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DoD News Briefing - Dr. David S.C. Chu, USD (Personnel & Readiness)

Presenters: Dr. David S.C. Chu, USD (Personnel & Readiness)
August 08, 2001

Wednesday, August 8, 2001

DR. CHU: I'm David Chu, as you know. And as you also know, I'm the just recently installed undersecretary of Defense for personnel readiness. And I'm delighted to have the chance to meet with you and get to know you a little bit better.

As you also are aware, I am now an expert, because I have been here two months and seven days. So I hope you'll be a little forgiving on certain subjects of which I have no idea what the answer is because they are also new to me.

I am not, as many of you are aware, entirely new to the Department. I did serve here for nearly 12 years in the Reagan and Bush-I administrations in a very different kind of post, as the director and then assistant secretary for program analysis evaluation, which was, as you appreciate, mostly an inside job. In fact, as some of you will recall, my main objective vis-a-vis the Fourth Estate was not to have to go on the public record, since I was the Secretary's -- as that post requires, I was the Secretary's internal adviser and in general did not testify.

This post, of course, is completely different. I have a very different set of responsibilities, which I have found very energizing, challenging. It's been a busy period of time, as you all know, where the Secretary is intent on rethinking many of the precepts on which the Department has operated for the last 50 years, and I think as a central point, I'd offer, as opening to our conversation this afternoon, really I think is challenging us to ask, with the Cold War now ended 10 years ago, the Department still in many of its endeavors practicing along the lines established during that long historical conflict, shouldn't we be reconsidering these practices?

And that, of course, is what many of you have written about in your articles and so on and so forth, and that's consuming much of the Department's senior leadership time at this point. And it's a certainly stimulating set of meetings. A lot of hard work has gone into it, a lot of people.

As I think Dr. Wolfowitz said this morning, we're not at endpoint yet. So I'm not here to announce any answers or anything like that. And I am convinced that it's going to, in the end, produce some very important results for the country.

So with that said, I'd be delighted to respond to your questions and talk with you about issues of your interest.

Sir?

Q: One of the things that the Secretary has talked about repeatedly relooking in the personnel area is "up and out." And, you know, our history goes back to General Marshall getting here and finding a bunch of 60-year-old majors.

DR. CHU: I want to emphasize 60 is not that aged! (Laughter.)

Q: I spent a little bit of time looking at the former Warsaw Pact military stats when we were looking at the NATO enlargement, and one of the many structural problems they have, because they don't have "up and out," and under their domestic laws you couldn't force people to retire, so they had these massive bulges, as you looked up the officer pyramid, of superannuated lieutenant colonels and majors who had forgotten nothing and who did nothing but sit there all day, you know, prevented -- now, you know, you haven't made any decisions, I understand. But conceptually, you know, how would you -- if you were to do away with what we think of in broad terms as "up and out," how do you prevent that kind of institutional constipation?

DR. CHU: Well, let me start by answering, that's not where the Secretary is headed. I think his -- in fact, his poster child case for this issue is Admiral Quigley. His question constantly is, "Why should I encourage someone who is at the peak of his game to leave?" And then we go into a long song and dance about this is the way we've done it, sir, and you have the Defense Officer Personnel Management Act, and you have the "up or out" rules, and so on, and so forth. And that's the route by which he gets to challenge the "up or out."

And it's really not so much a challenge to "up or out" as it is a challenge to, well, what is the appropriate length of a career in the military, especially in a technocratic age where the skill set in senior personnel we're calling on is not as physically dependent? In other words, we're not asking -- with due respect to Admiral Quigley and whatever physical shape he's in -- (laughter) -- we're not asking him to charge up the hill every morning; we are asking him to come in here and do combat with you guys, but that's a different kind of combat. And that's the essence of the Secretary's question. And it's a question in some respects I think that's also being asked in the American labor marketplace at large.

Now, we don't have the answer to that question. We are looking at what are the implications of inviting some people to stay longer, because as a first proposition, since you -- from the analyst perspective, you've got to have a constant manpower effort, so if some are going to stay longer, something else in the system has to change. Either some people have to stay shorter periods of time, or you take in fewer people to start with, which also leads to the question do you have enough junior people relative to senior people, so on and so forth.

Let me -- not to start any rumors, but I'll give you this example. Let me just point to the fact -- you used the Warsaw Pact as a source of example. Let me point to our European allies, which in general have a very different flow pattern for their officers, what some people like to call a two-step process or a process where they shoulder it in.

In other words, they bring in a lot of officers at a junior level, and then there is a decision point -- at 10 years of service or 12 years of service or some grade promotion or some combination of ingredients -- at which they invite only a modest portion to stay. And the others are thanked for their service, given some kind of deferred pension rights -- which also means if you're going to do this, you have to change the portability of the pension system -- and that senior cohort is the group that goes on for a long service.

And it's a bit like the British 11-plus exams for children. In other words, if you make it past the threshold, you've made it into the permanent group and you're going to stay for a long period of time. You're going to have a pretty high probability of promotion to senior rank, which is not the way we now do it. And so at every stage, actually in our system the probability of promotion goes down as you reach each. So it's lower probability of promotion from 03 to 04 than it is to 04 to 05 -- I mean, higher from 03 to 04 than it is to 04 to 05 and so on and so forth. The Europeans do it differently. I'm not saying the European model is right, but it's an example of some of the alternatives that are out there in other militaries that have proven effective.

