKE. Those ships were not under contract even though they were approved by the congress for fiscal year 2000 and '01. As a result of that, we only put on ship in for fiscal year '02.

     REP. VISCLOSKY: May I ask why they are not under contract? Were the contract negotiations delayed because of lack of money in the out years for additional ships?

     MR. ZAKHEIM: I'd have to look into that for you, sir.

     REP. VISCLOSKY: Okay.

     And Mr. Secretary, in other testimony, you also mentioned that you would not need the LHA until the out years. And you also mentioned, obviously, that you don't need to build a carrier every year. In only one of the examples you gave in your testimony did you simply say we don't have the resources. And apparently there are also --

     SEC. RUMSFELD: There's one instance -- like for example, the submarine was an issue, and it was a large enough bite that, you're correct, we simply did not have the money.

     REP. VISCLOSKY: Right.

     SEC. RUMSFELD: That's quite right.

     REP. VISCLOSKY: In 2000, we had a ship construction budget for six ships. In '01 we have six ships. In '02 we were to have eight ships; we have six ships, for the combination of reasons we've talked about. And you have mentioned that obviously you can't get from here to there without taking individual steps. And I guess my final question here is, when do we take that first step to increase the Navy's shipbuilding budget? Because I must tell you, every year, having been on the panel a number of years, we will always get to it. And I'm wondering when we will get to it.

     SEC. RUMSFELD: Well, I've got to believe when the shipbuilding study and we start working on the '03 budget, assuming that -- and my understanding is that there will be ships that will be at a stage of the contracting process where you could count them as a ship starting in that year.

     MR. ZAKHEIM: Congressman, I would just add that, in effect, we already did this with the amendment. As you know, there originally were five ships in this budget, and we found that we could add a ship that would not have any contractual -- obvious contractual problems, at least as we could foresee, and we seized upon that opportunity and added a DDG 51 precisely along the lines of your concerns.

     REP. VISCLOSKY: Right, and I appreciate that you did. But I'm looking at the Navy's budget and projections from last year and they were talking about eight ships. So even though you've increased what you found yourself with a couple of months ago, we're still short, and if my math's correct, we're at 180 ship. Obviously you have some differential here.

     I'm very concerned about it. And again, as you plug a carrier in from time to time, whether that be '06 or '07, it leaves you a very small window of opportunity, given the cost of those carriers, to start plugging in those additional ships.

     Thank you, Mr. Chairman.

     REP. J. LEWIS: Thank you, Mr. Visclosky.

     I might mention, Mr. Secretary, that there's a lot of popular discussion these days of incremental funding, advance funding for shipbuilding. I must say that that discussion should be addressed with great care as we go forward. I make the point that the Congress cannot commit a future Congress to priority in spending; that's one thing. But just as important, as I strongly support your commitment to a pattern whereby we build the ships that we need and keep us on a level that provides for adequate numbers of ships, the easy way out is not just to automatically assume incremental funding. Six or eight years later you've got yourself in a basket where the environment is pretty tight. The flexibility the Navy may need in the future could be significantly impinged if one doesn't think it through. And so we urge you to address that whole subject area with great care. The committee wants to help, but we also want to maintain the flexibility that the forces may need.

     SEC. RUMSFELD: Thank you.

     REP. J. LEWIS: Mr. Nethercutt?

     REP. GEORGE NETHERCUTT (R-WA): Thank you, Mr. Chairman.

     Thank you, Mr. Secretary. And, gentlemen, glad to have you here. I find it interesting to hear discussion about the numbers and why aren't you having more -- why isn't the administration putting more money in the defense budget, which I think all of us would agree would be a good thing. But I can hear the screams and howls and objections that you're giving additional consideration to defense at the expense of children and the elderly and many others, housing, and so forth, in a time of finite resources in our budget process.

     So I think you're smart, Mr. Secretary, frankly, in doing what you're doing, adding the increase, but also looking at the 5 percent savings that you're seeking in the budget, in your operations in the department, which will translate into a budget increase if you're able to achieve it. So I applaud you for that and think you're doing the very best job you can in very difficult circumstances.

     I would ask on a question related to the review of the spectrum allocation issues that you ordered in the department to take a look at the national need for expanded bandwidth and the new advanced telecommunications services, I think that's a good sign of leadership on your part to look at what DOD needs and what it doesn't need. And I would wonder, sir, if you would care to comment on what you expect with respect to the continuing DOD needs for spectrum, or whether some of that can be given up or not? What's your view?

