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DoD News Briefing on Amended Budget for FY 2002

Presenter: Secretary of Defense Donald Rumsfeld
June 27, 2001 1:30 PM EDT

Wednesday, June 27, 2001 1:30 p.m.

(Special briefing on the amended fiscal 2002 budget request for the Department of Defense. Also participating: Under Secretary of Defense (Comptroller) Dov Zakheim and Deputy Comptroller (Programs/Budget) Bruce Dauer.)

Rumsfeld: Good afternoon. We've got the famous Dr. Dov Zakheim here -- there he is -- and the brains over here, sitting on the right, ready to brief on the budget. And I thought I would just make a couple of remarks before I turned it over to Dov.

We had a very good meeting this morning with the congressional leadership, the House and Senate Armed Services Committees and the House and Senate Appropriations Committees, and their senior staff, where we discussed the budget, what it does, what it doesn't do, and how we see the situation.

I might just summarize it very briefly by saying that I arrived at the Pentagon and have been spending a good deal of time developing an evaluation of where I think we are. And I think it could be best characterized this way: that we -- the Cold War ended; the drawdown began; and it went on for a period of time; and we harvested a peace dividend by moving from wherever it was, up at the 5 or 6 percent of gross national product, down to some 3 percent of gross national product, a significant drawdown; and they overshot. That is to say that the coasting went on too long, and the underfunding in significant accounts has created a series of shortfalls with respect to very important key categories.

The -- for example, the shipbuilding budget is on a trajectory that would take it down to 220 ships. I'm not -- correction: 230 ships. I'm not in the position to say at this moment exactly what number of ships we need in the United States Navy. We will be addressing that in the Quadrennial Defense Review. But it is very clear that it is considerably more than 230 ships. We're currently at about 310. And if the funding stays roughly where it is, it would go down to a steady state, 230 ships, and then hold at that level.

That means the forward-year funding is sufficiently -- is insufficient to maintain the Navy at the current levels.

Infrastructure, we found the same thing. If the best practices in the private sector are 57 years recapitalization, and say for the sake of argument that a good number for the defense establishment might be 67 years recapitalization, we're currently up in the 190 years recapitalization. That is to say that we are not investing on an annual basis at a level sufficient to deal with the obvious problems that happen to all types of buildings, sewers, roads; all the things that are necessary for a large enterprise like the defense establishment.

Aircraft. To the extent aircraft -- the average age of aircraft keep going up. We find that the cost for repairs, the cost to maintain them, the number of hours that they're actually available goes down, the costs go up, and we have that problem. We have an aging fleet of aircraft in all of the services.

That said, there are other things that we need to do. We need clearly to invest appropriately in science and technology and research and development. We need to invest in modernizing the legacy force we have, and we also need to invest for the future and see that we can participate in a transformation over the period ahead so that we'll be arranged to deal with the emerging threats and demands that will be put on the men and women in the armed services.

I mention all that as a preface, because the defense budget increase this year is I think the biggest increase, I'm told, since the mid-1980s, at something in the neighborhood of $18.4 billion budget amendment. When the chiefs testify and when I testify and when Dov briefs you, you'll find that there are number of instances where the trend line was very negative, and it is still negative. You'll find instances where the trend line was negative and it is now less negative, but still negative. We'll find instances where things have leveled off and in some instances where they're improving but still below the target levels that are needed -- the point being that you can simply not do everything in a single year. There is no way that it can be done. It took years to get into this circumstance and it's going to take some years to get out of it.

I would add also that it's going to take something else. There is no way that we can meet the needs of the armed forces without changing how this institution functions, how we interact internally, how we deal with the contractor community, how we deal with the Congress. We're going to have to find ways to free things up so we can manage the institution in a way that can be truly respectful of taxpayers' dollars and that we can find the savings that are going to be needed to help contribute to the investments that are so necessary.

With that, I'll turn it over to Dov Zakheim.

Q: Mr. Secretary, can we ask you a quick question before you do that?

Rumsfeld: One quick question.

Q: Sorry.

Q: Two -- two, please.

Q: You've often said that transforming the military for the threats of the 21st century is a matter of some urgency.

Rumsfeld: It is.

Q: This budget for 2002 seems to add relatively little in that direction; takes small steps in that direction.

Rumsfeld: You're exactly right.

Q: Why are you waiting another year before you make the full push?

Rumsfeld: There's two reasons. One is that the work we've been doing on the terms of reference for the Quadrennial Defense Review and the work of the Quadrennial Defense Review will contribute significantly to the development of the '03 budget, which starts in August, September, October, and then is presented to the White House in November or December for going to the Congress in January. It's helpful to have that thought and the competence of all the people that are engaged in that process before stepping forward.

Second, as I indicated, the circumstances and the needs are sufficiently urgent that it seemed to me that we simply have to address some of them. We can -- the central -- the people of this institution are central to its success. And that means that we have to take steps to find that -- to see that the facilities are improved. You can't ask people to live and work in the kinds of facilities we have in too many places.

So it seemed to me that we have to step up and recognize that that underfunding has gotten to the point where it has to be addressed and, second, that we can benefit from the information that we'll gain in the Quadrennial Defense Review and step off from there.

Last question.

Q: Sort of a continuance, if you would, Mr. Secretary. You told us some months ago that you would finish your evaluation this summer. We're now in the long, hot days of summer, and I know that the QDR has perhaps more specifically to do with this than what I'm going to ask you, but going back to your evaluation, there is much conversation about the so-called "laundry list." I mean, you know, what are you going to do with such things as Joint Strike Fighter, new carrier, F-22?

Rumsfeld: Right. They're all going to be addressed in that process. I'm going to start those briefings within the next two weeks.

Q: Yet in this budget, you are basically not stopping anything except for the B-1. You are not making any of the kinds of cuts that many people thought you would be able to make, even at this preliminary stage in your administration.

Rumsfeld: Well --

Q: You're slowing things down some.

Rumsfeld: First of all, I would add the Peacekeeper as something besides the B-1 that it did not have funding to keep it, it did not have funding to retire it. How's that? You arrive at the Pentagon, they say, "Here's the drill. You've got the Peacekeeper, there's no money in the budget for the next five years to keep it, there's no money to retire it, and there's a law that says you can't retire it." How's that? Catch-22.

The way it's going to work is this, I think -- and I have not been the one to contribute to these expectations to which you have reference. I am a very careful, conservative person in what I speculate about for the future. But I think this is going to be what's going to happen.

We will move through this Quadrennial Defense Review period and begin to build for the '03 budget. I will be, along with the senior staff that has just arrived, will be reviewing the weapons systems and putting them in the context of the strategy and putting them in the context of how we see the total funds available over the period ahead and making those decisions. Those decisions will be -- there's not a secret in this building, that I know of. At least not since I've been here, that I've found that there's a secret. Almost everything is in the press before I know it.

