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Town Hall Meeting with the Under Secretaries of Defense

Presenters: Under Secretary of Defense for Acquisition, Technology and Logistics Edward C. "Pete" Aldridge
December 18, 2002

Wednesday, Dec. 18, 2002

(Pentagon town hall meeting with Under Secretary of Defense for Acquisition, Technology and Logistics Edward C. "Pete" Aldridge, Under Secretary of Defense for Policy Douglas Feith, Under Secretary of Defense for Personnel and Readiness David S. Chu, and Under Secretary of Defense (Comptroller) and Chief Financial Officer Dov Zakheim. Moderated by Ken Krieg, executive secretary of the Senior Executive Council.)

Staff: Ladies and gentlemen, please welcome Mr. Pete Aldridge, undersecretary of Defense for Acquisition, Technology and Logistics; Mr. Douglas Feith, undersecretary of Defense for Policy; Dr. Dov Zakheim, undersecretary of Defense comptroller and chief financial officer; Dr. David S. Chu, undersecretary of Defense for Personnel Readiness; and Mr. Ken Krieg, executive secretary of the Senior Executive Council.

Krieg: Great, thanks. Please be seated.

I appreciate you all coming today to join us on the first-ever town hall meeting, at least the first-ever that we can find in the annals of history of the Department of Defense, with senior policymakers and policy leaders in the Department of Defense. Joining us today, as noted, were the -- were Pete Aldridge, Doug Feith, Dov Zakheim and David Chu, the four undersecretaries of Defense who represent Acquisition, Technology and Logistics; Policy; Comptroller and Personnel and Readiness -- that's each of them.

It has been an amazing year for the Department of Defense, for the men and women around the globe of the Department of Defense who at the same time have managed to lead the Operation Enduring Freedom effort that drove the Taliban from power in Afghanistan and disrupted the al Qaeda network around the world, meanwhile, continuing the difficult effort of transforming our forces to prepare ourselves for the challenges of the 21st century. We've done a bunch of things both inside and outside of the department, many of them new, many of them, historic.

What we want to do today is offer each of these gentlemen a chance to describe a little bit about what they do and what their initiatives are, and then we'll open it up to questions as you all see fit.

With that, I want to introduce Pete Aldridge, who will be the first to make a set of remarks. Pete?

Aldridge: Thank you, Ken. Good morning, everyone. My job, as Ken pointed out, is Acquisition, Technology and Logistics. It is an all-encompassing job. I deal with roughly $140 billion of Dov Zakheim's money every year. It's all his money -- at least that's what he tells me.

When I first came on board in this office in May of 2001, I set for myself a set of goals that I wanted to accomplish while I was here. An umbrella for setting those goals is a change in philosophy from something that we had heard in prior times called acquisition reform. I looked at that and I didn't particularly like that word of "reform." It sounded like I'd done something bad and I must repent, or I'd been to reform school. And so I thought that given all the studies that have been done on acquisition reform, that what we really need to focus on was acquisition excellence. And so the theme of my office has become acquisition excellence -- doing things right, doing them quickly, doing them with skill and precision.

The five goals I set for myself were -- number one, was to improve the credibility and effectiveness of the acquisition and logistics support process. We have done those things over this past year and a half. We focused on spiral development, we focused on properly pricing programs, we've -- we're going to streamline the DOD 5000 series, the acquisition directives and regulations. And we're doing those things, I think, in the right way.

The second goal was to improve the morale and quality of the acquisition workforce. And we've done some things there. We've started a strategic plan for the human capital resources. We've reemphasized the Defense Acquisition University in teaching some of our acquisition professionals by both on class participation, as well as remote, remote learning. And we're expanding the demonstration, the acquisition workforce demonstration project, which is a focus on pay for performance -- a new approach we're taking in the support of our personnel.

The third goal was to improve the health of the defense industrial base. We've done some things in looking at profitability equations, progress payments, and shared cost-savings in that area. I think we've done some really good things on making sure our industrial base is healthy. By being healthy, it provides us with higher-quality products, and encourages investment, and draws the proper talent.