     SEC. RUMSFELD: Well, there's -- I guess the short answer is, I'm not prepared to come to any conclusions. We -- there's no question but that the demand for spectrum, bandwidth, has grown exponentially in the military, as it has in the society.

     The data point that floors me, frankly, is that in Kosovo we had one-tenth the number of people that we did in the Gulf War, and we used 100 times the bandwidth. It is just breathtaking.

     The -- Jim Schlesinger, as you know, has been helping me with this and been helping to sort it through.

     The other thing that's happening, besides this growth in demand, is that from my background in the private sector, in the electronics business, I have observed that we are continuously becoming more efficient in how we use bandwidth and spectrum, and that that is an encouraging aspect of it and fortunate.

     We do not have a confirmed person for the assistant secretary, C3I, that has the responsibility for the spectrum. So we are kind of patching and filling with part-time people and outsiders trying to give us enough hands, so that we can pull together the elements that deal with spectrum in the department -- three or four different agencies -- and see if we can't, as a department, be more effective in the interagency process and more thoughtful, and so too as a country be more effective internationally in this important area.

     REP. NETHERCUTT: Well, thank you.

     I want to ask a question of you and General Shelton as it relates to the QDR and the question of risk. I think central to the QDR is that issue of risk. If you have an appreciation for short-term risk, it restricts the ability to look at long-term needs, it seems to me. If you have a good sense of the short-term risk, it may give you freedom to look at the long-term needs of the department and the country and its defenses, but yet there then is an enhanced risk short-term.

     So I'm wondering if you can -- I know it's a tricky question and -- in general terms, I wonder if you might give us your sense of the short-term risk versus the long-term risk, and the freedom that you are seeking to meet the long-term needs of the military, because they are long-term. And maybe, General Shelton, you might have some thoughts as well.

     GEN. SHELTON: Sure.

     SEC. RUMSFELD: Sure. Let me just say that that question is absolutely central to the Quadrennial Defense Review process. The Department of Defense is quite skillful at assessing operational risks and understanding if they're acceptable or not, if they're low or high or -- and they do that well.

     The department is not organized and arranged to balance these other risks against those risks. So the risk of not having a force that's capable of functioning in the 21st century, because we're not providing proper housing or proper facilities or proper pay -- that's a risk. The risk, as you point out, of not modernizing and maintaining your force, your legacy force, properly is a risk to be balanced against force structure and your operational risk. And the four risk is the one you also pointed out, which is the transformation risk.

     And if you -- if we as a society become so self-absorbed with the present moment and do not assure that we have, for example, the ability to deal with the challenges we're going to face in information warfare and information operations, and if we don't have the capability to transform our force and develop the kinds of systems that will enable us to function in the likely threat situations that we'll face in the period ahead, we will have been doing a great disservice.

     It is an enormously difficult, complex task, as the people on this committee know. It is not something that some genius sits down, and out of a computer chip in his head figures out and then imposes on the Pentagon or the Congress or the world. It is tough work, and we've been grinding it out.

     And I must say I am mightily amused by those who say, "Oh, just do it." Well, my ear! The last thing we need to do is to tear down something that exists and substitute something that's worse. And by golly, we're working hard and we're hard at it and we intend to do -- if we make changes -- and we certainly will be making changes and they will be considered significant changes, they'll be changes that will be for the better not for the worse.

     REP. NETHERCUTT: Good for you. Thank you.

     General, any --

     GEN. SHELTON: Sir, first of all, I think the secretary has outlined a lot of the areas that we have to be cognizant of as we assess risk. You tasked me, in the National Defense Authorization Act, to come back to the Congress with my assessment of risk at the end of the QDR. From a military perspective, we look at the strategy driven by the national security strategy, the national military strategy, and then the force structure that is provided to carry out our military task, which -- and specifically the ability to fight and win against the anticipated threat, clearly defined. That is a -- and we measure risk against that; that's the operational level of risk that I will address.