What will happen is those decisions will get made, for example, in September. The '03 budget -- correction, the '02 budget -- will be up there on the Hill being considered and I suspect that what you'll find is that the department and the Congress will have discussions during that period and decisions that get made may very well end up in the '02 budget, notwithstanding the fact that they are not currently being presented there, simply because of the fact that we've been living with compression. We're dealing with '01, '02, and '03 almost simultaneously.

Dov Zakheim, you've got it.

Zakheim: Thank you, Mr. Secretary.

Rumsfeld: You bet.

Zakheim: Thank you, Mr. Secretary, and good afternoon, everybody. I will walk you through some detailed slides and try to answer your questions.

A couple of housekeeping items before I begin. There have been folks asking, "What about all the books that we normally get?" And the answer to that is, we do not have them for you yet. As the secretary just pointed out, this is rather a compressed schedule. We hope to have what are called the P-1s and R-1s and C-1s and O-1s next week. So when you walk out and you're given some handouts, that will not be in your goody bag.

In addition, as you well know, there are many, many specialists who will be available to brief you right after I am. I will do my best to answer your questions, but if I don't have the detailed answer, I will kick it over to them, and you will, hopefully, get a detailed answer.

So let's start. And can you hear me when I speak this way? Great.

[Slides used in this briefing]

This is the one I briefed you about not all that long ago. Actually, it was about three and a half weeks ago. This is the blueprint increase, $14.2 billion, that the president indicated in his February release. And it's called the budget blueprint. It actually had a blue cover. And this is what we're talking about today. [ A Blueprint For New Beginnings ]

So if you look at just the amounts of money that the Bush administration has put into defense from February until the end of June -- last February, March, April, May, June, five months -- 38-plus billion dollars.

(To staff.) Next slide, please.

This is another way to look at it. The enacted -- the last enacted appropriation is slightly over $296 billion; the blueprint increase, 14.2 billion. That included inflation money as well as President Bush's $4.4 billion of initiatives, with which I'm sure you're familiar, but I'll tick them off quickly: 1.4 billion for personnel, 400 million for housing, a billion for science and technology, and a billion-six for missile defense. You add them up, you get 4.4 billion.

We have now added the 18.4 (billion), so that the total request for fiscal year '02 is now $328.9 billion.

(To staff.) Next slide, please.

And these lay out for you the goals. The secretary emphasized the importance of treating our people in a way that they deserve to be treated. They're the ones out there. They're the ones risking their lives for us. Clearly, we can't play any games or take any risks with morale; it's as simple as that.

We did try very hard to bolster readiness. Again, the secretary pointed out that that was where we had to emphasize our efforts this time. There is money for transformation, and as you just heard, it's not, perhaps, as much as some of you might have anticipated. There is money in there. I will outline some of the specific programs.

Infrastructure -- again, the secretary mentioned how important that was.

And the last bullet -- we are serious about reforming organization and facilities and processes, and we've actually put some money behind it this year, as you will see.

(To staff.) Next slide, please.

Well, as you know -- and another slide will show this as well -- there was a pay increase that brought pay up by 4.7 percent. That is the comparability index plus .5.

We now have added the targeted pay raise -- that's the additional money that the president announced -- which results in at least a 5 percent increase for all grades. And in addition to that, in those middle grades that are the most difficult to maintain retention in, we're up to as much as 10 percent.

Reducing -- the last two bullets really deal with people who live off-base. The plan is to be on a glide path to reduce out-of-pocket expenses by 2005, and we're on that glide path, 15 percent in '01. Now it's down to 11.3 percent, ultimately to zero in '05.

And military health care -- you can see it's nearly a $6 billion increase. This is a huge portion of the budget. It is a reflection of the health care situation in the country at large. Again, we cannot treat our people any worse than others are being treated, and the bill is big, and it is growing.

(To staff.) Next slide, please.

Why do we have readiness declines again? The secretary spoke briefly about that. There has been a steady rate of underfunding, and it's a problem where you don't have one year where everything is massively underfunded. It's worse than that. It's been kind of a trickle year after after year after year, shortfall after shortfall after shortfall. And then it builds up. And then the catching-up process cannot all be done in one year. In fact, you couldn't execute it if the money were available. It's just too hard to do, because this is a process that's a decade old.

The tempo of operations you're all familiar with. That also seriously affects readiness.

Maintenance costs go up. The older the equipment, two things happen -- the more frequently you have to maintain it, the more you're paying for spare parts that are not easily obtainable. So you get hit both ways.

And finally, we begin to reverse that decline. We hope to see an uptick in our readiness for fiscal year '02.

(To staff.) Next slide, please.

The infrastructure -- we're trying to obtain and -- upgrade, rather, and maintain our infrastructure.

Inventory -- let me talk a little bit more about this 192-year business. Basically, it's this: If you wanted to recapitalize your entire capital stock of our facilities, it would take you 192 years to do it at the current rate we are spending money on modernizing our facilities -- 192 years. We are putting enough money in there as an initiative that will reduce that to below 100 years.

But -- and this is what the secretary was talking about -- if you went out to the commercial world and you asked how -- you know, on the average, how often would you want to recapitalize your facilities, the answer's 57. For DoD, it's somewhat higher; it's about 67, and the reason is because we have a number of historic facilities. You don't want to just throw them out the door. So that sends the average up.

But 67 is a far cry from 192; it's a far cry from just under 100. And unless you put the same level of money in year after year after year that we are putting in for '02, you're going to go right back up again. So it's a never-ending thing, and that is something that simply has to be understood. As long as there are facilities, we have to keep recapitalizing them at a rate that's viable.

We improve the quality of military housing. We accelerate the elimination of sub-standard housing. And the Efficient Facility Initiatives, of course, as you know, the secretary has oftentimes articulated his concern that we have an overhang of facilities. We don't know exactly how much; maybe as much as 25 percent, maybe slightly more, maybe slightly less, but there's clearly an overhang. And what we need to do is to rationalize those, and we are currently working on a plan to do that, but the strategy is very clear, we have to do this.

Next slide, please.

This is just a pie chart. Hope you can all read that. For those of you who may be sitting in the back, procurement is 18.8 percent of this budget, at $61.6 billion; operations and maintenance, $125.7 billion, which represents 38.4 percent of the budget; research and development -- as you'll see, there's quite a jump there, $47.4 billion, at 14.5 percent; military personnel, roughly a quarter of the budget, 25.1 percent, $82.3 billion; and other, 3.2 percent, about $10.6 billion.

I apologize to those in the front who can see it, but this was for the benefit of those in the back.

Next slide, please.