The fourth goal was to rationalize the weapons systems and infrastructure with the new strategy. And we've made a lot of decisions on weapon systems with Crusader, with the Joint Strike Fighter, the DDX program in the Navy, missile defense, the SSGN conversions, a transformational communications system, and so forth. We also rationalized our infrastructure by getting the Congress to agree to a base-closing legislation, which we'll implement in fiscal '05.

The fifth goal, and the last goal, was to enhance those high-leverage technologies for the future. We're trying to get our science and technology base up to roughly 3 percent of the DOD budget. We're not quite there yet. We're about at about 2.7. But I think it's the right thing to do. And we're also enhancing the advanced concept technology demonstrators, which transition technology to the war fighter faster.

Those are the five goals. We're making progress on all of them. And I believe, if you look back over this past year, as Ken pointed out, I think that we've done some good work here. Thank you.

Krieg: Thanks, Pete.

Next up we have Doug Feith, the undersecretary of Defense for Policy.

Feith: Good morning. It's nice to have a chance to talk with you.

History doesn't hand out great, terrible or important events evenly over the years. There are times when world affairs are fairly steady, when America's relationships are stable and proceeding predictably down a fixed track, and then there are times like ours.

Especially since the September 11th attack, the world and America's place in it have been in flux. When did Americans last at home feel so vulnerable to foreign attack? When ever in history did the United States -- or any county, for that matter -- exercise such influence and power all over the world?

It's been suggested that I should give you some idea of what the policy organization does. I'm told that it's rather a mystery around the building what we do all day, so I thought I would give you a sense of the kinds of questions that we deal with.

What national security goals should the United States set for itself in this pregnant moment in world affairs? What are the policies likeliest to secure America? What are the policies likeliest to produce productive friendships with foreign states? What are the policies likeliest to create more order and peace in the world, in the interest of the prosperity and the freedom of ourselves and others?

Now, more specifically, what kind of strategy is required to fight a global war on terrorism, not a war of the conventional type against the conventional armed forces of nation states, but a war against a decentralized network of terrorist organizations that comprise small cells that can do large harm and can especially do harm when they are supported by states, and especially if they can get access to weapons of mass destruction.

What kinds of treaties do we want with Russia or other countries? What purposes do we want the NATO alliance or our other alliances, with Japan or South Korea or other states, to serve in coming decades? How can the United States promote better peacekeeping operations around the world? What kind of defense cooperation should we have in South Asia or the Horn of Africa and other areas that have not been the traditional focus of U.S. national security policy? What kind of missile defenses should we have -- should we develop, and what should our nuclear weapons policies be? These are the kinds of fascinating questions and issues, the kind that sometimes cross one's eyes, that occupy myself and my colleagues in the policy organization.

Now, if that's what we think about, what do we actually do all day? The folks in policy represent the Defense Department to other agencies of the U.S. government, which is to say we spend a lot of time in interagency meetings. They also represent the department to other countries. A key responsibility of ours is to support Secretary Rumsfeld and Deputy Secretary Wolfowitz in their work with their National Security Council colleagues. We help the secretary and the deputy to advise the president on foreign and defense and intelligence policies.

Now, in doing this, we work intimately with the Joint Staff, especially the operations and policy directorates. I probably meet, on average, three or four times a day with General Myers and General Pace, and we have fashioned a tight and friendly connection that I've been told by people who have been in the Pentagon for a very long time represents a high-water mark in civilian-military relations here in the Pentagon, and that's something that is very gratifying to hear.

Now policy works not only on big-think, long-term issues, but on topics that arise daily. For example, how do we deal with the news that the North Koreans are enriching uranium for nuclear weapons? How do we defuse tensions between India and Pakistan over Kashmir? What kind of assistance should we give to friends who get hit by terrorist attacks?

The policy organization comprises hundreds of thoughtful men and women -- they are frequently accused of being brainy -- who routinely do -- work extraordinary hours, commonly six days a week, with short deadlines and high demands, and they produce large volumes of superb work of great importance to the United States. They're motivated by their innate professionalism, by an admirable team spirit, and they're fired up by the knowledge that their work, when it's smart and creative and timely enough, has a good chance of becoming U.S. policy.

