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DoD News Briefing: General Shelton

Presenter: General Shelton
November 20, 1997 10:45 AM EDT

Q: General Shelton, we've just ignored you, and we want to apologize, but can we just get a quick...

A: I'm indebted to you. (Laughter)

Q: A quick comment about what, if anything, significance you place on the fact that Iraq failed to make good on its threats to take a shot at that U-2? Do you read anything into that at all?

A: I don't read anything into it other than the fact that I think he was smart in not doing that. We will continue to act in accordance with what the United Nations asks us to do, and we'll keep our range of options open. I really have to go get in the same thing that the SECDEF's in.

Q: ...new forces into the region?

A: We have adequate forces there now. There's always movement of forces -- some coming in and some going out, but there's no plan as of right this minute to put any additional forces in for the mission required.

Q: Another U-2 flight any time soon?

A: That will be up to the United Nations.

Press: Thank you.

Dr. Hamre: (Laughter) I'm not taking it personally. I understand.

Press: We forgot to put money in our parking meters. (Laughter)

Dr. Hamre: We're going electronic -- we'll take your Visa card. Absolutely, I do understand.

My role here is obviously to fill in details to what the Secretary has already reported. What we're announcing today, it's like bookends, and this is the second bookend to the QDR. When the Secretary unfolded the QDR in the spring, he had to pay attention to all the big issues -- how big a military should we have, how much of our forces should we station overseas, how many carriers should we have, where should they be deployed? All of those major issues had to be decided in the spring. We didn't have time to really tackle these organizational issues. So the Secretary felt we needed a follow-on, more comprehensive effort.

He assembled a task force -- these remarkable individuals who have given an unbelievable amount of time. I don't believe anyone could possibly realize the dedication it took for them to work and bring this forward.

As you've seen from the Secretary, this is really an effort to try to bring business management practices that have been pioneered in the private sector over the last six to eight years. This just remarkable energy in the private sector... we're now going to try to bring into the way we run the business side of the house at DoD. And of course the Vice President being here was evidence that it was integral to the QDR.

As you see in the White Paper that's been distributed, this is in many ways a return to new basics. New basics that we've learned from the private sector, from the way in which they have this tremendous, explosive energy that's emerged in the private sector. It's also back to basics for us in the Department. Our role is not to be running programs out of the Office of the Secretary of Defense. It's really to be providing policy oversight and to help the Secretary formulate new directions. It's a return to those basics.

You will see how the mission is being, I should say the organization is being adapted to reflect that in this post Cold War period.

Why don't we take some questions?

Q: I'm confused about all the changes that relate to WMD and NCB. And who's going to fill...

A: Let me talk about that, and you will see that subsequently in our presentation, if we can get it running.

We found as we were looking at this, this was not just a downsizing effort. This was an effort to kind of reshape the organization to better reflect the kind of missions, and this new, complicated security environment that's emerged after the end of the Cold War is remarkably complicated. On the one hand you'll be working with a country that in the past was an opponent and now is a friend on a certain set of issues, and is still an adversary on another set of issues. We found out that this complicated security environment really can't be addressed when you have the old style organization that had lots of stovepipes that were working on separate pieces.

So to fix that, we are consolidating and creating a new defense agency -- a new defense agency called the Threat Reduction and Treaty Compliance Agency. This organization will bring together all of the disparate organizations that have been working with this as some of their primary or secondary missions. For example, the Defense Special Weapons Agency, the On-Site Inspection Agency, and the Defense Technical Security Administration. We'll bring them together into this organization. We will also take various stovepipe activities that were going on inside the Office of the Secretary of Defense, put the operation of it over in this new agency.

We will combine two Assistant Secretaries in policy -- ISP and Strategy and Resources -- into a new Assistant Secretary for Strategy and Threat Reduction.

The functions that were previously undertaken by the Assistant to the Secretary for Nuclear, Chemical, and Biological Weapons, those are being largely devolved. I mean Harold Smith has just done a splendid job, and we worked with him, actually, over the last six months, as we were positioning; and frankly, he did such a good job he worked himself out of a job. The oversight functions associated with nuclear weapons will be transferred over to the Director of Defense Research and Engineering.

Q: So who's going to be the new ASD, which is a combination of...

A: That's going to be Dr. Ted Warner.

I'm going to talk about the new business practices, and let me first mention this paper-free contracting.

The Secretary mentioned that we are choking in paper in the acquisition business. Every time we print up a contract, we print up 17 copies of that contract. We have roughly 11 million contract actions a year. Seventy-five percent of those contract actions are for less than $2500 -- frankly, we could take care of the bulk of these contract activities with purchase cards, with credit cards, and I will talk about that shortly.