So, on military personnel, we extend the benefits that were legislated in '01. You can see there's roughly a $7 billion jump. I mentioned earlier we have as almost a base line the 4.6 percent pay raise; the billion dollars more for targeted pay, which brings everyone up to 5 percent, some as much as 10 percent. We give people enough subsidy support so they do not have to live in poor or dangerous neighborhoods; that's the housing allowance calculation has been increased, and then, as I mentioned earlier, we reduced the out- of-pocket costs. We're on a glide path to zero in fiscal year '05.

Next slide, please.

I mentioned the Defense Health Program. You can see the $6 billion increase. This is a case where we seriously had an underfunding problem. We have a new healthcare and pharmacy benefit for those who are over 65. This is the first year. We do not know whether we are right on or not. We are making the best estimates we possibly can, but this is our very first data point.

We have made some realistic health care cost estimates. This is not the national rate of inflation, but it's roughly the rate of medical cost inflation: 15 percent for pharmaceuticals, 12 percent for managed care support contracts. Those are big jumps, and we have funded that. And we have legislation that we've proposed that hopefully would save us $300 million, and this is what's called a prospective payment rate system. You sign agreements so that in the future those who provide health care services would be provided at the Medicare rate. The way things work right now, or were legislated in December, I believe -- (to staff) -- Bruce? Bruce is our deputy comptroller, Bruce Dauer. It was December, right? The legislation?

Dauer: (Off mike.)

Zakheim: There is kind of a two-part system. You go to a Medicare provider -- I think it's called Medicare Part B -- you then get an additional, or he or she then gets an additional supplement through the Tricare system. So that's an additional cost to the government. This proposal will not in any way affect those who receive the care, because any doctor who refuses to take Medicare isn't going to take anybody under this other proposal, either. I mean, either you're going to take Medicare or not, and they go to Medicare providers. But -- and this is the important point -- that's where it would stop. And so you would get a $300 million saving, and everybody would receive the same level of care. The providers would essentially get the same reimbursement regardless of whom they're providing the health care to.

Next slide, please.

This is terribly small. Hopefully, you'll get copies of this. Operations and maintenance; you can see there's a big jump, nearly $18 billion. Let me highlight some of these for you. Aircraft operations, which includes a lot of spending on spare parts, goes up from 7.6 billion to 9.4 billion. Army op tempo stays at about the same, 2.7 billion. Ship operations slightly higher, 2.9 billion. Depot maintenance, a big jump; 6.6 billion to 7.9 billion. Training, $800 million jump from 8.5 to 9.3. Reserve components, $1.3 billion jump to 12.5. Facilities sustainment and base support, nearly a $3 billion jump from 17.9 to 20.7. Defense health program I just addressed, nearly 6 billion. And then drug interdiction is roughly the same; environmental restoration; contingency operations; cooperative threat reduction, otherwise known as Nunn-Lugar; all of those are more or less the same.

Next slide, please.

When you look at the operations tempo, flying hours, you see that the Army has pretty much maintained its flying-hour objectives, slightly lower at 14.0 than at 14.5. The Army, because of its much more pressing, in its view, needs for facilities and maintenance, is prepared to take some modicum of risk in order to basically provide the funds for these other areas that have been so seriously underfunded. So it's basically a half an hour less per month per crew.

Navy and Air Force have both met their goals. And I would draw your attention to the fact that those goals were not met either in '00 or in '01. We are fully funding both services to meet their goals.

With respect to tank miles, you'll see that there's a slight decrease from 800. Eight hundred has been the traditional goal. We're really talking about roughly a 10 percent decrease. The Army believes that it can meet its critical requirements even at that decrease. Maybe there's some relatively minor risk. And I use that term quite advisedly because it looks like, from what the Army tells us, they can make do with this, again the reason being that the maintenance and facilities demands have just been so great and have mounted continuously, and they just have to make a dent into the problem.

National Training Center, the same. Ship days the same.

Next slide, please.

You'll see there's no great change in force structure. That was one of the questions that was posed to the secretary. The only change from the previous Quadrennial Defense Review is that we are not counting one carrier as a training carrier; rather, we are counting the carriers, all 12 carriers, as fully deployable. Otherwise, what we are really waiting for is the outcome of the new Quadrennial Defense Review, where some of these numbers may change, and I do not want to anticipate that one way or another.

Next slide, please.

Research and development. I told you there was a pretty big jump there. It's over $6 billion. We have some leap-ahead technologies. We have -- we're trying to focus on countering unconventional threats to our security, improving the test range in research and development infrastructure, and reducing the cost of weapons and intelligence systems.

Next slide, please.

Science and technology. We have funded science and technology -- for those of you who are the cognoscenti, that is what is called the 6.1, 6.2 parts of the budget, basic research, and what is called, I believe, advanced or experimental technology. This is the very front end of the research and development system. And we have funded 2.7 percent of the budget. Our goal is 3 percent.

This 2.7 percent really needs to be compared not to what was enacted, but to what was requested, because what was requested in both years reflects the Pentagon's sense of what are needed military capabilities in the future toward which S&T will contribute. A year ago, that percentage was 2.5. This year it's 2.7. We're on a glide path to 3.0. Some of the items: high-energy lasers, nano-technology, chemical and biological agent detection. If you have lots of questions about these areas, the specialists are here to help you out.

Next slide, please.

There was a question about transformation, and one of the important areas in transformation is research and development. Here are some of the examples of items that are being funded, and there's one more that's not on the list, but I think is a very important one because it tells you about the commitment of this department. We are putting $5 million in to stand up -- or to use plain old English -- to create a new office within the Office of the Under Secretary of Defense for Acquisition; it will be called the Transformation Programs Office, and its job will be to be the advocate of transformation programs, the coordinator, to make sure that we're meeting our objectives. We're putting $5 million into the program -- into that office, not an insignificant amount of money for something like that, but a real measure of our commitment to transformation.

Next slide, please.

Missile defense, something that I recall was of interest the last time I spoke to you at a press conference. You can see here that there is quite a jump in the funding for missile defense. And I need to walk you through some changes in the way the program is being structured.

What has happened is that we have taken those programs that are mature -- and there are three of those: PAC-3, which is the latest variant of the Patriot; Navy Area-Wide, which used to be called Navy Lower Tier, for those of you who still read old newspapers; and the MEADS, which is -- let me see if remember the acronym, Medium Extended-range Air Defense System. How do you like that? And that one is an international program with some of our European friends. Those three programs are quite mature, and so what has happened is they have been transferred to the services for management and execution.

The remaining programs, those that are in research and development that, therefore, by definition are nowhere nearly as mature, will devolve or remain, depending on which program it is, in the Ballistic Missile Defense Office under General Kadish.