What the Secretary is really doing is challenging us to think about have we got the right model for the 21st century and for some of the kinds of skills that we want. He's particularly thinking of senior leadership, executive skills and so on and so forth.

Sir?

Q: When do you think you'll have a proposal that fixes all of this?

DR. CHU: When you say fixes all of it -- (laughs) -- I have many years left to go before my pension.

What we do hope to have is, by the time the Secretary and others subordinate to him, like myself, have to testify next year before the Congress -- in other words, with the President's budget request for 2003 -- is we do hope to have at least the outlines of a set of strategic human resource plans for the Department that deals both with military and civil personnel. It won't have all the answers in it. I don't want to pretend that everything will be thought through ably by that juncture, and some issues are harder than others. But I'm hopeful that the outlines of how we want to proceed will be established by that point.

So it's not something we have ready to announce this month. It's not the kind of the thing you can put in the infamous QDR report, although I think that report will identify some of the directions, you know, in which I think it's going. And the Secretary has been very up front about saying this is one of them, that he wants us to think hard about why not longer careers for some.

Sir?

Q: David, we already have things, you know, where people are -- particularly like in the Navy, where people are what they call restricted line.

DR. CHU: Right.

Q: So that they follow the career path where they're not going to go out and command ships or fleets. And, you know, are you thinking of, these people that you're, you know, looking at, technological people, putting them in a career field where they will not be, you know, commanding battle forces, that instead will be retained strictly for their technical capabilities?

DR. CHU: That's obviously one option, although I don't think the Secretary's charge to us is that narrow. In other words, he's raising the question about flag officers, including people in command positions -- why am I inviting some of my best senior leaders to leave? When they are just hitting their stride, they're delivering important results for the nation, why should I tell them it's time to go because I've got some arbitrary limit on how many years of service I expect them to be in uniform?

As you know, those of you -- and I know a number of you have studied the history of the American officer corps -- the notion of retiring on 20 years of service is really a relatively recent development. Even when Marshall and Eisenhower put in the up-or-out promotion system, the pattern in that period was 30 years of service. We've slowly moved to a point where the norm is 20 years of service.

Now some of that's a function of our compensation system, and I have to be realistic, as the personnel and readiness individual, that if we change what we want the results to be, we may have to change other elements of the system for those results to pertain. We can't just assume that if we want everybody to stay longer, that they also want to stay longer, irrespective of what this does to their second career opportunity. We have to change other elements of the system.

So one potential portion of the kind of plan you're looking for us to announce might be that we're going to expand the kind of program you're describing DOD already has. But I don't think it's going to be limited just to that sort of thing.

Q: The obvious downside of not moving people up and out is that you stagnate the lower ranks; you don't give it an opportunity to move, because there are only so many officer billets available. And you get back to the military -- you know, the pre-World War II military, you had 40-year-old lieutenants and 50-year-old captains, guys who'd been in the rank for 20 years. You know, Eisenhower was a major for something like 10 years, you know.

DR. CHU: The better part of 20 years. Yeah.

Q: And that -- the question is whether young, ambitious people would stay around long enough to make it to the cut-off point.

DR. CHU: And we all know the answer: They won't. And so that's not the kind of system, I think, that we have in mind.

And that's why I point to the Europeans -- and again, I'm not saying the European system is the right answer, but I point to that as one alternative that deals with several problems you've been identifying here this afternoon. Because you have a big group at the bottom and then a major winnowing point, you can keep promotion opportunity up at the lower ranks. Indeed, what it does give you is once you pass that winnowing point, it means that promotion opportunity actually rises, and you are virtually -- it's a bit like rear admiral, lower half/rear admiral, upper half. You're virtually -- you know, if you don't screw up, you're part of the elite.

You're part of what is the old French ecole politique kind of system. You're in the club. I don't want to sound as elitist as it is coming across.

But once you're part of the group selected for what in a corporation would be called "executive development" -- in other words, these are going to be your most senior executives -- you're actually given stronger signals that you're valued, because you're being told, "Look, you've made it past our key winnowing point, our key decision window here. We're investing you for a much longer career and for very senior leadership responsibilities." And you're virtually -- as long as your performance stays up, you're virtually guaranteed you're going to get that chance. That's a very different from the system we have today.

I want to emphasize that's not how we are, in terms of outcomes, but that's the kind of future -- not right away. I should emphasize this is nothing that's going to happen tomorrow. We have a system -- I want to emphasize this -- the current officer corps is extraordinarily good, and I think that's one of the reasons you, collectively, are expressing some nervousness about changes to it. You know, we have a winning hand here. The obvious issue will be, why should we change what is a very successful system? I think we can see how good the officer corps is in the degree to which they, the officers who do decide to leave at various points in their career, so easily command excellent civilian jobs.

Yes, ma'am?

Q: Well, let's ignore the senior officer corps for a moment, look at the senior NCOs and enlisted people. You have a situation now where you might have a guy who is maybe ideally suited to be the best tanker out there. It's his perfect post. He loves it. He's happy as a clam. But in order for him to advance, he has to leave that job. What can we -- is there a solution to try to figure out -- once someone's hit a niche that they're absolutely happy and everybody knows the guy's an expert, he loves his work, how can you keep him there?