I would say that their work is making America safer and more influential in the world. Their work is laying the foundation stones of world affairs for the 21st century. Their work is the stuff that our grandchildren will be reading about in their history books, and I like to think that our grandchildren will be proud of us. I know that I'm proud to work with the excellent people in the policy organization and throughout this department. Thanks.

Krieg: Thanks, Doug.

Next up is Dov Zakheim, the undersecretary of Defense, comptroller and chief financial officer. Dov?

Zakheim: That's a tough act for a green eyeshade to follow. (Soft laughter.)

You caught me on a bad day. This is a bad week for me. This is the week that we go through what are called program budget documents. This is the week we try to pull the budget together and satisfy all the stakeholders, everybody who needs something more, legitimate requests all, within a top line that we try to work out with the Office of Management and Budget, and come out of it in one piece.

We've managed to do that. We've managed to do it over the last -- I guess this is our seventh major budget activity since 2001 started -- in part because we have totally shifted focus. And some of the things that Ken Krieg mentioned a little earlier, that we have in effect transformed the department -- and what you just heard from Pete Aldridge. And by the way, I do not, and we do not own the money. This is taxpayers' money. (Laughter.) And we take that very seriously.

And I view our job -- and I know my team does in our office -- as trying to get the right money into the right hands, in the right hands of the people out there.

I know there are folks watching this on television. I was out in the Gulf region about four weeks ago, and morale's very high out there. Morale is high all over the world. And we've just got to make sure that people are looked after; people have what they need to fight with, if they have to fight; people know that they're appreciated; people know that their families are looked after. So we're trying to move the taxpayers' money in the most responsible way possible to the people who need it out in the field.

Now, a number of the things that we've done that are different from, say, when I came in here in 2001, or when I was here 14-odd- years ago, I guess is when I left -- '87 -- is the Planning, Programming and Budgeting system. We really have converted that system, working with people like Pete and David and Doug and Ken, and under the leadership of the secretary and the deputy, to what's effectively a PPBE system -- Execution.

Now, you know I wear a second hat as chief financial officer. And in the world outside the government, a chief financial officer is more important than a comptroller. But of course this is government, so everything's topsy-turvy. (Laughter.) But we felt -- and the secretary feels very strongly that the department needed to be managed in a business-like way, which meant that I had to take my CFO role every bit as seriously as I did my comptroller role. And a CFO looks at how you actually spend the money, looks at budget execution, looks at financial statements. And by the way, I understand that I'm the first comptroller ever to review financial statements as part of my penance. (Laughter.) But we've done that.

We've worked with the services and the agencies so that we have a more credible set of statements for the public in a language that they understand, as opposed to the appropriations language that's understood only by those of us who work here and those of us who work on Capitol Hill. We've dealt with matters large and small -- how to combine the program and budget reviews in a sensible way; how to ensure the decisions made by the secretary and the deputy in the program decision memoranda do not get reversed or undermined as the budget comes to a close. Small ways. How to make sure that we don't have a black eye because a few individuals abuse purchase cards or travel cards.

That's just what gives you a sense of the breadth of what we work on. I'll be delighted to answer questions later, but I want you to know that we in our office are doing our best both to husband the taxpayers' money, to give the taxpayer confidence that we are husbanding that money and to ensure that the people in uniform or in civilian suits understand that the money is going to them in the most efficient way possible. Thank you.

Krieg: Thanks, Dov.

Last, and certainly not least, at least on the initial face of the day, the Honorable David Chu, undersecretary of Defense for Personnel and Readiness. David?

Chu: Thank you, Ken.

Good morning. I'm the undersecretary of Personnel and Readiness, as Ken has outlined, and if you wanted a one-sentence description of what we do, I think that sentence would be, "We're the people people." That doesn't mean that we actually administer the programs that affect the daily lives of those in uniform and those who have civilian status in this department, but we set the rules of the game, so to speak. We set the policies within the limits provided by statute. If we think the statutes are too constraining, it's our job to speak up and recommend changes to those. And if the secretary and president are willing, and the Congress agrees, we can get the rules changed, as we have succeeded in doing a number of occasions in this administration.