For the larger contracts, we run that operation all over the country. For finance and accounting we do all of our contract payment out of Columbus, Ohio. At Columbus, Ohio, we administer about 370,000 contracts. It takes 11 miles of shelf space to store the contracts -- and that's just for one of the copies, of the 17 copies that are printed every time we issue a contract. So we've got literally hundreds of miles of shelf space dedicated to paper, and frankly, the inefficiencies that come with working with paper. We have committed to go to a paper-free environment by the turn of the century. It's very possible using some modern techniques of imaging, for example, to take and convert previous paper contracts directly into images and then have them accessed through the Internet. So we're going to be able to achieve this. The savings will be remarkable. We will get a return on investment within five months from moving in this direction.

This is just an illustration, this is from Columbus. This is where we also store... The Ark of the Covenant I think got lost out there someplace at that warehouse. (Laughter)

Everybody talks about Internet commerce. We are making a commitment to do this in a major way. We will have electronic catalogs and electronic malls available on everyone's desk who is in the buying business in the next 18 months. We want to transfer most of our procurement activity, frankly, it's a democratization effort, so that individuals buy things directly using these electronic tools, electronic commerce tools.

In this world, contracting officers set up the underlying contract and embed it into a software-based solution that's available through Internet. And then individual sergeants major, or whoever is in the business of buying things, will order directly and pay for it right off of the screen using their credit card.

The Secretary talked about publishing, and he referenced these. These are just the financial management regulations. There are 76,000 pages of material. A year ago we said we're going to get out of the paper business and we transferred that over to the CD ROM disk. That, however, misunderstands the true revolution that's underway here. That's summed up in the first bullet. Instead of having a print and distribute concept, which is really what we've been doing since Gutenburg printed the first Bible, what we're moving toward now is print on demand. When Congress passes legislation, the authorization bill will change entitlements, say for pay and compensation; only one of these volumes deals with pay and compensation, and probably only two or three paragraphs change. Instead, we would take changes and then print up the whole thing and distribute it to everybody all over again.

We're going to move to a print on demand. We will electronically notify people of what the changes are in the regulation and then it's available for them to pull it up as they need it out in the field. We will no longer be printing in bulk and distributing it.

The real advantage of this is you're always up-to-date. Your publications are 100 percent up-to-date. You no longer have this lag time --- in addition, you're saving paper.

We've talked about each of these. The Secretary mentioned the travel re-engineering. We have a system right now that is very paper bound. Last year we processed 370 million pieces of paper as documentary backup evidence for travel vouchers. Even though our average travel voucher was only $250. We are spending 30 cents... For every dollar we spend on travel we spend an additional 30 cents to administer travel. This is clearly crazy. We pioneered some new concepts. We've rewritten the travel regulations. It used to be 230 pages of scintillating prose. We have transformed that, we have now 17 pages in clear text English. We have bought existing commercial software tools. We piloted this process in 25 locations, and we found that on the average, performance increased anywhere between 75 and 150 percent, depending on the category, and costs were down 65 percent on the average. We will be at 10 percent when this system is in place. It is now under competitive award. There are two superb proposals that have been submitted. We will award that this fall, and we will start to roll out the new system in January.

Prime vendor contracting. I know many of you here are familiar with it. If you were to go to Walter Reed Hospital five years ago there would be a room this size that was just storing supplies -- bandages, cotton swabs, aspirin you name it. Obviously, when you have a warehousing operation like that things are lost, things disappear, you forget where you put things, you pass the expiration dates. There's a lot of loss. They have moved to a "just in time" delivery system using prime vendor contracting techniques. Ninety percent of all of our hospitals now are under "just in time" delivery. We've eliminated those stocks. This does not apply for field medical supplies. Obviously those we do store.

We will be moving from that concept over to provisions so that all of our mess halls in the future... We will eliminate warehouses storing the dried potato flakes and the biscuit powder, etc. We will extend the concept, as well, to all office supplies and base maintenance supplies. So broom handles, photocopy paper, toilet paper, all the routine things that it takes to operate a base, we will be moving to a direct vendor delivery concept.

The Secretary mentioned household goods transportation, and he mentioned this one horror story of a family who had their sofa cut in half because it didn't fit inside a shipping container. We have hundreds of these examples.

I should say, 75 percent of our carriers are quality carriers; but their reputation is being brought down low by the 25 percent that are not. We do not have procedures to avoid poor actors currently in the transportation field; and far too many -- we think about a quarter of all of the companies that are doing business with us -- are fake companies. They were previously disqualified. They have now entered with a new name, still operating the same trucks, same people. We need a whole new approach to that, and this is ultimately a quality of life issue. We're not going to save money off of this, we're going to get better service off of this.

Let me move quickly to the organizational changes. As I said, there are four elements to this. The first were these business process changes, now the organizational changes. I'm going to spend the bulk of my time talking about the Secretary of Defense and the defense agencies. Admiral Blair is going to speak about what's going on in the Joint Staff.