The amount of money that has been allocated to that office, as you can see, is $7 billion -- 7,043, for those of you who may not see that in the back.

So we are seeing a very significant increase in funding for missile defense, both in terms of what the Ballistic Missile Defense Office itself will have and in terms of the program as a whole, if you count in the mature technologies.

(To staff.) Next slide, please.

Procurement. As the secretary pointed out, many of these decisions are decisions that have to be made after the Quadrennial Defense Review has been completed. So this is essentially a placeholder. There was some new procurement, and I should point that out to you.

Optimum shipbuilding program. Those of you who follow shipbuilding closely know that there have been a number of complications with some of our individual ship programs where there were some contractual or design or other sorts of difficulties -- variety of complications.

The optimum number, the actual optimum number to maintain the level that the secretary was talking about -- and this is without getting into what the fleet would look like; this is just force levels, as opposed to what's called force mix, which kinds of ships -- to get that 300 -- roughly 310 that the secretary was talking about, you need nine a year.

Because of some of these complications, there's no way we could have done nine, but we weren't even at six, which was the optimum number. We were at five. And so we added a third DDG-51. DDG stands for guided missile destroyer. It is an Aegis destroyer. It's the third one that we are adding this year. It is coming in at an extremely attractive, I guess, is a good word -- price, only $850 million for you, for all of us. But that happens to be an extremely good price. And so we capitalized on the availability of a destroyer of that capability at that price.

We are also procuring a total of 48 F/A-18E and -F aircraft, which is the latest variant of the F/A-18.

(To staff.) Next slide, please.

Military construction. You will see that there is an increase in the aggregate of $600 million for military construction, and that includes a $2 billion initiative -- and when I say "initiative," it's relative to last year's enacted budget -- to restore degraded facilities from lower status to at least more reasonable status. It's a C-1, -2, -3, -4 system, C-1 being the best, C-3, C-4 being places you really wouldn't want to work or live in. And what we're trying to do is to do well by the people who have to work or live in these facilities, and that's what this program is about.

The original BRAC programs are those bases that were closed under the previous rounds of the base consolidation and closing effort. What is left in a number of cases is simply environmental clean-up, and so we're going ahead with that and, as I mentioned earlier, there is a new round for an efficient facilities initiative. Current planning is to do something in fiscal year '03, but that is planning, and I must underline that. We have not finalized, as the secretary indicated, exactly how we are going to do it, other than to indicate we do want to have a facilities initiative.

Next slide, please.

Family housing. This gives you some more details. The president's $400 million proposal in February, his initiative; 195 million for 13,000 privatized units, 98 million for nearly 850 on-base units and improvements to the existing ones, and 107 million in military construction for nearly 1,400 bachelor enlisted quarters.

Next slide, please.

And then management reforms. There are a number of these. The idea is to save money quickly or to begin the process of getting us into the business of saving money in the future. The first three are in my first category. Medicare billing rates I've already explained. Davis-Bacon Act, you are familiar with that. This is not anything new. The act does not permit the United States government to pay non- union wages for any activity that involves more than $2,000. Bottom line is you always have to pay union wages, even to non-union members, and we are trying to get that changed, which would save us $190 million. It's a new administration, we are emphasizing the importance of finding savings and turning them back actually to the services, and this would be an efficient use of money, if we could get that money and then turn it back, for dealing with some of the shortfalls that the secretary referred to earlier.

In addition, with respect to depots, this proposal simply says that if a depot is operating at full capacity and has more work turned its way, that work can then be contracted out for, rather than forced into another depot or be put on line for the depot that is already full. And a legislative waiver is required for that. We believe that would save $140 million immediately.

And finally, in order to begin to deal with the problem that Senator Byrd and Senator Grassley and others have pointed out, that we can't really track our own money and that the amounts are huge, mind- boggling, we have a situation where we have different systems that track money different ways and do not interconnect. And that makes it absolutely impossible to come up with what the accountants call "a clean balance sheet" -- "a clean audit," actually.

The only way you can come up with a clean audit is if all your systems are interconnected, interlocked, and answering the same questions in the same way. They do not do that right now. And the cost of doing that has been estimated at variously from a billion dollars to $2 billion or more. That is a huge bill. We need to get a better sense of what really needs to be done and how much it will cost. And this $100 million essentially is meant to get an architecture, a design, a wiring diagram, if you will, that will allow us to begin the process of getting all these various components of our rather large department to all speak in the same language and in a way that we can get clean audits.

Next slide, please. Just a couple of back-up slides.

The Interim Armored Vehicle -- by the way, as you know, the Chief Staff of the Army, General Shinseki, considers that a transformational system. And we'll put $329 million in for that upgrade of the Abrams Tank; of the helicopter -- of both helicopters, the UH and the Apache Longbow. Those are some of the highlights of Army modernization.

Next slide, please.

Air Force aviation: money for F-22; 15 C-17s; the Joint Stars; two C-130Js, as well as the -- (no ?) F-16 procurement this year.

Next slide, please.

Naval aviation. I need to walk you through this particular item, the V-22, because there's been a lot said about it. You'll see it says nine with an asterisk, sort of the Roger Maris asterisk. There are two additional -- in the '01 budget, two additional research and development aircraft that are Air Force aircraft that are not included in that number. So the grand total is 11: nine Marine Corps, two Air Force. In fiscal year '02, in light of the study that was just done, the blue ribbon study that completely reevaluated and suggested a major revamping of the Osprey program, we have funded 12 aircraft for the Marine Corps only. That is our understanding of the optimum number to protect the industrial base, even as we make the various changes to the program that the blue ribbon commission recommended. Because we have two things going on here. On the one hand, we want the plane to work properly. On the other hand, we don't want to drive the costs through the roof as we make those changes. And so the conclusion was that 12 planes would do that and allow us to hold the line on the industrial base side even as the changes are made to the program side -- or the research and development side, to be more specific.

Next slide, please.

And finally, shipbuilding. As I mentioned earlier, we are at six ships. That is the optimum for this year. That is not the optimum for the program. You need nine if you want to maintain 310 ships.

I believe that's the last slide. Yes, it is.

Okay. Ma'am?

Q Could you explain why Army procurement funding is lower in '02 than it was in '01, and why, given the state of needs of Army transformation, it received the second-(lowest ?) increase in RDT&E?

Zakheim: Okay. I will give it a try. And afterwards, I think the Army people will be prepared to speak to you on that.

I think part of it is a function of -- you know, essentially what you're doing is you're comparing across the services. You really have to look at what the Army's doing itself. What the Army is doing itself is two things. First, it's moving ahead with that interim vehicle, and I don't believe we've particularly underfunded the interim vehicle, even though there's less money this year than last year. But I think that was the intention of the Army.