DR. CHU: Or -- that is part of, I think, what is of concern to the Secretary. It's also in the officer ranks. I mean, this is a classic story about pilots. You have senior officers say, you know, "The worst day of my life was the day I got promoted and I can't fly anymore." And I probably won't mention the names here. We do know senior officers who flew a little bit extra and were invited to retire as a result, because they weren't supposed to fly at that rank anymore.

In some sense, I think the critics would say we've driven the up- or-out principle, both in the officer and enlisted force, a little bit too far, where people want to stay at a mid-level which in terms of their personal agenda is supremely satisfying, they love to -- they don't really want to be a supervisor or commander of large numbers of people; to, you know, have a -- you know, move from an exciting field environment to a desk in the Pentagon. And we don't have current mechanisms that always permit them to do that.

And so the challenge for us -- and this is why I would emphasize this is, as I said earlier, something that will take some time. We will not have -- we don't have all the pieces here at the moment, and we won't have even the outline of a proposed solution for some months.

The challenge is how we keep the best of both worlds, both the incentives that come from "up or out" to avoid the kind of stagnation, hanging on, hanging in kind of behaviors that have afflicted both our own military, own militaries in the past, and at the same time give people who have found their niche -- to take your example -- and who are really very productive for us in that niche, and who will be productive for long periods of time, to give them a chance to continue to serve for longer than our current system will allow. And therein is where the hard work lies.

Yes, sir?

Q: Sir, there's been some talk about looking at the length of command tours of officers. I was thinking, isn't that extraordinarily complex, because let's just say you made the cut and you're in consideration for chairman of the Joint Chiefs of Staff. You have a multitude of assignments that you need, a joint senior staff member, you know, the Pentagon and the field, and in some cases you'll see two-year tours in that. And it's reflected downward through the chain as well, from junior officers, people compete for prestigious assignments or schooling, as well as enlisted. Do you have any thoughts about that?

DR. CHU: Well, I do. And I think this is in part -- more than I think. This is in part what is motivating the Secretary to ask the central question that you began the session with about longer careers, if this is a good idea. He is deeply skeptical about the pattern in which people spend so short a time in each post. And so from his perspective, one of the benefits of a long career is people could stay in a post longer, become more proficient at it, give more value back during that period of time.

I think one of the conclusions we have reached in this QDR process is that for a variety of reasons, we're trying to jam too much into a 20-year career. People are put in position of sort of racing from one assignment to another in order to get all the requirements checked off.

We have looked at the Coast Guard's approach as at least a source of ideas, that they succeed in getting somewhat longer tours, on average. There is no free lunch here, I should emphasize. If you want a longer tour on average, it means people have fewer different experiences in preparing them for more senior responsibilities. And the issue, of course, is can I substitute some other vehicle for giving them that preparation than actually doing a job at some other level.

The Army leadership, as you know, has been concerned, expressed their concern a few years ago that some of the junior officers were not getting enough time in operational posts because of all the other requirements we're imposing on them. I'll leave aside whether that's factually true or not, but it was a worry of senior Army officers. And that's the kind of issue, I think, in contemplating alternative career paths and patterns we will need to deal with. Would we benefit, would the individual benefit?

Certainly to the extent you don't have to move again, the families will benefit, if we can find a way to give you more time in a particular job.

It's not so much, by the way, I might add, command tours per se, it's all tours; that we as an institution, given the length of career that's been considered normal, given the many things we say someone should be ready to do, given our own tendency once we change one thing to want to change everything else to reoptimize the system, it is the case that the average tour is very short. So you get all these evocative stories of senior officers who, you know, in 35 years in the service have moved 50 times, kind of thing. And that is, unfortunately, true.

And I think Mr. Rumsfeld's point is, you know, "If I were running a major corporation" -- which, of course, he has done -- "I wouldn't manage my talent that way." And, of course, from the family perspective, take a different angle on this, this is highly disruptive. And so one of the reasons I do think we get people declining assignments that in the past have been seen as plum jobs is because the families have said, "We've had it. You know, we're not moving." Or fathers and mothers saying, you know, "Because my daughter or son is in high school, I don't want another assignment, however good it is, until that child finishes high school."

And so I think even if the Secretary weren't asking these questions about tour length, I think the department would need to begin asking questions: Are we providing the kind of environment that an American family in the early 21st century will find attractive, or are we demanding so much that is so badly undercutting family life that we are turning away many talented people either from our service in general, or from specific assignments in particular? Shouldn't it be a little more sensitive on this issue?

Sir?

Q: How seriously are you looking at changing the 20-year retirement pattern, and what would some of the alternatives be?

DR. CHU: It's very serious. And I think my own sense is there is a consensus within the department, and without it -- and you saw this reflected in Admiral Jeremiah's Quality of Life Report -- that we need to think of an alternative to our current cliff vesting system. By cliff vesting, as you know, I mean the fact that through 19 years, 364 days, 23 hours and 59 minutes, if you left at that last moment you would get zero, and if you stayed one more minute, you'd get a lifetime annuity indexed for inflation, with medical care and so on and so forth.