These four things, which I need to just spend a moment on -- the Secretary talked about the Defense Management Council. I will chair up the Defense Management Council. On it will be the Vice Chairman of the Joint Chiefs, each of the Under Secretaries, the Service Under Secretaries and the Service Vice Chiefs. We will become the Board of Directors for the defense agencies.

If you were to go to almost any defense agency and say who do you report to? They'll know who they report through, but it's never entirely clear who they report to. Are they reporting to the Secretary? Are they reporting to their CINCs? Who are they accountable to? We are going to create that place of accountability, this management council.

The first thing we're going to do, we start next week, is we're going to negotiate performance contracts with each of the heads of the defense agencies -- a standard technique that's used routinely in business. Every one of the interviews that I know the task force had with industry said this is just one of the basics. You've got to start with basics.

Q: Is everything you outline something you can do by executive action, or do some of these things you're going to tick off need congressional approval?

A: Very few things require legislative change. There are a few that require legislative change. I will try to mark them along the way, and try to wrap up at the very end, George.

We're going to create a new defense agency. As I said, we really need to look at this back in its broader security context. As we are currently structured, it is not as adapted to this new environment that's emerged in the last eight years. It is an environment where on the one hand you're working with some people and they are partners in one dimension of your relationship, and they're still adversaries in another dimension of your relationship.

When you have organizations that are stovepiped and they're not integrated, you tend to reinforce those problems rather than ameliorate those problems.

So we're bringing together into an operating arm this new defense agency, consolidating the three defense agencies that I mentioned, as well as devolving activity out of OSD into this new organization. Of course its responsibilities will be counter-proliferation, threat reduction, things of that nature.

Q: (inaudible)

A: No, we don't.

Q: Do you know who's going to head it yet?

A: We had a superb candidate, and I'm still hoping that I can talk him into it, but... Well, we're working on that. I'm sorry, I'm not able to go into it right now.

Q: The Army... The National Guard now has the responsibility for handling terrorist threats, so...

A: No. I'd like to move to that next one because actually that will help, I think, explain...

Mr. Bacon: I suggest that we go through the presentation quickly and then get to questions. Otherwise, we'll never get...

Let me first talk about world class education. We consider ourselves a world class organization, but in all honesty, we don't have world class civilian education. I'm not talking about military education, but civilian education. Our faculty is uneven. There are no continuing education requirements, systematically, for it. Too many of them are civil servants, meaning they're instantly grandfathered and tenured, as it were. You don't necessarily have energy that we need to have.

So we're going to create a new position, a Chancellor for Education and Professional Development. This individual will be the quality assurance and resource allocation individual. It's not going to be a large organization, but it's going to be the center of gravity for quality in education.

Every program that we offer, every program that we teach is going to have to be accredited by the turn of the century or we're not going to let it be offered. That's going to be hard to do. And I'm not talking about kind of a fast Eddy's accreditation in car repair. I'm talking about a world class accreditation organization.

Where we can, we would like to find as much competitive opportunities in putting this in the private sector as possible, rather than us running the program in OSD.

The hottest thing in education is performance measurement. When a corporation wants to train technicians to tear apart equipment and rebuild it, they frequently will go to a profit-seeking education organization to train people. Those organizations have developed performance measurements, because corporations want to know did I get something for my money? Did I get a trained technician out of this?

We do not have comparable performance measures as a requirement for all of our courses, and we'll be insisting on that.

Now to the National Guard. There is an organization here in the Department called the Director of Military Support, DOMS. It is a command center that's in the Army. There are really two command centers in the Pentagon. There's the National Military Command Center, which is managing the things in the Middle East right now; and then there's the Director of Military Support. That is the command center that takes care of coordinating all Department of Defense activities supporting localities when there are national disasters; there are emergencies; there's rioting in Los Angeles; floods in the Midwest; Hurricane Hugo crashes ashore. This is being coordinated out of DOMS. DOMS has the linkages set up with the Federal Emergency Management Administration and with the State Emergency Action Directors.

The bulk of the activity that's carried out in this country -- the 911 force as it were -- is really the National Guard. Especially, and you mentioned this earlier in your question, the role of the Guard is going to be very prominent in this new national security requirement that the Secretary outlined in the Quadrennial Defense Review this spring.

The terrorist incident in the Tokyo subway system was a wake-up call. We need to develop a capability in this country where we, the Department of Defense, through appropriate channels, can support and augment local forces in responding to acts of terrorism involving chemical and biological weapons. We will coordinate that through the Director of Military Support. To do that, we need a general officer from the National Guard that will serve as the focal point. So this initiative really is to have a Deputy Director from the National Guard to help coordinate and develop this very important response mission and role for the National Guard in the future.

The Secretary highlighted these kind of bottom lines. Let me flesh in a little more data that goes with it.