We take our guidance from the words the president and the secretary have used repeatedly. As you all know, they have emphasized that people are the heart of this department; people come first, the most important element in this department. And I hope their actions are conveyed to you the sincerity with which those words are meant.

I think we saw the importance of people on September 12th in this building, when the work force marched back in, largely a civilian work force, marched back in when the building was still literally on fire. And we saw it also, I think, in the intrepid actions of our forces in Afghanistan. We've seen it in the excellence of the call up of Reserve personnel; we've called up at one time or another over 130,000 Americans from civil life. We have essentially had no significant complaints, even though in many cases, these are call ups that occur at a personally inconvenient time for the individual and often, in a financially inconvenient way. These people understand the obligations they have entered into, and they have met that call with great spirit.

If you look back on the history, I think you can see the importance of people in a variety of episodes in this country and in other countries. Let me just take one as an illustration. In 1940, June of 1940, the British army, as you may recall, in France was trapped by the Germans. The British made the decision to abandon all their equipment so they could save their trained people. They evacuated 340,000 people in a few days using a flotilla of small boats. And although Winston Churchill to the House of Commons lamented the loss of materiel, the materiel was replaceable; the people really weren't. And the British, as history, I think, subsequently validated, made the right decision. They rebuilt their army within a short period of time because they could replace the equipment they could not easily replace the people.

We are trying to take a more strategic view of how we manage our people, both military and civil. We have a Web site, and you can read about some of the details there. That does include how we manage the reserve forces of this country, and I think you'll be seeing, if the secretary and president approve, some both changes that would improve how we manage those forces as the fiscal 2004 budget is presented to the Congress.

It also includes how we prepare our military forces for use in crises or conflicts, to increase the degree of joint training that we have, creating a joint national training capability building on the training revolution in the services brought to fruition in the 1970s and 1980s that you see out at Fort Irwin, or Red Flag at Nellis Air Force Base, or the Rangers at Fallon at Nevada the Navy operates.

Let me say, if I may, in conclusion, this is our chance to say thank you. Thank you for the dedicated effort you bring to bear. Thank you for the spirit in which you undertake your duties. Thank you for the excellence of the work that you do.

Krieg: Thank you, David.

All right, now, this is your turn. I know that you were all required to bring a question inside. Let's not have that pregnant moment when nobody speaks when the guy at the stand says "Questions."

Questions? Down front.

Q: This question is really for Dr. Chu. Could you address what the department's vision for the future use of and integration of the RC forces are, and what force structure changes might be required in the near term?

Chu: We see the reserve forces as an indispensable part of the total military posture of this department. As you know, in the Cold War, the department had one vision of what they were, which was largely a mirror image of the active force. And I think, while we're still debating this proposition, we're increasingly seeing them as a complement. In other words, they don't need to look exactly the same. The Air Force has pioneered this approach with its associate units, for example, in which reserve personnel are really an integral part of the unit. It doesn't mean there wouldn't be stand-alone and reserve units, but that there would be much closer integration over time between active and reserve -- so-called active and reserve forces. I think we see the Reserves as a terrific way to reach talent in the civil sector that we really cannot grow, should not try to grow, necessarily, in large numbers in the active force. I'll offer information technology as an example of that, but also certain types of medical skills; trauma surgery, for example, is another kind of thing that exists in the civil sector that's hard for us. Fortunately, we don't have a lot of trauma in peacetime in the military.

Beyond that, we are looking at how we create a better continuum of service. I think the department, over the years, has viewed service as either active or Reserve, and these are two sort of poles apart. The reservist serves 39 days a year and that's it. That's not really the reality in many cases, as you are probably well. The active person serves 365 days. The model, I think, we're moving toward is this might be at any given year for an individual, anywhere from zero to 364 days. And we need a way for people to move back and forth between these two states, so to speak, that is easier for the individual, better for us, better for the nation in terms of what they produce. Some of that will take statutory changes in order to facilitate; some of it means using the secretary's demonstration power. We did that in the Reserve call-up that we had. We changed the way medical benefits are provided to reservists to facilitate their coming into active duty, recognize their special circumstances. I expect we'll do more of that over time. So I think you will see innovations here. Exactly what it means for the force structure, what the forces look like, that is still being debated.