     However, there are other risks, as the secretary has pointed to: the risk of not transforming. We tried to take a -- use a methodology that keeps us prepared to fight day in and day out against what we may be asked to do against the current strategy. That says today the most immediate threats we have are in Southwest Asia and in Northeast Asia, and we assess our ability to do that, and that defines where we are on the risk guideline. As I've testified before this committee before today, it's moderate and high. The QDR said assess it against a requirement to be at the low to moderate area, which we will be doing. But we also have to be aware or concerned about the fact that we have a changing threat. And we have addressed that.

     For example, in UCP 99, we in fact charge one of our CINCs and have stood up a computer network, first defense and then attack -- and they're called Computer Network Operations -- against cyber warfare. We recognize that one of the future threats is going to be potentially an increase in our threats to weapons of mass destruction, specifically biological or chemical. We formed a Joint Task Force for Civil Support, under our CINC Joint Forces Command, to start preparing the U.S. armed forces to be prepared to support the lead agencies of our government, the civilian agencies, if called upon for the military to respond. So we've started looking ahead at the future threats. At the same time, we have to be focused on day in and day out our ability to carry out the mission today, if asked to do it.

     And so it is a -- it's almost like a Rubic's cube. There are lots of aspects to assessing risk, and I'll try to provide that in some level of detail when we finish the QDR. But we are looking at all those, as the secretary has said.

     REP. NETHERCUTT: Thank you.

     Thank you, Mr. Chairman.

     REP. J. LEWIS: Thank you, Mr. Nethercutt.

     Mr. Moran?

     REP. JIM MORAN (D-VA): Thank you, Mr. Chairman.

     First of all, I want to thank General Shelton for his 38 years of service to our nation within the Army. You are a soldier's soldier. And I hope this isn't the last time we get a chance to talk with you, but we have appreciated all of your testimony.

     I want to follow up on the last comments of the secretary. We spend so much of our time on this panel talking about more money for weaponry, but I don't think that that is the most serious threat that we need to deal with.

     We have a crisis in the workforce in the Pentagon. There are almost three times as many civilian employees as military employees. Over the next three to five years, it's estimated that at least half of those civilian employees are going to be eligible for retirement. Those who are left have inadequate preparation for the kind of technological demands that the Department of Defense needs from them. And it's not just people in the field, it's people at headquarters. The Pentagon is one of the -- perhaps the largest, most outmoded and even anachronistic organization maybe in the world. And we need to figure out how the people that we need can be brought into the Pentagon to do the jobs that are necessary for the 21st century.

     Over the last seven years there has been a Reinventing Government initiative, where several hundred thousand federal civilian employees were dismissed. They retired, whatever, downsized. Almost all of that was in the Department of Defense. Many of those positions have not been replaced, an we don't have the people coming in that have the skills that are necessary, particularly in terms of technology.

     One of the things that we have suggested is providing scholarships for graduate students with the kind of computer and engineering skills that we need to be able to work in the Pentagon, pay off their student loan by doing so. We need more situations where the spouse of DOD employees are also working, so that we have more stability within the organization. And we need far more compensatory compensation using broad bands of pay grades. Right now the Defense Department is becoming more and more dependent upon private contractors. It's almost a one-to-one ratio, I understand. That's okay for me because I represent a lot of them, but I also represent a lot of federal employees, and I don't think it's necessarily in the long run the direction that we can continue going.

     So I'd like to know what within the Quadrennial Defense Review are we doing to provide the personnel that can operate these weapons, can deal with the kinds of threats that the chairman has talked about in terms of cybersecurity, which may be our greatest threat, and can reorganize and transform DOD to be able to carry out its mission of the 21st century.

     SEC. RUMSFELD: Mr. Congressman, thank you very much. Your question is, of course, right at the heart of an enormously important issue for the Department of Defense. We have a panel in the Quadrennial Defense Review on this subject. We have met with it twice in the last two weeks. We're obviously going to have to meet with it again. It is a big, broad, complicated subject.

     As you know, the Department of Defense really is not in charge of its civilian workforce, in a certain sense. It's the OPM, or Office of Personnel management, I guess. There are all kinds of long- standing rules and regulations about what you can do and what you can't do. I know Dr. Zakheim's been trying to hire CPAs because the financial systems of the department are so snarled up that we can't account for some $2.6 trillion in transactions that exist, if that's believable. And yet we're told that we can't hire CPAs to help untangle it in many respects.