There will be a 33 percent reduction in OSD. Now over the years we always said OSD was about 2,000 people. In fact we had another 1,000 of them hidden in other organizations. They were technically on somebody else's payroll, but they worked side-by-side with people here in OSD. OSD really was 3,000 people. And we will be eliminating a third of them. A thousand positions. Roughly half will be transferred to other places. For example, we have been running the Chemical Demilitarization Program for old chemical weapons. We've been running that out of OSD. We will transfer that to the Army. The Army will become the executive agent, for example. So roughly half of these are transfers, the other half are reductions, real reductions.

The baseline here is the last day of business for FY96, or the same as the first day of FY97. We did that because Secretary Cohen came here in the first quarter of FY97. If we'd taken a earlier base, if I'd have taken the first day of FY96, that number would have been closer to 40 percent. So truth in reductions here. We did not hook up the baseline to artificially inflate the percentage reductions.

The Joint Staff and Admiral Blair will be speaking to this. The Joint Staff and the Chairman's controlled activities will be reduced by 29 percent over this period.

The 21 percent reduction in defense agencies. I should say, this item will be accommodated over the next 18 months. The reductions in OSD and in the field activities which are really supporting OSD-directed activities -- that will be done over the next 18 months.

The defense agencies, this will be over the next five years. Let me give you a scale of numbers. I said that was 3,000, and 1,000 will be coming out. This is about 8,400 in the DoD field activities, and about 3,000 will be coming out. Most of those are transfers. Most of those are being transferred into defense agencies. But the defense agencies are going to have to absorb them. They're not getting head room relief for it. So they're going to end up in real cuts over a five-year period.

The 21 percent reduction of defense agencies, right now there are 130,000 civilians that work in the defense agencies, and we'll be eliminating 28,000, and those are absolute eliminations.

Q: What was the 8,400 again?

A: The 8,400 is in field activities, and that will be reduced by about 3,000. The bulk of those -- some of those are eliminations, but about 85 percent are actually transfers. But they're transferred into the defense agencies, and we're not going to be giving the defense agencies relief. They'll have to accommodate those.

Let me now go to the streamlining through competition the Secretary indicated, and you saw the bar chart. We are making an enormous commitment here through this technique to more efficient operations. We will be competing 34,000 positions here in FY97. That is a ten-fold increase over where we were in FY96. In the first two years... over the next two years we're going to be doing about 65,000, and that's more than all of the A76 competitions combined in its history.

We're forecasting savings of $6 billion over this period, and $2.5 billion annually. Let me tell you how we got that number. There have been 2,000 A76 competitions. A76, by the way, refers to a handbook, a regulation published by the Office of Management and Budget, to compete, to evaluate competition between public work and private work for the same activity. It allows government workers to design a most efficient organization and then compete against the private sector for work.

Over the last 15 years, and for those 2,000 competitions, on the average, government has won half of the time. Then of course the private sector has won the other half.

Where the government wins, on the average, the savings have been 20 percent. Where the private sector wins, on the average the savings were 30-35 percent. We have taken the most conservative numbers, so we have put in, we're assuming the government wins every one of those and that the savings are 20 percent, the historical average. So we think this is a conservative number, these are conservative numbers.

In addition to those A76 competitions, we will be expanding it to include these activities -- directives. So we will direct a head-to-head competition for payroll services, for retiree pay, personnel services. Personnel services are, I think, in poor shape here in the Department. We need to tackle them.

Leased property. We spend about $900 million a year to rent property. We don't have a very good management focus for that, so we're going to be opening that up for competition.

Finally, let's talk about the infrastructure. The Secretary mentioned we have beseeched Congress for having two more rounds of base closures. We know we need them. I should say the savings aren't in the five-year plan, the savings really accrue for the next... The health of long term modernization depends on these rounds of base closures.

As the Secretary said, we need to have at least $2.8 billion worth of additional savings from base closures, and we're forecasting that. Very little of that, of course, is in the five-year plan. As a matter of fact there are costs in the five-year plan. There are really no net savings in the five-year plan.

We have directed DISA, Defense Information Systems Agency, to downsize their 16 megacenters. They capitalized all the data processing centers. In the past there were over 250 of them. They brought them down into 16 megacenters, and we're telling them now, get down to six.

DFAS, Defense Finance and Accounting Service, over the last two and a half years has been collapsing its field operation locations. There were 330 locations, they have collapsed them now into 18 operating centers, and we're saying we need to get down to ten. So we need to reduce that structure down to ten.

Laboratories. A full scale consolidation of labs really is going to depend on the BRAC route -- where we can get some savings through smaller consolidations. We will try to accomplish that here in the next three years.

We will also be knocking down old facilities. The budget that we submit in January will pay to dismantle 8,000 structures -- old facilities.