Krieg: Thanks, David.

Next out there.

Q: Good morning. This is a question for Mr. Zakheim. Sorry to maybe add to your bad week here, but I have to bring up the government travel card program. As a self-proclaimed representative of Navy TACAIR, I have to say that there is widespread dissatisfaction with this program.

Since 1998, there's been a huge administrative burden shifted to the tactical units and to the commanding officers and department heads and their equivalents throughout the services in administering this program. And basically, I've seen those 05s and 06s transformed into collection agents on behalf of Diners Club or Bank of America; having to do financial management counseling, having to make difficult decisions about how we're going to handle a deployment because critical technicians that have the skills that we need can't go because their card's been revoked.

And it strikes me that while we may be achieving some savings, we're doing that on the backs of the operators who would be better served taking that leadership that they're devoting to this program and applying it to combat readiness.

And I'm not trying to bring up a problem without a suggestion for solution. Somehow, I think we need to take individuals in the service, especially our youngest and most naive, out of the loop of responsibility for this. We may be generating savings that may be going to good things like MWR, but that's coming out of our operational readiness. At least, in those operational units in my perspective. And that we need to somehow, if there are savings to be achieved, the agencies that are achieving those savings should be the ones that bear the administrative burden for administering the program.

Again, we're trying to, according to Secretary Rumsfeld, increase the tooth to tail ratio, and anything that piles the administrative burdens on those operational units is counterproductive to that. So, I'm curious to hear your comments, sir. Thank you.

Zakheim: Sure, it's a good question. And it kind of highlights the fact that many of these issues really have multiple sides to them, and there isn't just a clear fix without looking closely at the challenges involved.

Now, the rationale behind the card programs in the first place, as you probably know, was to eliminate disbursing offices, which soaked up an awful lot of people doing exactly the kind of thing that concerns you. You were taking people off the line, operators who needed to do other things, and essentially having them push papers. So that was the idea that underlay the cards in the first place.

What's happened is as you rightly said -- is first of all, we've got younger people who, you know, maybe their parents, if they were at home, wouldn't be allowed a credit card, who knows? But you're placing a tremendous burden on them -- and particularly if they only travel, say, once a year, or maybe twice a year. One of the things we've done is ratchet that down. If you're not going to travel reasonably frequently, you don't need a card. If you haven't used your card in a long time, you don't need a card. So we're looking at how we manage that to deal precisely with that problem. And it isn't just the 18-year-old, I mean, quite frankly, some of the things that have made it into the newspapers haven't involved the 18-year-olds; they've involved the 38- or 40-year-olds, quite honestly. So, you know, we shouldn't just target our younger people in uniform. But the problem is there. That is to say, you know, if you're not going to use this card frequently, you probably shouldn't have one, and that lowers the administrative burden. So there's that aspect of it.

Another thing we've done, and Congress approved this, is what's called split disbursement. Sounds terribly technical, but what it really means is this: To the extent that a hotel, for example, can directly bill the credit card company, we're out of the loop, the person's out of the loop, everybody's out of the loop, and therefore, again, you minimize the possibilities of something going wrong; you minimize the burden of responsibility on the individual; and you probably are going to track your accounts much more carefully.

So we are very attentive to your concern, and that's what we're working at. We put together a task force. We've got a boatload of suggestions in it. We're starting to implement those. We got some legislation, because Congress is very sympathetic to this. They understand that, on the one hand, you want to be efficient; on the other hand, you don't want to put undue burdens either on the services as a whole, who have responsibilities other than administrative ones, to put it very mildly, and on the individuals themselves.

So yes, you raise a good issue, and I hope this clarifies at least our approach to dealing with it.