     So it's a big problem, and you're quite right it is an aging civilian workforce, they tell me, technically. They all look young to me. (Laughter.) But the fact is that some 40 or 50 percent are going to be eligible for retirement in the next five or six years, I'm told, and we simply have got to find ways that we can be deft and flexible enough so that we can attract and retain the kinds of people that are going to be needed for a very different civilian population in the Pentagon over the next 20 years compared to the past 20.

     REP. MORAN: I appreciate that response, Mr. Secretary. We can't afford for all the people eligible to retire to do so. We're going to have to find ways to keep them in. And what's going to happen, of course, is most of them will go to the private sector, operate as consultants, get more money and enhance their pension. But we need to be looking at the long term. I'm glad to hear your perspective, and we plan to follow up with further discussion in that area.

     Thank you, Mr. Chairman.

     REP. LEWIS: Thank you, Mr. Moran.

     Mr. Secretary, the first time and the last time that Dov Zackheim and I broke bread together, he told me he would have a handle on that 2.6 trillion by now. (Laughter.) But we'll discuss that a little --

     SEC. RUMSFELD: He's got a handle; it's just a little hot. (Laughter.)

     REP. LEWIS: Randy Cunningham. Duke?

     REP. RANDY CUNNINGHAM (R-CA): Thank you, Mr. Chairman.

     Mr. Secretary, you know, I always bring it up, because it's true, and I want you to understand this is one of the best committees to ever serve on, the bipartisanship with my colleagues on the other side, Jack Murtha, Norm Dicks and right on down the line. Their focus is on helping defense and helping our kids out there. And it's a pleasure to work on this committee because very seldom do you know that there is a Republican or a Democrat on this committee. And I think history has proven that correct.

     But, saying that, I also want you to stick to your line on the increases, the biggest that you have. Our feeling is that if Dick Gephardt can spend us -- with all 13 appropriations bills -- spend us into oblivion, back into a debt and a deficit and put us into the trust funds, he wants to take the majority. And that's one of the issues in which we feel, at least the perception, that the other side, outside of this committee, is trying to do. So you stick to your guns, and over a long period of time, and you've got a lot of us that support budgets and keeping the deficit down and also enhancing defense as we can.

     I also want to mention that you've got some tough decisions that are coming up and that a lot of that is because of the 124 deployments that we went into in the last administration. I think we could have been -- not well, but I think we could have done fairly well with our budgets, with a balanced budget in defense, if we hadn't had to go on 124 deployments, which has killed our readiness, it's killed our retention, it's also driven those old machines, as you talk about, those antique machines into the dirt. That's why we're here today and that's why I think that when you say you're lifting eery rock, that that's what we have to do.

     I'm going to be asking you, and I want to give you some recommendations here and I think that some areas that you can save. I know you're a big supporter of Global Hawk. So am I. But you know the -- and especially, General Shelton, when you're working in Bosnia, Yugoslavia and Kosovo, you know the value that the Predator gave us. The Predator B is not funded till the later year. I think you can actually save money while you're getting Global Hawk on the road and funding ahead of time that Predator. And I think my colleagues and Norm Dicks and them support it as well. Because it can do right now what you're trying to re-engine and stuff with the Global Hawk and the things that you're trying to do.

     Secondly, ARGM. I was shot down with an SA-2 missile, and I want a system that will go out there and knock out those enemy radars 90 to 100 percent of the time with a kill probability. It's now called Quick Bolt. They've had two successful shots. Hundred percent. Bull's-eyes. Supersonic. And it knows. I mean, the enemy can shut down the radar, and the GPS says, "Hey, I know where you're at and I'm going to kill you." It's an area which is going to save lives. It's going to enhance readiness. It's a five-inch rocket. You can put it on any one of your -- you can put it on a P-3 if you had to on the thing.

     I want to thank you. The ship repair issue, I got a call that afternoon, Mr. Secretary. And we're hoping, you know, for some response on that coming down the line. And Don, I want to thank you. I mean, I was -- I mean, with your limited staff and what you've got to do, that call was very, very important, those things. And that's what we were talking about, the communication. And boy, the meeting that you-all had, I think, was outstanding also.

     I also want to thank you for the Andy Marshall. You know I had some heartburns with the Andy Marshall review, and from what I've heard from the service chiefs, they've got access now, and that's going to save a lot of dollars in the long run.

     You don't want bean counters and academicians and curmudgeons making those decisions without military, because in the past it's got us killed, and it's hurt us.