As you saw in the Secretary's chart, we are directing that every public utility that we run -- we operate over 550 public utilities -- electric systems, natural gas, water, waste water, that we, to the maximum extent possible, we privatize that. We're creating a new center. We're actually changing the Defense Fuel Supply Center over to the Defense Energy Management Center. We came to realize through the work of the task force and others, that we were focusing on the wrong thing. We were so busy managing power infrastructure that we lost sight. The real goal was to manage energy. Our goal really ought to be not to manage the infrastructure of power, but to manage energy, and we need a change in mindset for that.

Because I head up the Defense Management Council, which is also where we're going to be monitoring all of these things that we've announced, and you will see in this White Paper that's been handed out, a series of very specific directives. The Secretary put down very specific milestones of what he wants to get accomplished, so we'll be monitoring it through that.

We'll also be taking, our next step is to the military departments to say okay, here's what we've been doing, what are you going to do? We intend to be very vigorous in pressing these kinds of management changes with the military departments as well. And we will have these legislative changes.

George, you asked what legislative changes will we pursue? For example, some of the Assistant Secretaries are set in law -- the Special Operations and Low Intensity Conflict Secretary is set in law, that organization. We are going to change the title to really reflect its much broader mission. It's what's going to be called Special Operations and Humanitarian Assistance. That will be an example.

But we do not require far-reaching legislative changes for what we're posing here. Most of it, frankly, is things that we could do internally.

Q: How much money per year would you save if you got everything done that you have authority to do -- in other words, you don't need congressional approval -- and on top of that figure, how much would you save per year forever, or whatever figure you can hang your hat on, if you had the legislative cooperation?

A: Overall the entire package, our goal here when it's implemented is to save no less than $6 billion a year -- annual. Now because the BRAC rounds do require legislation, and that is about $2.8 billion -- the $4.2 is what we believe we can accomplish with our existing authorities.

Now I would say, I actually think that's a minimum. We're going to do better than that. Excuse me, $3.2.

Q: What year could you get this, the $3.2?

A: That's going to be the steady state after five years.

Q: So come...

A: 2003, 2002.

Q: ...you're going to start...

A: Yeah. Because some of these things, I am not banking savings for some of these initiatives, frankly, because I don't want to remove the incentive from the Departments to take and accomplish it. So I'm confident we'll do better.

Q: If you get BRAC you'll get $1.4 a year?

A: $1.4 per round when it's steady state.

Q: How much will competition, the 60/40 rule, the core competency functions and that sort of stuff, don't you...

A: The legislation that the authorization committees have worked on do drop it down from a 60/40 to 50/50, changes some of the definitions internally, and the forecasts that I'm presenting here are consistent with that.

Q: You can work within that 50/50?

A: Yes.

Q: What is your net count for job cuts? You said there were some transfers involved there. What's...

A: About 30,000.

Q: I see nothing in the report on DARO, and BMDO is just mentioned in an org chart. What's up with those?

A: I'm really glad you brought that up. One of the things we learned from the task force and from industry is press ahead, make your changes, you're going to have mid-course corrections, and you're going to have new things that you're going to want to tackle. There are some things that we clearly didn't decide right now. Some of the space organization, BMDO, DARO and other things -- those are going to be part of the ongoing review through the Defense Management Council.

Q: The House National Security Committee asked for cuts of 125,000 in the acquisition, so-called acquisition work force, and they claim that's going to save $19 billion if you do that. Have you incorporated any of that into the...

A: We spent a long time working with the committee because frankly, there are not 120,000 people in the acquisition work force. There are 120,000 people who some way or another are involved in the acquisition process, but they might be running laboratories or they might be doing all kinds of things. It was really a misnomer of the people who were actually involved in the acquisition work force.

We're going to have very heavy downsizing here in the acquisition work force. It's already come down, frankly, by 40 percent.

Q: So how many will you cut?

A: It's embedded in the 30,000 that's in the defense agencies.

Q: The 30,000 cuts are out of how many positions overall?

A: Out of about 130,000. Excuse me, I'm sorry. About out of 141,000. About 130,000 in defense agencies; 3,000 in OSD; and 8,000 in the field activities. So it would be 141,000.

Q: Unrelated, can you just go through -- either in broad terms or however you can do it -- how much... A lot of these initiatives are going to cost money up front. Can you talk about how much they're going to cost and how much they're going to save and when savings overtakes their costs?

A: Would you ask me that question in January? That's now what we're transitioning. We've got the blueprint down and the Secretary's direction on what to do. We're now going into the budget review. One of the reasons we had to do it this early is because we're not transitioning to exactly that. It's a very fair question. I really don't have a comprehensive answer until we go through the budget process.

Q: On the A76 savings that you mentioned and some of the other things...

A: We have budgeted the A76 stuff up front.

Q: You have budgeted that.

A: Yes, we have budgeted the A76.

Q: So, that means an increase in modernization or...

A: No, the A76, those involve basically analytic efforts and we have budgeted the cost for analytic efforts in the...

Q: Have you budgeted the savings?