Q: Can I follow -- (off mike) -- sir? Just to follow up on one thought, is there any legal challenge to this, in the sense that we have a program where we're basically compelling folks to do exclusive business with a single commercial entity? You know, we're in free market economy, and we're forcing them to it at their own risk, and yet the government has essentially gained the benefit through the rebates of the program. It just strikes me that we're almost open to a legal challenge on some kind of a program, in that sense, where we're asking individuals to bear responsibility, and the government is bearing the benefit. And I'm wondering, is there -- you talk about legislation. Is there a look at that aspect of it to see if there's a better way to spread the risk, instead of having it borne by individuals?

Zakheim: Well, there is responsibility, of course, you know, as I said -- for instance, hotel bills and that sort of thing. We're trying to get that dealt with directly anyway.

In terms of the general notion of being forced to deal with, say, one credit card company or one bank, one could argue that pilots are being forced to deal with one manufacturer of aircraft or two. When you're on a ship, you don't turn around and say, "Well, I don't like this producer. I want that producer." I mean, when you sign up, you sign up, and the government gives you certain privileges, certain responsibilities and certain tools to use.

So although I'm not -- I wouldn't dream of speaking for the general counsel -- I've been burnt too often to do that -- (laughter) -- it does seem to me that legally we're on pretty solid ground.

Krieg: Next question? In the center here. Long arms.

Q: Good afternoon. This is kind of a question for the whole panel. And that is -- it's kind of a two-part question. The first part is, there seems to be a renewed drive, not only within the Department of Defense but throughout the entire executive branch, to contract out support. And most of this is not in a -- if I interpret the guidance, it's not only about savings, but it's about the government competing with its private producers.

And philosophically, although I agree with that, I am very concerned about our -- the rapidity with which we're doing this, and without a solid strategy to leave behind in the workforce both the talent and knowledge within the government to subsequently not only manage these contracts, but to write the initial contracts; to understand when the contractor is delivering the support service for the folks in uniform, that we're getting what we're paying for.

So, I was just wondering, is there a strategy or is there a way you're developing a strategy to not only contract out as quickly as possible, but to leave behind a functioning management force? And if anything, what are those things that you just are taking off the table for contracting out?

Thank you.

Krieg: Pete, why don't you take the first crack at that?

Aldridge: Yeah, I think you're talking about the -- contracting out services and things of that nature. There is a process by which we go through to determine what activities of the government can in fact be contracted out. We take a look at all of the slots, the equivalent positions, and there is a judgment call made by the individuals who command that function or that agency, that determines that these functions are in fact capable of being done by the private sector, as opposed to government; it is not a core function that is necessary to be done by government employees. And so that process occurs.

When that occurs, then it goes out for competition for the private sector. But the government can also compete for the job. And it so happens they win about 50 percent of the competitions.

So first, these functions are already decided to be not government functions necessarily; they can be done by the private sector. But when that is done, then the private sector can compete, as well as the government employees. And in half the time, the government employees win. And in every case, we save 25 to 30 percent, even when the government wins. So there is a benefit to going out and doing these competitions, when in fact we've decided that that function is not inherently governmental.

But the government -- the bottom line -- has to retain sufficient power to be a smart buyer. And that's one of the things we have to look at; to ensure that the government employees who have an inherently government function have to be a smart buyer for that -- whatever piece of service or equipment we're doing. And that certainly has to be the case, and I think we've got a process to do that.

There was a Commercial Activities Panel called for by the Congress to go take a look at this process, which is called A-76. And the Activities Panel has made some recommendations to make the competitive process more like the federal acquisition regulations, rather than a special process. And there are some functions going on within OMB (Office of Management and Budget) right now to revise this process to be more attuned to the federal acquisition regulations.

Krieg: Thanks, Pete.

Back in the middle on the left here.

Q: To sort of piggyback on that question, there's been a lot of discussion within the news and all across the federal government in terms of the average age of the civilian workforce in Washington and around the United States, and the impending retirement of a substantial proportion of the civilian workforce.

I guess my question to any and/or all of you, is how are you recruiting and retaining that smart and capable civilian workforce, and what do you see the prospects in the next five to 10 years of developing and increasing that?