     But that's -- this is a study in which the previous administration -- and I'm sure that your predecessor looked at, and every time you make changes within the building and eliminate bureaucracies -- and we talk about Department of Education having too many bureaucracies -- well, DOD does, too. And like the commandant of the Marine Corps wanted to buy camouflage gear -- he could do it at 1 percent, but yet your Pentagon buyers wanted 22 percent overhead. This study, which was not acted on, I think, because of all the lines drawn in the sand -- this will save you money.

     SEC. RUMSFELD: Is that the Pinero (sp) --

     REP. CUNNINGHAM: Yes, sir.

     SEC. RUMSFELD: I've had every senior civilian official get briefed on the sections of that that relate to their area of responsibility. I agree with you; there's an awful lot of very interestin things in there.

     REP. CUNNINGHAM: The -- let me give a pitch for training. Many people don't know that Captain O'Grady was not trained in air combat when he got shot down. General Ryan wasn't knowledgeable of that until I brought it, and I looked at his records. He wasn't even trained in air combat, yet he got shot down with a surface-to-air missile.

     The helicopters we lost in Kosovo -- those pilots had never flown at night with a combat load and using night goggles, and we lost two -- you know, we lost personnel, we lost two helicopters.

     So training you do -- you fight like you train.

     We had a Navy fighter weapons school. We had a one-to-one kill ratio in Vietnam -- it's one of the reasons I was after the Andy Marshall thing -- against a very poor enemy. And then the military came in and threw out the civilian view, and we went up to a 12-to-one kill ratio.

     I'm going to meet with General Ryan this afternoon, and you're aware of the SU-27 and the follow-ons and the weapons systems that they have. Unless we reinvest -- and I know at a time like this, when our adversary -- both your Air Force fighter weapons school and your Navy fighter weapons school, which services the Army and Marine Corps, is brought back up to speed, you got -- 75 percent of those airplanes are down, and you can't fight even a simulated old MiG-17 and MiG-21 right now in those schools. So it's -- I think that's critical as well.

     The spectrum analysis that my colleague -- that Mr. Nethercutt brought up -- that's an important issue. And please don't treat that lightly, because I know what the defense needs are, but if there's any give at all in that, we'd appreciate.

     I also think that BRAC -- have you ever, as a kid, thrown a dirt clod at a --

     REP. LEWIS: I just want to mention to my colleague that you now are equal in time with Mr. Dicks. (Laughter.)

     REP. CUNNINGHAM: One last thing like he did, then. (Laughter.) Have you ever thrown a dirt clod, as a kid, at a wasp nest? You get all those wasps, you know, titillating (sic) around that nest, and all of a sudden they come down and sting you sometimes.

     SEC. RUMSFELD: No! (Laughter.)

     REP. CUNNINGHAM: I have.

     SEC. RUMSFELD: (Laughing.) No ordinary dummy --

     REP. CUNNINGHAM: And I want to tell you, I think BRAC, to not titillate those wasps -- but if you come out with a list ahead of time, instead of having us all have to hire consultants and stuff, that kind of communication's going to save you time and money, sir.

     SEC. RUMSFELD: Well, I thank you. I'd sure wish that the members of Congress would offer up bases, rather than me have to go find them. (Light laughter.)

     REP. LEWIS: I've already given you three, Mr. Secretary. (Light laughter.)

     REP. CUNNINGHAM: Thank you.

     REP. LEWIS: Mr. Frelinghuysen?

     REP. RODNEY FRELINGHUYSEN (R-NJ): Thank you, Mr. Chairman.

     Mr. Secretary, from all reports, publicly and privately, including your testimony today, you've been bemoaning the fact that when you opened the financial books at the Pentagon, it was a God- awful mess.

     I know that your agency conducted its own review of the DOD's financial management practices in a report that was made public earlier this month. And the report, if I may say so, paints a pretty grim picture, including, and I quote, the problems include: "The inability to consistently provide reliable financial and managerial data for effective decision-making; lack of an overarching approach to financial management; disparate systems; overly complex data requirements driven by appropriation funding rules." And it goes on: "Convoluted business processes which fail to streamline excessive process steps; cultural bias towards the status quo."