In terms of Army research and development, again I think it's more a function not so much that the Army R&D has been cut back as that R&D for some of the other services -- for example, the Osprey -- has gone up.

And third, you have to, again, to look at for the Army the marginal dollar right now, if they have one additional dollar, what would they do with it, and their concern was they have to make life a little more livable for their people, whether it's where they live, where they work, what they train with, how they train, what equipment they've got, spares and so on. And so that was the Army's decision, that that was the most pressing need right now.

So when you take that into account and you take account of the fact that, as the secretary said, we are going to be making major decisions, hopefully, in this Quadrennial Defense Review, and I believe I used the term "placeholder" for the procurement budget generally, I think maybe that helps to explain why you see what you see. But again, I would refer you to the Army afterwards for any more detail.

Pat?

Q: On the military personnel and defense health programs, of the -- (inaudible) -- you've got only a handful of major bulleted items on each of those pages, and I wonder if you could put numbers against those. Those are the -- I mean, they're big items. They obviously rose to a high level. I mean, you know, can you tell us, for example, how much is for the over-65 health care and pharmacy benefit, how much of it is, you know, this realistic pharmacy inflation rate, that sort of thing?

Zakheim: Okay. And I will have Bruce correct me if I'm wrong here, because he has those numbers even more at his fingertips.

As I understand it, the health care costs, the baseline cost this year is about $2 billion, Bruce -- is that right -- for the over 65?

BRUCE DAUER: The over-65 portion of that is $3.9 billion for the year 2002.

I stand corrected. It's 3.9 billion for 2002.

Q: Is that the pharmacy?

Zakheim: That's the over-65.

Q: That's both health care and the pharmacy?

Zakheim: That includes both the health care and pharmacy.

Q: One of the TRICARE providers researched by the chart on the Hill that showed the quality -- you know, in the economy at large, the health rate of inflation has been like 15 and so, and you've -- in this ridiculous budget, the 2 and 3 percent in the defense health program. But the actual inflation rates in the defense health program, while nowhere near 2 percent, are nowhere near 15 percent. I mean, you know, they've actually been holding them down somewhere in the high single digits. It looks like you're sort of giving away the farm, here, if you're accepting --

Zakheim: Not really. Basically, as I understand it, the way these are estimated, these are based on actuarial estimates, I believe -- (to staff) -- isn't that correct?

BRUCE DAUER (Deputy Comptroller, DoD): Not the pharmacy. It's what we're actually experiencing, but it's not -- there's confusion because it's not just the --

Q: Could we hear --

Zakheim: All right. What he's saying is -- Bruce, why don't you come up here and tell people about that. What he's saying is that we do have some actual experience in this and we're looking at what the cost is, but why don't you explain that?

MR. DAUER: Right. The 15 percent growth rate is really what we've been experiencing over the last several years, and it has -- it's not just inflation. To some extent, inflation here is a misnomer. It's the cost we're experiencing for the drugs we are providing, and a lot of it is because we're providing new, better, more expensive drugs, replacing, you know, older, less expensive drugs. So it's not just inflation. It's also what you'd call technology improvement that's in that 15 percent.

Zakheim: Yeah.

Q: Okay. Can you talk a little bit about the savings he's getting out of the B-1 and the Peacekeeper, and where they went?

Zakheim: Okay. The B-1, the number is $165 million.

Q: And that was just in '02? Is that a year, or is this an '02 savings?

Zakheim: That's '02 savings. And those are being turned right back to the Air Force. This is not money that somehow is disappearing from the Air Force budget and, in fact, it is not only going right back to the Air Force, it's going right back into the B-1 program itself. And it's going back for several things. It's going back for various survivability upgrades, for communications upgrades; it's to -- the number goes down from 93 to 60. Below 60 we'll be a lot more capable and, I believe, survivable, as well.

Then on Peacekeeper, the number, I believe, is 100 million, isn't that right? No, no, no. What's the Peacekeeper number --

MR. DAUER: Well, the Peacekeeper right now is at cost, so --

Zakheim: Oh, that's right. Let me explain what the story is here. There's no saving on the Peacekeeper. There was no funding for the Peacekeeper.

That's right. If you recall, the secretary said so. No funding for it one way or another. Okay. You then have a choice. You either fund this things and keep it, or put some money in to retire it, which is what we've done.

Q: How many are you retiring?

Q: How much?

Q: How much?

Zakheim: We are retiring -- the plan is to retire all 50.

Q: How much money though?

Zakheim: All 50 units. Do you have the number at your fingertips?

STAFF: No, I don't.

Zakheim: What do you think?

STAFF: Well --

Zakheim: Nobody wanted to hazard a guess, so I'll put you onto the specialist -- (inaudible) -- guess later on.

Q: (Off mike) -- a cost to retire them?

Zakheim: Yes, of course there's a cost to retire them. And this is the whole issue. And it's not well understood. If you want to retire a system, you have to put money in to go through the process of retiring it. What happened was, we were left with this rather peculiar legacy that no money was put into retire it; no money was put in to maintain it or keep it.

In addition, as the secretary pointed out, there's a congressional restriction. And that restriction is, you cannot take anything out of our current strategic nuclear forces below what are the START I levels, the first START Treaty, not the second, until such time as the second START Treaty is agreed to. And it hasn't been agreed to. So there's kind of a double-whammy here.

Q: So you're asking for relief from that requirement?

Zakheim: Yes. Yes. But not just for the Peacekeeper, for all of them.

Q: All of them.

Zakheim: For all the systems, relief from that, yes.

Sir?

Q: Sir, besides cost, what was the rationale for cutting back the B-1? And also, how do you respond to reports that some states' Guards and congressional leaders were really not informed about this until just a couple of days ago, and some of them were none too happy about this?

Zakheim: Okay, three different questions. In terms of what you get out of it, there are efficiencies simply because you will go from five facilities or locations to two. You will then be able to save money that way.

Sir, you want to follow up? You were about to say something.

Q: He's holding his --

Zakheim: Oh, okay. (Laughter.) All right. (Laughs.) And you would then turn those efficiencies back, and that's the 165 million that I mentioned.

Now, a couple of misunderstandings here. The first thing is, we're not talking about base closings. There are aircraft at all these bases. Secondly, we're not even talking about major reductions of people. The total number of people involved is less than a thousand, I believe. And even then, those people are apparently -- there are plans that the Air Force is currently developing -- and I direct you to them for more detail -- but there are plans that the Air Force is developing to use those people. For example, the Air National Guard people. The Air Force has a thing called the Future Total Force program, which essentially uses the Reserve and Guard together with the active in one seamless way. And my understanding is that the people who are affected by this B-1 decision will be incorporated in this Future Total Force program in some other activities, so that the people aren't affected and the base is not affected.