Thank you.

Krieg: All right, thanks.

David?

Chu: First of all, I want to emphasize, no members of this panel are against an older workforce -- (laughter) -- although there may be a conflict of interest involved in that observation!

Second, I think while this is a big issue, which is the age structure of the federal workforce, and the Defense workforce looks like the federal workforce at large, we can easily scare ourselves if we don't first focus on actually what's happening out there, which is how are people actually behaving.

There has been an assumption, and it's quoted frequently in newspapers, that, quote, "half the federal workforce can retire in five years." That's only true if, in fact, we awarded everyone who's eligible early retirement. So actually, the numbers are, in five years, about a quarter can retire at their volition, about a quarter could be allowed to retire early, if they were given various waivers, et cetera.

The source, as we all know, is -- in defense, specifically, but also in the federal government more generally -- the decision in the early '90s to manage the downsizing of this department, and the reinvention that went on in other Cabinet departments, by throttling back on new hires. With 20/20 hindsight, that might not have been the best policy, but it's the policy that was followed, so we are where we are.

And it does mean that eventually -- we're assuming that all these people will retire. Now, this then becomes an empirical matter, well, what is their actual behavior? And I think it's a tribute to the people working in this department and elsewhere in the federal government that in fact, most people don't retire the first year they're eligible. If you look at the actual retirement rates, they are more modest.

And let's take Dov Zakheim-- from the financial management -- some projections actually made there. For the federal government as a whole, the retirement rates are actually quite modest in financial management, even though it has the same skewed age structure that you described. DOD actually, depending on which year you look at, it has retirement rates a bit higher than others. Now, that could be because we've got stronger financial managing and there are better outside opportunities; there's all sorts of ways to interpret these results. What it does mean is that while on the one hand we have time, this is not a problem that is going to descend on us quite as fast as the doomsayers would argue.

We also need to have a strategy of how we're going to manage this, as I think your question implies. And we are starting to formulate that strategy. I think that strategy does have to focus on two key things. We need to be much more like the uniformed services in thinking about recruitment as one of our premiere responsibilities. That has not been the orientation of Civilian Personnel Management the last 10, 15 years because their big job was, in fact, to shed people from the payroll, to find them a soft landing someplace else, not to hire new people.

And I challenged them to take the very first step, "Let's just set ourselves a goal. How many people do we need to recruit next year?" And of course, the next step would be, how many people do we need to recruit in each specific broad functional area? Let's be sure we actually make those numbers and have a process for doing so.

We need to think how we're going to reach out to the pools of talent in the civil sector. We've begun that, we've begun putting together a kind of roadshow any good firm would have, where you go to the schools from which you'd like to recruit young people and you get them to consider the government as a good choice. And we are a good choice, particularly, I think, in this department. And I think that as we pursue that strategy, in which we invite your help and assistance, we will formulate a way forward that I think is going to give us the chance to replace the talent we have here.

Now, we're also looking at other innovations. Are there ways to get people who would like to retire perhaps to work part-time to serve as mentors; maybe they want to throttle back a bit. Certainly private firms do this all the time. You get the more senior person to say, okay, I'll work, you know, 60 percent, 40 percent, whatever; they help transfer their knowledge, their understanding of how the system really works, to the next generation. That's terribly important.

Some of you may recall what happened in New York City when Mayor Lindsay allowed, as an economy measure, most of the senior mechanics to retire. Well, he found out that not all the ways to fix the trains were written down in the maintenance manuals. And the reliability of the New York City subway system plummeted in the next several years while they struggled to understand all that knowledge, all that understanding of how you actually made the system work could be replaced in the new generation. We don't want to make that mistake, and I hope we don't.

Krieg: Dov, do you want to add a few thoughts?

Zakheim: Yeah. This sort of fits within the umbrella of what David's talking about. But one of the areas that we focused on, particularly on the financial management side, which David mentioned, is the whole question of professionalism, both in-house and bringing people in. In a certain respect, if you look at the lawyers, those folks very often are really top-grade people who come in from law school, spend a few years in government, move out, and maybe come back. They'll go back and forth. By and large, that doesn't happen in many other parts of our civilian government sector.