A: We are budgeting the savings that I'm showing you. When the budget comes out it will show that $6 billion over the five year period.

Q: Considering the scale of cuts to OSD and the Joint Staff and field activities, what would your estimate be for savings in the military departments?

A: I don't have an estimate for that. In fairness to the military departments, they have been doing a lot of this already themselves, so that's why I really would hesitate in saying what I think they could do.

Believe me, this takes an awful lot of work to get to that point. If I were to give you... I'd be shooting from the hip and it wouldn't be helpful.

Q: What kind of clout is the Defense Management Council going to have so that it's not a body that's a please do this versus you must do this?

A: When I was the Comptroller I had all the clout I needed. I controlled people's money. (Laughter)

Q: ...from the Council, though.

A: I control the money.

Q: The stick is, we need to see potential progress against...

A: Most of this we're going to lay into the budget over the next three weeks. This is not a debating society we're creating.

Q: Obviously, one of the objectives here was to find money for modernization. Are you confident that this plan, if everything goes well, will get up to $60 billion a year for modernization?

A: We are going to be at $60 billion. We've been forecasting to get up to $60 billion for three years running. What happens every year is other costs come in that, frankly, slide that and divert it. So what this is really going to do is to take care of those unrequited operating and support costs that keep eating away at the modernization program.

So the answer is yes, but it's kind of an indirect mechanism.

I need you to see Admiral Blair's presentation and talk about the Joint Staff. I will hang on, but let me turn it over to Admiral Blair right now so that you have a chance to see that part of it.

Q: Dr. Hamre, will 100 percent of the savings go into modernization?

A: No. We have developed a program where we meet our modernization goals and we get to the $60 billion target. But we have operating and support costs that are not yet taken care of, so it indirectly takes care of the modernization bill. But yes. In the long run it will. Indirectly, by eliminating the things that represent IOUs against the modernization account.

Let me turn it over to Admiral Blair first.

Oh, I apologize. I'm meeting a bunch of folks upstairs so I'm leaving, but I will come back.

Q: Before you leave, John, did you put health care off limits when you did this, and also military retirement?

A: Military retirement was not on the table. There's not a bit of change on that. Health care is a much more complicated issue. We think that the health care program does a very good job, frankly, of peace time health delivery. If you look at cost containment in our military treatment facilities, it beats the private sector hands down. We do a very good job with that.

Where we think we're probably not as strong on health care is in the area of deployed medicine. Medical force protection. Admiral Blair will talk to you about that. He's actually been working on a lot of this.

How well we do preparing soldiers to go to the field with the environmental things they'll confront when they get there, especially in this new world where we potentially have to inoculate soldiers against biological weapons or chemical weapons. There we need a much stronger program. So you're going to see that unfold in different channels. We have made some changes which were below the level of this briefing, which we think will improve the delivery of health care at a management level, but in terms of health programs in general, we think it's good but it's deficient in the area of battlefield medicine.

Q: Do you think that consolidating into the Threat Reduction and Treaty Compliance Agency and the confusion that that consolidation would bring is, that it's really wise to do as the threat of terrorist attacks abroad and in this country increases?

A: We honestly think that it's going to eliminate confusion rather than promote it. This is really, more than anything, going to bring, we think, coherence, because right now these activities are too broadly spread throughout the Department -- too many different organizations.

I really do have to go. I'm sorry. Thank you.

Q: (inaudible)

A: We're hoping not, and that all depends on how closely we work with everybody whose job is being affected. We're not going to... We don't believe we're going to be required to do that.

Admiral Blair: If I'm the only thing that stands between you all and lunch, we'll see if we can move right along. (Laughter)

When the QDR was completed and the Secretary of Defense charged Dr. Hamre to continue the Defense Reform Initiative, he also charged the Chairman to take a look at the Joint Headquarters. By Joint Headquarters I mean the Joint Staff and Chairman-controlled activities, the CINC staffs, and all of the military headquarters that work under them.

About 18,000 people came to work this morning to those headquarters. I'm one of them. About 40 folks who are out in Vietnam in Joint Task Force Full Accounting are part of that number.

In looking at this review, we basically used the business principles that Secretary Hamre outlined. We're looking for agile organizations. We're looking for the right people working on the right thing at the right level. And we're looking for technology to help us work smarter and better.

As were the other parts of this Defense Reform Initiative, we were assisted by the Defense Reform Task Force -- General Punaro, Dr. Zakheim, Mr. Locher and their colleagues -- provided us a lot of input, interaction, and good ideas. But Joint Headquarters are different from the other headquarters in this building. Since the Goldwater/Nichols Act of about ten years ago, the Department of Defense has made a commitment to joint warfighting. This has meant more work, basically, for the Joint Headquarters. But as you will see, we think we can carry out these increased responsibilities while reducing our total personnel to do it.