What is affected is the aircraft themselves.

Q: But do you have a definite plan of what these new missions would be? Because each unit, each base would -- has about a thousand- plus guard people, and combined they have about a thousand-plus people who are full-time people.

Zakheim: Yes, and my understanding is that the Air Force is currently in the process of developing this plan, and I do refer you to them for details about it.

But there is a definite plan, what they call a mitigation plan, to mitigate the effects and also actually to be more efficient about the use of the people. That is in the works.

General, am I correct about that?

Maj. GEN. Northington : That plan is in works -- the mitigation plan. That's correct.

Zakheim: Okay, General.

Q: And the congressional question I had?

Zakheim: Okay. I don't know that people were deliberately blindsided about this. This was a -- as you know, we prepared this budget in not very much time. It was less than a month ago that I was up here speaking to you about the supplemental. And there was certainly no deliberate attempt to blindside anyone, particularly, as I say, because I think there's been a tremendous degree of misperception about what was going to happen to those facilities. Those facilities continue to be used. The people will continue to be used. It's the planes themselves that are going to be retired, and this is exactly the kind of thing that the secretary has been talking about, where if you want to get the most modern force, you have to make some choices. You eliminate those elements that are less efficient, in order to bolster those that can be more effective. And that's exactly what's happened here.

So the impact on the bases -- and some of the articles that I read over the last day or so kind of miss the point a little bit, in my view.

Q: Can I follow that up?

Zakheim: Yeah.

Q: Can I follow that up? Is it politics or coincidence that the only two bases that are keeping the B-1 are in the home state of the president and the Senate majority leader?

Zakheim: Well -- (laughter) --

Q: Politics.

Zakheim: (Chuckles.) I won't say "politics." All I can say is that if you actually look at the numbers and you do talk to the Air Force about it, you'll see that there's a pretty good rationale for what they did.

And again, I think the question would be probably -- it's already pointed, but it would be more appropriate if indeed we were having the kind of impact on people and on the bases that we are in fact not having. Because there isn't that level of impact on the people or on the bases, it's not at all clear to me where the great political benefits or the great political losses are.

You have to have a loss to have some kind of political loss. It's not clear to me that there's a loss. There's an efficiency, but not a loss.

Yeah?

Q: A big picture question. Could you tell us if you're satisfied with the amount that's in the '02 budget? Because there's a general -- a lot of people think that the president's tax cut took precedence over other budget increases, and DoD was one of them.

And also, could you explain what you mean by a poor and disadvantaged neighborhood? (Laughing) I'm pretty sure I live in one! (Laughter.) Certainly the dangerous part -- and what that whole thing means because --

Zakheim: Okay. On the first question, frankly, it wouldn't surprise you, given that I'm a political appointee and worked with this president when he was governor for two years, that I think the tax cut was a good idea. Now, you may not, or others may not, but I happen to think so.

Secondly, in our discussions with OMB, it was quite clear that what we were doing -- what this increase provides is consistent with both the tax cut and the other macroeconomic objectives of this administration. Now, the secretary outlined, and I outlined for you, areas where we have not closed gaps, that's clear. But I also pointed out that we are not always able to close a gap in one year anyway; there's a question of execution as well as just putting out the money. Finally, what is really important is where is your glide path; where are you headed? And what we have tried to do is essentially turn the corner wherever possible, or at least mitigate the declines wherever possible.

Now, does that do everything? Well of course not, because if it did everything there would be no shortfalls, there would be no mitigated declines, there would be no declines. But we believe that this budget, when combined with the amount of money that was in the president's blueprint, when you also factor in the supplemental, goes a very long way toward dealing with long-standing festering problems that were not squarely addressed.

Now, on the question of disadvantaged neighborhoods, I think maybe the concern on the part of the people living in those neighborhoods is, frankly, that they're dangerous. And the idea was that the monies that they were given -- or they have been given, I should say, have not allowed them, afforded them the wherewithal to live in basically safer districts. Now, does "poor and disadvantaged" mean "unsafe"? No, it doesn't. But I think the real issue wasn't the districts were poor and disadvantaged, I mean the real issue was the districts were unsafe. And again, you know, these are people who are already putting themselves in harm's way; you don't want to put their families in harm's way too.

Q: This is just an increase, then, in their housing allowance?

Zakheim: Yes. To get it all the way down to -- to get this problem down to zero.

Q: Sir, what was the source for the $18.4 billion increase? I ask because both Senator Levin and Senator Burns have said whatever the Pentagon brings up has to be paid for applying offsets. Can you give us a feel for where the $18.4 billion is coming from?

Zakheim: Well, I believe that -- you know, this is as much a question to OMB as it would be to me. I believe that the surplus, though, allows for that $18.4 billion. As you know, there is a gamut of macroeconomic forecasts regarding the tax cut, regarding the future of the economy. Being an economist myself, I can tell you that it's no great secret that very few economists agree amongst themselves at any given time, and that you'll always find five economic opinions for any one issue. Given that gamut, and given what the -- our best economists have been saying, the surplus does in fact allow us to budget for $18.4 billion for defense.

Q: How about in '03? You've seen the bleak forecast there, and you're an economist, you have to plan ahead. What's the picture for '03 looking like?

Zakheim: Well, I don't -- I'm not necessarily as negative. I think right now if you took a snapshot, you're correct, the forecast is bleak. But then I would turn around to you and say to you, five years ago, who predicted the surplus that we're now realizing?

You know, these forecasts really -- I mean, they're not really forecasts. I mean, there's a problem here. The correct term is "projection." A forecast means you know exactly what's going to happen because you see what's coming. We don't see what's coming. And so in '03, I would say that yes, the situation looks a little bit tighter right now. That doesn't mean it will be tighter; that doesn't mean that we cannot come up with a defense budget that we require.

In addition, as the secretary said, we have to go through our Quadrennial Defense Review, and that's the first step. I mean, the review is not meant to be nor will it be budget-driven. So the kind of question you're asking me, you probably want to ask me in December.

Q: Could I ask you about the Abrams Tank upgrade? I'm venturing into an area; I'm not a regular here. But I expected to hear in this briefing of more cuts of weapon systems that maybe aren't so important in the post-Cold War era as they were in that one, and I'm a little surprised to see you upgrading Abrams Tanks.

Zakheim: Well, even if there were cuts, and I think the secretary made clear that a lot of these decisions are going to be made this summer -- he had to do a strategy review, he then had to do his Quadrennial Defense Review, and it's in the course of that that major program decisions will be made, and any cuts that are made will be made then, whatever they might be.