     I know you're intimately familiar with all of those. The question is, what are we going to do about it? Your report calls for the establishment of a centralized oversight process, and the comptroller for implementing structural changes. I just was wondering how long do you expect the department to take to establish and implement such a system? How much might it cost? And the question often comes up, can you do it yourself, in many instances, without congressional action, the passage of laws?

     SEC. RUMSFELD: Well, it is a -- it clearly is disturbing that the department is without the financial management systems so that you can track dollars in a way that you can feel confident, when you answer someone's question as to what happened to various transactions. Every report I have seen indicates that it will take years and years and years to do the job.

     Now, I've asked Dr. Zakheim, who happens to be sitting on my left, to do it in less time, and I'd like him to explain how he's going to do it. (Laughter.)

     MR. ZAKHEIM: Thank you, Mr. Secretary. (Laughter.)

     Congressman, we did a number of things almost at the outset when I took the position. The secretary and I discussed restructuring the front office. My principal deputy now is also double-hatted -- in English that means he has a second job -- to monitor reforms in the management system. At the same time, because I recognized that it wasn't just a matter of reforming the system, it was making sure that it didn't go further off the tracks, I hired away one of your best staffers, Tina Jonas, to become deputy undersecretary for management.

     In addition to that, we inserted into the current budget amendment -- the amended budget, $100 million to get our arms around the architecture problem. Again, just in plain English, when you have systems that don't speak to one another, that were essentially geared for dealing with budget issues as opposed to financial management, they're totally out of whack.

     We don't know, Mr. Congressman, how long it's going to take us and how much it will cost. I've been told estimates of anywhere from $1 billion to $2 billion, which is an awful lot of taxpayer money. The $100 million we've asked for -- and as you heard, we have many other priorities, so this is clearly an important chunk -- is to get our arms around the problem, figure out the architecture so that we can follow a voucher from the day it was issued till the day something was paid out so that we don't have these huge sums of money that actually have not been misspent, but have not been properly accounted for.

     One other major area of concern that I discussed at length with Steve Friedman, who was the chairman of the panel that issued that report, was that we have to have a proper Management Information System. That's absolutely integral to running a department this size. I've come out of the business world as well; it's 14 years since I was last in government. And, frankly, I was astounded at what is called an MIS in the Department of Defense, and we're working on that at the same time.

     REP. FRELINGHUYSEN: Part of the business world invests its time in what's called the Business Executives for National Security, BENS group. I know that we've briefly touched on BRAC, and that's a hot point, it's controversial. But that group has come up with a lot of, I think, some great suggestions, including improving process for contracting services, revising the A-76 process in terms of out- sourcing competitions successfully, making the private sector the preferred provider of military family housing, making the private sector the preferred provider of long-haul defense communications, et cetera, et cetera.

     Are you taking a look at some of those recommendations? I know the secretary mentioned some of these in his oral testimony here this morning. But there are a number of suggestions here. I just wonder whether you're talking a look at the vast range?

     MR. ZAKHEIM: Oh, more than that, Mr. Congressman. I've been directly in touch with the BENS leadership. This is a group that I've been familiar with for many years. We've also got, in fiscal year '02, some pilot programs that actually begin to implement some of the ideas. For instance, a commissary pilot program that allows us to privatize some activity in that regard. So, yes, we're in touch with them, and yes, we're getting a head start on some of the issues they've rightly raised.

     REP. FRELINGHUYSEN: Well, there's housing issues. And will we know at some point in time whether -- if you're moving ahead with some of these, whether they require congressional action or whether they can just be done in house?

     MR. ZAKHEIM: Well, we'll certainly be in touch with you, sir.

     REP. FRELINGHUYSEN: Thank you.

     Thank you, Mr. Chairman.

     REP. J. LEWIS: Thank you, Mr. Frelinghuysen.

     Mr. Tiahrt?

     REP. TODD TIAHRT (R-KS): Thank you, Mr. Chairman.

     First of all, Mr. Secretary, let me congratulate you on a successful ABM test. I think that even the most avid critics have to agree that the technology is there. And they were able to distinguish between a decoy and the real threat and knock the real threat out of the sky, so I think that's very important, especially when we have a constitutional requirement to protect -- "provide the common defense," is the proper term, of our United States citizens, and we're not doing that today. It appears that technology for anti-ballistic -- or for ballistic missiles -- excuse me -- ballistic missiles is increasing faster than our ability to defend against them, especially in third world countries.