So we, for instance, got some legislation that would allow us to focus on getting MBAs and CPAs, highly qualified people, to come in, to make it attractive for them, then maybe they'll go out and tell others that this is a good experience. And so you could bring people in constantly. You'll have a core of people who are highly trained, who stay, and you'll have infusions of new blood.

So it's a slightly different way of looking at the issue. You can do the same thing, obviously, with management. Government managers would offer a lot to the outside world. At the same time, those in the outside world can bring a lot in to government management. And I think, working with David's folks, we're finding that there are ways -- we're just starting up -- to truly enhance the attractiveness; I mean, folks stay here and don't retire because it is challenging and exciting to work in the government. That message is starting to get out, and we're trying to do it in a way that allows people not just to think, "Well, if I go into government, I'll stay there for 30 years, and maybe after that, who knows"; but rather, "This is an important line on my resume which then I will have the option of using outside or remaining inside." And that makes it a very attractive place to be

Krieg: Great. Thanks, Dov.

We have time for about one more question. Is there another one out there? In the center.

Q: I wanted to ask a question for Mr. Feith, since he hasn't had one. And it's really just a curious question. It's great to see you guys here, you know, open, accountable, transparent. But I have a question about the Defense Policy Board and how it relates to the things that actually all of the undersecretaries do. I know a lot of ideas come out of there. It's been -- it's a very activist Defense Policy Board with Richard Perle and guys that actually speak out in the media quite a bit.

And I just wondered if -- I don't want to put you on the spot, but does that sometimes cause a problem, that they have maybe less accountability than you do as, you know, direct employees here?

Krieg: Great. Thanks.

Doug?

Feith: The Defense Policy Board is a group that largely has people who have served in the government; a number of former Cabinet members. And it is a group of very smart, very experienced people who have not only a lot of knowledge from their government experience, but who remain plugged in to national security policy circles in the United States and around the world. And so when they get together and talk about topics -- and frequently they pick their own topics. Sometimes we'll have a chance to talk and they'll connect either with me or the deputy or the secretary and ask what would be a useful subject for them to chew on for our benefit.

When they get together and talk about things, they frequently come up with questions or insights that are real value-added to the work that we do. And it's -- sometimes the value is in the form of their reporting to us what people in Asia or Europe or Latin America are saying or perceiving about our activities, and that's very valuable input, especially since, as I said, these are, in some cases, very high-ranking people who are dealing with high-ranking current officials abroad on a regular basis. Sometimes it also includes, by the way, some former senior -- very senior military officers, and they second-guess and they think about things that we're thinking about from fresh angles.

And it's just a valuable advisory group. They have no formal role in policymaking, but it's just useful to have a bunch of wise people get together periodically -- every several months is what they do -- and they give of their time. They spend a day here. Sometimes they get involved in little working groups between their regular meetings to study a subject and give the benefit of their thoughts to me or to the secretary or the deputy. And we're grateful for their work. They add a lot to our understanding of the issues they deal with, and we're happy for them.

Krieg: Thanks, Doug.

Do you have one more, burning-desire question that has to be asked?

Krieg: Ah.

Well, as we discussed, 2002 was a very challenging year for the men and women in the Department of Defense. And as Doug pointed out, 2003 offers many opportunities for us to succeed as well: from developing the fighting force of the future through transformation; to continuing to counter threats of weapons of mass destruction and continuing the war on terrorism; from thinking about and designing joint concepts of operation and experimenting in new areas of warfare; to attracting and retraining talent for the 21st century; to spending the taxpayers' dollars more wisely. The men and women of the Department of Defense, both civilian and military alike, can meet these great challenges that we have ahead of us.

On behalf of the four undersecretaries who are here, thanks to all of you for coming. And for those of you around the world who are watching this, thanks for what you do to help defend America and its interests.

Have a safe and happy holiday season. We get very few moments where we can say, "Enjoy your families." This is one of them.

Thank you for all you do. (Applause.)

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