But having said that, in 10 years' time, 85 percent of our forces will be what they are today, whatever you do. If you want to be really radical, it would be 80 percent. So then the question is, what do you do with that 80 percent? Is that 80 percent going to be forces in the year 2010 that have a 2000 capability or not? If you're going to field those forces, you're going to have to upgrade them.

Now, the Army in particular, it seems to me, has bitten the bullet on this one because what they're saying is we want to develop a completely new fighting vehicle. So they're saying no, the future Army is not going to look like today's Army, but even if you develop the right vehicle and even if you bought it, just the nature of the research and development process, the nature of the procurement process, means that in 10 years' time, 15 percent of the armored vehicles, at best, maybe less than that, would be of this new type. Now what are you going to do with the other ones? Do you want to just leave them so they'll be some kind of, you know, semi-obsolescent system, or do you still want to be light-years ahead of everybody else? The only way you can do the latter is by upgrading, and that's what they've done.

Yes?

Q: Yes, sir, two personnel questions. One, overall end- strength, no major force cut -- structure reduction?

Zakheim: No.

Q: What about end-strength? Have you changed the number of personnel levels? And could you explain the pay raise? You're throwing out two numbers 4.6 percent, but then a 5 or 10 percent targeted. Okay, so if --

Zakheim: The 4.6 -- let me take the first one first. As far as I know, there aren't any major end-strength changes; okay? I refer you to the services, if there's anything minor. To my knowledge, there's certainly nothing major.

As to your second question, the baseline was the increase that brought the across-the-board pay up by 4.6 percent, as opposed to the previous 3.7 percent. When you then factor-in the various targeted increases for all the different kinds -- whether it's sea pay or bonuses or whatever, you then find that you have across the board a 5 percent increase instead of 4.6, and then it varies all the way up to 10 percent, depending on the category. So everybody's getting 5 percent; the least they get is 5 percent.

Q: The lowest one is 5 percent?

Zakheim: The lowest one is 5 percent.

Q: That's not base pay, though --

Zakheim: It's not base pay. Base pay is 4.6 percent. What they actually get, though, due to all these -- (To staff) -- Is base pay now 5 percent?

STAFF: It's a targeted pay raise, so it becomes kind of their base pay.

Zakheim: It will be their base pay.

STAFF: It doesn't include the bonuses. The bonuses would be separate.

Zakheim: So base pay has in fact gone up. I stand corrected.

Q: For active and Reserves, sir?

Zakheim: Sorry?

Q: Will that include the Reserves?

Zakheim: That includes Reserves, yes.

Right here.

Q: Are you cutting a fighter wing? On page 12, the bottom right-hand corner, is there a fighter wing that's going? It says 12-8 to 12-7.

Zakheim: Air Force fighter wing. Oh, you mean the Reserve? I don't think that's happened this year.

(Aside) Have we cut one this year, General?

Maj.Gen. Northington: Sir, I did not hear the question, I'm sorry.

Zakheim: The question was, if you take a look at -- maybe we could flash it up there, if we find it, page 12, it shows a Reserve fighter wing decline from the QDR of 12-8 to 12-7-plus.

And does that mean we're actually cutting a fighter wing this year? I don't believe we are. I believe this is a reflection of an evolution that took place over the last three years. (To staff.) Is that correct?

Gen Northington: To the best of my knowledge, yes.

Zakheim: Yes.

Staff: (Off mike.)

Zakheim: Okay. The answer is, it was the same way in '01. So that already happened.

Yeah?

Q: I have a follow-up on the next page.

Zakheim: Yeah.

Q: Defense-wide R&D goes from 11.3 to 15.3.

Zakheim: Yes.

Q: Does this include missile defense, or is there a -- I know you gave some examples, but what are the biggest chunks of that?

Zakheim: Well, defense-wide -- missile defense is included in defense-wide.

Q: (Off mike.)

Zakheim: So that's -- yeah, that is the biggest chunk.

Yes?

Q: On your approach to fixing the financial accounting system in the department, Senator Byrd has indicated -- in recent days, even -- that he is not really willing to wait a few years for this to turn around, that he wants to hold DoD's feet to the fire and be able to hear from you that you can track expenditures, even in the upcoming budget -- even in the supplemental, actually.

Zakheim: Right.

Q: What is your response to him looking --

Zakheim: Well, the only thing -- I would be less than honest -- actually, I'd be outright dishonest -- if I said that I could clean up the concerns -- I could clean up a system that causes him so much concern in the space of a year. There's just no way. This is built up over years and years and years.

And I can tell you just -- this is very personal -- I spent 14 years in the business world and had been in DoD before then. And quite honestly, when you are in the department, and you have never been outside in the business world, you simply do not look at these problems the same way. You are not thinking about a bottom line, because, in a sense, there is no bottom line for a government department. It's very, very different.

The incentives don't always exist to save money. One of the things Secretary Rumsfeld has been saying is, we have to create incentives for people to save money. The best way you do that is, you tell the services, "Whatever you save, you keep yourself." If the money is not kept, what incentive is there to save money?

And there have been study after study after study showing that what budget practice really amounts to is trying to spend up to your budget ceiling, so that you won't get less of a budget next year. That's a positive disincentive, and you know it's the truth. Ask experts like Alan Schick and all kinds of people around this town, my old boss Alice Rivlin; they'll all tell you the same thing.

So if that is the culture and that is the mentality, you're not going to turn that around either in terms of culture or in terms of practice in a year. What you can do is take steps to change the culture, because people, once they have incentives, are going to respond positively.

What they have had up to now are disincentives, so they've responded to the disincentives.

Q: What kind of incentives do you have in mind?

Zakheim: You find the money, you save the money, you keep the money. Best possible incentive going, and services need to modernize, they need to do research, they need to upgrade themselves. Best way to get it to them.

The B-1's a good case in point, by the way. It's exactly what we're talking about. They find the money, they save the money, they keep the money, they upgrade the aircraft. Now, the other side of it is if we're serious about getting these so-called "feeder systems," the various systems that provide the information so that Senator Byrd can now see exactly how much money the department has in an accounting balance that makes sense, that any accounting firm could then make sense of, we've got to put our money where our mouth is. That's $100 million. It's not trivial.

Yeah.

Q: Can you comment on what you're doing with respect to DD-21?

Zakheim: We're not doing very much with DD-21 this year. DD-21 is one of those systems that has run into complications. We have not made, to my knowledge, a final decision on what to do with DD-21. I believe that is going to be reviewed in the Quadrennial Defense Review, so we're kind of treading water on DD-21, isn't that correct?

R Adm. Church: I would say there's no change. The down-select was delayed a couple of months waiting for QDR, but there's been no other change, no funding changes whatsoever in this budget.

The admiral said there's no change. The down-select has been delayed a few months. No basic change whatsoever. Like I said, there's no real change -

Q: Just a follow-up. Are you considering cancelling the program as a possible way to save money for additional priorities?