     Now, it's my impression that former Congressman Bob Dornan was not consulted in your B-1 decision. (Laughter.) In fact, I'm not sure that anybody outside the Pentagon was consulted. And I think the initial decision perhaps needs to be reviewed. There certainly was no -- it wasn't part of any QDR. Now, there may be some discrepancy on the cost numbers, but there is no question that the top-performing B-1 Wing is an Air National Guard Wing. They have the lowest cost-per- flight hour. Now, some may say it's $4,000 less per hour; it may be $2,000 less, but there's no question that it's cheaper to fly out of a Guard unit.

     And I think there's no question that the most experienced personnel, both pilots and flight line personnel, are at the Air National Guard bases. Right now at McConnell Air Force Base, the mission-capable rate is 20 percent higher than the active duty. Now, it would be 30 percent higher, except they have a dog from Dyess that couldn't be repaired down there, so they sent it to the experienced personnel at McConnell to get fired, and they're getting it back on line.

     Now let me tell you a little bit about the people at McConnell because I think it's important in the final decision. There's 1,330 families that think on October 1st their bags will be packed at the front gate of McConnell Air Force Base with no place to go. They come from a community that has 20,000 aerospace workers at Boeing, 15,000 aerospace workers at Cessna, 12,000 aerospace workers at Beech, which is owned by Raytheon, 8,000 aerospace workers at Learjet, which is owned by Bombardier. Some of these people in the flight line are second- and third-generation aerospace workers. They have a love for their job. And I think that explains why they are doing such a fine job. Now, they've got kids that are school age, they own homes, and they're a little concerned about where they're going in the future.

     You mentioned that this is a 20-year-old airframe. I think that's very clear. It's not stealthy. Very clear. It could be more potent, and currently it's not viable. I agree with all of those. The proposal is to go from 93 birds to 60. Sixty may be the right number, although I think it was rather arbitrary. I think there ought to be some strategic value to whatever the final number is. And you mentioned two bases. In my mind, there's no reason, if you go to 60, if that is the right number, I would agree we need to make them viable. Two bases, that may be the right answer too. But if there is only two bases, one of them ought to be a Guard base with about 18 birds sitting on it, for several reasons. Experience, experienced pilots, and cost and the ability to handle a high mission-capable rate.

     So I've got about there questions. Number one is, what message are we sending the Air National Guard when the premier B-1 unit, with the top performance in the entire nation, has its mission yanked away from them? What message are sending to the Air National Guard?

     Number two, how do we justify the loss of cost savings when you have a lower cost per flight hour, when you have an engine shop that saves a half a million dollars every time they repair a B-1 engine, when you have an avionics shop that has the highest number of innovations of anywhere in the Air Force? So how do we justify the cost?

     And number three, how do we justify the loss of qualified pilots? I mean, one of the problems we're having in the Pentagon today is retaining and attracting good pilots. When they have more experience than the average pilot in the Air Force, it seems a little bit short- sighted to dump these folks, who have given, in some cases, 12 months of their career in order to learn to fly the B-1, and now we're just putting them on the back burner.

     So I think it's important that we look at the message we're sending, justifying the loss of cost savings, and third, what about these experienced personnel -- pilots and mechanics -- that we're giving second-class treatment.

     SEC. RUMSFELD: Mr. Congressman, I thank you for the questions, and they're good ones.

     First, there's no message that's in any way negative to the Guard. There's no question but that the B-1 team in Kansas at McConnell have done a great job. And it is a set of issues that I have characterized in my testimony, and I won't repeat them, but it certainly has no implications for the Guard.

     Second, there's no question but that in the aggregate, dollars will be saved. The reduction from five to two bases and the concentration of those remaining B-1s, the 60 out of 93, and the upgrading of those B-1s so that they are a viable weapon system for the period ahead is going to save enough money to pay for the modernization and upgrading.

     With respect to pilots, I don't know where the numbers -- I guess you were characterizing total numbers, but the defense budget is not going down, it's going up by the biggest amount -- if the Congress approves it, by the biggest amount since the mid-1980s. It's not as though we're going to stop doing things; it is that we're going to try to do them in a more efficient and better way.

     But goodness knows, we do need pilots. You're quite right. And there is a significant role that will remain for pilots. And as you are aware and have visited with the Air Force, their full intention is to see that, to the extent possible, any loss of jobs are mitigated.