The generic answer, of course, is to offer what people like to call a portable pension benefit. In fact, the Congress has started to do this for us already by starting to create savings accounts, retirement savings accounts for military personnel.

Beyond that general point, we have not yet gotten. And there's no particular plan that's been endorsed at this stage.

Q: Does that -- I mean, are you studying that?

DR. CHU: But that is part of what we need to be forming as part of the strategic human resource pattern, what kind of alternative pension arrangement would make sense, which obviously turns on this -- rushing to redesign the pension system would be a mistake. The first question is the one you began with, which is, well, how long would you like people to stay, and who is going to stay that length of time and who is going to stay some other length of time?

So you first need to rethink, as we're trying to do, rethink what the career pattern is going to look like and who you want to attract to that career pattern and how you want to have them assigned, how you want to motivate them and so on and so forth; then you start redesigning the pension plan. There is a tendency, as you all know, in this business -- because we all love the mechanics of these systems so much -- to rush in there and say, "Oh, well, if I were designing the system, it would have these bells and whistles on it and these attributes." And I think what we're saying is, no, let's figure out first what we -- to use the language of the Government Performance Results Act -- what results do we want, what outcome do we want here; and then in order to achieve that outcome, what kind of pension system do we need for our people?

Ma'am?

Q: On a larger scale, though, do you think the military is the right size? Do you think services are in proportion to each other? Does there need to be changes in that scale? Should the Marine Crops be bigger, the army smaller? What do you think should happen in those numbers? If you're talking about the small idea of moving people up and out, you have to be looking at the grander scale, too, right?

DR. CHU: Indeed you do. And you also have to be looking at, as you think about all these different pieces of the puzzle, you have to be thinking about how those forces are disposed. In other words, where we put them around the world and what we expect of them; what's our, as it were, our social compact with the military member and his or her family.

On the question of the size of the active duty and reserve force of the United States, that's obviously one of the central issues in this Quadrennial Defense Review. And as to its division among different services, that's a subsidiary question of that part. That's where the Department as whole is engaged in. It's not my or my office's individual privilege to pronounce on that subject. And on that, I guess I have to say sort of "watch this space" kind of thing.

I'd also emphasize, as you look back at the historic changes in the American military, that rarely do these things happen all at once. In a way, we, I think, all become a bit a prisoner of the statutory requirement to submit a report.

It has taken on the flavor of writing one's final exam for some kind of college course; all the answers will be there in that little blue book.

As you look at how the United States evolves both its strategy and its force structure in response to international events historically, what you see is we realize we need a new direction, we start off in that direction, we may make some important amendments in how we carry things out. And that's true both of the size of the force, the composition of the force, its disposition. It's true of the weapon systems we use, you know the classic case being B-52, designed as a high-altitude nuclear bomber against the Soviet Union, never used in that mode, although, ironically, eventually used as a high-altitude bomber against North Vietnam with conventional weapons, but throughout much of its life, used as a low-altitude weapon system.

So I think that we all benefit by reminding ourselves that historically, big changes in American security posture tend to happen gradually, not all at once. And while we, of course, are all eager to see what's going to be between the covers of this report, I think we need to recall that if it sets out some new directions and gives some indication of where those directions would take us, that will be by itself a significant event.

Hoping that every -- back to your question, sir -- that I will have all the personnel stuff ready in response to that is, I think, asking too much of a single document.

Q: But does it naturally follow that there have to be cuts in personnel to achieve this transformation?

DR. CHU: Not necessarily.

Q: So things could actually remain the same or get larger?

DR. CHU: Oh, I think the one thing I'd be willing to bet on is things will not remain the same. What that means beyond that, you know, do some people win and others lose, to put it in sort of the bureaucratic competition parlance, you know, again, that's yet to be determined. And whether the overall active force goes up in size or goes down in size, again, that's to be determined.

Q: Can I ask you about gender-integrated training?

DR. CHU: Yes, sir.

Q: As I'm sure you're aware, there's some sentiment among some conservatives on the Hill to revisit whether men and women should be separated during the initial stages of basic training. Is that something that you're thinking about, considering, or would even consider, revisiting that issue?

DR. CHU: Well, I think let me say -- here I'm going to take refuge in my two months and six day -- seven day answer. My view of that subject is exactly the view I gave in response to the same question the Senate Armed Services Committee asked during my confirmation process, which is, ultimately, in terms of how we conduct training. We look to the leadership of military Departments to advise as to what makes sense from their perspective and that what -- again to emphasize the results orientation that I think I would hope to bring to this post -- what counts is we need to have individuals who are trained and ready to do their responsibilities properly. And as you know, the military Departments have different views of this, and so we have -- we don't have a one-size-fits-all policy. And I would therefore be surprised to see us adopt such a policy.

Q: So your intention would be to continue to allow the services to decide the best way to train for their individual needs?

DR. CHU: I didn't quite say that. What I think I tried to convey is we first look to them to do this. Now obviously, the role of our secretary of Defense is to help judge did they achieve that result. And if in an important dimension they're not achieving that result or we're unhappy with that result in some fashion, then that's the point at which we ought to intervene.