Zakheim: I am not considering cancelling anything right now. What I'm trying to do is get a budget through. I believe that during the Quadrennial Defense Review, based on the strategy review, all sorts of programs are going to be looked at. Whether this one is in the mix or not will be a function of discussions between the office of the secretary of Defense and the Navy and the cognizant people.

Admiral, do you want to add to that in any way?

R Adm. Church: (Off mike.)

Zakheim: Okay.

Q: If you had to guess right now for a time all the negotiations are done at the end, do you think that the increase is going to be bigger or smaller than what you're asking for right now?

Zakheim: We have proposed $18.4 billion to the Congress. We have told the Congress that's what we need. I am not in the prediction business, and there's no way I can predict congressional behavior. You should ask people on the Hill that. We have put in what we think we need.

Q: Sir, another shipbuilding question. Given what you've said was a stated need to buy nine ships a year, why did you take out two LPD-17s, apparently what has happened? And why didn't you use that money to buy another ship, another Virginia class sub or a converted cruiser or something like that?

Zakheim: Well, again, we looked at what were the programs that had some contractual difficulties, what were the - what could we do. There were already five ships in the program, as you know. What would be the most cost-effective next step we could take to get up to six ships? And we did that. That was, in the Navy's considered judgment and in that of the Office of the Secretary of Defense and, most important of all, the secretary of Defense, that was the most cost-effective step we could do to get up to six ships, and we did it that way.

ADM. QUIGLEY: Just a couple more, please, ladies and gentlemen.

Q I had a question on missile defense.

Zakheim: All right, yeah, you've had -

Q Missile defense. You talked about Army PAC-3, MEADS, and the Navy Area being devolved back to the services.

Zakheim: Yes.

Q: Would that happen in '02?

Zakheim: Yes.

Q And then what about the future-year funding for these programs? Would they come from the services or -

Zakheim: The idea is that the services will have that in their programs. And yes, it's being devolved in fiscal year '02.

Q: Can I ask you -

Zakheim: Well, you already had a shot. Let me get to somebody who hasn't. Yes?

Q You mentioned earlier on that for the B-22 program, that the 12 aircraft in '02 will be going to the Marine Corps.

Zakheim: That's Marine Corps, yes.

Q: And we do assume, then, that the Air Force will get no CB- 22s for two or three years, until the design is completed?

Zakheim: Well, that's not clear. The only thing we have decided upon is that in fiscal year '02, there are no Air Force aircraft. That is without prejudice, to my knowledge - General, correct -

Maj.Gen. Northington: That's right.

Zakheim: It's without prejudice to what happens in '03. So in other words, in six months time there may be a different story. We have simply, as I said, done what we thought was the optimal way of maintaining the industrial base, on the one hand, while at the same time dealing with the blue-ribbon commission's recommendations.

Last question. Sir? All right, ma'am, I'll give you one, too.

Q: How was it decided that we were not going to close bases, but rationalize them?

Zakheim: Oh, that's very simple. (Laughter.)

Q And the second part of that question is, the submission to Congress seems to suggest one round rather than two; is that what you're looking at?

Zakheim: Okay. On the first one, we are not rationalizing the bases. Let's be clear about that. We can't -- the law makes it impossible, as I understand it, to take steps to close a base without going through a process, some process, which up to now has been the BRAC process. So we are not rationalizing the bases. What we are rationalizing is the B-1 fleet. Okay? It brings me back to the point of all these bases are going to have aircraft on them, and there will be activities and missions for the people who are affected by the B-1 -- basically the B-1 cut and consolidation.

Q If you read the language under the EFI, that's what I'm getting at.

Zakheim: Okay. Well, that's not B-1.

Q: No, I understand. I'm talking about BRAC.

Zakheim: Okay.

Q: But you're not calling it BRAC.

Zakheim: Yeah, that's right.

Q: Why are you not calling it BRAC? That's what I'm getting at.

Zakheim: Oh. Oh, okay. That's a different issue. Oh, that's fine.

Q: Why the gobbledegook?

Zakheim: Well, it's not gobbledegook. It's actually --

Q: This is different gobbledegook. (Laughter.)

Zakheim: That's what I like, help from the audience. (Laughter.) BRAC connotes a very specific process. Very, very specific. There is a commission, there are recommendations, there's an up-or-down vote. And there are lots of other things that have gone along with BRAC, like every -- since no facility knows they're safe, they all hire lobbyists. It's a boon. You hire a lobbyist, then he lobbies the city council and he lobbies the governor, he lobbies the senator -- or she. I mean, there has grown up a kind of industry around BRAC. Okay? So BRAC connotes a very specific set of activities.

What the secretary has said is, "I want a more efficient facilities structure. I do not know whether BRAC will do that for me or something else will do it for me more effectively. I do not know whether it's two rounds or not." Some people are suggesting two rounds, some people are suggesting one round, some people are suggesting, well, don't even think in terms of rounds, think in terms of identifying bases. I mean, we are all across the map on this one in terms of people's suggestions.

So what the secretary has indicated is he supports the idea of rationalizing the facilities. He has not determined exactly how we will do it. And that's why I don't refer to it as "BRAC" because it does connote in everyone's mind who has followed these issues a very specific set of activities and activities around the activities.

What was your second question?

Q: But it does mean base closing, right?

Zakheim: Sorry?

Q: But it does mean closing bases?

Zakheim: It would, of course, absolutely.

Q: I think you got at it. Even though the submission was -- suggested one round, but it wasn't entirely clear.

Zakheim: And it has yet to be determined -- TBD.

Q: Wouldn't that necessarily involve congressional approval? I mean, you can't really do that --

Zakheim: You can't do anything without congressional approval; right? Okay, so you've answered the question that you've asked.

Now.

Q: The deployable Joint Command and Control that's on the transformation R&D, that sounds like that's for the Joint Response Forces that were proposed?

Zakheim: It could be, but not necessarily. I mean, there is a real concern in general about making sure that when the forces are deployed, however they are deployed, whether it's a standing force that is being (inaudible) as a possibility, or the actual forces we have today, or what General Schwarzkopf had with him in the Gulf, the ability to have a command and control that really interlinks. This is not a new problem. When I was here 20 years ago, I remember the chairman, General Vessey, complaining about the exact same problem. And the money hasn't been put in to anything like the degree it should have been.

Q: The blue top refers to Accelerating a Global Joint Response Force. So have you committed to that idea?

Zakheim: The secretary -- well, the secretary feels pretty strongly about it. Again, how it is embodied, what shape it actually takes is something that I don't want to prejudge. The concept is one that's pretty important to us.

Q: Thank you very much.

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