Let me start first with the reductions that we'll be taking in the Joint Staff, the folks who work down the passageway here.

About ten years ago a little over 1600 people came to work wearing this badge, the Joint Staff badge. In the early '90s, as the base force reductions affected the total force, we brought the staff itself down. In the last couple of years we've added staff. As a result of the recommendations of the Commission on Roles and Missions we added staff to do joint warfighting assessments, and more recently when the Chairman was designated the focal point for force protection, we added staff following Khobar Towers.

We also reviewed our interactions with the Office of the Secretary of Defense. The Joint Staff provides military advice to the Secretary through the Chairman. The Office of the Secretary of Defense basically handles the policy side. We looked to make sure that our lanes were correct. In about three areas we found that we were, in fact, doing exactly the same work and not adding any value, so we split those up. Two of those went to OSD, one of them came to the Joint Staff, and we dropped the people.

So we will be eliminating about another 170 people out of the Joint Staff over the next couple of years through attrition as they move off to their next assignment. These are primarily military officers. As you see the total reduction there from Goldwater/Nichols will be about a little over 25 percent.

There's another group of people who work for the chairman called chairman's controlled activities. These are a varied group. They range from the National Defense University over in Fort McNair, the Inter-American Defense Board, but a group of them, that group that you see below the line, the four, are really centers of excellence which support both the Joint Staff and the Commanders in Chiefs in joint warfighting areas. We plan to move all these four centers from the Joint Staff to one of the Commanders in Chief.

Now in warfighting terms, these centers operate at the tactical operational level. At the Joint Staff we operate at the strategic level. We need to move those staffs down where they can interact directly with their customers.

In business terms, the Joint Staff needs to stay out of the retail business. We need to stay in the wholesale business.

For those of you who don't happen to be Joint Center aficionados who know every person in those organizations, I'll help you a little bit. These groups are really the functional experts -- the pros from Dover in the areas of command and control warfare; in targeting; doctrine and training; command, control, computers, intelligence and reconnaissance. I should add that none of these centers will move physically. Their reporting chain of command will change and we will harvest some savings because the consolidations will enable them to realize efficiencies.

When you wrap these two sets of reductions together, the ones I showed you on the Chairman's immediate staff and the Chairman's controlled activities, they add up to the 29 percent that Dr. Hamre referred to earlier.

Finally, let me turn to the Commanders in Chief staffs. As I mentioned, the Goldwater/Nichols Act substantially strengthened the CINCs and they have grown commensurately. These increases that you see, for example, are the standup of the Transportation Command out at Fort Scott in Illinois up through '91; and then the standup of the Strategic Command in Omaha, Nebraska, in 1992.

Since 1992, there have been small increases and some, quite a bit of churn within those total numbers you see, as the CINCs have been picking up new missions. Most recently we strengthened the CINC staffs after Khobar Towers when they picked up more responsibilities in the areas of force protection for the troops that are out in their areas of responsibility.

We will trim these staffs down, as you see, reducing, outsourcing, transferring functions in personnel. But they will maintain their core functions of the unified direction of the armed forces, and we're convinced that they can do them well.

This streamlining of the Joint Headquarters is not an easy process. I have a few less close friends than I did six months ago. There are a lot of very hardworking people out there in the CINC Headquarters in Stuttgart, Germany; Seoul, Korea; Colorado Springs, Colorado; Tampa, Florida. I told you there were 18,000 of them coming to work today, and in a couple of years there will be a little over 16,000. But it's the right thing to do. Our Joint Headquarters will be more agile. Their duties will be better defined. They'll be more streamlined, and we'll still be able to do the job that we have. The core missions of engagement in the world to protect U.S. interests, and response to challenges to those interests when they come.

That's our plan.

Q: You mentioned that a few of the joint-run organizations will be transferred out to a CINC somewhere?

A: Right.

Q: Are we talking USACOM or has that been identified yet?

A: We haven't made final decisions, but USACOM will be picking up several of them, yes.

Q: You said that you're going down from 18,000 to 16,000, right?

A: Right.

Q: That would be as of what year?

A: It's going to be front loaded. It will be completed in five years. It will be probably half completed in two years.

Q: How about the 2,000 that are cut? Where will they go?

A: That 2,000 is a combination. About a third of them are reductions. Those billets are being returned to the services, and they can send those officers to other duties or they can use that money. The other two-thirds comprise transfers. I showed you the examples of the Chairman's controlled activities -- that's about 600 folks. There are similar transfers being pushed off the CINCs' staffs.

Every person you take off a headquarters staff probably gains you five in subordinate staffs, because you don't have one son of a bitch who writes questions that the other five have to answer. So every transfer that you get off a staff is a good one, even though the number itself may be small.

Q: Nobody's kicked off the payroll basically, right?

A: No, not off the payroll. Six hundred are reduced, roughly 1400 are transferred.