But our first recourse ought to be to invite them to tell us, either in report form or by their actual practice, whether they're meeting the standard in terms of the kind of people we ought to have. And I think that's the first way we have to approach it, rather than starting with an answer. In other words, what I'm emphasizing is we need to start with the result we want here, which is well-trained personnel who are ready for their responsibility.

Q: Do I read any hint into your answer that there is a question about whether gender-integrated training is accomplishing the level of training that you expect?

DR. CHU: To my knowledge -- and again, let me emphasize my relative newness to this post -- to my knowledge, none of the military Departments is so claiming that there is a problem. It doesn't mean there isn't a problem, but none of them is claiming there's a problem.

Yes, ma'am?

Q: Could I take you to a completely different subject, the new package of healthcare benefits especially for military retirees. Could you just sort of lay out for us what kind of financial drain that's going to be in the -- or commitment, financial commitment that's going to be in the years ahead; your concerns about fully funding that, the growth in financing that that's going to pose upon the Department, and I guess the general notion of whether or not you're creating a class of retirees in this country that's somewhat separate from other senior citizens.

DR. CHU: Okay. Let me take the last portion of your question first, because I think there is a classic question which is yes, we are creating a class that's somewhat separate, and that is the Congress' decision. And I take the spirit of the decision that these men and women have served their country in uniform, have risked their necks for us, typically over a long period of time, 20 years or more, and that part of our compact with them is this is how we honor them in their old age. So I don't want to dodge the fact that this is a better package than the average American is going to receive, but these people have also done things that are different from the average citizen. And the Congress has spoken on that. And I think, in my judgment, unless it chooses to revisit the issue, it has settled it.

Now, then we get to the practicalities, which you've raised, which include how we pay for it. And the short answer is we will pay for it. In other words, we're not worried about the financing. We realize this is a commitment the country has made to these people. You know how the Congress has arranged this in terms of its mechanics, and that is that the cost for these individuals will be paid out of a trust fund whose unfunded liabilities will be assumed by the Treasury, and whose future liabilities become the province of the Department of Defense. So we will pay an accrual charge every year for what a board of actuaries estimates will be the incurred incremental future costs by that year's service by the current cohort of military members.

That actually won't start, as you all know from the details of this, till 2003 and 2002. We foot the bill simply because no one -- correctly, no one thought we'd get this trust fund set up and all the mechanical details worked out in time -- how were they going to get paid, and, you know, how do we build the trust fund, all those sorts of questions.

And as you know from the budget documents, for TriCare for Life, including the pharmacy benefit, we've allotted in fiscal 2002 $3.9 billion in the DoD budget for this purpose, which is our best estimate at this structure (sic) of what it will cost. Now, that is not the full cost, because as you recollect, if the retiree or his or her dependent, as I say, goes downtown for medical care, in other words, goes to a non-military treatment facility, Medicare actually is the first payer under those circumstances.

But the funding -- the short answer to your question is, yes, we recognize this will be a special cost of retirees when this benefit begins, and it's already begun because the pharmacy benefit started on 1 April. My take on this is the Congress has made its political decision this is a group of Americans that's rendered special service to the country, and this is part of our responsibility to them. We will fund it, and we will fund it through an accrual mechanism in the future. In 2002 it's a cash budget item for the Department, which we think we have covered properly. And, obviously, there are some uncertainties associated with that, but we -- I'm on the hook to deal with those and execution, make sure everybody gets taken care of. And you can all judge by the complaints, or lack thereof, next year whether we've done a good job or not.

Sir?

Q: What ideas do you have for reducing overseas deployments and paying for contingency operations? You said during your nomination hearing that if you didn't have a contingency fund, you would support the use of supplemental appropriations for that.

DR. CHU: Well, I've always been -- on the second part of your question, I have also personally been attracted -- I should say this is not the administration's policy, necessarily -- by the notion of some kind of contingent fund so that an unanticipated major deployment does not drain the Department's normal training and war-preparation activities. Whether that's something the administration is going to want to do or not remains to be seen. I do think the administration is intent -- I should say more accurate, I know the administration is intent on being very disciplined about undertaking new deployments. I think there'll be a spirit of asking if you want a new deployment, what is the old deployment we want to give up in order not simply to add to the burden both on our people and our budget for that activity.

On your first question, it's not my responsibility to change overseas deployments. That's obviously ultimately a military mission matter. That's the Secretary, the Chairman, the CINC's to decide what do we need deployed overseas, what do we -- and ultimately, of course, the President -- what do we have stay here in the United States that we then send to a foreign crisis when the need arises. Where my office can get involved are the more detailed questions of is this an accompanied tour, an unaccompanied tour? Can we do more things along the lines the Navy has occasionally done, where the families stay at home; we simply send the crew to the ship, rather than shipping everybody overseas?

But the headline question of what's deployed overseas -- that's, as I say, above my pay grade.

Ma'am?

Q: Earlier today Mr. Wolfowitz said that as part of the QDR, the department is looking at creating a new definition for readiness and a new methodology for measuring readiness.

DR. CHU: That's correct.

Q: Could you give us some of the options that you're considering?