     My -- I don't know if the number's right, because they're still sorting through all this. But they're looking at a net loss of some 26 civilian jobs among the three active bases, not large numbers at all.

     REP. TIAHRT: When you talk about cost savings, there will be a non-recurring cost savings from dragging the total number from 93 to 60. My concern is about the reoccurring cost savings that were going to be avoided. From the information that I've been able to see, it looks like it costs about $6,800 per hour to fly the B-1 for people who are directly tied to the B-1. At an active-duty base, it costs some $14,000. So there's a big difference in the amount of reoccurring cost associated with the B-1 when you take them away from a Guard base and put them in active-duty base, and I think that's something that ought to be taken into consideration before the final decision is made on the B-1s, Mr. Secretary.

     SEC. RUMSFELD: Thank you. We'll certainly see that that data is taken into consideration. Thank you.

     REP. TIAHRT: Thank you, Mr. Chairman.

     REP. LEWIS: Thank you, Mr. Tiahrt.

     Mr. Murtha?

     REP. JOHN MURTHA (D-PA): I just have, for Dr. Zakheim, DBOF, DEFAS, and RCAS. And we've heard this for a long time about the financial situation over there at the Pentagon, and we always work our way through it. So good luck, Doctor. (Laughter.)

     MR. ZAKHEIM: Gee, thank you, sir. (Laughs.)

     (Laughter.)

     REP. LEWIS: Mr. Secretary, we made a commitment early on to give General Shelton an opportunity to get out of here at a reasonable time, so that he can meet a schedule I think is very important.

     I've been asked by staff -- my personal staff to take a briefing myself relative to the Predator B item that Duke Cunningham raised earlier. Perhaps saving some money there as we go forward and figure out how we use Global Hawk is an important item.

     You and I have talked about you personally helping me figure out if the right questions are being asked on the JSF, and I appreciate that as well.

     Let me use that to take me to a final point. DOD transformation is one of the items we're all talking about these days. This committee has extended very significant support to the effort being made by the Army. Could you give me a feeling from your perspective; is the Army transformation initiative consistent with the approach DOD is taking in transportation for the military generally, and does the Army initiative represent a model for that transformation?

     SEC. RUMSFELD: We have provided funds for the Army transformation because we think that the Army has fashioned a good plan and is moving forward and has been moving forward on it.

     We're -- I think this afternoon -- is this afternoon the QDR meeting on that?

     GEN. SHELTON: (Off mike) -- sir.

     SEC. RUMSFELD: Yeah. We're meeting this afternoon on that very subject of the forces with respect to where -- various Quadrennial Defense Review panels, and I will know more this afternoon. But certainly we have in the '02 budget proposed some -- goodness, close to $8 billion for Army transformation.

     REP. J. LEWIS: Mr. Secretary, the committee has been very supportive because it's very apparent that the chief is committed to transformation that will allow the Army to reach out, be present almost anywhere in the world in a reasonably swift and forceful way. The commitment is to have an initiative that would allow the Army to be able to deploy a combat-ready brigade, such a brigade anywhere in the world in 96 hours, and do so with strength, a presence that I believe is very significant if we're going to continue to play the role for peace that we're all about in terms of this world.

     General Shelton, any final comments, since you're blest with not having to come before the committee again, we think?

     GEN. SHELTON: Mr. Chairman, first let me say what a great honor it's been to serve as a representative for our great men and women in uniform. And let me personally thank you and all the members of this very distinguished committee for the great support that you have provided to them. It has been felt, and I can tell you from talking to them in the field, the things that you've done in terms of the pay, the retirement, the housing, the medical care, et cetera, have made a difference, and we've turned around the recruiting and some of the retention challenges that we had last year, the year before that. And a lot of that is due in no small part to the great work that this committee has done, so I thank you very much on their behalf.

     REP. J. LEWIS: Well thank you one more time, General Shelton, and Mr. Secretary. I think that will close the work of the subcommittee for this session.

     Let it be known that the subcommittee stands adjourned until 2:30 today, where we'll have the opportunity to meet with the secretary of the Air Force, as well as the chief of staff of the Air Force, regarding the 2002 budget.

     The committee is adjourned.

     SEC. RUMSFELD: Thank you very much.

     GEN. SHELTON: Thank you, sir.

END.


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