Q: OSD changed its intelligence structure with a breakout of C3I. Does that at all impact your intelligence function responsibilities? Will there be a change in that?

A: Yes. It will put more of a weight on the Director of DISA and the Director of J-6 in the area of operational architectures for command and control systems. Command and control systems are much faster moving than our traditional acquisition programs because we're basically riding the information technology bow wave. You have to have some real pros who can integrate military/civilian systems technology and actually fit them into the programs that we now have, and that's going to put more weight on those officers. We think they can handle it.

Q: Will you exempt them from cuts because of that?

A: No. Because they're some of the greatest users of information technology, they can do it with fewer people also.

Q: Are the 2,000 all military, or are they a mixture of military and civilian?

A: They're almost all military. A few civilian positions.

Q: You have a lot less friends, or a few less friends, probably than six months ago, but I imagine the services are pretty happy about it. Is that right?

A: The services think it's a good idea. I used to work for a service. I know.

Q: You mentioned responsibilities that were redundant between OSD and the Joint Staff. Can you tell us what those are, and who got what?

A: In the area of this whole set of issues on pay and compensation and social issues were an overlap area between Office of Secretary of Defense and the Chairman's staff. Those are really Title X service issues. OSD should have the lead for those. They're going to take the lead. We're going to trail. We will not be leading task groups on compensation inequities among the services which we have in the past, for example. That's one.

In the policy area, the approval of the transfer of technologies to different countries when we sell equipment was an overlap area between Office of Secretary of Defense and the Joint Staff. We both basically did the same work, and then voted separately, and the vote was always the same. We're not going to do that on the Joint Staff anymore. OSD has the lead. We will know what happens, but will not be staffing out among the services.

The third area is contingency costing. Every time we have to think about, for example, what we're going to do after June of next year in Bosnia, how much it will cost is a big factor. That was a duplicate function between J8 within the Joint Staff, and the Comptroller's Office in OSD. We've combined those two functions. They will work for J8 and will not be done in OSD, so it was that sort of... Those are the three that we've done in particular.

Q: General Sheehan criticized the Joint Staff for getting involved in war planning, which he said was an OSD function. Is that a correct assessment? And secondly, any of these changes reflect any move in responsibility for war planning?

A: I think you heard him wrong, because General Sheehan was a former J3 on the staff, so he knows that the CINCs do the war planning, they are then brought to Washington, reviewed by the services, and the Chairman's staff, and the Chairman then approves it. That system was the same as it was when he was a J3 and participated in it and when he was USACOM.

Q: One of the big disappointments with the Weapons Mix Study was that there was no longer a mechanism to make the services get rid of the redundancy due to the cost (inaudible). Is there somewhere in this that mechanism reinstituted where you'll force the services to look very carefully at what they do predominantly and to eliminate it?

A: This organization preserves the joint warfare assessment capability within the J-8, which basically staffs the JROC which was the Joint Requirements Oversight Council, which consists of the Vice Chiefs of all of the services. That's still the body that sorts out those joint requirements. I think it's unfair to say that those trades are not made. Those trades are made and the JROC is really the cutting edge on the requirements side, and then it's up to the A&T to take those requirements and match the programs to them. So it works pretty well. Not perfectly, but it works well. We've got the support staff retained here to make sure the requirements side is well analyzed. They were the folks who did the DOMS study.

Q: Any concerns about taking the warfighter out of the social issues? When you have civilians making these decisions that actually impact the day-to-day operations of the military in the field?

A: I don't think the warfighters belong in them. I think the Service chiefs belong in them, and that's what this... The Service chiefs don't work for the Chairman in areas like compensation and pay. They work for the Secretary. So I think this puts it where it should be, rather than just having the Chairman do it because he's the senior military officer. So I think it's putting the right job in the right lane.

Q: If we understand you correctly this is ...I just want to know whether you have a dollar savings in any of this.

A: In this? No. We don't have a dollar savings in it because as we said, the resources are going back to the services.

For example, we're taking about 400 intelligence positions out of the Joint Intelligence Centers on the CINCs' staffs. Those 400 positions will be taken by the General Defense Intelligence Program Manager and used for the other shortfalls that he has. We need attaches in strange places of the world where we don't have them these days; we need experts in some of these strange new places that we can't even pronounce. We need a lot more analysts in the weapons of mass destruction area, so they're not going to be making slides for the CINCs anymore, they're going to be working on -- either they or somebody else will be working on those new challenges which we have.

Q: I noticed in the report that there will be more freedom of movement around the Joint Staff area. Can you tell us what areas will be open to general traffic as in the rest of the building? And what will be...

A: We have removed the external perimeter guards and retained those on the National Military Command Center which is that area in the center. So if you want to walk down and have a cup of coffee with me, just go down, take a right, a left, a left, and you're there. But don't come.

I was told that was why we had the guards, but I think that's... (Laughter)

Press: Thank you.