DR. CHU: I can, in the following sense: First, we all recognize that the present definitions focuses too much on what one might call the design mission of military units, which is ultimately theater war of some kind; do not really take into a account the full range of complexities that military units today must deal with -- the Bosnian deployments, the Somali operations, and so on and so forth. And so one element of changing the way we assess readiness is to recognize the rich menu of things the unit might actually be doing and not just fixate on one element of the spectrum.

Second, I think we all recognize that for this to be useful and affordable in both the dollar and bureaucratic senses, that this system needs to be easy to administer. In other words, some big, elaborate reporting system that requires everybody to fill out new forms in the morning is probably not a grand idea.

What we are exploring is to what extent can we use the transaction records that are kept for other purposes at unit levels in all the military departments -- about what happens to a particular piece of gear, for example. So when something breaks down, you have to make reports out, you know, in order to get our spare part ordered and so on and so forth.

Can we -- given modern computing power, can we use these transaction level records to give us what a business would have, which is an instantaneous view of what's actually happening in detail in the field? The advantage that has is, there's much better fidelity in a system like that. It's much less burdensome to administer, because it builds on what you're already doing anyway at the operating level. It has the further advantage that if something is occurring that you think is anomalous, that you can drill down quickly to understand what are the sources, rather than to call someone up and send out a request for more data, et cetera, in order to figure out what's going on down there.

Now those are really principles on which we're going to try to build this. We have not yet built that system. Becky, your question -- that's part of our "by 1 February" agenda. We've got to get this -- at least the outlines of this pulled together. I don't want to promise that we'll start reporting that way at that time. In fact, some of this -- especially if one's going to do something fancy, as I suggested, using existing transaction records, some of this becomes the software issue of putting the software in place and testing it out, making sure you can do all that before you can actually render reports. So it may be a while before we actually start reporting on a different system.

But my -- our goal is to have the element -- the outline of that system decided by the 1st of February.

Sir?

Q: Due to a provision of the authorization bill for '02 marked up last week in the House -- actually, due to a provision that's not in there, the Navy and particularly the Marine Corps asked for relief from the hundred-dollar-a-day 400 days more, in two years -- you know, that -- and the committee left in it. And they said --

DR. CHU: The House committee.

Q: The House. The House --

DR. CHU: Right.

Q: And they said, "Chu told us it was manageable." And they did a lot of data. They wanted to see what was going on. On its face, I mean, when they put it in last year, the committee made it unusually clear that they did not intend that that would ever be paid, that it was intended purely as a forcing mechanism to get the Department to focus on the PERSTEMPO problem.

Given that, and given Admiral Clark's estimate that it's 160 million a year I assume he has better uses for, why -- could you just talk a little bit about your thinking that, you know, you actually follow through with what was obviously intended as just a shot across the bow? It seems like a weird call.

DR. CHU: Well, it certainly has gotten everyone's attention, as you point out --

Q: (Laughs.)

DR. CHU: -- particularly in the Navy and the Marine Corps. Second, my understanding of congressional intent is a little different, which is that it's more than a demonstration. It was a serious -- as you recall the history, the Department actually went up and negotiated with the Congress because this is a change to a prior standard that was even tougher. And so there is some element in this of -- that we agreed to this, although stories differ -- and this is before my time here -- as to who really agreed to what. Depending on -- I have talked to all sides, and they do not agree as to who agreed. But they're it.

Third, I should emphasize -- I want to be sure I've characterized my position correctly. My position was, I was not ready to request on the behalf of the administration a change in the law at this juncture. I emphasized in the testimony that I certainly didn't stand -- this is the Congress's decision. You want to change it? Be my guest.

We're not lobbying to keep this; don't get me wrong. On the other hand, we are not prepared -- back to the kind of question you asked me earlier on; we're not prepared to say this afternoon what alternative system we want. And my position has been there are going to be large number of -- as we've been discussing, there will be a large number of changes here, potentially in the size, the composition, and specific disposition of forces, and what we want people to do.

We need -- rather than pasting a bigger Band-Aid on this problem than the Congress provided, we need to think through the implications of what the incentives need to be to be consistent with those desired changes, and come up to the Congress next year with our proposal, which might be that we love the hundred-dollar-a-day payment. I mean, one fear the Navy has -- I'd be quite direct about this -- is people will be standing in line for this opportunity. (Laughter.) You know, a hundred dollars a day -- even -- I mean, I thought -- even mid-grade officers have been telling me, "Well, I might be willing to volunteer at that level for this duty." So maybe it's great incentive. Maybe we've solved our, you know, excessive deployment problem here.

Of course, as you point out, Admiral Clark doesn't like the bill. But that bill is already there, I would argue. That bill is there in bad retention results. That bill is there in morale problems. That bill is there in family dysfunction that we have to pay for.

So my view is, we're already paying this bill; it just may be hidden, not easily totaled up by the accountants.

And it may be that an outright cash payment for extended arduous duty, which we do in other ways -- we have hazardous duty pay, we have tax exemption for the Balkans, we have imminent danger pay, we have all kinds of special pays if you're a parachutist, et cetera -- it may be that an outright cash payment is the right idea.

Now, whether this particular structure is the right one, that's another matter. In fact, the Navy has already started raising, "Well, maybe we need a better sea pay plan." And I said, "Right on; now, what is that plan?" But of course no one's ready yet to table one. So that was the reason for my testimony. We're not prepared. And my understanding of the committee language -- which I've actually not seen, I should emphasize -- is that it will say the Department's invited to render a report next year and to provide this plan.

One reason I take this view is, as you know, just as an arithmetic matter, it will be November before the first person could even be theoretically eligible for this payment. And so, while I know those responsible directly for the operation of the fleet are nervous about it, my view -- I recognize, insulated by the fact that I'm sitting here at headquarters -- is, it's a while before this is a large-scale enterprise.

Q: So those persons who would have deployed by now, people who have deployed by now will still be at sea in November.

DR. CHU: Well, but you have to get past -- the trigger is a year ago this past October for the start of the two-year calendar. So it's not till November that the first person theoretically could have 401 days and start being eligible for the payment. So the first-year burden is not probably very large.

Sir?

Q: Dr. Chu, I apologize if this question was asked and I didn't hear it. I got here a little late. But on the travel initiative that the House includes in its mark are some pretty ambitious increases in the reimbursement rates for service-people when they move between assignments. Can you say whether the Pentagon -- I think there is some flexibility -- whether or not you put the money forward for those kind of increases, whether they get funded and begun? For example, the per diem, flat per diem of 50 would rise to what federal civilians get of $85 a day when they're in the travel status. Can you say at this point whether you'd be ready to fund those things? Because I understand they're quite expensive.

DR. CHU: The short answer is no. We have -- I have not studied the provision yet, nor have we thought through what we need to do here in order to be fair to our people.

Q: So you're saying no, you can't say today?

DR. CHU: No, I can't say today. No. In other words, I'm not taking any position one way or the other as to whether it's a good idea.

Sir?

Q: A number of people I've spoken to about the personnel management system have said that at the end of World War II they designed the system in such a way that it would have a large officer corps that could then form as the nucleus of an expanded mobilized military. Do you agree with that? And are you looking at changing that? That maybe we don't need to have a large officer corps; that the ratio of officers to enlisted could change?

DR. CHU: Well, I'm not sure I agree with their reading of the historical record, first. Second, we have changed the officer/enlisted ratio over the years. Not always, I grant, in the purposeful, organized way your question would imply we act, but as you look at the results, we have changed that number.

Third, even if you don't like our number, we are a lot better than many other militaries, which have larger officer to enlisted, or more officers per enlisted than we do.

Fourth, we have some variation within our own ranks, the leader in the case of the Marine Corps, partly because they don't have all the infrastructure; they use the Navy for that. So there's a lot of variation here.

I would say that to the extent that -- this is back to what I think Secretary Rumsfeld is trying to do in the Department at the present day, to the extent that practices derive from what I would call the mobilization philosophy of the Cold War period, where we had to be ready to expand the force in a major way in order to fight a global conflict, which is not part of the current strategy, obviously that, I think, is one of the fundamental kinds of things Mr. Rumsfeld wants reconsidered. And to the extent there are practices out there, whether they affect the officer corps or the size of a particular arm of the force, or whatever the case might be, that's clearly going to get reconsidered in the course of this set of reviews.

But I don't sense we're keeping a large number of extra officers on active duty just to expand the military with. Those officers are justified by requirements processes; that billet needs to be -- needs to have an officer in it, et cetera. And you might quarrel with how good that process is or whether we reach the right answers all the time, but I don't think there's a philosophy of staffing a lot of extra people around.

Yes, ma'am?

Q: A family question. There's a Rand study that came out earlier this year on the subject. To a large extent, the military really depends on unpaid labor in the form of spouses to provide a lot of fairly high-level support to other spouses and families. Often it's rather simple, just staying in contact with people. Sometimes it gets into issues of child abuse or the sort of things that you would expect an expert would be better prepared to deal with that spouses are forced to deal with, commander's spouses. Is this something that you're planning on looking at?

DR. CHU: We have, and we've reached a conclusion, which is on the one hand, we are very grateful for the volunteer efforts that you describe. On the other hand, to the extent people have been volunteered -- to use as a verb -- somewhat against their will, that is not a practice that we're prepared to endorse going forward.

And we recognize that particularly as the situation of the American family and the military family has changed over the decades, that we have to change our family support policies to go with it, and that some of this -- that it will -- we will not get from where -- we will not get to where we need to be by relying exclusively on volunteer support; that there is an element of government responsibility here that we have to accept. And that in particular, we should not be volunteering people who have neither the time nor the inclination to do these sorts of things.

So on the one hand, we're very grateful for those who want to do it; we don't want to turn off the true volunteer effort. On the other hand, we don't want -- how did they say it in draft days -- "induced volunteers," I think was the nice phrase; you people who signed up for the Navy or the Air Force with the hot breath of the Army at their backs.

So we are going to move to a different policy on this front. Now, what the content is going to be -- back to your colleague's question; when is my detailed plan available for your study and review? -- that's yet to be decided: How we're going to do this, whether we'll be -- (inaudible) -- we haven't decided yet. But --

Q: Funding, how much it would cost?

DR. CHU: No, none of that's decided. Obviously, we have to watch out that the costs are kept within reasonable bounds and so forth. But the principle has essentially been decided that this is not -- to the extent that's going on -- and as you know, by regulation it's not supposed to be going on. But to the extent it's going on, it's to be stopped.

Sir?

Q: I'm a little surprised that the revised defense authorization for 2002 request included small increases in end- strength for the Navy and the Air Force, given that the QDR is looking at that whole question and there's lots of anticipation that it will downsize. You know, why that little bump up? Why not stay status quo for that extra year and wait for the QDR result?

DR. CHU: The short answer is the Secretary gave the leadership of each military Department some leeway in terms of end-strength to meet their needs for this next year, which will not be all that affected by the QDR results, to meet those needs as they saw best. And both those Services thought they needed a little bit more and that was permitted.

In the case of the Navy, I know this was gone through at some length because Admiral Clark is very pleased with the improved operating results that he has achieved by being a bit over his official strength, which as you know, with a 2 percent flex number he's allowed to be. And that has allowed him so much better to respond to events, that he asked for and received permission to use the available funds to fund that going forward.

So this was a leadership decision. The Secretary gave them that leeway and they took it.

Sir, you had a question?

Q: Yeah. How do you plan to address double-digit healthcare inflation costs in DOD, especially without the Defense Medical Oversight Board?

DR. CHU: Well, we -- I think it's a two-part question. One is, what about the Defense Medical Oversight Committee or Council, as it was called. And second, what about the double-digit inflation.

Double-digit inflation in the civil sector, in my view, is a fact of life. To the extent we are a purchaser of care -- some of you have seen the New York Times report a week ago Sunday about California's premium results, which are, I think, ranging 12 to 24 percent increase -- that's a reality of the marketplace we have to face too.

Now, what the surgeons general have stood up and said is let us build on our excess capacity, if you'll give us the additional operating resources, to allow us to take care of a larger share of the patient load. We said we'd welcome that. If you can demonstrate you can do it, we'll -- and this was part of my testimony to the Congress for no fences, which I'm delighted the House Armed Services Committee honored. To the extent the Congress allows us, we allocate monies within this account by its marks. And if you can demonstrate that you can deliver that care, we'll be happy to try to give you the wherewithal to do so.

And so part of our answer -- really a two-part answer to your question on the inflation rate. First, the realities of the marketplace are still there, you know.

We mustn't be like King Canute's advisers, believing we can get the tides to turn back simply because we stand out there with our hand saying, "Stop." Second, the recourse we do have is to turn to our own in-house system and challenge it; can it do more and can it produce at rates that reflect the lower cost increase in the private sector? That challenge we've accepted. That challenge our surgeons general want to step up to.

As far as the committee is concerned, ultimately the responsibility for the system is lodged in the way the Department is currently constructed, in the TriCare management activity, in the assistant secretary for Health Affairs and in myself. It's our job to manage the system. The Secretary is not keen on management by committee. And so every time -- I do wish to emphasize to you I'm very sensitive on this subject because every time the rate of inflation in health care comes up, the Secretary looks at me as if I am somehow gobbling up the Defense Department budget. (Laughter.) So I am very appreciative of the point that I am the "stuckee," not a committee. (Laughter.)

Sir?

STAFF: One or two more, please, ladies and gentlemen.

DR. CHU: One or two -- one more, and then we'll finish.

Q: Military pay table. Last two years, raises have been anything but across the board. You've been targeting different ranks and different time grades to reflect changing workplace demographics. Is that going to continue ad nauseam, or are you going to at some point get it right?

DR. CHU: Well, I hope it's not ad nauseam. But I do think what you're seeing in the Department at the tail end of the last administration, beginning of this one, as we discover how we best respond, as you put it so ably, to changes in the civil labor market, that the notion that you can fix once and for all what the pay structure should be and then just leave it alone and simply give a single across-the-board increase and get it right is probably not a good way to get good results long term; and that we have to, in the kind of dynamic economy the United States has in recent years achieved, we have to be a lot more agile, a lot more responsive to what's happening out there with our pay decisions.

And so, while I don't want to promise one way or the other how we're going to do it, I do think that it seems likely that we will want to have, as we did his last year typically, some kind of base minimum pay raise for all, and then some degree of targeting that allows us to respond to the issues we need to meet, whether those are driven by the private marketplace, whether they're driven, as we discussed, with deployment burdens, by our mission needs or whatever the case might be.

You know, in a way, we've long done this, because we have all these special allowances. Every time a new problem came up, we created a new special allowance. And in fact, the critics complain that it's Byzantine in its complexity, and they always want simplification. I am struck by the degree to which this is essentially targeting, except by another name. And so I think in my estimation, it's an honored tradition in this department, it's just been made a little more explicit by the way the overall pay raise has been handled.

And what I think is interesting and I think important to the individual member and his or her family, because so many other benefits are hooked to your basic pay, that instead of glomming it on with some special allowance that says, "Okay, the Balkans, you get this money, or Korea you get that money," we are now willing to enter into the basic pay table with a more generous overall raise that would be the case and say okay, we'll make -- we won't just, you know, hang one more ornament on the Christmas tree here, we'll deal with the underlying structure in order to be able to resolve our problems. I think that's a sounder way to manage. I think our people are going to like it better in the long run. It's better for them in general.

Thank you all very much.

Thank you.

DR. CHU: Look forward to seeing you from time to time.

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